Posts Tagged 'Omnichannel'

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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Holiday 2017, in several observations

Starting with Black Friday, I’m stringing together a few comments on RetailWire about the holiday 2017 shopping season. By all estimates (and retailers’ reports), sales were better than expected considering the doom-and-gloom early in 2017 about the “death of brick and mortar” at the hands of Amazon. Here’s the thread:

1. Most of the anecdotal evidence and reports from retailers suggests that foot traffic was down, especially on Friday, but overall sales volume was good. This suggests that stores’ omnichannel strategies are working to drive total sales, instead of the “silo” effect of looking at e-commerce and brick-and-mortar as two separate businesses.

There is also a sense of higher discretionary spending, which will tend to benefit department stores along with off-pricers specializing in apparel. Early cold weather doesn’t hurt, either.

2. Several factors came into play, including low unemployment, the “wealth perception” of high stock prices, and a break on the weather that helped drive sales of seasonal goods. But I think there are two other key factors in this holiday season’s apparent success: First, the large number of store closings during the first half “cleared the deck” for those left standing to gain market share. And, even more important, most brick-and-mortar stores finally figured out how to leverage their own e-commerce business into a true “omnichannel” experience for their customers.

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.

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.

 

 

 

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

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.

Macy’s store closures don’t fix the problem

I commented on RetailWire in early January about Macy’s announcement of 2017 store closures:

I saw with a particular shudder that one of the Macy’s stores on the list is the “flagship” location in downtown Minneapolis — the old Dayton’s headquarters, where my wife and I both worked and eventually met. It’s hard to imagine that a store with an appropriately sized footprint can’t thrive in downtown Minneapolis — full of office workers and residents — unless there is something fundamentally wrong with how Macy’s is running its business. I’ve shopped their stores from California to Florida to Nevada to Illinois over the past couple of years, and continue to be disappointed by the merchandise content, the physical condition of the stores and the service experience. Until Macy’s addresses these “Retail 101” issues, it doesn’t matter how many stores they close.

Additional thoughts from RetailWire:

Some of our observations about Macy’s are based on 20/20 hindsight, not based on what seemed like a smart move at the time. Even though there was plenty of debate about the disappearance of powerful local nameplates like Marshall Field’s, the reality is that several of those retailers were in their own slow decline. So Macy’s effort to create a national brand (and economies of scale) paid off for awhile.

Where Macy’s has lost its way is in the failure of the “My Macy’s” initiative to cater more effectively to local tastes. The best data science in the world may not be a substitute for experienced managers who really understand their customers’ taste (and when things sell in a given climate). But the bigger issue is the overassortment of women’s brands, erosion of customer service and lack of capital spending; no amount of localization can overcome those hurdles.

And to add a final thought after visiting Macy’s Manhattan flagship in early March: This is a spectacular store that has gotten a big boost in capital investment over the last few years. But Macy’s is so focused on this location (visible to its investors, suppliers and competitors) that it has neglected hundreds of other locations around the country.


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