Archive for the 'E-commerce' Category

Did Walmart deserve the punishment?

By “punishment,” I mean the 10% drop in Walmart’s stock price yesterday (February 20) when the company reported slower-than-expected sales and profits in its e-commerce business. My comment at RetailWire expresses a contrary opinion about the market reaction:

Walmart’s stock took a similar hit a few years ago when management decided to investment-spend in the store experience — more payroll in areas like fresh food, remodeling and refixturing as needed, and so on. These were smart strategic choices that weren’t meant to please investors only interested in the latest quarter. Walmart’s decisions at the time have been rewarded with better results ever since.

I look at the 10 percent drop in stock price as a similar overreaction. Walmart is now starting to come up against its own numbers after the Jet.com acquisition, and (more importantly) it’s doing major spending on logistics and marketing to gain omnichannel market share. I’m no stock picker, but maybe this is a buy opportunity …

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Can Circuit City make a comeback?

Whoever bought the Circuit City brand after the store’s demise a few years ago plans to revive it — both as an e-commerce site and as a re-engineered brick-and-mortar store. The question in front of RetailWire panelists: Does the world need a revived Circuit City? (Or, as their headline put it, “Can Circuit City come back from the dead?”) Here’s my skeptical point of view:

This reminds me of the Linens-N-Things saga, in which the brand survives as an e-commerce site but its physical stores are long gone. There simply wasn’t the need for two similar big box concepts, so Bed Bath & Beyond turned out to be the survivor. (But BBBY stock price has fallen sharply in the past five years, like many retailers, as it faces increased competition from Amazon and others.)

It’s hard to see what value Circuit City brings to the table at this point — except as a web-only play. Does a small-footprint “experiential” store offer something different from Best Buy or Apple? (Especially now that Best Buy is removing CD’s from its physical stores, it’s easy to see that they will roll out more engaging and productive uses of that space.) The Circuit City brand was already “damaged goods” because of bad decisions they made to reduce customer service and in-store expertise.

Online shopping: Mobile or laptop?

Online shopping is migrating rapidly from desktops and laptops to mobile devices. On RetailWire, panelists recently discussed this trend:

The answer to the question depends on which retailer you’re talking about. Amazon (for example) makes the process of buying directly from your smartphone app as simple as possible, so it’s easy to buy without having to reach for your laptop. On the other hand, some transactions are more complex (for example, the dishwasher we bought after Thanksgiving) and really benefit from a bigger keyboard and screen to “close the deal” — even if the initial searches happen on the smartphone screen. (At least that’s true for this troglodyte.)

Lesson learned for all e-commerce and omnichannel retailers: Follow the Amazon model where possible, and make the transaction as easy as you can — from search to selection to checkout. If more retailers follow this example, the smartphone share of wallet will continue to grow at a rapid rate.

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.

Another Amazon/Kohl’s tie-up

To follow up on my comment on “smart home” shops at Kohl’s, now comes word that Kohl’s will test Amazon processing locations (pickup and return) in several markets. I agree with most fellow RetailWire panelists that it will drive traffic to Kohl’s but is an even better deal for Amazon as it fills in its physical footprint:

Omnichannel initiatives like BOPIS already put strain on existing store operations, as panelists just discussed in the context of holiday hiring. So Kohl’s ability to process Amazon returns (even unpackaged ones) without affecting their other operating standards will be something to watch. Without payroll support from Amazon, this could be a heavy lift.

As to who comes out ahead in this collaboration, I understand that this will drive even more traffic to Kohl’s stores. (And my usual disclosure that I worked there from 1982 to 2006.) But Amazon picks up as many as 1100 more brick-and-mortar locations (if it rolls chainwide), with the eventual ability to add pickup lockers and even an ordering kiosk if they play their cards right. So it looks like Amazon is the biggest potential winner in this deal.

Can Amazon execute grocery delivery better than the competition?

A lot of the conversation about the Whole Foods acquisition centers on Amazon acquiring a bigger brick-and-mortar footprint. My RetailWire comment suggests that Amazon also has a chance to take home delivery of groceries to a higher level:

I think Amazon has the chance to bring a level of execution to online grocery shopping that doesn’t appear to be in place yet. I don’t want to judge an entire industry from my experience with Safeway last week, but it may be typical. While on vacation, I ordered groceries to stock up our rental house for a week. The order did not show up in the scheduled delivery window (in fact, Safeway was running 3 hours behind and I canceled the order) and would have been 1/3 short-shipped. What I thought would be a convenience turned out to be a customer service nightmare, after spending nearly an hour on hold to fix the problem.

Again, it’s a small sample size but the combination of stock-outs and late delivery is not exactly meant to inspire confidence in the process. I believe Amazon has the capacity to make this work, and they won’t roll it out aggressively until they are ready.

Is Amazon Prime Wardrobe another disruptive move?

Amazon is introducing a new feature for Prime members: Risk-free trial of several apparel items with the ability to return what you don’t like. (And price incentives to keep more of what you chose.) RetailWire panelists mostly see this as another Amazon “game changer,” but I view it a bit differently as their response to the lack of physical stores:

If Amazon aspires to be the top seller of apparel in the U.S. (and it’s already getting close), it needs to add a “try before you buy” feature to keep driving more Prime memberships. It’s responding to the challenge of concepts like Trunk Club — but it’s also acknowledging its lack of a physical footprint. Think about it — stores like Kohl’s and Macy’s already have huge numbers of brick-and-mortar locations where you can return unwanted clothing that you bought online. This may be a rare case where Amazon responds to a competitive weakness in its formula.


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