Category Archives: Current Events

Amazon moves into the Kombucha aisle in a big way

One day we might look back at June 16, 2017, as the day the retail and grocery business changed forever. It was, after all, the day Amazon decided to stop dipping its toes in brick and mortar retail and instead dive in head-first with the announced $13.7 billion acquisition of Whole Foods Market. While the news itself made a big splash with the public, the overall ripple effect could send waves of change across the industry for years to come.

Just take out the Citizens Banks!

The deal gives Amazon a network of 450 Whole Foods stores in the U.S., Canada, and United Kingdom, many of which are located in affluent neighborhoods and come with a loyal customer base willing to pay a premium for high-quality groceries. It also potentially extends the online retailer’s existing grocery service, Amazon Fresh into new markets while also broadening the assortment of products sold. And almost overnight, Amazon goes from a niche player to a national powerhouse in the $1.4 trillion grocery industry. Combined with Amazon’s well-established expertise in logistics, customer data, and pricing, Whole Foods could become a transformational force in brick-and-mortar as we know it.

So what does it all mean everyone else? Retailers and grocers continue to feel the pressure from shifting consumer habits, with many struggling just to stay relevant. Amazon’s new push into the physical world will likely add to the pressure. Here are five things to watch for as Amazon and Whole Foods move forward:

Flexible distribution

Your local Whole Foods likely won’t change into a massive Amazon warehouse and fulfillment center overnight. But there’s a good chance Amazon’s already thinking about how to leverage these strategically located stores (as well as Whole Foods’ existing network of distribution centers) to get products to customers faster and more efficiently than ever. Especially as the company looks to develop its Amazon Fresh service into a leader in the small, but growing online grocery space. Somewhere between Whole Foods’ in-store experience and Amazon Fresh’s online convenience lies the potential for great synergy – especially when it comes to giving more customers access to the whatever delivery method they prefer.

Experience matters

People don’t just buy products; they choose experiences. And the most successful retailers today understand that experience matters. Whole Foods is a long-time leader in bringing experiences to its stores. Whether it’s through in-store cafes, bakeries, cheese tastings, or coffee roasting, Whole Foods customers have come to expect an opportunity to see, taste, touch, and learn about many products before they buy them. That type of experience remains a tough solve for online-only food retailers. Whole Foods is an opportunity for Amazon to double-down on the ability for customers to experience new products and how to use them. Will it extend these experiences beyond just food products?

Fulfillment-plus

Jeff Bezos was one of the first to propose the idea of delivering orders to a physical location other than a customer’s home or office. Today Amazon Lockers are commonplace, giving customers a secure place to receive orders whenever and wherever it’s most convenient for them. Having an additional 450 Amazon-owned locations could extend the service even further, providing new real estate for deliveries, returns or other shipping services that can’t simply be provided in the back of a 7-Eleven. While there’s no public plans for Amazon shipping centers, it’s certainly within the realm of possibility.

An industry wake-up call

Amazon’s big jump into the grocery business splashes water on the faces of just about everyone else in the industry. Now it’s up to grocers to innovate and refresh their business models in order to stay afloat. Will it lead to traditional grocers adopting more online shopping and deliveries? Will they be able to compete on more than just price? Clearly, customers will choose the experience that suits them best. They ultimately vote with their wallets. It’s up to grocers to gain a better understanding of all the data behind customer interactions, to be able to match pricing and promotions to a customer’s preferences, and to create experiences that delight and reward shoppers for their loyalty.

The landscape is changing fast – don’t get left behind

It used to be that Amazon was the leader in online shopping and services and Walmart was the king of physical retail. But now Amazon is building bookstores and could soon have its own massive grocery chain, while Walmart gets more aggressive online. Somewhat lost in all the news about Amazon and Whole Foods was Walmart’s announced acquisition of online fashion brand, Bonobos – not to mention its recent purchase of Amazon competitor Jet.com. In their quest to be the primary destination for consumers of all walks of life, both Amazon and Walmart have begun aggressively stepping on each other’s turf.

It’s further evidence the lines have blurred between physical and online retail and there’s no single path to success. It’s no longer just about stores or about prices, delivery speed or convenience. Those who succeed will do so by finding the right mix of products, prices, and technology to surround the customer with consistent, seamless, personalized experiences.

