Amazon’s interesting play with their new stores.

Hey look Amazon is in the news again! Surprise surprise. They just announced their first Fresh grocery store – click here for article. On the surface it appears to be a traditional grocery store, but with a number of technological goodies from Amazon. From Amazon Echos allowing patrons to ask for directions and help in the aisles to smart shopping carts that allow for frictionless transactions. Of course all this can be tied to the customers’ Prime account. It is almost as if Amazon was looking to combine the online experience to the brick and mortar world. So is there something beyond simply grocery shopping here? Absolutely.

Bezos always has some secondary goals with his efforts. Other than world domination. Let’s go beyond the fact Amazon wants to capture even more of your household spend. This concept grocery store is an opening to more micro-fulfillment centers for Amazon. Amazon is known for opening mega fulfillment centers to service geographic areas. These distribution centers are sprinkled across the country, with the idea in mind to ensure customers are within easy reach of an Amazon fulfillment center. If you want to see where the centers are located, check out this wiki page. But what about getting into denser population centers. Where having a massive distribution center might not be optimal? What about having a micro-fulfillment center where consumers are trained to interact with automation? Hmmmm….exactly.

These Fresh grocery stores will allow Amazon to offer a location for their

customers to get groceries and pick up or return orders. They have an opportunity to interact face to face with these customers. Amazon will also be able to fulfill online grocery orders within the store. Adding the automated grocery cart mimics similar technology leveraged in traditional warehouses where eaches picking is done with automation. Could Amazon leverage the automated shopping carts to do order picking when the store was closed to the public…or even where the store was live. Amazon could basically flip between a traditional grocery store and a micro-fulfillment, warehouse lite. The technology could empower more sophisticated home delivery or BOPAC (buy online pick up at curb) from the store. Amazon could also leverage these facilities to train consumers to interact with more in store automation. Consumers would be introduced to the automated shopping carts. A shopping cart that could guide the consumer through their shopping lists. Next step would be getting used to having other automated devices doing replenishment, cleaning, stock counting or security within the store.

These new store concepts are not simply about getting you to buy groceries from Amazon. They could prove to be the beginning of new play from Amazon to create more micro-fulfillment centers and introduce more automation into the shopping experience. So the ecommerce giant continues to expand its brick and mortar presence. How times continue to change!

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.

Digitally native brands, need customer touch points…you don’t say.

A recent interview with founder of Bonobos, Andy Dunn, caught my eye. In large because of the shade he threw on what was previously his mantra – digitally native brands are the future. According to Dunn, “I don’t really like digitally native vertical brands,” Dunn said. “What gets me excited are brands that are really strong and direct-to-consumer, but also have got omni.” Click here for the article.

Interesting 180 degree change from someone who was a strong advocate for brands being “digitally native.” Also interesting to see some folks falling all over themselves on social media trumpeting this statement as a “eureka” moment. Let’s rewind to when companies such as Bonobos, Casper, Warby Parker and others were seen as the future of retail. Pundits fawned over how they had captured mind share for a specific part of retail, and bypassed traditional vendors by not having the burden of that pesky brick and mortar albatross. Whether in men’s apparel, Bonobos, mattresses, Casper or eye wear, Warby Parker, these brands were turning retail upside down. One aspect that was ignored, as these digitally native brands were making noise, was that the granddaddy of all digitally native brands – Amazon – was starting to dip into the physical world. Whether via their own branded pop up stores, Amazon Go stores or when they made the bold move of acquiring Whole Foods, the biggest digitally native brand was admitting what many knew – you cannot grow without offering some physical touch points for your consumers.

While it is refreshing to hear Andy Dunn talk about the need to have a multi-pronged approach to retail, those that look at this as an “a-ha” moment are missing the point. Digitally native retailers that are just now realizing this are already behind, just like traditional retailers who scoffed at the dot com rise and saw that as a fad. What all retailers need to realize, if they haven’t already, is the digitally empowered consumer now runs the show. She dictates where, when, how and why she will interact with your brand. And she is not a one size fits all persona. Retailers need to be wherever that consumer wants them to be.

We need to pivot the conversation away from omni-channel, digitally native, brick and mortar or mobile to simple commerce. When consumers interact with a brand, the distinction between in a store, at a kiosk, on line, via an app has evaporated. Instead they expect and assume that the experience they have with that brand will be the same regardless of the medium. The challenge for retailers and brands is to constantly think of their touch points with consumers under this lens. How does my consumer want to interact with me? Where are some hidden opportunities to touch and amaze my customer?

I am glad to see Mr Dunn realizes the importance of multiple customer touch points. Sometimes you just have to continually repeat yourself to be heard.

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?

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?

Your supply chain – not simply about cost control

I recently attending the WWD CEO apparel summit in New York City. The event brought together a number of executives from the fashion world from the likes of Dior to Neiman Marcus, as well as fashion superstars such as Ralph Lauren, Vera Wang, Joseph Abboud and Diane von Furstenberg. Other than a fabulous two days at the Pierre Hotel, I took away some key themes to the event. The main talking points:

• Supply chains are for more than simply cost control. Supply chains have long been seen as centers to control cost, but they are finally starting to be recognized as tools of differentiation, tools that need to be leveraged to gain opportunities within the space. The CEO from Neiman Marcus highlighted as his top initiative the supply chain. Without an efficient and robust supply chain, all the efforts Neiman Marcus are making to redefine their stores and customer interactions will fall short. The supply chains must be increasingly nimble to meet the shifts within the retail world. As we pass through the omni channel stage of retail and evolve to a state of constant retail, or ambient commerce, the supply chain has to be nimbler and more flexible.
• Stores aren’t dead, just being redefined. As mentioned above, the store is not dead. Far from it. Brands such as Neiman Marcus recognize that the physical store remains an essential cog in the retail universe. However, it is undergoing a transformation and will continue to undergo changes. From bringing beauty salons, restaurants or coffee shops the real estate footprint for fashion and retail. The question for these brands is how do they better manage their ability to fulfill. As stores change dynamics, what are the repercussions of the overall network’s strategy? Brands and retailers must become even more sensitive to how they manage their inventory positioning and fulfillment as their distribution footprint constantly shifts. The retail footprint is evolving, the store is being redefined and driving the overall retail experience. As was often stated at the conference – retail and fashion cannot view physical stores as separate from web commerce, but both must go hand in hand. All one had to do was listen to Hudson Bay and why they acquired mobile eCommerce darling, Gilt. Truly creating a full retail footprint.
• Consumers are the queens and kings of fashion and retail. The consumer runs the show, according to the numbers presented by MasterCard, close to 70% of the purchases are made by a female buyer. That buyer is also becoming increasingly driven by experiences and driving the relationship. Clearly the consumer continues to grow in strength. She expects to have unique products available, experiences but does not necessarily want everything immediately. Consumers want to have visibility into when they can expect product, but do not necessarily expect it always right now. Retailers and the brands need to keep this in mind, while they need to be sensitive to their consumers’ wants and desires, they must balance the importance between experience, available inventory and meeting consumer needs.

Hearing the presentations from main stage as well as the hallway conversation reinforce the notions that retail continues to evolve, and at an unprecedented pace. While these changes are happening at a breath taking pace, the fundamentals around inventory, supply chains and the consumer must be kept in focus.