Archive for the 'Multi Channel Retail' Category

Amazon and Kohl’s in a “smart home” alliance

Amazon and Kohl’s announced jointly that they are setting up “smart home” shops in 10 test stores in Chicago and Los Angeles this fall, using 1000 square feet to promote items like Echo along with related devices and the home services to set them up. Reportedly (according to RetailWire) the shops will be staffed by Amazon and the revenue will accrue to them. Here’s my comment:

A ten-store test in an 1100-store chain is not significant in the short term, but it’s an interesting alliance. (My usual full disclosure: I worked for Kohl’s between 1982 and 2006.) It’s curious that the sales revenue goes straight to Amazon (with a presumed piece of the action to Kohl’s), compared to the traditional model where somebody walks into the store and uses his/her Kohl’s card to buy an Echo Dot. It’s also a recognition that the “smart home” business needs more hands-on salesmanship.

Amazon look like the winner in this deal, because it potentially leads to another brick-and-mortar tie-up with a much bigger store footprint than Whole Foods, without the cost of a flat-out acquisition. Meanwhile, Kohl’s benefits from increased traffic and a meaningful use of space at a time when it is “right-sizing” about half of its stores. This bears watching.

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Thoughts on the QVC-HSN merger

Here are some quick impressions that I posted on RetailWire about QVC’s plan to acquire HSN. “Home shopping” has lost its novelty — especially as TV viewers cut the cable cord — so the combined company faces some daunting challenges:

The initial benefit of the QVC-HSN merger comes from economies of scale in a mature segment. (It’s the same kind of play that Macy’s made for May Company several years ago, recognizing the lack of organic growth in traditional department stores.) But it’s clear that home shopping (via TV) is not where the action is. It’s up to QVC to figure out how to translate the “treasure hunt” experience of off-pricers to its model, and especially how to engage mobile shoppers at its site. It becomes an urgent challenge as more consumers (especially younger ones) continue to cut the cable cord.

Is omnichannel really less cost-effective?

CNBC recently ran a story (linked below) about the relative costs of brick-and-mortar, e-commerce and omnichannel retail. Their results were surprising and I expressed my skepticism on a recent RetailWire post:

I was skeptical about the analysis when I saw it reported on CNBC last week. Does the study factor in the efficiencies that might be achieved by leveraging physical stores’ payrolls and inventory levels? Does it continue to look at the silos of brick-and-mortar and e-commerce as separate expense centers? Are some retailers with negotiating leverage with the big freight carriers able to achieve cost efficiencies through ship-from store and also save operating expense in their e-commerce distribution centers?

I’m also skeptical as a longtime (1982-2006) employee of Kohl’s, which is pushing its omnichannel initiatives hard. Kohl’s has always managed its expenses carefully, even in down times, and I doubt they would be pursuing omnichannel aggressively if it were truly an SG&A-buster.

http://www.cnbc.com/2017/04/19/think-running-retail-stores-is-more-expensive-than-selling-online-think-again.html

Are “same store sales” still meaningful?

In a recent RetailWire discussion, panelists commented on an article about same-store sales. The issue is whether this metric means anything in today’s world of “omnichannel” and stores closures. Here’s my perspective:

The article brings up a key point about the impact of omnichannel on same-store sales metrics. If a customer uses BOPIS (buy online, pick up in store), does the sales credit belong to the company’s e-commerce site or to the store that fulfilled the order? Is it a fair metric when store A might have the merchandise in stock and location B might not? And, bottom line, does it or should it matter to a true omnichannel retailer?

There is another issue casting a shadow on the validity of same-store sales: The increasing speed of store closures. At one point “comp sales” was a valuable tool as a lot of retailers were in a go-go expansion mode, but just the opposite is the case now. As companies close overlapping locations, the remaining stores may benefit from a spike in same-store sales without actually reflecting on the health of the business.

Why Kohl’s needs a large store count

Amid all of this year’s news about stores closures, Kohl’s maintains that its large location count is a strategic advantage. (At the same time, it intends to re-size some of its existing stores.) Here’s a recent RetailWire comment following Kohl’s announcement:

I’ll start with my usual “full disclosure” that I worked for Kohl’s (and with Kevin Mansell) from 1982 to 2006. Convenience has always been one of the legs of Kohl’s strategy, and its real estate portfolio was intentionally built apart from regional malls. (I think Mr. Mansell mentioned on CNBC that only 80 of Kohl’s stores are located in regionals.) Maintaining this footprint is not only important as Macy’s and JCP continue their strategic retreat — not to mention whatever happens to Sears — but also as a way to leverage the e-commerce business that represents 15% of Kohl’s sales today.

As to the smaller or downsized stores, the trick for Kohl’s will be to keep narrowing its assortments to fit these formats. This is just as true in full-sized stores — when Kohl’s takes a position on a key brand like UnderArmour (or activewear in general), something has to give.

Walmart buys Jet.com

Some observations (about a month late) about Walmart’s announcement in early August that it is acquiring web startup Jet.com. Here’s my comment from a recent RetailWire panel discussion:

The risk isn’t great to Walmart, considering the purchase price vs. Walmart’s scale. But the reward is definitely in favor of Jet.com’s founders and investors, who are about to become very wealthy. The real question is whether Walmart intends to keep the Jet.com brand alive or simply wants to take a competitor off the playing field.Jet.com seems to have followed the typical internet startup path of losing money while aggressively trying to build traffic and market share. But Walmart’s move makes it hard to tell if Jet’s business model is sustainable over the long haul. Let’s face it — nothing about this move changes the reality that Amazon is the alpha dog.

Target’s new supply chain chief: What’s the message?

Target recently hired its new logistics head from Amazon, and RetailWire panelists weighed in on the meaning of the move. While I’m sure Target is trying to send a message about its “omnichannel” growth, the new supply chain team needs to fix in-stock levels in the stores first:

Omnichannel initiatives (like BOPIS) and the growth of e-commerce have made effective supply chain management more challenging. And nobody has mastered this aspect of the business like Amazon — with the caveat that they are not experts in brick-and-mortar logistics. Target has had supply chain issues for many years in its physical stores, based on its seeming inability to keep its shelves and pegs full. If I were Mr. Valdez, this is the first issue I would tackle as a sales and reputational problem for Target.