NRF16 Retail’s Big Show – what I expect to hear this year.

Every January for the past few years I have made the trek to the Big Apple and spent the better part of the week at the cavernous Javits Center for the National Retail Federations Big Show. The event feels like the official kick off for the year. While I know many who grudgingly make their way to NRF, I have always enjoyed my time at the event. So what about this year? What will I be looking for from the show?

• The continued evolution towards the endless aisle – Matrix Commerce, is all about the merging of physical retail with eCommerce in all its forms. Where commerce is thought of without the distinction between what happens in a store or in cyberspace – it is just commerce. Obviously this is not a new concept, more an evolution of omni channel retail. One key need for Matrix Commerce is to be able to meet customer demands anywhere those demands emerge from – understanding inventory availability is the key. However, this remains a major challenge for retailers and holds back Matrix Commerce to take full flight. Too often retailers are still struggling to merge multiple systems, those that serve physical stores and those that may serve eCommerce, catalog driven sales and other channels. Often times these issues stem from past decisions made to treat eCommerce as separate from their traditional business – brick and mortar. Today more retailers are struggling to find ways to consolidate these systems and begin to gain greater visibility into their overall inventory positions. I will be interested to see what are the solutions and processes being offered for retailers. Without the ability to gain this visibility, the ability to achieve the endless aisle retailers are looking for will remain a major hurdle. Retailers cannot expect to be flexible and capable of meeting customer demands, regardless of which channel generates that demand, if they do not have true view into their inventory positions. This is not simply where inventory is, but what inventory has been promised and how to match order priority with accessible inventories. I am curious to see how the likes of Infor, Software AG, IBM, Aptos, Oracle and others are tackling this challenge.
• Workforce empowerment picks up momentum – An area that has picked up in intensity over the past year is the ability to bring smarter solutions, information and insights down to the store associate and even distribution center employee. How to bring more insights and tools to the store associates runs in parallel with the redefinition of the store itself. Stores are being asked to do more – become destinations through hosted contextual experiences within the stores, leveraging store inventory to fulfill orders, act as return depots and embrace show rooming. A key aspect of these new store uses will also change the store associate role within this infrastructure. In order to maximize both the store as well as the associate, retailers are looking for solution providers to offer ways in which technology and other solutions can be integrated with the store associate daily activities. Think mobile tools, wearables, greater system integration and better business processes all being put on the floor of retail brick and mortar locations – right in the hands of store associates and managers. This is also true for distribution center labor. With continued rise of eCommerce, fulfillment takes on a new dimension where distribution center labor is asked to not only package inventory to be delivered to stores but to provide direct to consumer fulfillment as retail supply chains are more flexible with regards to where they service demand. Look for more discussion, from such players as Salesforce, Netsuite, Kronos, and others, around new solutions and efforts made by those attending NRF on how they can empower retailers’ workforces with enhanced tools and insights.
• Tackling last mile logistics – All one has to do is look back a few weeks and realize that the crush on logistics, especially the last mile portion, continues to be a strain on the retail supply chain. Stories such as the one from the University of Connecticut’s mail room that is overwhelmed by package delivery, that Jet.com had to apologize to some of their customers for not being able to meet holiday order deadlines and real estate management firms such as Camden Property putting in policies that restrict and even prohibit package delivery to their properties, are all examples of the last mile retail crush. As we see more retailers offering free shipping and returns or the likes of Amazon and Jet.com incentivizing customers to look to receiving a wider array of products delivered to home – this issue will not go away. I am looking to NRF to learning of new and innovate manners vendors are looking to address this issue with their customers. How are traditional logistic solution providers such as JDA, Manhattan Associates, Oracle to name few are tackling this issue and what innovate strategies are they helping their customers implement?
• The revolution in customer relationships, beyond CRM – I hesitate to call this CRM…reason is that I believe that the connotation associated with CRM is limiting to what is really being offered to retailers. What is key in today’s retail world is getting a rich view of the customer, and not only at those customers’ interactions with the brand. Retailers, just like they do with their inventory, must approach customers across all channels that they touch the brand through. Similar to understanding your inventory position, knowing all the touch points and the context of those interactions are not easy to achieve. As retailers must pull from multiple and often time isolated systems, it is a daunting task to create a clear picture of consumers. Understanding goes beyond creating the 360 view of the customer but also how to apply this within the context of the store and even beyond. What are the technologies that can be leveraged within the store to build on this customer knowledge and help convert and build deeper relationships between the customer and the brand. Looking at NRF16, I am interested in seeing how the likes of Salesforce, Oracle, Engage.cx, SAP Hybris, Zebra Technologies to name a few are taking on this challenge.

