Saturday, January 31, 2015

Omnichannel or ecommerce? Kohl's omnichannel strategy

I only started writing this blog about 15 months ago, and at that time calling it "Ecommerce thoughts from Ann Arbor" seemed like a reasonable-enough title. The field is moving so fast, however, that the term "Ecommerce" seems outdated already. Now it's all omnichannel---retailers fighting hard to move to the online space, but integrating their online and offline capabilities into a single channel.

Case in point, from Retailing Today: Kohl's is rolling out buy-online-pickup-in-store to its entire network of 1200 stores. In addition, it does ship-from-store from an unspecified number of stores. Moving forward, it plans to enhance its capabilities in the "mass personalization" area---something I'm hearing more and more of retailers doing. For Kohl's, this article only mentions personalization with respect to the webpage and fulfillment options, but it's when personalization actually enters into production of customized products, fast, that things will get interesting.

The article makes no mention of Kohl's operational costs, so it remains to be seen how this is working out for them financially. On a different note, next quarter onwards Amazon has promised to separate out its web services business from its other businesses in reporting financial results, which will perhaps give us a better sense of how their retailing options are working.

Tuesday, January 20, 2015

2014 Holiday Ecommerce Retail Overview

This year, traditional retailers just reached the projected sale numbers for the holiday season due to competition from Amazon.  For many, sales in their stores decreased from last year, but ecommerce sales increased making up the difference, according to a Reuters article.  "The majority of retailers will be flat to negative in their bricks and mortar business but their online sales will show significant double-digit increases. This should boost the overall sales number,” said Keith Jelinek, senior managing director of FTI Consulting.

Shoppertrak, which surveys spending at brick-and-mortar stores, estimated that Super Saturday sales would reach $10 billion this holiday season.  According to early numbers, Super Saturday only brought in $9.15 billion, a 0.5% increase from last year.  These numbers from Super Saturday could not make up for the weak sale figures from Black Friday and the Thanksgiving weekend.  The total spending from that weekend fell 11% from the year before.

The most popular items this season included, Apple’s iPhone 6, toys based on Walt Disney’s animated film Frozen, and cold-weather clothing from retailers such as Macy’s.  Highly discounted segments such as consumer electronics and home improvement did well this season, as opposed to the apparel sector that performed very weakly (All figures from same Reuters article cited above.)

Although the traditional retail sales may be a bit weaker than last year, there were vast improvements in the delivery of online purchases.  As reported by Washington Post: Last year FedEx delivered 90% of their express packages by December 24th and UPS delivered 83%.  This year both companies deliver 98% of their express packages by Christmas Eve.  This improvement was a combination of better communication between retailers and these delivery companies and better weather conditions.  FedEx and UPS both capped the number of express orders each retailer could submit.  Also, each shipper hired 10,000 more seasonal workers than last year.

Shippers felt it necessary to improve their methods from the year before with the increase in online sales this holiday season.  It was reported in TechCrunch that the Cyber Monday was’s largest day in the history of online sales.  Customers were extremely interested in Walmart’s deals on electronics.  The retailer also catered to those working all day, by “releasing a ‘Cyber Monday Evening Edition’ that contributed to a higher traffic surge in the evening than it had ever seen previously”.  A surprising 70% of customers that shopped on during the five-day period from Thanksgiving to Cyber Monday, did so on a mobile device.

Traditional sales scraped by this year, but ecommerce was booming.  Shipping companies improved their services, making online retail even more reliable and companies like Walmart worked to make online shopping easier for the busy customer.  These improvements helped ecommerce make up for some of the lost sales in traditional stores.  Changes in ecommerce can be seen by the growing number of people who used their cell phones to do their online shopping.  Craig Johnson, president of the retail and consumer product-oriented private equity fund Customer Growth Partners was quoted in the Reuters article as saying that online sales kept this holiday season from being a “dismal one”.

[- Research by Madeline Stroin]

Tuesday, January 6, 2015

Returns, fraud, and ecommerce

Ecommerce retailers often offer very generous return policies, to counteract the issue of customers not getting the "look-and-feel" of stuff that they only see on a screen. But, it turns out that returns is an area subject to plenty of abuse. From Yahoo Finance:

According to the National Retail Federation, holiday season return fraud alone was expected to cost retailers a whopping $3.8 billion in 2014. Overall, return fraud was projected to take a $10.9 billion chunk out of retailers’ bottom lines last year. Ouch.
The article only mentions stories of people returning stuff physically to stores, and suggests things like checking picture ids of people returning stuff. Online, however, this suggests that the potential for fraudulent returns is even more. I haven't yet seen any numbers for the volume of fraudulent ecommerce returns,  but I suspect it's a growing problem, even if volumes currently are small.

