Tag Archives: Supply Chain

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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Take me out to the ballgame, take me out to the store – Flexible fulfillment is a homerun for retail’s biggest fans

Unlike most other sporting arenas, baseball stadiums truly have a soul of their own. Each ballpark has different dimensions. The fans, the surroundings, and the amenities make the experience unique to each and every team. And while no two games or stadiums are alike, watching America’s pastime in-person lends itself to a different, more universal kind of sport: retail.

With each new stadium visit, I like to come away with a little memento for myself or for my friends. Souvenirs are as much a part of the game as hot dogs, Cracker Jacks, and the seventh-inning stretch. And my recent visit to Atlanta’s SunTrust Park was no exception – especially since it just opened this year. Indeed, I had high expectations for the new home of the Braves.

 

The Braves new ballpark…what was wrong with the old one?

 

Like a good consumer, I made sure to visit the Braves Clubhouse Store, the stadium’s featured concession for all things Atlanta baseball. And while I left with a bag full of merchandise, the experience was no home run. My path to purchase within the store was a microcosm of the challenges created at the intersection of consumer demands and retailer capabilities.

My experience isn’t that unusual. We entered the store in search of two Bartolo Colon t-shirts for friends – one male, one female. Simple enough. Colon is a popular pitcher who’s achieved something of a cult following among baseball fans, in part because of his size (big), age (old), velocity (slow), hitting ability (poor), and the unrestrained joy he brings each time he takes the mound. He neither looks nor acts the part of a player who’s won 235 games across more than 20 baseball seasons. And that’s a big reason why fans love Bartolo so much; he’s one of us.

The team store is usually the best place to find authentic merchandise on game day. And I quickly spotted the women’s version of the shirt as soon as I entered the store. Surely I’d find one sized medium. But it wasn’t meant to be. All the shirts on the rack were at least one size too large. I asked for help and a friendly store employee went to search for the elusive medium shirt in the storage room. She came back empty handed. The week’s deliveries had not yet arrived, but if we came back in a few days the shirt should be back in stock.  We moved on to the men’s section, where there were two different shirts to choose from. So I dug in, determined to find an extra-large for my friend and make the shopping trip at least partly successful. But it wasn’t meant to be. Once again it felt like I unfolded the entire stack of shirts, only to find the right size was out of stock.  A store associate reminded us the shipment hadn’t arrived and that we should check again later. I ended up buying a shirt in large along with some other gear, but didn’t leave fully satisfied with the experience. It was a reminder of the ongoing issues retail must address in order to compete in today’s world of ambient commerce.

Let’s break it down.

  • Lack of inventory mix: There were clear issues with getting the right size mix for a popular shirt. Neither the men’s nor the women’s version of the Bartolo Colon shirt had much in the way of size availability. Though it seems simple, having the right mix of product sizes and colors is one of the biggest challenges in fashion and retail. It leads to lost sales. Retail operations such as the Braves’ Clubhouse, where sales are based around finite and well-defined experiences, could benefit from postponement. Rather than stocking a set number of finished products, they could turn to in-store screen printing as a means of applying any name onto one of several standard blank shirts during the game. The retailer would still want to have a mix of standard products on the shelves, but the added ability to print on-demand would help buffer against stock outs and give customers the product they truly want. It would also help ensure the store’s ready the next time another folk hero like Bartolo Colon captures the hearts of fans.
  • Limited inventory visibility: Knowing what’s on the shelf and what’s still in storage still gives most retailers a headache. It’s time consuming and inefficient for staff to sift through boxes while a customer waits in the store. Technologies like RFID and the Internet of Things help retailers bring greater visibility to the store Imagine how much more productive staff would be if they could easily tell what items are in stock and where they’re located – down to the exact spot on a shelf or box in the back room. Now imagine if this visibility extended to all the stores within the stadium (or any given region). If you could see across all that inventory, if your staff was empowered to find it, make the sale, and have it delivered to the customer, how much happier would that customer be?
  • Rigid fulfillment: The act of fulfilling a customer order remains the moment of truth for retailers. In my example, the Braves’ retail had an opportunity to meet our needs at the ballpark, but lost out on a bigger sale because the inventory wasn’t there. But it’s not as though the store is the only way to deliver goods. If the lack of available inventory was strike one, strike two happened the moment the associate asked me to come back at a later date. But the Braves hadn’t struck out just yet. Say the team could locate the shirt at another in-stadium store? That would have been a base hit. Or if they had sold me the shirt in-store and had it delivered to my home address? Run-scoring double. But the lack of alternative fulfillment methods was a big swing and a miss. Batter out!

