Monday, June 29, 2015

Meijer expanding Curbside

We'd reported earlier on Meijer coming back online with a curbside pickup option in Grand Rapids. That must be going well, because apparently they're expanding it to Ann Arbor too. As a proponent of the click-and-collect model with curbside/drive-through pickup, this is not a surprise. I expect retailers to add this, including perhaps Amazon. In the meantime, it's worth mentioning that Busch's has had this service for several years now (and I'm a big user of it); also that Meijer is apparently adding only their grocery section to this service, not their entire catalog.

Monday, June 22, 2015

Instacart converts some temps to paid employees

Instacart has been one of the faster-growing companies in the crowdsourcing or 1099 economy, other members of which include Uber and TaskRabbit. Personally, I've been skeptical of the long-term sustainability of companies relying on temps acting as contractors, but that's an opinion that I don't have any research to back up with.

Anyway, Slate reports today that Instacart is converting a few hundred of its contractors in Boston and Chicago into part-time employees. Instacart does grocery shopping; as we've found in our study, the biggest cost driver in in-store grocery ecommerce models is the labor cost of picking items off the shelves. The Slate article also mentions this:
“As Instacart grows, and we continue to learn what makes the best experience for our customers, we are constantly looking for ways to improve our service,” Apoorva Mehta, Instacart’s founder and CEO, said in a statement. “When you look at the difficulty of shopping, picking and delivering items such as fruit or eggs that need to be carefully selected, you realize that grocery shopping can be complicated. For this reason, we want to provide supervision and training, which can only be done with employees.”
So there's that: making them employees can help improve the efficiency of the pick process. Another issue here is efficiency over multiple jobs. Suppose Instacart gets 5 orders, all at roughly the same time, that need to be picked at the same store. In a pure contractor-based system like Uber, it would offer each job up to the contractors, and different contractors would pick different jobs. With employees, Instacart could assign all 5 to the same employee, who would shop all 5 orders simultaneously---which is much faster and more efficient than having 5 contractors shop 1 order each. Having employees gives Instacart the ability to do this, and significantly reduce the single biggest cost driver in ecommerce grocery models. This "combining orders" logic of course does not apply to taxi services like Uber---but it does apply partly to the delivery of groceries, which as of now Instacart is leaving in the hands of contractors.

Online apparel purchases and fit

One of the big problems in ecommerce is of course the lack of the ability to touch and look at the stuff you're buying. In fashion goods, this is a particularly acute problem, with some retailers reporting that as many of 70% of items purchased are returned by the customer (see one study with somewhat lower numbers here).

That's a problem, and therefore also an opportunity. This brings us to websites like shoefitr.com and metail.com, which offer solutions in allowing you to "try" out the stuff online before you purchase it. Another option is to "try at home", something CaratLane is doing with jewelry in India. (Side note: the new CMO of CaratLane is the most frequent commenter on this blog!) I don't know of any statistics or studies that report on the performance of these systems, but it's certainly an interesting idea. Hat tip for pointers to the first two to Toni Moreno, who I ran into at the fantastic COER conference.

Tuesday, June 16, 2015

Amazon meets Uber


It is no secret that Amazon is facing massive challenges in its shipping costs, and is experimenting with many different delivery models. Here's one more, from the Wall Street Journal:
The Seattle retailer is developing a mobile application that would, in some cases, pay ordinary people, rather than carriers such as United Parcel Service Inc., to drop off packages en route to other destinations, according to people familiar with the matter.
As envisioned, Amazon would enlist brick-and-mortar retailers in urban areas to store the packages, likely renting space from them or paying a per-package fee, the people said. Amazon’s timing for the service, known internally as “On My Way,” couldn’t be learned, and it is possible the company won’t move ahead, the people said.
I am very skeptical of the long-term viability of an economy consisting of a whole bunch of freelance contractors driving taxis, delivering packages, sorting Legos, etc. But in the short term, as Uber, Instacart and Deliv demonstrate, this system is clearly working. Amazon, however, is such a large-scale company that such a system will only be able to take a small portion of its overall shipping needs. Additionally, think about Christmas: that's when Amazon's demand peaks, but it's also a time where items need to be delivered with short lead times, often under bad weather conditions---is there really an army of individual contractors who will be willing to sacrifice family time to deliver packages under those conditions? Perhaps Amazon is examining its own version of surge pricing in the context of this system.

