Archive for the 'Omnichannel' Category

About that “whole paycheck” perception…

Some of my earlier comments about the Amazon-Whole Foods deal touch on the expected benefits of better e-commerce execution and predictive data science. But let’s not forget that Whole Foods has a price perception problem that Amazon needs to fix. Here’s a recent comment from RetailWire:

I teach a college-level class in retail management. When I surveyed the class about where they shopped, most answered Aldi, or Trader Joe’s, or Metro Market (the Milwaukee brand of Kroger-owned Mariano’s). None of them shops at Whole Foods even though the store is in the neighborhood where most of them live.

There is no doubt that Whole Foods’ “premium price” reputation has kept many shoppers away, as they face more competition in the “organic” arena. I believe the first round of price cuts is just the start, and it simply moved some overpriced key items to the “market price.” Expect more of this from Amazon in the future, but also expect Amazon to build Whole Foods’ base on its potential e-commerce and home delivery upsides.

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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.

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.

 

 

 

“Whole Paycheck” no more

As soon as Amazon closed the deal on its Whole Foods acquisition, it dropped prices on several best-selling staples (with more to come). This sent a shudder through the rest of the grocery industry, especially with Amazon’s history of losing money to gain market share. I argue (on RetailWire) that Amazon had to move fast to overcome Whole Foods’ perception as an overpriced place to buy groceries:

I did a fast price check at the site for Metro Market (one of the Kroger’s divisions operating here in Milwaukee, and the sister brand of Mariano’s in Chicago). Its prices on organic bananas, eggs, butter and Fuji apples are already at or slightly below the new pricing at Whole Foods. (Its price on lean ground beef is 50 cents higher as of this morning.) What this points out is that Whole Foods had a pricing problem (“Whole Paycheck”) that Amazon is taking aggressive steps to correct.

Based on what happened to Costco’s and Walmart’s stock prices since Friday, there is a typical overreaction to the steps that Amazon is taking. Just keep in mind that Walmart and many other grocers are already competitive and Whole Foods is just joining the party. Also keep in mind that the Whole Foods brick-and-mortar footprint has a long way to go before it catches up with its competitors, despite the smart moves that Amazon is likely to make.

Macy’s reshuffles the merchant deck

Macy’s new CEO Jeff Gennette announced yesterday the hiring of a new president (with background at eBay and Home Depot) and the restructuring of its merchant organization. The company also announced plans to grow its private brand penetration from 29% to 40%. Here’s my comment from a recent RetailWire discussion:

I’ll start with this point: Growing private-brand penetration from 29% to 40% will only drive Macy’s sales if the company gets the merchandise content right. I’d argue that there are already too many private brands and lack of clarity between them, especially in women’s apparel. Macy’s execs may be able to tell the difference, but I doubt the average shopper can define what Karen Scott vs. Style & Co. vs. Charter Club (and so forth) really stand for. Let’s face it: Most stores trying to grow their private label business are doing it as a margin play, not a loyalty tool, and it’s often moved the sales needle in the wrong direction.

As to the new hires and restructuring: It’s clear that Macy’s is doubling down on omnichannel with the hiring of Mr. Lawton. It’s also clear that streamlining its merchant organization is meant to bring more speed to the decision-making process. Let’s see if the new team can tackle those “clarity of offer” problems after all.

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.