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 Shop.org.
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 Amazon.com, 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!

Saturday, November 29, 2014

Black Friday, Webrooming, and Meijer

Looks like Black Friday was strong---in the ecommerce world. From today's WSJ:

Wal-Mart Stores Inc. said Friday that Thanksgiving was its second-biggest day ever for online sales. Target Corp. said Thanksgiving was its biggest online day ever, with sales up 40% from a year earlier. 
A few years ago everyone was worried about showrooming: customers coming to brick-and-mortar stores to browse and get the look-and-feel, but then buying online. This seems to have reversed itself, to a phenomenon now called "webrooming": customers research and read reviews online, comparison-shop for prices online, and then pick it up from the retail store for instant gratification. With retailers matching online prices closely, ecommerce sites no longer have price as a competitive advantage.

Meanwhile, Meijer still seems to be missing out on all of this. As of right now, we still have the following:
In the meantime, most products are not available for purchase on Meijer.com. You can still buy Meijer Gift Cards (for redemption in stores), mall gift cards, and use online photo services.

Tuesday, November 11, 2014

Amazon to deliver through grocery stores in India; Singles Day

This one comes to me from my brother. Amazon is moving very rapidly in India (although it's still a small fraction of their overall business), and is considering using local grocery stores as pick-up points for their orders.

This makes a lot of sense for India, for a number of reasons. As the article says, local grocery stores may welcome the additional footfall. I don't think Amazon is doing groceries in India, so there's no competition there. India's grocery sector is dominated by small mom-and-pop stores, unlike the US and other countries where the large grocery chains would be very skeptical of helping a competitor.

By the way, we cannot let today pass without mentioning that it's the single largest ecommerce sales day in the world, with Alibaba alone hitting almost $10 billion in a one day. Happy Singles Day!

Tuesday, November 4, 2014

Ecommerce, omnichannel, and challenges further up in the supply chain

So far, most ecommerce research has focused on the last mile: from the retailer's stores or facilities to the end customer. But, it has been clear for a while now that the challenges are going to percolate further up in the supply chain as well. Our conversations with industry partners certainly supports this, and a recent report referenced on internetretailer makes this point as well.

To supplement the findings there, what we are finding from our research and conversations is that ecommerce sales are subject to much higher variability than traditional retail sales. This is tied to the growth in social media: think of demand for some product suddenly "going viral" on social media, followed by a surge in online orders. Although demand surges have existed in the pre-ecommerce days as well, the ease of such demand surges is leading to much higher variability (and therefore greater fulfillment challenges). More interesting stuff to do research on!

Wednesday, October 29, 2014

FreshDirect

FreshDirect is a relatively new company located in the northeastern region of the United States. FreshDirect specializes in online grocery retail, and they have two options for their customers to use. The first is home/work delivery, this method allows the customer to order their groceries online and arrange to have them shipped to their home or their place of work. FreshDirect has a $30 dollar minimum on orders being shipped to a place of residence and a $50 minimum on orders being shipped to a business, FreshDirect also charges a delivery fee based on the location to which the groceries are delivered1 2. The deliveries can be made as far as a week in advance and as soon as the previous day, they do not provide the option for same day delivery1 2.  Also, it is worth noting that you must be present in order to receive your delivery, they will not leave your delivery at the location. They will attempt to re-deliver the groceries as soon as possible, but a $4.99 fee will be charged (regardless of when they re-deliver)1  2

The second option they give their customers is the option to order online and pick up at their warehouse (site to store). In the site to store option, the customers place their order online, but instead of having it delivered to their home, they arrange a time to pick it up from the warehouse (located in Long Island3). The orders can be placed anywhere from one day to one week in advance4. There are not delivery/pickup fees charged and there is a minimum order of $304. Also, orders must be pre-paid. Customers have the option of looking at their groceries and can have their groceries loaded into their car free of charge4.

As I touched on previously, FreshDirect is located in Long Island and they serve the surrounding northeast area (parts of New York, New Jersey, Connecticut, Pennsylvania, and Delaware). There are a few other competitors in the area that directly threaten FreshDirect, but FreshDirect claims to have 80% of the market share in their territory6. Also, FreshDirect had sales figures of roughly $400 million in 2013, ranking as the top ecommerce grocer7, and are looking to increase those numbers through new customers in existing territories and new ones6. In October 2013 FreshDirect expanded to the Philadelphia area and is looking to expand to other areas within the northeast6. As more stores like Amazon and Walmart expand to online groceries, it will be interesting to see how smaller, more localized, companies like FreshDirect adjust.

[---Research by Connor Hawley, as part of the research team's series of reviews of ecommerce practices at different companies.]



Thursday, October 23, 2014

The (sometimes) dirty back end of ecommerce and logistics

Although this blog is generally very upbeat on ecommerce (and logistics in general), it is worth keeping in mind that the shift to ecommerce has some negative effects as well. To me, the single biggest such effect is that on labor. Labor gets moved away from interacting with customers, and the job of labor, consisting mostly of packing boxes and moving stuff around, is both physically demanding and makes the workforce easily replaceable. Customers often have no idea about this, and even if they did, often only care about lower prices and faster availability of their purchases.

This issue is not necessarily a secret; there are many articles about it in the popular and business press. One recent article that addresses the environmental downsides of the growth in ecommerce and logistics and also talks a bit about the labor issues is at Buzzfeed, Warehouse Empire, with the following subtitle:
Behind the largest undercover bribe the FBI ever paid to a public official is the story of how our whole consumer economy has been transformed, bringing lung-stunting pollution and, in some cases, political corruption.
It's a fascinating read. Personally, I'm not as against the logistics industry as this article is; after all I teach a class called Logistics. Nevertheless, these are issues that I think deserve more attention and consideration, from customers and managers in these fields.

Hat tip to Longform for the article.