Will drone-delivered, organic kombucha come next? Maybe not tomorrow. But all signs point to the dawning of a new age of retail. And it’s only just begun to get interesting.

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Walmart loads for bear

How do you extend your business to compete with always-on world of ecommerce? For one retail giant, the answer appears to be if you can’t beat ‘em, join ‘em. Or buy them, at least.

The latest rumors have Walmart in advanced talks to acquire Bonobos, the well-loved fashion brand that built its reputation on stylish men’s essentials. An industry pioneer, Bonobos has carved out a niche in the retail and fashion space, both through its catalog, eCommerce site and boutique stores.

Bonobos’ stores are a prime example of how brick and mortar retail is shifting. While you can purchase some products in-store, the space is really used to provide experiences for the customer, immersing shoppers in the brand’s curated world view and easing the anxiety that often comes with making sure the clothes you buy online actually fit. From the variety of items on display to the personalized service the staff provides in guiding customers through the buying process, the experience is what sets Bonobos stores apart. Coupled with traditional retail practices such as colorful, magazine style catalogs, a robust eCommerce site, and aggressive email marketing efforts, it’s the model of the modern retail experience. And it makes Bonobos an intriguing target for Walmart.

Walmart is well known for its always low prices, its robust supply chain, and its disciplined approach to supplier relations. So why would the world’s largest retailer want to change? Walmart has long attempted to build out its own eCommerce footprint. Despite those efforts, it’s still perceived as something of an also-ran against some of the internet-first retail giants in terms of products, services, and user experience. One could consider Walmart’s 2016 purchase of Jet.com as a sign the company finally recognized its shortcomings in that space. The Jet.com model is an interesting one, in part because it allows the consumer to adjust the price of products either by bundling higher quantities or varieties of products into one order, or opting into- or out of a variety of associated services. For instance, customers can determine shipping costs based on how quickly they want to receive a product, they can forego the option of free returns, and prices generally drop with each item added to a single order. Tied into the vast network Walmart already has with major players in consumer products, it may prove to a long-term winner for the Bentonville firm.

Adding other eCommerce players such as ModCloth, Moosejaw, ShoeBuy, and now potentially Bonobos, seems to signify Walmart recognizes its current business model needs to evolve in order to compete in today’s retail environment. But this strategy also has Walmart walking a fine line. For instance, Bonobos and ModCloth built their brands largely by being what big box retailers are not. Their value is not derived solely through products, but also the experience they’ve been able to create. As men become more attuned to their styles and grooming needs (just looks at the rise of men’s shaving services), or women look for authentic clothes for any body type, retailers will need to address and target these segments in a much more precise manner. There’s a reason consumers flock to these emerging brands – retail is no longer a one-size-fits-all industry.

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The Amazon effect…

When I started my “adulting” journey, one of my first jobs was at Forrester Research. It was during the end of the last century, wow I’m getting old, and I had a front row seat to the rise of the internet. Those were the days of irrational exuberance both in the stock market but also with technology. While many of the companies that rode this wave to fleeting stardom, remember the likes of Pets.com where you could order anything for your gold fish, basset hound or pet ferret needed from a sock puppet? Or Webvan which was ahead of its time when it came to the online grocery game. Even a surgeon general Dr C Everett Kopp dipped his toes into the dot com game creating Drkoop.com which tried to make a go at the online medical space. One company that was born of this time but has continued to flourish is Amazon.

Why is this man smiling?

The pioneering eCommerce player who started by selling books and CDs is now a market shaper. Their success was in large part built on seizing on the consumers’ growing hunger and desire to access shopping via the internet, keeping the eCommerce player’s cost down since they bypassed the expensive cost associated with retail real estate. But fast forward to 2017, and it appears that Amazon is now going to be aggressively looking to open physical stores. Gasp. What???

