Archive for the 'Omnichannel' Category

In praise of Amazon (again)

As the biggest “disrupter” in retail, Amazon is always a hot topic on RetailWire. Here’s a recent comment:

There may be more innovative retailers who are not as visible as Amazon, but it’s hard to think of a company with such scale that is less willing to rest on its laurels. I know that some panelists view Amazon’s push into new businesses and logistics methods as not much more than a well-oiled PR machine (see yesterday’s discussion of intimate apparel as an example). But it’s hard to deny that the company is anything but complacent when it comes to extending its reach and improving its execution promise.

The real test for Amazon will be its success in rolling out innovative brick-and-mortar retailing models. The bookstore and especially the C-store tests will be telling, because most other stores with “omnichannel” strategies have not succeeded in offering an innovative approach to the business of shopping.

And more thoughts from another post:

Amazon’s competitors have it all wrong if they think it’s all about low prices. (And this is the fundamental error behind Walmart’s “brand promise” over the years.) Amazon has always been focused on breadth of assortment and great execution. As the company has entered more categories (starting all the way back when when they were in the business of shipping books), it has never lost sight of these key competitive advantages. Customers’ expectations have been scrambled as a result, and everybody else (whether pure play e-commerce or omnichannel) is just trying to keep up.

Two comments on omnichannel

Here are a couple of RetailWire posts on the subject of whether e-commerce is eating into brick-and-mortar retail. The first comment was published after stores reported year-end sales:

“Omnichannel” retailers like Macy’s, JCP and Target are still heavily dependent on their physical footprint. Each store reported rapid e-commerce growth (from 17% in Penney’s case to 30% at Target), yet each of them also reported total comparable-sales declines in the low single digits. So it’s clear that the combination of brick-and-mortar and omnichannel isn’t driving sales yet.

All of these stores and others have opportunities to improve their assortments, customer service and overall store experience. Omnichannel initiatives like BOPIS and “ship from store” have put even more strain on retailers’ ability to execute these “Retail 101” issues better. But until they do, their overall sales will continue stuck in neutral.

The second comment was published today:

“Cannibalization” may be the wrong term, because retailers with true omnichannel strategies need to think about how to grow the overall pie. Continuing to think about business silos (e-commerce vs. brick-and-mortar) will stand in the way of a consistent overall approach to the business.

But there’s no doubt that brick-and-mortar is losing its relevance, as seen in the growing number of chains closing locations or throwing in the towel altogether. To go back to the question of how to grow the overall pie…why isn’t that happening? Why aren’t strategies like BOPIS (intended to drive traffic to stores) driving incremental sales?

These aren’t easy questions to answer, but I continue to believe that the operating demands of turning a physical store into a mini-distribution center are eroding the service-centric reasons why consumers shop in those stores in the first place.

“Cannibalization” may be the wrong term, because retailers with true omnichannel strategies need to think about how to grow the overall pie. Continuing to think about business silos (e-commerce vs. brick-and-mortar) will stand in the way of a consistent overall approach to the business.

But there’s no doubt that brick-and-mortar is losing its relevance, as seen in the growing number of chains closing locations or throwing in the towel altogether. To go back to the question of how to grow the overall pie…why isn’t that happening? Why aren’t strategies like BOPIS (intended to drive traffic to stores) driving incremental sales?

These aren’t easy questions to answer, but I continue to believe that the operating demands of turning a physical store into a mini-distribution center are eroding the service-centric reasons why consumers shop in those stores in the first place.

 

 

 

 

JCPenney: “Less bad than most” again

JCP reported 2nd quarter results that were modestly better than other department stores’ sales trends, and measurably better in operating profit compared to their own past standards. This continues to point toward operating improvements but it’s a long way from a true turnaround until the sales trend becomes more robust. Here are some thoughts I posted on a recent RetailWire panel discussion:

Marvin Ellison has noted the sales gains in JCP locations where Sears has closed, and it’s not surprising. Even those Sears stores that are still open are often woefully light on basic inventory, especially in Penney’s sweet spots like sheets, towels, socks and underwear. And the play for Sears’ appliance business is clearcut, even though JCP also has an opportunity to make its own home stores more productive.

But some of the credit for JCP’s modest operating improvements is coming from other initiatives that Mr. Ellison is spearheading — cost reductions, improved supply chain management, better IT managment, and (most important) new merchandising leadership. Given these changes, and the tailwinds coming from Sears and Macy’s store closures, JCP investors probably have a right to expect faster growth after 2016.

Primark builds out its brick-and-mortar locations

Primark (a British fast fashion chain) is expanding in the U.S., not only in vacated Sears stores but in other locations. They are in no hurry to establish a robust online presence, preferring to open stores first. Here’s my comment from a recent RetailWire discussion on the subject:

I agree that Primark has plenty of opportunity to build its brick-and-mortar footprint before worrying about the complexities of “omnichannel”…after all, it’s not as simple as just starting a website anymore. H&M is a good example of a company late to the e-commerce party while busy opening stores — and building its brand awareness — coast to coast. This isn’t Primark’s only option, but there is nothing wrong short-term with the road they are taking.

BOPIS: Good for Target’s business?

To answer the question in the headline, Target would say “yes.” But, as I discussed recently at RetailWire, these kinds of omnichannel initiatives can be a double-edged sword:

Claiming success depends on what metric you use. Target’s argument seems to be that a growing percentage of orders is being fulfilled by stores — which is doubtless true — but it misses the bigger picture:

1. Is Target growing its overall topline sales? How about other general merchandisers who are pursuing “ship from store” strategies?
2. Is the “ship from store” trend actually cutting down on store visits, and the chance to sell impulse items?
3. How is the multitasking sales associate (busy fulfilling BOPIS or ship-from-store orders) doing his or her core task of interacting with customers or replenishing store shelves?

On the third point, it’s clear that department stores in particular have allowed their in-store service levels to decline while they try to fund omnichannel initiatives out of the same expense bucket. But by all appearances the issue is costing Target sales, too.

Amazon figures out how to make money

The Amazon momentum continues, with evidence that the company is finally delivering a profit to investors. (Granted, some of it comes from cloud services and membership fees…) Here’s a brief comment from a recent RetailWire discussion:

Four consecutive profitable quarters look good for a company that seemed willing not long ago to keep losing money in order to gain share and invest in infrastructure. Those logistics investments are starting to pay off, and the growth in Prime membership reinforces Amazon’s brand image as the best “execution” retailer in the business. ┬áThe growth in Amazon’s overall profit gives the company some breathing room to reach into more and more categories — from grocery delivery to apparel — at the same time that it tests the waters in brick-and-mortar retail too.

What’s a “chief innovation officer” to do?

SuperValu recently announced the hiring of a “chief innovation officer.” As discussed on RetailWire, I thought the job description sounded pretty vague. Here’s my comment:

This is a title (like “chief experience officer”) that only means something when the underlying value is embraced by the entire organization. It’s hard to impose “innovation” from the top down if it’s not part of Supervalu’s everyday culture. And the most innovative companies — in any industry — focus on innovation from the ground up.

When you read the job description from George Anderson’s article (“will work closely with the company’s various units to develop new business and cross-channel merchandising and promotions initiatives, while driving integration of logistical solutions for its retail customers”), does this sound like innovation? It sounds like Supervalu is aiming for better execution of omnichannel, multi-platform opportunities, and supply chain management. But “innovation”? We’ll see.