eCommerce’s moment to shine, but what about post-Covid 19?

Much has been written and discussed about the current state of retail during these unprecedented times. Like many of us, I am staying at home, venturing out only to get groceries or to the pharmacy. Other than that, when we do leave the condo it is to walk the dog or get some exercise. No more excursions to stores or the mall, no more date nights at restaurants or meeting colleagues at coffee shops or bars. Our retail muscle is atrophying before our very eyes!

Of course not all retail is suffering. Online grocery ordering has been skyrocketing in this era of social distancing. The most recent data showed a 37% increase in April online grocery sales from March.

What’s interesting is the number of customers only grew by 1% and spend per order by 3%, but clearly the order number jump by 33%. So those that are leaning on online grocery are placing more orders. Another interesting data point – 26% of homes that had not purchased online groceries in the past 30 days are highly likely to do so in the next 3 months. Interesting numbers to say the least.

Of course not all categories are enjoying such a bump. A recent New York Times piece looks at the categories that are doing well, and those that aren’t.

No surprise that travel has taken such a beating during this time…we aren’t suppose to leave our homes!! So not sure how we are suppose to get on planes and trains. But what is even more interesting is to see what categories have spiked in terms of online sales. Disposable gloves have seen a 670% increase year over year sales and bread machines 652% increase in online sales. Some of the biggest categories that have dropped? Luggage -77%, Men’s swimwear -64% and Bridal clothing at -63%…no surprise there either. Click here for a more complete list. So coming out of Covid-19, do we expect to see disposableglove.com as the new go to ecommerce site and all of grocery shopping being done on line? Of course not.

Online Retail peaking at 22%?

But what do the numbers show us? That eCommerce, in terms of “percentage of change” has slowed down before the current pandemic. In our current state the categories of eCommerce that are peaking, are not necessarily those that will be sustained post Covid19. But what should we expect?

• A bit of an acceleration of eCommerce growth continues – I realize I have stated that we cannot simply assume that eCommerce trends will continue, but I am not naive enough to believe things will go back to “normal.” I certainly expect a number of consumers who have been forced to try eCommerce will see the utility. That utility will continue post Covid19. Specifically in having grocery and other staples delivered.
• Rushing to brick and mortar. Wait…what? Yup. I expect a burst of consumers rushing out to physical retail locations. Think about it, we have been stuck in our homes for close to 6 weeks now, we are itching to get out and do something! Retail is part of that activity. There will be a resurgence of retail-therapy…in the store. Savvy retailers will look to creating in store experiences that not only excite consumers to be in the store but also provides a safe and healthy environment. Those retailers that offer such an experience might find a new loyal customer.
• Increased fulfillment experiences. Before Covid19 we had already started to see new fulfillment methods: BOPIS, pick up lockers to name a few. Of course we are now seeing BOPAC (buy on line pick up at curbside) becoming pivotal for retailers. Look for more fulfillment options from retailers to meet customer needs. Expect the consumer to start demanding these as well! For example, I wouldn’t be surprised if consumer pressures force legislation to loosen up regulations that have grounded drones for last mile distribution.

Let’s all hope we go back to a new normal soon, meaning we can slowly start to interact with one another, leave our homes, go to church, have a dinner in our favorite restaurant and yes shop in stores. Of course things will never go back to “normal,” then again I would argue what was that normal you speak of? Haven’t we seen retail undergo constant change since humans first traded from our caves?

The pandemic has made some of our retail muscles atrophy, while building up other muscles. Stay healthy everyone, stay strong. We will emerge from this and so will retail. It is much more resilient than we realize.

Digital disruption on verge of taking out historic retailer

The 94 year old retailer, Radio Shack, is on the verge of no longer being in existence. Sad, but another example of digital disruption in the retail supply chain. Radio Shack was one of the leading retailers when it came to cutting edge electronics. I remember as a kid going there to get a new tape recorder (yup I played my first Van Halen cassette, 1984, on a tape recorder from Radio Shack) or when cordless phones came out, Radio Shack was the go to place to acquire such technological marvels. There is a picture circulating around social media about all the technologies you could have at Radio Shack in the 1990s…that are all now contained in that device we carry in our pockets – the smart phone (see below). Talk about digital disruption.

As the rise of Amazon took place in the 1990s, electronics being sold more widely and consumers becoming more digitally savvy, Radio Shack found itself in a difficult situation. The store’s footprint was too small to carry the wide array of SKUs that a Best Buy or Circuit City could (not that is necessarily a long term advantage as the latter is out of business and the former struggling) and it could not compete with the online force that Amazon had become nor the discounting that the likes of Target and WalMart offered. Not a great place to be for Radio Shack.