According to a piece in Seeking Alpha, it is rumored that Amazon will be targeting the opening of close to 2000 stores. Supposedly up to 400 bookstores, but also appliance stores, furniture, electronics and others. No small feat to say the least. So why is Amazon jumping into the brick and mortar game when so many other retailers are desperately trying to prune their store trees? The reality is Amazon realizes, as do other pure eCommerce players such as Warby Parker and Bonobos, the experience you can provide the consumer online and via a mobile device has limitations. Consumer expectations have evolved to the point where price is no longer the only driver. They know they can get a competitive price at the touch of their fingers. What they are now looking for are the experiences retailers bring to the table. Why do I shop and give my money to retailer A and not retailer B? Experience plays a large part in that decision making. One simply has to look at retailers such as Urban Outfitters that are looking to add experiences such as enjoying a fresh slice of pizza to the in store shopping experience. Or Restoration Hardware that are turning stores into true show rooms – allowing the customer to have a true experience with furniture and home goods. We already know high end retailers such as Barneys, Neiman Marcus and Nordstrom offer such experiences as cafes, salons, personal shoppers to name a few. The shopping experience becomes complimentary to the acquisition of a product.

For Amazon it makes sense to get themselves into the physical store game. First don’t think of Amazon stores as traditional sites to simply buy items. While that will be a major component of the stores, think of them as multi discipline assets. Buying product, picking up product purchased online, returning goods at the store, receiving training or services from the store, even distributed warehousing capacity for Amazon. Second, even if the stores lose money, expect Amazon to push for these stores to be nodes within their digital footprint. Points of data and behavior gathering. How much information can Amazon gather from their interactions with customers in these locations? Finally, is this a marketing gamble for Bezos and company? As certain brick and mortar players struggle with their footprint, is Amazon announcing it will be opening up stores a message to the world declaring that they truly are looking to be the dominant retail giant for years to come?

As a recent headline article in the Economist points out, Bezos and Amazon are trying to create the ultimate customer centric company, but they are also aware that other players are looking to sell something Amazon doesn’t have – that is the experience of physical retail. Traditional retailers still have a card to play, but they better be laser focused on how to differentiate through this channel, because Amazon isn’t standing still.

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Will the ghost of Christmas past haunt retailers?

The Charles Dickens’ novel, A Christmas Carol, Ebenezer Scrooge gets a visit from the ghosts of Christmas past, present and future. They all take their turns trying to melt the dark heart of Scrooge. Eventually Scrooge wakes up with a whole new outlook on Christmas. So what does this story have to do with retailers and their Christmas? A recent story in the Wall Street Journal points out that retailers, while trying to resist it, have looked to employ deep discounting to flush out inventories and to capture customers this holiday season. Click here for article.

Retailers, as we have stated on this blog, have been scrambling to keep up with customer demands and the shifting sands of retail. We witnessed this even more so this year during the beginning of the holiday season – Black Friday. Retailers were scrambling to allure customers to both their brick and mortar stores as well as their eCommerce assets. Clearly they are continuing to scramble to figure out what is the best combination of discounting and holding the line. The challenge for retailers is that the ghosts of retail past are exactly that…the past.

Consumers have become accustom, if not expect to see discounting take place early and often. Why would the major gift giving season of the December change this mentality? If everyone is discounting…is there really any discount? So what are retailers to do?

  • Consumers expect discounts…so you will have to provide them. But can retailers be savvier with them? Follow the Jet.com model – provide discounts but some caveats such as non-returnable. Rather than simply discounting, bundle items. The article points out discounting done at Ralph Lauren on a scarf, what about bundling it with gloves. Discount the bundle but look to capture a higher amount of revenue.
  • Lean on your supply chain network for greater nimbleness – the ghosts of Christmas past never had to deal with such new fulfillment models as deliver to home, order on line and deliver to store…add these to the traditional brick and mortar distribution methods. Underlying all these new models are retailers’ supply chains. The ability for retailers to position inventory, respond to demand and fulfill more effectively is vital. As consumers expect more from their experience, retailers need to keep pace. The supply chain is the best way of doing so.

No one wants a visit from ghosts, let alone during Christmas. Retailers are seeing ghosts themselves. They are reacting to consumers’ demands and leaning on discounting to draw them into their stores. The ghost of Christmas past when they had control of their pricing is exactly that, the past. Focus on the future, the game is constantly changing. Nimble retailers, who leverage their supply chain network will have the opportunity stay ahead of their competitors.

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NRF 2017 – continuation of the age of the consumer?