Now, I know one experience at a ballpark hardly represents the entire world of brick-and-mortar retail. The Atlanta Braves are in the business of playing baseball. Selling products and merchandise isn’t quite the same priority as winning a World Series. But if you can’t win on the field, the least you could do is service your fans, and provide the kind of novel retail experiences that might help you win a few more.  Whether it’s at the ballpark, the mall, or on a mobile app, retailers need to understand that it’s a big playing field. If the fans aren’t happy, there isn’t much stopping them from choosing another team.

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Moneyball and retail: How to play smarter with big data

With the start of another baseball season upon us, I can’t stop thinking about Moneyball—the story of the Oakland A’s General Manager Billy Beane and his revolutionary method for recruiting and evaluating Major League Baseball players.

For those of you who aren’t familiar with the book (or subsequent movie starring none other than Brad Pitt), Michael Lewis’s Moneyball: The Art of Winning an Unfair Game takes a close look at how MLB’s veteran scouts, talent evaluators, team owners, and general managers in the early 2000s relied only on traditional methods and their gut instincts to evaluate and choose players.

Recruits at this time were viewed through a lens that leaned solely on superficial statistics like number of home runs, RBIs, or even a player’s appearance. Players with the “right” attributes commanded large salaries like those of the New York Yankees—money which small-market teams like the Oakland A’s simply could not afford.

To win at this “unfair game,” Billy Beane spearheaded an effort to dive deeper into the player data he already had at his fingertips—thereby uncovering the hidden value of players who were not identified as assets right off the bat. Today, the majority of MLB teams employ some form of deep statistical analysis, and recruiting on gut instinct alone is virtually unheard of.
What does Moneyball have to do with retail?

Much like Billy Beane, today’s retailers may feel they are playing in an “unfair game.” To many, competing with the New York Yankees of retail seems impossible.

Moneyball taught the baseball industry to use data to focus on individual players and the (sometimes hidden) value they could bring to a team at large. And while retailers may not have the resources, logistics, and of course, money, to compete with the behemoths of the industry, they do have the data at the fingertips to succeed by playing smarter.

If retailers dive into their data and focus on each individual consumer, as well as their products and services, there’s an opportunity to uncover hidden value in the data associated with the consumer and the products they seek—just like Billy Beane did with the Oakland A’s.

So why should retailers revisit this well-worn story?

  • It’s the customer, stupid. Most pundits and practitioners would agree that the retail dynamic has shifted. The consumer now has the bulk of the power. But the consumer is also willing to provide retailers with a wealth of data and information. Much like Billy Beane was able to, can retailers leverage this data to uncover more about their consumers? Who of them are really profitable? How are they interacting with the brand? And what do the answers to those questions mean for long-term profitability in a highly-competitive industry?
  • Efficiencies in the supply chain. How well is supplier A performing compared to supplier B? Are there metrics that can be measured to gain greater supply chain efficiencies? How about distribution networks, warehouses, and stores? Retailers need to be open to measuring new (and maybe counterintuitive) KPIs across their operations. By seeking data that might uncover new ways to measure and improve operations, retailers can get ahead of the game.
  • Product evaluations. Think of each product as a baseball player. While some products are consistently the highest performers, is it possible there are other equally profitable products sitting on the bench? By analyzing assortment under a data-focused microscope, retailers have the power to understand all the costs and opportunities associated with each product and mix, and identify the hidden gems lurking in their assortments. What else could be uncovered that may have been otherwise viewed as a retail truism?

None of these insights are especially earth-shattering, but what is surprising is how often retailers neglect them. The data is there. The insights are at our fingertips. It’s not about amassing more data, it’s about using the data we have to make smarter, more informed decisions. Billy Beane and the Oakland A’s didn’t discover a wealth of new player data—they looked at the information that was available to every other team and asked different questions of it. If retailers want to compete with retail Goliaths, it’s time they start asking different questions, too.

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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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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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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 1477496755713Wang, 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.

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