Wednesday, August 6, 2014

Despite downbeat traffic numbers, overall retail sales have inched up. Pictured, customers at a Costco.Bloomberg News

U.S. retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online.

Aside from a small uptick in April, shopper visits have fallen by 5% or more from a year earlier in every month for the past two years, according to ShopperTrak, a Chicago-based data firm that records store visits for retailers using tracking devices installed at 40,000 U.S. outlets. Even as warmer temperatures replace the harsh winter weather this year, store visits fell by nearly 7% in June and nearly 5% in July, according to ShopperTrak.

New data from Moody's Investors Service shows that the shift to online sales has prompted retailers to scale back store openings and will likely lead them to pare back their fleets even more in coming years, as more than $70 billion in lease debt expires by 2018. Growth in store counts at the 100 largest retailers by revenue has slowed to less than 3% from more than 12% three years ago, according to Moody's.

The pressure comes as consumer tastes are changing. Instead of wandering through stores and making impulse purchases, shoppers use their mobile phones and computers to research prices and cherry-pick promotions, sticking to shopping lists rather than splurging on unneeded items. Even discount retailers are finding it harder to boost sales by lowering prices as many low-income consumers struggle to afford the basics regardless of the price.

On Tuesday, Walgreen Co said customer traffic in the nonpharmacy section of the store fell 2.6% in July. CVS Caremark Corp. said declines in traffic contributed to a 0.4% decrease in front-of-the-store sales, excluding newly opened or closed stores, in the quarter ended June 30, as customers aggregate trips and make fewer store visits. A decision to stop selling tobacco played a part in the declines, CVS said.

"Consumers are still a bit cautious," said Helena Foulkes, president of the pharmacy unit at CVS, noting that its competitors are offering more aggressive promotions this year.

Target Corp. warned investors on Tuesday that its second-quarter financial results would be lower than initially expected after heavy promotions didn't do enough to bring back shoppers following six quarters of declining traffic and lingering fears stemming from last year's credit-card data breach.

One deal at Target gave customers $10 off a $40 online order if they came into the stores to pick it up, which enticed some shoppers to stock up on diapers and other consumables but ended up denting the discounter's profit.

The Minneapolis-based retailer said sales at U.S. stores open more than 13 months were flat for the quarter ended Aug. 2, highlighting the challenges incoming Chief Executive Brian Cornell faces when he takes the helm next week.

"While the environment in both the U.S. and Canada continues to be challenging, and results aren't yet where they need to be, we are making progress in our efforts to drive U.S. traffic and sales," said Chief Financial Officer John Mulligan, who is serving as Target's interim CEO.

The traffic declines are widespread across the industry. Last month, Family Dollar Stores Inc. said traffic declines contributed to a 1.8% drop in sales for the three months through May 31, excluding newly opened or closed stores.

Declining traffic numbers at dollar stores and pharmacy chains are particularly worrisome for the industry as big-box retailers like Wal-Mart Stores Inc.make big bets that they can win back shopper traffic by building smaller stores.

Despite the downbeat traffic numbers, overall retail sales have inched up every month since January as job growth and consumer confidence ticks higher. Store chains like warehouse club Costco Wholesale Corp. and T.J. Maxx parent TJX Cos. continue to post gains, while retailers like Dollar Tree Inc. and Wal-Mart plan to add hundreds of stores over the coming years.

Online sales now make up more than 6% of total retail sales, according to the U.S. Census Bureau. Internet sales have grown by more than 15% every quarter for the past two years and are having a big impact on the way many companies are looking at their brick-and-mortar stores.

In a response to a request to break out online sales by the Securities and Exchange Commission made public on Tuesday, Best Buy Co. said programs that allow customers to buy items online but pick them up in store, made it "increasingly difficult to distinguish between the performance of online and stores." Its online sales made up 8.2% of total revenue in the quarter ended May 3, from 6.3% a year earlier.