What a year 2016 has been. With a unexpected result in the United States presidential elections, the United Kingdom deciding to leave the European Union, one of the world’s largest shipping companies (Hanjin) going bankrupt, Olympic games being held for the first time in South America to name a few, I think we are all ready to close the chapter on this year and look forward to 2017. With every new year we in the retail world, also begin to look towards our annual pilgrimage to the Javits Center in New York City for the biggest retail show of the year – NRF. I have lost track of how many of these I have attended. The nice part is they always teach me something, there is always something new and exciting. So what should we expect during this version? Here are some trends I would keep an eye on:

  • The store version 2.0…or is it 3.0 – Okay okay this might be boring and something that I already discussed last year, but the reality for retail is that the store is continuing to undergo a massive metamorphosis. The age of the massive, cold, heartless store is over. Stores will remain points of sale and fulfillment, but how they achieve these goals is what is continuing to evolve. Are retailers going to leverage stores as do brands such as Restoration Hardware with certain stores that are truly only showrooms, allowing the consumer to experience the furniture and housewares in a variety of settings? Will stores morph towards the Apple Store model – a fulfillment center, a showroom, a service and maintenance center. What about stores such as Bass Pro shops, a store where the experience is as much a part of the store as is purchasing product. Brands and retailers will continue to work on figuring out what their stores need to resemble or what mix they want to employ. This will have an impact on their inventory strategies, labor mix, store technologies and integrated omnichannel strategy.
  • Retail supply chains, back to the glory days? An interesting report came out recently from the University of Auburn and RILA that looked at where retailers were going to invest their funds over the next year. The supply chain, while not earth shattering news, was one area of focus and investment. But, it is investments not in squeezing out more cost savings from the supply chain but instead investments towards making the supply chain the engine for growth and expansion. I couldn’t agree more! The primary function of a well-oiled supply chain is to get the right product or service, to the customer at the right time, right price and for the right margin. Simple! Too often retail has looked at supply chains as where they can squeeze out cost and instead looked to the customer facing assets – web sites, eCommerce, mobile, CRM to name a few – where they should invest treasure with the idea of capturing customers. This remains important, but now retailers, the smart ones, are recognizing that unless they have a nimble and efficient supply chain, can they meet their customer’s expectations? Expectations that are stoked by, at times, overpromising with the front end bells and whistles? It will be interesting to see how supply chains are discussed and viewed at NRF.
  • IoT and digital how are retailers doing? Last year it was interesting to see the number of vendors and discussions that included some degree of IoT (internet of things). Will this hold the attention of the audience again this year or are already past this? I hope not. Reality for retailers and really most industries is that the digital journey, of which IoT is a part of, is only beginning. The digital transformation – where companies are raising expectations to expecting over 40% of their revenue will be generated from digital by 2020[i] – is only beginning. How will retailers begin to adopt digital technologies such as smart displays, virtual reality, connected products via IoT, greater digital connectivity with both customers and their ecosystem? We cannot, and I trust we have not, buried the idea of digital transformation or digital enablers such as IoT. It will be interesting to see how much of the narrative continues to contain a digital focus at NRF.

These are three big themes I will be looking for at NRF. You might ask yourself – well what about omni channel or mobile commerce or even social commerce. I am sure these topics will remain a constant. However, I think it is time we stop trying to categorize commerce and just call it what it is – commerce. There was a great article earlier this year from the Harvard Business press that talked about consumers moving to a model of ambient commerce. A world where being able to purchase, transact and acquire products is always on. Consumers no longer have to think about shopping or transacting. Retailers must be aware of this new reality.

A few weeks away from our annual kick off for retail in New York City and NRF. Hope to see you there.

[i] Gartner, “Create an Industry Vision for Digital Business.” April 11, 2016

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The struggle for retailers – How do I fulfill all those orders, on time and within budget?

It’s December and retailers have kicked into high gear to meet the increasing demands of holiday consumer shoppers, both in store and online. If the Thanksgiving to Cyber Monday time frame in the United States is any indication, the strain felt by the retail supply chains is not going to subside during the Christmas season.

A recent article in the Wall Street Journal highlights the struggles retailers such as Toys “R” Us faced last year when it came to fulfilling all the online orders that taxed their systems. Click here for article. So what are we to make of this? Should retailers

Plenty to go around! If your supply chain is up to par.

Plenty to go around! If your supply chain is up to par.

throw their hands up and allow the mighty Amazon to march on, unabated? Of course not. Retailers must be increasingly savvy when it comes to their integrated online and brick and mortar strategies.

