Archive for the 'Discount stores' Category

And now, a Google/Walmart tie-up

To expand on my last post (about Kohl’s and Amazon), now comes word of a stronger alliance between Walmart and Google. Here’s my comment from RetailWire, in which I comment that each company brings specific strengths and weaknesses to the partnership:

When the majority of product searches start at Amazon, that’s a huge advantage — it combines the predictive intelligence of an SEO company with the execution skill of a best-in-class e-tailer. But is Amazon invulnerable? Of course not, and that’s part of the reason why the company is filling in its portfolio with brick-and-mortar acquisitions (Whole Foods) or alliances (Kohl’s).

So an expanded partnership between Walmart and Google has potential: It provides Walmart with more robust search capacity and web traffic, and it offers Google a stronger e-commerce platform. But unless Walmart adds more second-party retailers (and their goods) to its site, it’s not going to catch up to Amazon’s head start for awhile.

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Holiday hiring and the “omnichannel” challenge

Two recent (and related) comments from RetailWire on the subject of holiday hiring and whether stores are prepared to deal with the operational demands of omnichannel. First up, my take on the kinds of stresses on payroll and customer service that stores are trying to manage today:

BOPIS can have an impact on customer service especially in those stores where payroll is being stretched to manage “omnichannel” process instead of the shopper in the store. I’m thinking particularly of department stores (Macy’s, for one) whose higher-touch service standards have slipped while they are asking the same sales associates to cover additional tasks.

But there is another kind of “customer service” (in self-selection stores like Target and many others) that really depends on efficient restocking of fixtures and quick checkout. I don’t see BOPIS having the same kind of stressful effect on these stores’ service standards.

And here’s the second comment, published a few days later after Target and Macy’s revealed their holiday hiring plan:

Target’s hiring forecast vs. 2016 is a healthy sign, and Macy’s announcement is also a positive in light of the smaller store base. What both retailers are signaling is that they are figuring out the manpower requirements of omnichannel initiatives like BOPIS and ship-from-store without sacrificing the service standards they need to maintain in their core brick-and-mortar business. This seems to be a particular challenge at Macy’s, so it’s good to see them recognizing the cost of a solution.

 

 

 

Target’s choice: Cheap chic, or just cheap?

A brief RetailWire comment below on Target’s re-pricing of food and commodity basics,  which is something they periodically need to do:

Target periodically needs to reset its prices on commodities because of customers’ nagging perception that it charges too much. This has always been an issue with Walmart as its key competitor, and now Amazon adds to the challenge with its dive into the grocery price wars.

The key to making this work is to drive the higher-margin categories like apparel at the same time. (That’s really the key to the company’s success, not its grocery business.) Target’s reset of its private brands needs to accomplish this goal, otherwise the lower prices on food and household goods will only erode the company’s profitability.

Target finds small-format stores are more productive

Today’s RetailWire discussion centers on Target, which is enjoying more productivity in its expanding base of small-footprint stores. I don’t think this is rocket science:

Locating smaller-format stores in higher density areas (especially city neighborhoods) should drive more productivity. If these stores aren’t generating much higher sales per square foot, they are unlikely to be profitable given the higher occupancy costs (rent, loss prevention, etc.). So Target needs to hold these stores to a higher standard in the first place.

That being said, the focus on fewer categories and tightly edited assortments probably doesn’t hurt, either, and might be a lesson learned for the full-sized Target stores. I assume that most of the small-format stores contain much smaller grocery assortments, which is a good thing considering the low margins in an area where Target has struggled.

Walmart on a roll?

Walmart’s 2nd quarter results were strong, although their stock price may or may not be rewarded for it in the short term. RetailWire panelists addressed a simple question — is Walmart unstoppable? — and here’s my response:

I would never say “unstoppable,” but Walmart’s strategies in its stores and omnichannel certainly seem to be paying off. They do need to anticipate the impact of the Amazon-Whole Foods tie-up, in terms of its impact on online grocery retailing. But Walmart is seeing payback from its multi-year investments in upgrading brick-and-mortar, focusing on better execution in food, and getting its full-size prototype right

Walmart is the most obvious case of a retailer figuring out how to leverage its e-commerce business into store traffic, but Target’s results seemed to point to the same thing. Even stores like Kohl’s with comp-store decreases suggested 2nd quarter improvements in store traffic — so maybe the stores with the most aggressive omnichannel effort are starting to see results.

How do vendors meet Walmart’s price demands?

From a recent RetailWire discussion…it’s always been challenging for vendors dealing with Walmart, but never more than now when it’s waging war on multiple competitive fronts. Here’s my opinion:

Walmart has always been tough on its suppliers when it comes to costs — it’s part of the company culture. Recall several years ago when suppliers were dealing with escalating cotton costs but Walmart didn’t budge on the prices charged to its customers. And the company is not going to cede its price leadership to Amazon if it can help it.

What can vendors do? As the article suggests, they can try charging more to other customers, they can find cost savings in their supply chains or (the least desirable but most probable outcome) they can compromise product quality.

Can JCP be a player in toys?

JCPenney recently announced an expansion of its toy business, in time for holiday 2017 selling. RetailWire panelists weighed in on the topic, and here’s my take:

Toys are a double-edged sword for softlines retailers like Penney and Kohl’s who want to strengthen their children’s offerings. It’s hard to avoid carrying toys, but it’s also hard to compete against the dominant space of the discounters and big-box stores. (Not to mention the low margins.) Customers have come to expect the best selection and prices from market leaders like Amazon, Walmart and Target.

The broader risk to JCP is that it becomes a “bunch of stuff” with the addition of new categories (from appliances to toys, from bikes to electronics). Just because the store has square footage to burn doesn’t mean that overassortment is a winning long-term play.