Earlier this year, Staples Inc. CEO Ronald Sargent told investors that stores now "have to earn the right to stay open." With roughly half its sales originating online, the company plans to close hundreds of physical locations over the next two years."While we don't take this decision lightly, we know it is the right thing to do for the long-term health of our business as we become more efficient and increase our focus online," he said.

Sears Holdings Corp. closed more than 12% of its stores in the past three years and has closed another 80 stores this year, while RadioShack Corp plans to close 200 stores this year. "We're in a transformation where retailers are recognizing the Internet isn't going anywhere and to be competitive, you have to have a more compelling online presence and an efficient store base," said Moody's analyst Charles O'Shea.

The lease obligations set to expire by 2018 provides companies that overbuilt in the past decade with a way to reduce their retail footprints. The change will be particularly apparent at office supply stores, where more than two-thirds of retail leases are set to expire, and specialty retailers and convenience stores, where roughly half of retail leases are primed to expire by 2018.

Sunday, August 3, 2014

EMERGING OPTIONS FOR OMNI-COMMERCE LOGISTICS STRATEGY

APRIL 12, 2014ADMINCOMMENTS DISABLED

At SCI Logistics in addition to fulfilling millions of e-commerce orders on an annual basis, we also spend a significant amount of time studying the optimal methods of helping our customers serve consumers in Canada. And by the way, if you’re not already serving online consumers in Canada, you might want to read ‘Looking For Growth in Lean Times? Look North to Canada!‘ to see the opportunity you may be missing!

Every week I’m interacting with more and more e-commerce professionals whose day to day job is coming up with the best methods of delivering Omni-Commerce solutions for their customers.

One thing I can say is there seems to be a lot of angst, confusion, and misinformation out there, so I thought it might be helpful to share some of the best practice options, opinions and trends that seem to be emerging.

Those of you who know me are aware of my work in coining and developing the ‘Matrix Commerce‘ concept, however I’m sure you’ll have noted today that I’m using term Omni-Commerce. This is simply a reflection of blunt reality, before any firm can even think of accomplishing a full Matrix Commerce implementation, they and their organizations will have to master and implement the basics of Omni-Commerce logistics. Think of how mountain climbers get to the summit of Mount Everest, the first step in that trek is to get to Base Camp and when it comes to implementing Matrix Commerce in your organization, the first step or Base Camp is to effectively implement Omni-Commerce logistics.

Simply put Omni-Commerce is allowing your customers to effectively access, research and purchase your products in any manner they choose PC, mobile, tablet, kiosk, virtual store, in-store; and then deliver them, or have them available for pick up, when and where your customer would like. To do this you need to ensure that at ALL locations where stock is held or displayed for retail sale, that ACCURATE and TIMELY inventory information is available. Without this you don’t have a hope of delivering even a basic level of satisfactory omni-commerce customer experience.

As this post is about the logistics strategies and approaches to support Omni-Commerce I will not deal with the front end ordering or online technologies, but rather the logistics surrounding where product will be stocked, picked and shipped from for either delivery or pick up by your customers.

The options we will explore are the major models being utilized to date:

- National Fulfillment Centre

- Regional Fulfillment Centres

- Ship From Distibution Centre

- Ship From All Stores

- Regional Hub Stores

- Pick Up Centres and/or Lockerboxes

- Drop Ship From Vendors

Each of the above will be briefly explained and then we’ll touch on some of the potential advantages and disadvantages of each approach. And of course it is important to note that the above are not mutually exclusive and ultimately many retailers will utilize a combination of these approaches to support their online clients.

National Fulfillment Centre

To date this has been the most widely used model where one main fulfillment centre is implemented to service the entire country. The majority of national fulfillment centres are in eastern Canada, typically Toronto, with some in Montreal. Although, there are also some outliers with national fulfillment centres operating in Western Canada in Vancouver or Calgary.

Establishment of a national fulfillment centre is the most common and a natural response in order to implement e-commerce delivery.

Almost all of these national fulfillment centres are run as separate operations from retailer’s store distribution networks and a number of them are operated for retailers by third party logistics providers.