I am bracing myself for busy and hectic 4 days in New York, but I am also looking forward to absorbing a lot of great information, seeing old friends and meeting new ones. Will I see you there? I hope so! What are you hoping to see at NRF this year?

Happy New Year 2016! Looking forward to a sweet 16 year for Supply Chains

Happy New Year to all, I hope that your 2016 is already off to a great start. Looking forward to this year there are some exiting changes as well and continued progress in other areas. Here are some trends we are focusing on for 2016:

• Retailers will continue to seek new solutions and services to empower their stores: in 2015 we started seeing greater efforts and emphasis on the role of brick and mortar stores. Written off as irrelevant, even a burden a few years ago, retailers’ views of their real estate assets has taken a turn. Brick and mortar stores’ role in the retail supply chain will continue to grow in importance. This momentum is due to the evolution of how stores are being leveraged by retailers. Embracing show rooming, leveraging stores as distribution centers, creating contextual experiences within the store to drive traffic to name a few trends, are all making stores matter again. Most significantly the redefinition of the store’s role allows traditional retail to tackle the pure eCommerce players. 2016 will continue to see this evolution of the store. Gaining improved inventory visibility, empowering store associates with greater information, enhanced operational data to allow more business processes to be tested and adopted are all areas where retailers will be seeking appropriate solutions. Look for retailers to lean on their solution and service providers to bring them the necessary technology and business processes that can allow retailers to continue to transform their physical assets. Solution and service providers must work with their retail clients to not only provide technology or business process solutions, but to also offer strategic insights and ideas. Technology is not the panacea but the enabler for new ideas and processes.
• Logistics continues to feel the strain: Your supply chain is only as strong as your ability to minimize the friction associated with moving inventory and products throughout your supply chain. This burden falls on logistics – rail, ocean, air, trucks even bicycles and donkeys are all part of our logistical network. This past holiday season witnessed another situation where the strain on the logistics network can rear its ugly head. eCommerce retailer Jet.com had to apologize to some of their clients for falling short on being able to deliver products in time for Christmas. Logistic giants FedEx and UPS had to jump through some hoops to meet the delivery crush. Coincidentally, over the holidays,  eCommerce giant Amazon announced it is exploring adding an air cargo arm to their distribution assets. While eCommerce is growing at a steady 1o-15% year over year since 2012, the strain it is placing on logistics is disproportionate – due in large part to seasonal aspect of certain package delivery. The strain is also starting to pop up in places such as college campus mail rooms where they are being overwhelmed by services such as Amazon Prime. This trend is not going to disappear once the calendar flips to 2016. Transportation and warehousing will continue to feel the strain of keeping up with the accelerated evolution of supply chain in 2016. Look for continued efforts from service and solution providers to work with their customers to continue to find innovate manners to handle the crush of logistics.
• Explosion of disruptive technologies continue to grow: Whether it is IoT (internet of things), robotics, drones, 3d printing or virtual reality to name a few, these disruptive technologies will continue to grow in importance within supply chains. IoT is already well entrenched within manufacturing and logistics, in 2016 look for this technology to grow in importance with regards to the retail supply chain. Robotics are also well know within manufacturing, but look for this technology to play a greater role in places such as customer service and inventory management in retail. Drones are getting much attention, somewhat negative, post holidays as those who unwrapped them as gifts are wondering if they need to register with the FAA, there was even a near disaster during a World Cup skiing race when a drone literally fell from the sky, click here for video. Reality is drones have a role to play in our supply chains – the genie is out of the bottle and properly leveraged they can reduce friction from our supply chains. As technology giants Amazon and Google continue to push on how to leverage these machines to address last mile delivery. Additive manufacturing will continue to play a role in the manufacturing process, but will also create new business models. Companies such as Lowes are already experimenting with 3D printers in their stores, allowing customers to have custom products manufactured on site.  3D printing is already playing a significant role with manufacturers such as Airbus and Boeing, but we are only at the cusp of how this disruptive technology will play in our supply chains. Finally virtual reality will continue to play a role in places such as retail – allowing customers to experience product as well as in supply chain design and CAD software. As mentioned above, we see warehousing and other logistics being strained as more companies look to add more of these assets, leveraging virtual reality allows for better testing and understanding of how these capex projects will turn out. Imagine being able to test and try out a full scaled model of a plant or warehouse via virtual reality. Look for these technologies and others continue to grow in importance within our supply chains.

