Tuesday, February 24, 2015

Curbside

In the fast-moving world of ecommerce and omnichannel, new business models keep popping up all the time. Here's one of them: Curbside. One of the research students on this team reviewed Curbside, printed below.


Curbside is a company that is in its infancy. They were created in the Fall of 2014 and have been operating since October. Curbside currently operates as an app where they allow customers to place orders via their mobile phones/tablets, have other people do the shopping for them, and then go pick their order up in front of the store (hence “curbside”). Curbside does not charge customers fees or increased prices, instead they get a percentage of sales from the retailers they partner with in order to keep costs the same for customers.

Curbside is very similar to other third party delivery services such as InstaCart, but they pride themselves on being a mobile “on the go” service. They are an innovative third party delivery service that allows people to shop for things on their own time and pick them up when they are ready. Out of 27 reviews, Curbside had a 5-star rating on the Apple App Store. Generally (everyone but one reviewer) loves the idea and the execution that Curbside provides.

It should be noted that Curbside only offers their services in the South Bay area (California) but they are working on expanding their services elsewhere. Curbside currently operates at 10 Target stores in the Bay area, as well as a mall in San Jose. Operating at the mall, Curbside allows customers to order items from several different stores and pick them up together from Curbside. They are currently working with the majority of the stores in the mall (ex. GAP, Target, Macys). Curbside uses employees to do the shopping, known as associates. These employees are full time to ensure that orders are filled quickly and reliably. Although Curbside currently operates solely in California, they do have plans to expand to 10 other major areas across the US. They have not released which cities they plan to expand to.

[ - Research by Connor Hawley]

Thursday, February 19, 2015

Wal-Mart's continued ecommerce push

While much of the reporting on Wal-Mart today has been dominated by their announcement of increasing wages, there was also a lot of interesting information on their ecommerce push. For instance, although same-store sales as well as total sales are only increasing in the 1% to 2% range, web sales are increasing at a furious 22% rate. Put another way, without ecommerce Wal-Mart's sales growth would have been less than 1%.

Additionally, Wal-Mart plans to invest heavily in their ecommerce operations. From Internetretailer.com:

Faster e-commerce fulfillment is another area Wal-Mart will continue to put resources into, the company says. “Our next-generation fulfillment network combines new large-scale fulfillment centers that combine with our distribution centers and stores, all connected by Wal-Mart’s transportation network,” Ashe told analysts. “Our data scientists have built algorithms that dictate the assortment that needs to be placed in our different nodes, and to dictate from which node we ship an order.”
The retailer also will open four e-commerce distribution centers, including one in Texas and one in Georgia. “Four new fulfillment centers will come online starting in the second quarter,” Ashe told analysts. “When fully operational, these centers, along with our other nodes, will position us to serve the vast majority of the U.S. population fast and at a low cost.”
I wish I could see those algorithms! Our research team is working on pretty much this same algorithm design problem, though as academics we're at a much slower pace than Wal-Mart.

Friday, February 13, 2015

Nation of truck drivers?

From NPR, a few days ago, in 29 of the states in the US, the most common occupation is truck driving. The article says:

What's with all the truck drivers? Truck drivers dominate the map for a few reasons.

  • Driving a truck has been immune to two of the biggest trends affecting U.S. jobs: globalization and automation. A worker in China can't drive a truck in Ohio, and machines can't drive cars (yet).
  • Regional specialization has declined. So jobs that are needed everywhere — like truck drivers and schoolteachers — have moved up the list of most-common jobs.
  • The prominence of truck drivers is partly due to the way the government categorizes jobs. It lumps together all truck drivers and delivery people, creating a very large category. Other jobs are split more finely; for example, primary school teachers and secondary school teachers are in separate categories.
I think there's another reason at play, that's not mentioned: ecommerce! Whether it's the last mile home delivery, or the stuff moved on big UPS/FedEx trucks across states, it's all still counted in the Census Bureau's "Truck, delivery, and tractor driver" category. Can't imagine tractor drivers have increased that much, but I'm sure deliveries have increased, at the expense of retail salespeople.

Oh, and is anyone surprised that the most common occupation in Washington DC is Lawyers?

Wednesday, February 4, 2015

Amazon to buy RadioShack stores, expand retail footprint?

From Internet Retailer and some other sources, we are hearing reports that Amazon may be considering buying a bunch of RadioShack retail stores or stores from some other chain(s) to expand its retail footprint. The article mentions three main reasons for this to be a good idea for Amazon: it's a place for customers to pick up orders, return orders, and for Amazon to showcase its own branded products like the Kindle.

Regarding the pickup and return: I would be very interested in seeing whether Amazon re-configures the retail locations to allow for drive-through pickup and return. There is increasing activity in the drive-through model of ecommerce, and Americans in particular value the ability to get their work done without having to get out of their cars. Drive-through is no more expensive than in-store pickup, although there is a bit of an initial fixed cost in setting up the drive-through system. However, if customer value is sufficiently high, and Amazon can promise items at the drive-through quickly enough, that would be a strong business case for it.

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 Walmart.com’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 Walmart.com 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?