Archive for the 'Supply chain management' Category

More on combating the Amazon grocery juggernaut

Another timely discussion at RetailWire about the best ways for grocers to fight the Amazon-Whole Foods tie-up. To me, it’s not just about price competition but a lot more:

Most of the spotlight on the Amazon/Whole Foods acquisition has focused on price cutting, but these were necessary to make WF more competitive. Look for more cuts to come, to help Whole Foods overcome its “Whole Paycheck” brand reputation.

But longtime observers of Amazon know that the keys to its success are its assortments and its mastery of logistics. If I were a competitor, this is where I would focus my efforts before being run over by the Amazon juggernaut. Improving the efficiency of the shopping experience — whether through faster checkout, better execution of home delivery or higher in-stock rates — will go a long way toward dealing with the looming challenge.

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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 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.

On Amazon’s bid for Whole Foods

Talk about breaking news: RetailWire panelists had a chance today to weigh in on the announcement of Amazon’s bid to acquire Whole Foods. While many panelists see it as a way for Amazon to gain a bigger toehold in brick-and-mortar retail, I view it differently:

First, the move can help grow Amazon’s brick-and-mortar footprint, but it’s more about taking the Whole Foods brand to every household in America that may order groceries from Amazon. It gives Amazon’s fresh food businesses (meat, produce, organics) instant credibility in homes without a Whole Foods location in sight.

As to the skeptics about whether Amazon can handle the logistics — can they deliver organic produce and Cheerios at the same time — this is the smartest logistics management company in the world that we’re talking about.

Finally, Amazon has a longstanding willingness to lose money in a new business where it is trying to grow market share. The days of “Whole Paycheck” may be over.

Does “free shipping” have to be a money pit?

A quick comment from RetailWire about free shipping and whether it is destined to be a money-losing proposition for most retailers:

Retailers have competed over e-commerce free shipping for a number of years, so it’s hard to envision the genie being put back into the bottle. (Customer expectations are hard to unwind, after all, when they are given a benefit for free.) The trick that Amazon seems to be mastering is the trade-off between speed and cost. Even Prime members may pay extra for same-day or next-day delivery compared to truly free shipping for an item showing up in two days; the shoppers figure out the value equation that matters to them. But will competing retailers take advantage of the solution that Amazon is providing to them?

Operations management needs a seat at the omnichannel table

Today’s RetailWire discussion focuses on the operating pressures caused by omnichannel and digital initiatives. Field managers absolutely need to be part of the planning process, and here’s my point of view:

Retailers pushing for omnichannel solutions (BOPIS, ship-from-store and so forth) absolutely have to involve store operations. There is no way to plan the costs of these services (especially in payroll hours) without field management at the table. And store management has a responsibility to speak up when pushed to “do more with less” — otherwise the costs of omnichannel programs erode the customer service that brick-and-mortar shoppers still expect.

Is there a market for “ultra-fast” fashion?

RetailWire panelists weighed in on the growing trend toward “ultra-fast” fashion. If the short lead times of fast fashion retailers (think Zara) aren’t short enough, how about two to four weeks from concept to delivery? And what sacrifices need to happen as a result? Here’s my comment:

Retailers have been too slow reacting to the fast-fashion capability of companies like Zara and Forever 21. These two companies (and a few others) have brought great supply chain management and data science to the art of getting relevant product to their customers quickly. But the key word here is “relevant”: Does a two-week lead time offer enough chance to test and reorder in depth?

Cost is another factor: Ultra-fast retailers will probably have to pay a premium for manufacturing labor close to their stores (especially in the U.S.), even if there is some offsetting saving on transportation. Fast turnaround makes sense if your store needs Stanley Cup championship jerseys tomorrow, but for the majority of goods a little extra time is worth the investment.