Every year at this time it is always interesting to look back and see what the prior year held for us and more fun to look forward to the coming year. As I have become more of an optimist as I have grown older (is that normal?) I am looking forward to 2016 and some of continued evolution of these technologies and trends.

Happy New Year to you and your loved ones!

Foot Locker same day delivery – embracing Matrix Commerce

Earlier this week Foot Locker announced it was going to start testing same day delivery for consumer purchases. Click here for the press release. This is an excellent case study of what we at Constellation Research are discussing with Matrix Commerce. It is a prime example of where the consumer voice and needs have converged with the retailer’s supply chain.

Foot Locker will be testing the same day delivery in 5 locations between the San Francisco and the Los Angeles area. In order to address the last mile delivery challenges, Foot Locker will be partnering with Deliv for the logistics of getting the product from the stores to the consumer’s location. Think of Deliv as doing for small parcel shipping to consumers as what Uber did for personal transportation – crowdsourcing last mile transportation. A very interesting challenge and service to say the least.

The voice of the consumer continues to grow when it comes to asking for and seeking the ability to get their products where they want it and how they want it. For retailers such as Foot Locker it is imperative that they determine how they can meet these demands from their consumers. They are already addressing their customer’s needs by allowing for online ordering with in store pick up. This new pilot is the natural next step.

As Daphne Carmeli, CEO at Deliv stated, “Foot Locker who surpass their customer’s expectations by giving them the ability to receive their merchandise when they want it, including same-day…” This is one area where the likes of Foot Locker, who are brick and mortar retailers at heart, have an advantage over eCommerce giants like Amazon. Foot Locker already has a number of distribution centers (DCs) that are located close to their customers – the actual Foot Locker stores. With the likes of Deliv’s services, they can now solve the last mile delivery issue that has made such services a logistics headache.

This success of the pilot project will be interesting to observe. Some questions a retailer such as Foot Locker will have to address:

• Can the staff in their stores be able to not only service the customers that come into the physical store, but also efficiently pick and pack the orders? Store personnel are trained to service a customer in person, Foot Locker will now have to ensure proper training for this staff to have to properly prepare orders for home delivery. Not as easy as it may sound.
• How does a crowdsource delivery offering like Deliv handle customer interactions? Once you start delivering products to consumers’ home you are exposing your brand – the person doing the delivery represents your company whether or not they are on your payroll.
• If your store acts more and more as a DC, how do you handle returns and restocking issues? Again, similar to the first bullet point, your staff is trained to sell products to customers who are in the store, now you are adding tasks to their jobs. How ready are they to handle this added demand?

The ability of companies such as Foot Locker to offer same day delivery is a natural progression when it comes to Matrix Commerce (other retailers such as Macy’s and Bloomingdale’s also announced this week they are running same day delivery pilot projects). That does not mean the challenges aren’t there…on the contrary the complexity remains and may become increased as Foot Locker travels down the learning curve. These companies are making the correct choice when it comes to offering such services, but they need to show patience with the process. There will clearly be some growing pains. However, similar to when eCommerce exploded on the markets in the late 1990s, the genie is out of the bottle. Now it is a matter of how well retailers and their partners meet the ever increasing speed for fulfillment.

As the Foot Locker EVP of Operations, Mike Owens, stated, “We want our customers to experience speed in everything they do, from shooting hoops to on the track.” It is all about speed…just make sure you don’t sacrifice quality for speed!