It's also not clear what the best solution would be. If the ecommerce retailer receives a damaged item and refuses to refund money because of suspicion of fraud, this becomes a "he-said she-said" situation with the customer insisting they did nothing wrong and suggesting the items got damaged in transit. The only robust solution would be to have physical handoff of the returned items, but that defeats the whole purpose of the ecommerce model. Is this just the cost of doing business?

Thursday, January 1, 2015

Smoother holiday season

Unlike last year, this year's holiday season seems to have gone well for ecommerce deliveries. No major surge of undelivered packages was reported. Of course, the weather cooperated, with no major winter storm yet. Additionally, both retailers and carriers were much better prepared. reports from a couple of sources that overall ecommerce sales were approximately 15% higher than last year, continuing on the 15% average growth rate of ecommerce in general. Some additional factoids of interest reported in that article, originally from the IBM Digital Analytics Benchmark Report:

Average order value was $100.33, up 6.2% from a year earlier.
Shoppers purchased an average of 3.5 items per order, down 1.4%.
Smartphones accounted for 40.6% of online traffic and tablets 15.9%. But tablets accounted for 18.4% of online sales and smartphones 16.3%.
Computers accounted for 42.6% of online traffic, and 65.2% of online sales.  Consumers spent 21.4% more on average when shopping on their desktops, with an average order value of $107.72 compared to $88.70 on mobile devices.
Consumers using Apple iOS devices, iPhones and iPads, outpaced those using Android devices on three key metrics. Apple users averaged $97.28 per order compared to $67.40 for Android users, accounted for 39.1% of online traffic versus 17.7% for Android users, and accounted for 27% of online sales versus 7.6% for shoppers on Android phones and tablets.

Meanwhile, Meijer sat out the entire holiday season in the ecommerce space. No news yet about when their online channel will open, but at this point it doesn't really matter whether they open in the next few weeks or few months. Hopefully it'll have been worth the lost time.

Oh, and happy new year to everyone!

Tuesday, December 23, 2014

UROP report: current state of ecommerce in groceries/CPG

As readers of this blog know, I work with a bunch of students on ecommerce research, among which are a pair of undergraduate freshmen as part of the university's UROP (undergraduate research opportunity program). These students do excellent work every term, discovering facets of ecommerce that are very interesting.

This term's report is now available. The most fascinating discovery for me is with respect to one particular practice by Tesco, one of the largest retailers (brick-and-mortar and ecommerce) in the UK. Tesco charges different amounts for home delivery depending on the time chosen by the user. If the user chooses a peak time, delivery will cost 6 pounds (11 dollars) or more; at non-peak times it may be as little as 1 pound (less than 2 dollars). Read on for more, comments welcome as always.

Happy Holidays!

Tuesday, December 16, 2014

Same-day delivery

Business Insider a few days ago had an article headlined "Same-Day Delivery Services Are Going After Brick-And-Mortar Retailers’ Last Big Advantage". Excerpts:

Companies like Google, Amazon, eBay, and Uber are operating and expanding services that allow shoppers to order something online and have it that same day, without ever leaving home.
If they manage it, despite the expense and complexities involved in delivering over the "last mile," these companies will grow e-commerce's customer base (as well as its share of retail dollars), and siphon off one of offline retail's last real competitive advantages. 
There is no doubt that customers would love to have the stuff they buy delivered to them on the same day---for free! But are they willing to pay for it? More pertinently, are they willing to pay as much as it actually costs to deliver? Here's one random reference for estimating how much it might cost to deliver: an old article from WSJ suggests that it costs $9.44 to deliver pizza. Of course economies of scale, better algorithms, etc. have probably brought that cost down, but I don't think there's a sufficient market of people willing to pay actual costs of delivery, not yet anyway.

And yet, same-day delivery will continue to grow, as the companies doing this will continue to absorb losses. At some point the market will have to correct itself, I suppose.

Thursday, December 11, 2014

Rush for free, fast, delivery continues, but with small signs of backing away ...

We all know that ecommerce retailers are amping up their offerings of free and fast shipping. To quote some data from a recent article in US News:

This December 92 percent of merchants will offer free standard shipping promotions, with 23 percent of those businesses offering the promotion through Dec. 21 or later, according to
At the same time, there is no evidence yet that any of this is actually profitable. In fact, anecdotal conversations suggest that much of these are loss-leading efforts attempting to build marketshare.

Meanwhile, Amazon has slowly started taking steps to rationalize their offerings a little more. There was of course the well-publicized increase in the Amazon Prime fee a few months ago. If you've shopped lately at, chances are that you may have seen a shipping option that offers a $1 credit if you select the "no hurry" shipping option, wherein Amazon would still deliver stuff very fast (a week or less), but not in the standard 2-day guarantee for Amazon Prime members. We'd of course love to see more data on this and there is no doubt that Amazon is looking very carefully at it.

Holiday shopping season is in full swing, with many people keeping watch on whether the congestion issues of last year will be avoided!