Archive for January, 2014

Walmart’s “Buy American” drive: Real, or a PR push?

RetailWire started a conversation among its panelists about Walmart’s drive to grow its “Made in the U.S.A.” business (again). The company has said that it will increase purchases by at least $50 billion over 10 years, but for a company with almost $400 billion in cost purchases in its last fiscal year, it’s hard to tell whether this number means anything. Count me among my fellow skeptics:

Actions speak louder than words, and Walmart continues to source products as cost-efficiently as possible wherever in the world it takes them. I suspect that the dollars allocated to “buy American” are a relatively small percentage of the company’s total cost purchases, especially stretched over a ten-year period. But it’s a smart PR move that might actually continue the move back toward U.S.-based manufacturing, even in a small way.

Home grocery delivery: Time for a quantum leap?

Here’s a comment from a recent RetailWire discussion about home delivery of groceries. The question posed to panelists was whether 2014 will be the year in which we see “critical mass” for this segment. Despite its rapid growth, especially in high-density urban areas, I don’t believe this is “the year”:

I’m not sure that 2014 will be the breakout year, but it’s easy to foresee that logistics-minded companies like Amazon and Walmart will continue to build share in home delivery at the expense of traditional grocers. One way to combat this is to develop a hybrid model, in which the shopper can preorder packaged goods packed and ready for pickup at the specific time that she or he comes to the store to select fresh produce.

At the same time, it’s clear that great food merchants like Whole Foods and The Fresh Market continue to grow their models, based in part on the sensory pleasure and impulse buying that drives a lot of the business.

How do marketers reach Millennials?

The question in the headline was a recent topic at RetailWire. The issue is that “millennials” are driven more by word-of-mouth than by traditional advertising media. Conventional ways of shaping opinions (and affecting consumer behavior) may not work for marketers and retailers as this segment of the population grows in importance. Here’s my comment:

It’s become a cliche to describe Millennials as “tribal,” but there is some truth to it based on their consumer behavior patterns. The most obvious sign that word-of-mouth matters is the importance of social networking and review sites as tools to spread opinions to a broad audience. Some marketers have clearly done a better job than others — either using Facebook and Twitter as “new media” ad tools, or exploiting customer reviews on sites like Yelp and TripAdvisor.

“The Year of RFID”…again?

It’s probably self-serving among providers of RFID hardware and software, but once again 2014 is being declared “the year of RFID.” While stores like Macy’s and JCPenney are moving forward with it, the industry as a whole has been slower to embrace the technology than you might expect. My recent opinion:

To George Anderson’s point, “the year of RFID” seems to be an annual topic on RetailWire. There is no doubt that the technology is gaining traction and significant users, but the question is “what’s taking so long?” It will become easier to sell senior management on the expense investment in RFID if it can demonstrate quick revenue and margin payback, not just improved inventory accuracy over the long haul. At the same time, retailers need to face the loss-prevention risks of conversion from security tags to RFID tags.

Best Buy: On the comeback trail…or not?

Here’s an appropriate followup to my last post (about the “premature burial” of big box stores). There is a lot of attention paid to the turnaround efforts at Best Buy, and justifiably so. Here’s a recent comment from RetailWire:

Best Buy was declared dead far too early, considering its size and its niche. And Hubert Joly’s hiring — at first met with skepticism — turned out to be a smart way to refocus the business on customer satisfaction.

I give credit to Mr. Joly and team for focusing on the fundamentals at Best Buy: First, embrace the challenge of “showrooming” by converting store traffic into transactions. Second, recapture at least some of Best Buy’s reputation for customer service, which slipped after the demise of Circuit City. Finally, find some new merchandising strategies (Samsung and Microsoft “shops,” for example) to use the center of the store more productively.

Best Buy still faces plenty of challenges, including robust competition from Walmart and Amazon among others, some unproductive sites and the cyclical nature of consumer electronics demand. But there is no doubt that the company has taken some important steps forward.

POSTSCRIPT: Since I published the comment above, Best Buy reported very disappointing holiday sales and their stock priced has fallen from the upper $30’s to the mid-$20’s as of January 24th. Obviously they are not out of the woods yet. I still think Mr. Joly’s initiatives are the right ones, but it’s hard to drive demand in consumer electronics without an influx of new products.

Category Killers: Premature death knell?

Every so often, a retailing pundit declares an entire segment of the industry to be “dead.” First it’s the traditional department store (how’s Macy’s working out for you)…then Best Buy…then apparel retailers in general…you get the idea. The latest “victim” of a premature obituary is the “category killer” — but the segment is so broad and varied that this kind of declaration looks foolish. Here’s my point of view from a recent RetailWire discussion:

Category killers may be the victims of changing technology (the obsolete business model of the traditional book or record store, for example). But more often they are victims of their own poor execution, just like other retail nameplates that have disappeared over the years. Best Buy is a good example of a big box store that lost its way and has begun to recover through better execution and more innovative use of its own square footage. And the DIY big box stores have recovered nicely from their own missteps and the housing downturn.

Bottom line: There may be room for consolidation (Office Depot and OfficeMax, for example) but there is also space in the retail landscape for category killers who fill a relevant niche and execute well.