Everything on this page is now in your smart phone…talk about digital disruption

So now the stories are that Sprint may take on or co-brand some locations. Makes sense for the telecom giant as they look to increase their reach with their brick and mortar stores. Unlike Radio Shack, Sprint only needs to carry a very focused and smaller inventory – just mobile phones and tablets. Wireless providers like Sprint and AT&T benefit from having some brick and mortar for sales but also lean on them for service and customer support. The more intriguing option is the one where Amazon would swoop in and purchase some locations. Interesting.

This comes on the heels of Amazon opening their first brick and mortar store, something I wrote about a while back, click here for post. Does this make sense for Amazon? Some are pointing out that Amazon could use these stores to showcase products. Not sure I agree with that. Amazon already has that…it is called Barnes and Nobles, Target, Best Buy, REI, Toys R Us, Dicks Sporting Goods, Home Depot etc…why would they add a cost layer to get something they already have? They could use the locations for pick up and returns. Hmmm, that I might see as a more viable option. Radio Shack stores have an average of 2,426 square feet, a little bigger but similar footprint to UPS stores. UPS stores range from 800 to 1800 square feet. The Amazon/Radio Shack stores could provide similar services: receiving and holding orders or processing returns. With this level of service, Amazon would not have to worry about carrying SKUs at these locations nor having a large staff to manage need to manage the retail aspect. Could they also act as smaller distribution centers (DCs)? Why not. As Amazon is also looking to expand their own transportation fleet – in such deliveries as grocery – these smaller outlets could also be staging areas for some inventory. They may even have their own drone delivery assets at each physical location. Don’t laugh too loud, this might be closer then we think!

One topic we are covering in 2015 is the transformation of the consumers’ home into an extension of the retailer. Amazon moving into Radio Shack locations would allow the online giant to move in this direction. It could give users of such services as Zappos who are used to getting multiple sizes and colors delivered to their home to try on and then return, an alternative channel from which they can return their items. This move might allow Amazon to get a little bit closer to their consumers.

The 800lb supply chain gorilla continues to disrupt with payment services

Amazon announced today it was going to jump right into the deep end when it comes to physical, in-store payment systems. They have unveiled a mobile payment service for brick and mortar stores. Taking direct aim at other mobile POS systems – Square, Paypal as well as Google and Apple. From the reports, Amazon will look to undercut other mobile payment systems – taking 2.5% of transactions versus 2.7% for the likes of Square – to grow their market presence. They are giving merchants an introductory rate under 2% to build that beachhead (feels like a credit card invitation – 0% APR and then only a slight bump to 33%).

In the online world, Amazon already knows how to handle and secure credit cards. They are also well versed when it comes to mobile payments as their iOS and

Coming to a brick and mortar store near you…

Android apps’ success has demonstrated. The natural progression was to push into the brick and mortar space – where 90% of retail transactions live. In the near term I am not sure that Amazon will do more than offer a secondary maybe even tertiary option. Brick and mortar retailers could view the Amazon system as letting the fox into the hen house. It would be understandable if these brick and mortar players do not flock to embracing Amazon and their payment systems. But I am sure that the favorable financial set up will force a large number of players to give it some serious consideration. Whether or not Amazon is widely successful with this venture is secondary to what the eCommerce 800lb gorilla is doing with regards to their overall supply chain disruption.

A quick look at what Amazon has been doing to become the 800 lb gorilla in supply chain:

• Acquired Kiva Systems to add sophisticated robotics and automation to their massive distribution centers.
• Gobbled up the likes of fabric.com, CDNow, Zappos, Pets.com to constantly expand their ability to offer a wide array of inventory.
• Pushed out a tablet and now a mobile phone under the Fire umbrella. Both of which are really hand held sales terminals for Amazon to leverage.
• Started pushing last mile grocery delivery in certain markets with their AmazonFresh offering.
• Even leaking that they are thinking of delivering via drones.

This is in addition to their deep experience in the online retail world. Taken together and you have the 800 lb gorilla that is disrupting the supply chain jungle. Add to this the news of them pushing into the payment space and you see Amazon gaining access to POS data from brick and mortar, coupled with all the data they have on consumer online buying. Amazon is quickly aggregating vital data sources on how consumers buy, where demand is being generated and how it impacts the retail supply chain.

So now Amazon is dabbling in last mile logistics, continually working on more efficient warehouse management, putting portable POS systems in consumers’ hands and now putting POS systems in the retailers’ hands.

That 800lb gorilla might have added another 50lbs of lean muscle.