Wednesday, September 17, 2014

In-vehicle returns and exchanges of ecommerce purchases

We love the convenience of our vehicles. We love the convenience of ecommerce. But we want the ability to return and exchange stuff, if after we get our hands on it we find that it's not exactly what we're looking for. Put these together, and it becomes very clear that there is potential for in-vehicle returns and exchanges. From Internet Retailer: Sears is adding this feature.

You have to use their app, which is actually a good thing because it links to your order history, payment history, and also their product catalog, so that the process is much more efficient. Sears is promising a 5-minute turnaround on this, from the moment you arrive at the designated parking spot for this service. That 5-minute turnaround to me appears to be the biggest risk factor: I'm not sure Sears (or anyone) can guarantee a 5-minute turnaround under all conditions. Note however that the 5 minutes start ticking only after you've parked, so if there is a queue for this then that waiting time doesn't get counted. For now I think their volumes will be low enough that they won't have trouble meeting the 5 minute deadline (while still getting marketing points for having this feature), but over the long run we'll have to see how this evolves.

On a broader note, this is yet another way in which brick-and-mortar stores can creatively leverage their physical assets to fight back against Amazon. Particularly for home-improvement stuff like what Sears sells, I would be very appreciative of a feature that makes it so easy for me to swap the wrong part for a right one, compared to shipping to Amazon and back over a few days.

Saturday, September 6, 2014

US Postal Service engages in a big way in eCommerce

The US Postal Service is engaged in a fascinating pivot and entering eCommerce in a big way. USPS has been struggling for many years, with the decline in snail mail given the rise in email. (There are additional issues such as high legacy costs and all that, but we won't go there in this post.) However, it has a massive infrastructure of post offices, sortation centers, vehicles, carrier agreements, manpower, etc. It is natural that USPS should shift some of its attention to compete aggressively in the eCommerce market, and leverage those assets which are now under-utilized.

Apropos that: the USPS is now testing delivering groceries in San Francisco for Amazon (covered here in the Wall Street Journal). Deliveries will be made between 3 am and 7 am, when their vehicles are currently unutilized and traffic is easy. Sounds strange to some; in the words of one of my disbelieving colleagues: "you mean my mailman is now going to bring me apples?" To me it seems like a natural fit.

Additionally, USPS has announced a massive price cut to compete aggressively with FedEx and UPS. Of course those two are not too happy about this; see this article, also on WSJ. A fascinating side note: FedEx and UPS pay large fines for illegal parking in cities to meet their delivery deadlines and treat that as a normal cost of business, but UPS is immune from such fines and can park illegally at will (from BusinessWeek)!

This pivot of USPS should make for a great business school case study. Any takers?

Wednesday, September 3, 2014

UPS Lockers

From Internet Retailer: UPS plans to offer a network of locker pick-up points for ecommerce orders, and has started testing in Chicago and New York. There doesn't seem to be any other news coverage of this, nor anything on the UPS website. I'd be interested to know whether UPS would offer any shipping discount for this service, because the last mile of delivery is often the most expensive and UPS potentially could cut out some of that. However, this particular service seems to be geared more towards convenience and safety (as in, customers don't want to wait around at home but also don't want the package to be left unattended at their door), in which case it is plausible that customers would be willing to accept the service without any reduction in shipping cost.

If this takes off, I would expect ecommerce retailers to start significantly advertising this on their own websites, giving them one more tool to try and catch up with Amazon. Personally, I have no doubt that these lockers will gain popularity very quickly; what is to be seen is the precise shape of the locker industry.

Wednesday, August 20, 2014

Amazon to test drones in India?

Apparently, Amazon is considering test-launching its drones in India, in Mumbai and Bangalore, possibly as soon as Diwali in October. Thanks to Atul, my favorite commenter, for this! I have to admit I still remain skeptical of the viability of delivery by drones in the near term, but then this won't be the first time I have been completely and overwhelmingly wrong.

Monday, August 18, 2014

Does shift to ecommerce increase employment?

With ecommerce accelerating in terms of the proportion of total retail, does that mean there is a net loss of jobs or a net gain? On the one hand, we obviously don't need as much staff in retail stores. On the other hand, a lot of the labor that used to be done by the customer now is done by the seller: picking the items and transporting them, in particular. Obviously some of this gets automated, but that still leaves a bunch of work that humans need to do, particularly on the delivery front (at least until driverless cars and drones really scale up in volume).

A recent series of articles from Re/Code, (which I found through one of my favorite websites:, brings up many other related issues, of which one is that there appears to be more and more demand for customers wanting their stuff right away, which leads to delivery via the "sharing economy". I'm completely mystified about how this is supposed to scale and be sustainable (financially and in terms of a source of stable jobs), but then I'm sitting in Ann Arbor and not in Silicon Valley. In any case, the point is that if there really is such demand for instant gratification and the sharing economy is the right model for delivery, then there should be a fairly substantial employment increase from it.

Any pointers for studies/data addressing this directly?

Tuesday, August 12, 2014

Stores and malls shutting down ...

The shift to ecommerce for retail sales is accelerating, with at least one aspect moving faster than I had anticipated: the decrease in foot traffic to stores. The Wall Street Journal reported on August 5 that:
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.
A 5% annual rate of decrease sounds pretty huge! In addition, it was reported at many places (and quite frankly is easy to observe) that traditional shopping malls are also facing tremendous pressure in the form of decreasing traffic and closing stores: see here, here, here, and here. The retail landscape is changing, perhaps faster than some of us expected.

Wednesday, July 30, 2014

eCommerce heats up in India

Just a day after Flipkart raised $1 billion for its ecommerce operations in India, along comes Amazon with its $2 billion investment. For Amazon, the nice thing about its India investment is that it is not in the business of selling stuff directly, but only providing website, logistics, and distribution services for third-party sellers (similar to Amazon Marketplace). Much better prospects for profitability!

Other ecommerce news worth mentioning without commentary: UPS announced yesterday that they are investing heavily in their network for the upcoming season to prevent last year's debacle from recurring, and a very interesting article on Amazon's new network of "sortation centers"---does this remind anyone of what are called cross-docks in traditional retail logistics?