Get your milk and eggs delivered by … Amazon. The eCommerce giant tackles a big nut

One of my fondest memories as a child was being able to spend the summer with my grandmother in France. At the time she lived in a small village about an hour from Paris – Morsains. The village had no commercial establishments so every morning a number of food trucks (really vans) would come by and offer the residents the ability to purchase the usual staples: fresh baguette, cheese, meats, milk to name a few. As a kid it was always exciting to hear that horn (they would honk when they got to the village), because sometimes you were able to purchase candy or some pastries as well. This was back in the 1980s. Interesting that the ability to deliver in this manner lost momentum. Of course we saw this type of delivery start up again in the 1990s when the dot com boom struck. Everyone from Webvan to Kozmo looked to bring just in time food delivery to your front door back to the mainstream. During those hey days I was working at Forrester Research and remember seeing these companies come to brief us and ask our opinion but also, especially when it came to Kozmo, I would see them deliver to myself and fellow co workers on a daily basis. Unfortunately, these companies were not able to solve the nut that is grocery, last mile delivery. Webvan in particular ran into major problems – how to delivery if no one was home, what to do with perishables, what about frozen goods? I remember one discussion we had at Forrester that to be successful Webvan would have to find a way of putting refrigerators in customers garages our somewhere accessible if no one was home. But the investment that would require would destroy their margins…oh wait those already got destroyed. Unfortunately, Webvan and the likes burned through a lot of cash and could never capture profitability. Traditional grocery chains such

Amazon really going after UPS and FedEx?

as Whole Foods have also expanded their home delivery. So consumers have plenty of options. Now add another option…a big one. Amazon.

The eCommerce giant is finally wading into the online grocery and home delivery market. Not a surprise. And could have a major impact on the market. Can Amazon be successful? Of course. Unlike the likes of Webvan, Amazon has been perfecting their order management, inventory optimization and delivery for the past 20+ years. In doing so they have also built a fairly vibrant business (to the tune of $60b in revenue). Groceries are not going to make or break Amazon. However being able to apply what they know of eCommerce will give them a leg up on the start ups from the 1990s. Also, if their past is any indication, they will ease into this. They have already tested this out in their home market and are slowly rolling this out to other large metropolises where their distribution network can be best leveraged. Amazon also knows how to manage multiple smaller retailers. Have you ever noticed when you order products on Amazon that many times it is from another supplier…not named Amazon. They understand how to tie inventory from disparate sources, consolidate payments and move merchandise from these retailers.

Of course the food business is different than delivering books or CDs to your door. The largest issue is around food safety. Unlike the majority of other products that Amazon can deliver to your front door, groceries have a shelf life. This has haunted others who have ventured into this realm. With Amazon’s slow roll out of the offering I am going to assume they are working out the kinks with this aspect. They are already tackling one of the issues with forcing users to choose from two windows for delivery – hopefully cutting down on non deliverable items. That is a major issue with groceries…re-slotting a book in the warehouse is one thing, but having to transport and re-warehouse items like milk or seafood or frozen good is a whole other dilemma. If Amazon can solve this problem, how much harder will it be to deliver other items “same day.” Probably not that difficult. As this article points out, click here, if Amazon can solve the math they can most likely deliver anything from apricots to zubaz pants.

Finally could this foray into grocery delivery also lead to Amazon creating their very own fleet of trucks? Going after the last remaining dollars that Amazon has to share? Rather than having to rely on FedEx or UPS, Amazon can just leverage a delivery fleet to ship some of their items. They can also pocket all the shipping fees. One could envision a “value” add service, an expansion of the Amazon Prime. Pay for a premium service and 75% of your items will be delivered same day via the Amazon truck fleet. Cutting out reliance on 3rd party logistics.

Maybe Amazon’s foray into groceries is not necessarily about getting you fresh produce, but about learning how to do delivery, how to run a shipping fleet. Amazon has made investments by acquiring companies like Kiva to better run their warehouses. Now they can focus on how to most efficiently get material from the warehouse to your front door. If they can learn how to efficiently run the last mile logistics…look out world a new supply chain powerhouse.