The majority of these national fulfillment centres are operated in a conventional manner with little or no automation, however as e-commerce volumes continue to grow the trend towards automation will also continue to increase. Please see the below chart to get an idea of the advantages and disadvantages of operating a national fulfillment centre.

Retailers operating on a national fulfillment centre basis in Canada will typically have service level issues with customers located on the opposite end of the country. So retailers who have national fulfillment from the west will have service levels of 3 or 4 days or more to eastern Canada and beyond. And those retailers with a national fulfillment centre in the east would have similarly delayed delivery service levels to western Canada.

Regional Fulfillment Centres

As customer’s continue to demand more rapid delivery service levels we are seeing an increase in retailers utilizing multiple fulfillment centres to support the storage, picking, packing and delivery of their e-commerce orders.

This is an area and phenomena we’ve been following closely and have highlighted “The Power of Two” to discuss related details and highlight the potential benefits of introducing secondary or regional fulfillment centres.

Advantages, Disadvantages and Benefits – Regional Fulfillment Centres

There are of course pros and cons to each of these omni-commerce logistics approaches and we have developed the chart below to highlight these for Regional Fulfillment Centres.

Over the last twenty plus years, logistics professionals in North America have been consolidating and centralizing their distribution and logistics networks. In a world where carbon is not considered an issue this was indeed the lowest cost, however a much higher carbon, solution. Specifically the elimination of regional DCs means much higher amounts of outbound transportation in the logistics network which is where the carbon is generated.

Fast forward to 2014 and now carbon is becoming more and more significant a variable in business planning and at the same time online consumers are becoming more and more demanding of rapid delivery. Next day seems to be becoming the new standard service with same day or ASAP / immediate delivery the premium service. These two trends to the environment and rapid local delivery seem to fit together very well and a strong driver for examining potential for regional fulfillment centres.

Ship From Distibution Centre

Although not optimal some have chosen to utilize their existing distribution centres to service e-commerce business. Thought is to leverage existing building assets, people and inventory to support the online business. Typically we see this method applied for either large or bulky items as well as very slow moving items which wouldn’t work as well in the high volume fulfillment centre model.

In most cases, traditional distribution centres are designed and utilize systems more for full case and pallet picks versus the each picking requirements associated with e-commerce picking.
Advantages, Disadvantages and Benefits
There are of course pros and cons to each of these omni-commerce logistics approaches we are reviewing here and we have developed the chart shown below to highlight a number of these points for Ship From Distribution Centres.

Of course utilizing the same inventory of products to service multiple demand streams can be positive and DCs are much better trained, positioned and have more cost effective space and access to packing materials than the model we will discuss next, Ship From Store.

Ship From All Stores

Some retailers rather than introduce a fulfillment centre or ship from their distribution centres have decided to ship their online orders directly from the closest store to the end customer.
Although there are some specific retail scenarios where this might make sense, the Ship From Store model may not be the nirvana it’s being touted as. For a ‘tongue in cheek’ review of some of the issues surrounding the “Ship From Store” phenomena see my recent article “Beware the Ship From Store Spin Cycle0”.

One thing that’s clear from all of the retailers who’re successfully using this e-commerce logistics model is that even with Ship From Store, there’s still a requirement for back up fulfillment centres for 30 to 50% of their orders. Retailers implementing pure Ship From Store without such back up in place risk serious customer service and experience issues and potential related damage to their e-commerce business.

Advantages, Disadvantages and Benefits – Ship From All Stores

Putting “tongue in cheek” satire aside, below we’ve created a chart which plainly lays out the advantages and disadvantages of the Ship From All Stores method to lay out for retailers considering this option what positives and negatives they may encounter using Ship From All Stores.

Make no mistake, Ship From Store is still a relatively new phenomena and as it matures new models and methods may emerge that address some of the disadvantages and while at the same time capturing some the positive items. Could our next omni-commerce logistics model “Regional Hub Stores” be the first stage in this evolution?

