Tesco profits drop 92% yet online sales increase

Tesco-LogoIn what is probably the biggest financial error in commerce this year, Tesco announced that it overstated its profits. By a lot. The problem was caused by the company booking payments from suppliers as income. In fact, payments were used by the company to run promotions on the suppliers’ behalf.

Tesco is now under fire as forensic accounting investigators from Deloitte reported the company overstated profits expectations by £263m in the first half of 2014.

Not only that but profits overall are 92% down after a previous write down of £527m caused by the above mentioned error in registering income in previous years.

Nevertheless, Tesco is still the largest supermarket in the UK, leading the pack with a large market share:

tesco

Although its market shares have taken a hit, it seems that online sales are growing at 11% and I believe this is just the beginning. Following the unfortunate news eight executives were forced to leave the company, including chairman Sir Richard Broadbent.

Now the company is ready for a fresh start. Ok, scratch that “fresh”. It’s more like it’s forced to improve its omnichannel approach as customers demand better service and improved shopping experience. The company had previously employed several experienced directors to help it become a competitor to Amazon in global retailing. How well this would fare is hard to tell but they should get some award for trying. After all Tesco was the first to ship an online order.

 

 

The Fascinating World of Amazon Logistics

Jeff Bezos

Jeff Bezos

Word’s out that Amazon is planning on opening its first brick and mortar shop. With such news the retail world is now buzzing with questions:

Is Amazon really going head to head with mainly brick-and-mortar retailers? Should the likes of Walmart be paying attention to such tactics? Could this mean a new way of doing business for Amazon?

The answer is no.

First of all Amazon is not opening actual stores. It’s opening pop-up stores. The big difference is pop-up stores are available for just a limited amount of time. They pop-up and then they pop-off. For example the two stores Amazon is now opening will be in San Francisco and Sacramento and will be open just for the holidays.

Amazon will use these stores to showcase its proprietary mobile devices (tablets, ebook readers, the smartphone). Once the holidays are over – puff – they disappear.

There is, however, one report from the Wall Street Journal, not yet confirmed by Amazon, saying the company would actually be looking for more. This report points to a New York location in Midtown Manhattan that would serve as a permanent physical presence. Again, this won’t be your typical store but rather a location designed to respond to specific Amazon needs.

Such needs would include testing Amazon products, order pick-up, returns and local delivery. Maybe even a drone helipad. Who knows?

Seriously now – with the store working as a mini-warehouse, the company could easily offer same-day delivery to near-by customers. That’s a great way to compete with Google’s same day delivery. These type of operations (pop-up shops and drop-shops) could become mainstream in the future as retailers need to bridge the gap in omnichannel retail AND provide faster shipping.

However, Amazon’s offline presence should be scanned from a different perspective:

Amazon is not moving offline. It is already there.

There are no Amazon stores just yet. Except for a few Amazon lockers and the occasional pop-up stores, the largest online retailer remains a pretty digital presence.

Except for its logistics.

Beneath the magic of Amazon’s online retail presence lays an well-oiled logistics machine. Amazon combines advanced IT systems, human operations, robots, huge warehouses and a complex shipping operation to fulfill its daily orders. And some underpaid workers but that’s another thing.

Inside one of Amazon's Warehouses. Source: Wired

Inside one of Amazon’s Warehouses. Source: Wired

How many products does Amazon ship? Billions.

In 2012 Amazon sold and shipped more than 10 million products each day. The total number of products shipped in the last quarter of 2012 was 1.05 billion. Yes, that is a Billion with a B and it is reportedly the first time in the company’s history when it sold more than 1 billion products in just one quarter.

The number of listed products is also huge. Its top 5 markets all list more than 100 million products, with the US totaling a whooping 253 millions, as reported by Export-X:

The total number of products listed on Amazon's top markets. See more here.

The total number of products listed on Amazon’s top markets. See more here.

Amazon Fulfillment: 83 million square feet of storage and fulfillment centers

You’ve probably guessed that shipping 1 billion products per quarter to more than 200 million customers worldwide requires a bit of work. What you probably don’t know is that such a large-scale operation uses 50 million square feet of storage in the US and 33 million square feet of storage outside US (source).

There is no other ecommerce competitor with such storage and fulfillment potential. Its dominant position allowed for two interesting business models to evolve: The Amazon Marketplace and Fulfillment by Amazon.