Sunday, June 14, 2015

Stockouts in online retail

The Wall Street Journal reports that many large CPG brands such as Unilever are struggling in China as more and more retail moves online. The gist of the problem is captured by the following quote:
The shrinking role of large traditional retailers hurts the big consumer-products companies, who had dominated their store shelves.
“If we like it or not, e-commerce will change our business,” said Reinhold Jakobi, NestlĂ© China’s food and beverage managing director. “If you go online, everyone gets the same screen space.”
Now consider what happens when the brand is trying to sell on an ecommerce platform (Alibaba, Amazon, etc.), and their product is stocked out. In many cases, in such a situation, the product won't show in the search result when the customer searches for it. This leads to not just a lost sale, but has a negative impact in terms of brand awareness in the customer's mind [Hat tip to Supriya Chaudhury at Clavis Insight for this idea]. Additionally, many ecommerce platforms use sales quantity as one of the metrics in ranking search results, so lost sales hurts that ranking as well, creating a downward spiral for the brand.

Therefore, staying in-stock in an online sales platform is much more important than in a traditional retail store. All our conversations with executives at partner companies confirm that this is a big challenge, made even more difficult by the fact that sales can be much more variable on online platforms, partly driven by the amplification effect of social media. Clearly more research is needed on how to manage this well!

Monday, June 8, 2015

Walmart "delighted" with Click-and-Collect experiment

From Supermarket News:

Walmart officials said Thursday that they were “delighted” with the performance of its nascent Grocery Pickup facility, but noted it was only one of several fronts under attack in an ongoing global war to win virtual food shopping.

...
In a separate presentation Thursday, Neil Ashe, president and CEO of Walmart global e-commerce, acknowledged that consumer demand for online grocery shopping has improved in recent years but that market density issues that stymied home delivery as a solution had driven the company to pursue pickup as a more effective means of solving the issue. 
“The customer has demonstrated a desire for e-commerce grocery that hadn’t been proven [in 2013], but density hasn’t changed much,” he acknowledged. “So we’ve had a tremendous amount of success with pickup in our markets in Denver, Phoenix, Huntsville and here in Northwest Arkansas. That solves a tremendous problem for the customer and helps us down the path for e-commerce for groceries…. We’ll continue to drive delivery as we get to density in places like Denver, but we feel good about where we’re going right now.”
This echoes some of the points we've been making in our research. Let's see if they ever release numbers, or take actions such as expanding one or another fulfillment channel.

Buy online, pickup where?

Many retailers are offering "Click-and-collect" programs, where you buy stuff online and then go and pick it up. The two main ways of doing this require you to either pickup inside the store, like Kohl's, Macy's and Walmart's site-to-store program, or pickup Curbside, like Meijer's Grand Rapids experiment and Walmart's Bentonville experiment. Some, like our local Busch's, offer both. The main dilemma faced by retailers when deciding which program to offer is that customers prefer the convenience of curbside, but retailers want customers to walk in to buy more items.

Here's another perspective mentioned at one of the discussions at IRCE 2015: Retailers should think of the full customer lifetime value, rather than a single visit. From that perspective, what's more important is to make the customer's experience pleasant enough that they keep coming back to you. That is, give them Curbside if that's what they want, but make it a nice experience, perhaps throw in some freebies if it's a large order, have display advertising at the pickup location, etc., to entice customers to come in next time, or at least keep ordering from that retailer.

From a research perspective, this is a great question. Which works better, and if the answer is "it depends", then on what does it depend?