Regional Hub Stores

Recently, keeping our ear to the ground on omni-commerce logistics innovations we have seen the emergence of Regional Hub Stores. Specifically what we’re looking at here is instead of using all retail stores for Ship From Store, this model is to focus the demand in each region on one specific store or Hub Store for e-commerce fulfillment.

One of the innovators in this case is The Gap and details on their use of Hub Stores are shared in the article “How Gap Connects Stores and Online Channels.” Not only does this methodology focus fulfillment issues in less stores, it also simplifies the inventory search to a more manageable number of their literally 1000’s of stores.

So although all of the disadvantages of the Ship From Store model are not eliminated, there are somewhat lessened and more focused. In many ways these regional hub stores are very similar to regional fulfillment centers in function however operating using much more expensive real estate with typically much more difficult access and egress for delivery and pick up vehicles.

Advantages, Disadvantages and Benefits – Regional Hub Stores

The chart below highlights the advantages and disadvantages identified in association with the use of Regional Hub Stores. Clearly this approach mitigates some of the negatives associated with the Ship From All Stores model.

Pick Up Centres and/or Lockerboxes

One variant on traditional online delivery models is the introduction and use of Pick Up Centres or Lockerboxes. These have been spreading in both the United States and Europe and other than a few retailers who’ve had them removed from their stores, have for the most part been well received.

The methodology is to have unattended lockerboxes, similar to airport lockers which work automatically using barcodes or codes to open for the online consumer when they arrive to retrieve their product(s) at any hour of the day.

Our below chart on these Omni-Commerce logistics options, shares some of the pros and cons we were able to identify relative to retailers utilizing the Pick Up Centre / Lockerbox delivery methodology.

Advantages, Disadvantages and Benefits – Pick Up Centre / Lockerboxes

In Canada, there was a start up founded called BufferBox which after being acquired by Google in 2012 this service will be sunset by Google at the end of April 2014. One of the benefits of this model other than 24 hour access convenience is that all the consumer deliveries are consolidated to one point instead of delivered direct to home individually. Some carbon benfit should be expected as consumers stop by to pick these deliveries up at the Lockerbox on their way to or from work or while already at the location for other shopping purposes.

Drop Ship From Vendors

As many online sellers seek to expand their assortment and cover more product categories in their online offerings they shift to an “endless aisle” model where products are listed on their site and kept in inventory at the original vendor’s warehouse. As soon as a product is sold on the website, the order is passed along to the vendor who then Drop Ships the product to the end consumer.

Likewise, many retailers continue to drive inventory out of their operations to become more efficient. When it comes to a specific product each retailer may stock the same item in several different warehouses and the vendor in their warehouse as well. Any of you familiar with the laws of logistics knows one of the big ones is the Square Root Law of Inventory which basically means the more locations one stocks inventory the amount of inventory in the system grows geometrically based on the number of locations stock is held. So if all the inventory is focused in vendor held and owned locations the duplication, triplication and more of the same item being held by multiple retailers can be reduced if not entirely eliminated.

Advantages, Disadvantages and Benefits – Drop Ship Vendors

So what is the correct answer when it comes to your omni-commerce logistics strategy? Bottom line is that this answer will be different for many companies. One size will certainly not fit all, and in almost all cases, the best solution will be to utilize a combination of these solutions optimized to provide the best cost, service and customer experience to fit each retailer.

In order to determine the best combination of omni-commerce logistics components for a given retailer requires the completion and analysis of the business utilizing a sophisticated omni-commerce network strategy model. Feel free to ping me through the contact details below should you like to learn more about these omni-commerce logistics options or the required network strategy model development.

My next article will discuss the most appropriate combinations of these omni-commerce logistics models which will vary across different sku velocities, product types as well as delivery service levels.

In the meantime, hopefully the above review will give you a clearer understanding of your potential logistics options and the related advantages, disadvantages and benefits of each acting as a starting point or perhaps even a reset point for your omni-commerce logistics journey.