  • Be judicious with online promotions. Easier said than done, as the majority of consumers expect to get deals online, and better prices. But, retailers need to start being disciplined with their promotion and pricing strategies, and avoid running a promotion for the sake of it. They truly need to understand why and how this promotion will impact their bottom line.
  • Have a network view of all distribution nodes. The advantage traditional retailers have is the real estate they have invested in. While it is not always a positive, retailers must take a holistic view of their assets. Can they distribute popular, standard or fast moving items from their stores? View them as forward-positioned distribution centers. Hold back inventory that is more unique, less likely to be mass purchased back in true distribution centers.
  • Don’t be afraid to set expectations with customers. This is difficult, especially considering Amazon isn’t shy about taking a financial hit on some of their fulfillment promises. But why can’t retailers have a deeper understanding of their product assortment with associated costs? Certain items need to have a cutoff date – if you do not order by this point then there is no guarantee it will arrive by the desired date. Yes, this is available sometimes, but make these options crystal clear.

At times, retailers must feel like they are the dog that constantly chases cars – run, run, run, but alas the car is always faster than you. In a way retailers need to stop focusing all their attention on the car (aka Amazon) but rather focus on other dogs – can they out run them? Focus on your supply chain network. Is it flexible enough to allow the retailer to seek new offerings, new business models? Without the visibility and understanding of what is possible, what can you really hope for?

Retail faces a daunting task. Not only do they have to compete with the likes of Amazon but they have to keep up with our, the consumers’, needs and desires. A challenge, but a great opportunity.

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When we all become a market place, it is up to your supply chain network protect the brand

In a recent article, Crate & Barrel, announced that it would start selling other brands on their website. Click here for article. This is not a new concept. Companies such as Lord & Taylor, Saks, Macy’s, Walmart and JCrew are already selling other brands on their ecommerce platform. In the case of JCrew you can even purchase products such as New Balance sneakers in their brick and mortar stores as well. According to the WSJ article, there are more than 250 retailers already offering this functionality. This begs the question, are retailers and more specifically their eCommerce activities gravitating towards become more of a market place?crateandbarrelicon_400x400

Are we seeing another influence on retail from the likes of Amazon and Ebay, two online pioneers that made their businesses through offering their clients almost unlimited selection of products from a wide swath of brands. For the likes of Crate & Barrel it makes sense for their customers. For obvious reasons, they want customers who come to their web site to have access to the widest array of goods for the home. However, they cannot grow their inventory offered as fast as if they allow others to join their marketplace. Rather than spend time scouring for new products, niche vendors and the latest trend, Crate & Barrel can open up their platform and incentivize these brands to come to them. Makes sense, right? Yes, but there are some key issues these brands have to consider:

  • Transforming their eCommerce assets into a marketplace places greater pressure on the brand’s supply chain. The value that an Amazon offers when it allows vendors to sell their products via the marketplace is the massive supply chain and fulfillment engine that goes behind that front end web site. Retailers like Crate & Barrel and other traditional brick and mortar brands have struggled to seamlessly and easily bring eCommerce to their offerings. If they now take on a greater array of product through their site, product that falls outside their control, can their supply chains keep pace?
  • It’s the brand stupid. One appealing factor for brands to associate with the likes of Crate & Barrel is to ride on their brand presence and reach. For Crate & Barrel the positive is being able to offer their customers a deeper and wider product assortment. The risk for Crate & Barrel is that it is their brand that is on the mast head. What happens if one of the vendors they allow onto their online asset sells defective or subpar products? The real issue is that it is the brand, Crate & Barrel that will suffer.

So what does this mean? As more of these brands begin to explore the strategy of creating mini-marketplaces on their web site, they have the opportunity to expand their offerings to their customers (don’t forget as we have stated many times, the customer has now gained the power in the retail relationship) but they will have to rely upon their supply chain network at a more intimate level. These brands must be able to have absolute clarity with regards to which suppliers are being allowed onto the marketplace. There must be absolute understanding into the product offering, what happens post sale and how will disputes be handled by the entities involved. They must also have clarity as to the impact these relationships have on their financial supply chains. This requires a supply chain network that has a deep degree of insights and visibility, but also the capacity to have the flexibility to manage a marketplace that itself needs to be nimble enough in order to truly achieve the aspirations of the medium.

This is yet another example of the continuous evolution of retail. I wonder when I can start buying my groceries with that Basque Honey dining table on the Crate & Barrel site?

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