Archive for April, 2014

Can stores meet peak e-commerce shipping goals?

RetailWire panelists weighed in last week on a recent Kurt Salmon study about e-commerce order fulfillment, after some of the well-reported problems in late 2013. The study recommended that retailers use their brick-and-mortar locations more robustly as fulfillment centers, especially at peak times. There were plenty of red flags raised by panelists, including this comment:

There is no doubt that order fulfillment from brick-and-mortar store locations is growing. It’s a feasible way to leverage store inventory and payroll, especially given better forecasting, partnering with carriers, and so forth. But there is one big caveat: Do physical locations have the payroll and skill set to execute a rush of last-minute holiday orders, at the same time that they are pressed to staff the checkout lanes and restock the shelves? It’s hard to add a completely different function (with an unpredictable demand workflow) while also trying to leverage existing payroll costs.

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Netflix starts to push its pricing higher

There were plenty of opinions last week at RetailWire on the subject of Netflix. The company announced that new members will need to pay 8.99 or 9.99 per month, but existing members will be “grandfathered” at the current rate of 7.99 for its streaming service. I took a contrarian point of view, because I feel this is a way for Netflix to test the limits of existing customers’ price resistance, too:

The price increase for new members is the “canary in the coal mine” for Netflix. They should be able to measure price resistance at 8.99 or 9.99 per month, in order to decide when and how fast to raise subscription rates on existing members. It’s only a matter of time.

It’s hard for Netflix to maintain pricing while committing to improving the product. Netflix needs to pay carriers like Comcast for higher speeds, it wants to develop more original programming, and it needs to make its movie catalog more competitive with Amazon and Apple. (Right now, the movie selection is awful.) The only realistic way to do this, and to maintain margins, is to raise prices in increments.

Use our coupons, just don’t sue us

General Mills has stirred up some unwanted publicity by imposing a new policy on users of its digital coupons. The “terms of service” apparently prevent users from suing the giant CPG company in the event of a product liability issue. (I’m paraphrasing.) This issue has caught the attention of many RetailWire panelists, including this one:

Part of the problem is that digital and print coupons are increasingly seen as the same thing, in the eyes of customers. Younger consumers who are not newspaper readers are less likely to be “coupon clippers” and more likely to respond to online or mobile offers as time goes by. In that context, how does General Mills differentiate legally between a print coupon user with a product liability claim, and somebody using a digital coupon? Either way, I agree with my fellow panelists that this is not a well-considered PR policy, outside of the legal firewall that the attorneys are trying to create.

How do retailers react to the “new urbanism”?

There has been a well-reported “move back to the city,” including two stories in the New York Times this week (mid-April 2014). The question posed to RetailWire panelists is how retailers should respond to the trend. Here’s my brief comment on the issue:

While it’s too easy to stereotype Millennials as “tribal,” it’s not hard to understand why their desire to live in cities is a reaction to their parents’ lifestyles of exurban sprawl, McMansions and so forth. The long-term question for retailers planning their location strategies is whether the “new urbanism” will last, once Millennials start families. And having children seems to be happening at a later age among this group.

A recent New York Times article reflected on the growing numbers of young urbanites who are choosing not to make the traditional “move to the suburbs” even after having two or three children, so perhaps this trend will be long-lasting. It’s not surprising to see some of the biggest retailers (Walmart, Target and others) accelerating their urban and small-format strategies to keep pace with this trend.

Time to reinvent the food court?

A recent RetailWire panel discussion about food courts brought a strong response. Here’s my take:

Without painting every regional mall with a broad brush, it’s clear that many food courts have not evolved nearly as fast as customers’ tastes. You can picture the “typical” food court group of tenants with your eyes closed: The steam-table Chinese food, the tenants selling “teriyaki” or “bourbon” chicken that are indistinguishable from each other, perhaps a pizza place, a Cinnabon and somebody selling cheese steak subs. Occasionally you might find a national fast-food franchise, such as McDonalds, Taco Bell or Arbys. (Does it sound like I have spent too much time in food courts?)

Meanwhile, many of the trends driving the restaurant or fast-casual business are being ignored. Where is the “locavore” offering? What about a healthier sandwich and salad outlet? Isn’t there a growing market for Thai or Indian food?

Most mall operators have broadened their food offerings outside of the food court, from Five Guys to Panera to Starbucks and so forth. Why leave the food court as a culinary and nutritional dead zone?

Walmart sows its “Wild Oats”

The day after Target announced some new initiatives to build its organic food business, Walmart made a much bigger splash. It announced that it is reviving the Wild Oats brand and will be pricing a new assortment of organics to be more competitive. Here’s a recent RetailWire comment on the subject:

Since Whole Foods bought (and was forced to sell) Wild Oats several years ago, it’s been a brand without a significant retail footprint. This is an obvious win for the owners of the brand, and is a potential win for Walmart, too. Presenting its organic assortment under one brand name (different from the Target approach) provides an umbrella for the overall business.

The usual caution about Walmart product initiatives needs to be raised: Hitting a “competitive” price point at the expense of the quality that an “organic” customer may be willing to pay for could turn out to backfire. Get the product right and if it’s priced appropriately, it will succeed.

Defining the “CXO”

“CXO” stands for “Chief Experience Officer,” and it’s becoming a hot commodity in many retail organizations. The question posed by RetailWire is how to define the job and its realm of responsibilities. Here’s my opinion:

Kohl’s seems to have gotten this right with last year’s hiring of Michelle Gass from Starbucks as the “chief customer officer.” In this case, she has direct responsibility for all aspects of the company’s “customer engagement strategy,” including both marketing and omnichannel efforts. It’s important for the CXO position to be empowered in this way, not to be treated as a staff support job without real authority to drive change.

At the same time, the most important customer-facing element of most brick-and-mortar or omnichannel retailers is the shopping experience in the physical store. Aligning the strategic view of a CXO with the operating realities of a Director of Stores may require a broader portfolio for the “experience officer”…or a CEO prepared to deal with natural internal tensions in a productive way.


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