Forget Google Glass — These Smart Glasses Put A Virtual Tablet In Front Of Your Face

LISA EADICICCO

AUG. 2, 2014, 10:43 AM

Business Insider/Lisa Eadicicco

Lisa Eadicicco wearing Atheer's smart glasses

The company initially grabbed headlines in 2013 when it demoed its One headset at AllThingsD's D11 conference. Following the conference, Atheer Labs more than doubled its $100,000 goal on Indiegogo to fund the One in early 2014.

Although the headset was meant to be a consumer device like Glass, the company recently decided to switch gears and target the enterprise field. There's simply a stronger need for wearable technology in the enterprise field, Soulaiman Itani, co-founder and Chief Scientist at Atheer Labs, told Business Insider. The ultimate goal, however, is to eventually push a pair of smart glasses like the One into the mainstream.

"The PC started with accountants, [and] Blackberry [phones] started with executives that needed to share email," Itani said, illustrating that technology trends sometimes start in the enterprise market before making their way to consumers.

Business Insider/Lisa Eadicicco

A closer look at Atheer's headset

Itani said he believes this is indeed the case with wearable displays, and that the One and similar gadgets are the next major evolution of the computer.

Wearable displays have already proven useful in operating rooms, and Atheer's plan is to optimize its wearable display for use in hospitals, construction, and even the aerospace field.

The decision to switch directions was based on early feedback from Indiegogo backers, Itani said.

"We had no direction at that point," Itani said. "The challenge with consumers is that [they] want something that works in all situations."

With enterprise, it's easier to fine-tune your product to be really good at one thing rather than a little bit of everything, Itani explained. Once Atheer's smart glasses become a hit with enterprise users, the company will have enough feedback to decide which features are most valuable and what needs to be changed for the consumer version.

This software on this enterprise headset would be catered to whichever field it's being used. A doctor's smart glasses would be different than those of a construction worker or an electrical engineer. The headset we played with during our demo was ran on Android, and Atheer said it's capable of running any existing Android app.

Business Insider/Lisa Eadicicco

The computer screen shows what you'd see if you were wearing the glasses

Unlike Glass, you interact with Atheer's tech through gestures. The smart glasses literally display a virtual tablet in front of your face, which you can reach out and interact with. During our demo, I read a magazine and flipped through the pages by moving my hand to the left and right, essentially flipping a virtual page.

The headset's display was much larger and brighter than that of Google Glass. This isn't an un-intrusive screen that sits above your eye like you'll get with Google's eyewear.

What's even more interesting, however, is the headset's 3-D capabilities. I viewed an interactive diagram of organs in the human body in 3-D, which I was able to reach out and move the image around to look at different parts of a human heart. It's sort of like having a Leap Motion or Kinect strapped to your face.

Although the technology was impressive, I could see how it could become burdensome after long periods of time. My arm became a little tired after my short demo session from reaching out to interact with the virtual screen.

Right now, Atheer's headset looks a bit bulky and cumbersome, much like other devices of its kind. But Soulaiman doesn't expect wearables to stay this way for long. In three to four years, he predicts that smart glasses could be nearly as sleek and natural as sunglasses.

Marketing Perspectives

Wednesday, August 6, 2014

Shoppers Are Fleeing Physical

Stores

Shift to Online Sales Is Prompting Retailers to

Scale Back More Store Openings

Related

Sunday, August 3, 2014

EMERGING OPTIONS FOR OMNI-COMMERCE LOGISTICS STRATEGY

Forget Google Glass — These Smart Glasses Put A Virtual Tablet In Front Of Your Face

Wednesday, August 6, 2014

Related

Sunday, August 3, 2014

EMERGING OPTIONS FOR OMNI-COMMERCE LOGISTICS STRATEGY

Forget Google Glass — These Smart Glasses Put A Virtual Tablet In Front Of Your Face

Since Google unveiled Glass in 2012, we've seen a handful of more ambitious smart glasses that claim to do a lot more than Google's gadget. Startup Atheer Labs is the purveyor of one such device.