To reach sales as those shown above, Amazon lists and sells both its own products and those from 3P (Third Party) merchants. Merchants can join its Fulfillment By Amazon program, ship the product to Amazon’s Fulfillment centers and than leverage Amazon’s Logistics.

This means the company can count on its sales AND influence to shape the future of retail. Its logistics are probably the most useful and under rated tool in expanding globally. While everyone wonders if Amazon will set foot in the offline world, the company has already laid the foundations to what will probably be the future of retail.

Of course, the numbers listed above can only show a small bit of what is required to keep Amazon moving and growing. The operational tools Amazon employs and the processes behind this amazing machine will be uncovered in an upcoming ebook. Until then – check out “Understanding Omnichannel Retail” – a comprehensive report on how online and offline sales are now connecting.

Ebay and PayPal Splitting. Why is This a Good Thing?

Ebay and PayPal have been together since 2002, when Ebay decided to acquire PayPal for $1.5 billion. At that moment both companies were heavy weights in their respective fields and growth was booming. Ebay struggled with a previous solution, called Billpoint, until deciding to give in and purchase PayPal.

eBay-and-PayPalSince then, both gained a lot from the other. Ebay benefited from PayPal’s ease of use and helped its customers send money to one another. This helped streamline and secure the purchase process, thus increasing transactions. PayPal, one the other hand, piggy backed on Ebay’s massive user base and international exposure. Its revenue increased by the year and in the second quarter of 2014, it amounted to 45% of Ebay Inc’s total revenue.

The fast growth of PayPal, as well the whole “payments revolution” potential lead Carl Icahn to propose a split between Ebay and PayPal this year. Icahn’s proposal / attack was then fended off by Ebay CEO John Donahoe and PayPal ex-leader David Marcus. Since february 2014, a lot of things happened. David Marcus left the company to join Facebook and biggest of the biggest, tech mammoth Apple launched the Apple Pay. What seemed like a closed case soon turned into a huge split between the companies.

Now – John Donahoe will still run Ebay Inc until the split is official. As of that moment he will step down as CEO and Ebay will be lead by Devin Wenig, now president of eBay Marketplaces. PayPal will split into a new company, directed by Dan Schulman, now president at American Express, Enterprise Growth Group.

PayPal benefits from Ebay Inc. spliting. The split means that PayPal will be able to roam free, grow and develop independently. On the other hand Ebay will be able to … well … do everything it was doing before. The marketplace division is not gaining much from the split. It loses a revenue stream, its shares will drop and it will have to find a new way to keep up with its growth in the future.

However PayPal needs independence to keep up with increasing competition in the omnichannel payments landscape. It needs to innovate, it has to connect online and offline and it has to do a bit better on mobile devices. The split will help the company evolve and here are three reasons why:

1. PayPal can mean more than just payments

Banking as we know is shifting from an old, rigid system to a new way of doing business. That means more than wiring money. It means deposits, it means financing, it means Peer 2 Peer Lending and more. Under Ebay, PayPal was bound to stick to payments and money transfers. Now that Ebay is no longer the umbrella that fosters PayPal innovation, we may soon see more financial goodies from PayPal.

2. PayPal should be more than an accessory to Ebay

Elon Musk explained best why Ebay should not hold PayPal back: “It doesn’t make sense that a global payment system is a subsidiary of an auction website… It’s as if Target owned Visa or something”.

The fact is PayPal outgrows Ebay. It can and should be a global financial company, a field that’s obviously larger than Ebay’s marketplaces can ever be.

3. PayPal could grow even faster as a separately traded company

It’s no secret that Ebay has already done what it could to help PayPal. Now it’s just living off PayPal’s growth. As a separately traded company PayPal can become a larger company, more attractive to investors, which in turn can help the company finance its expansion, growth and fight against Apple, Google, Amazon and even AliBaba.

But …

Carl Icahn is known as a corporate raider and maybe there’s more to this story than meets the eye. There is a possibility that he and others are just splitting the company to later organize a take over from companies such as Visa, MasterCard or one of the larger banks. What could be a profitable short-term strategy could hurt PayPal in the long run and kill one of the most promising financial companies in the world.

World’s Top 7 Best Auto Sellers and the Strategy they follow

Currently, we find many competitors in the motor-vehicle manufacturing industry. The industry is however dominated by just a handful of companies. What separates this handful from the rest? Well, let’s take a look at the top seven auto companies by sales and the strategies they employ to increase sales.

Toyota

toyota-logoJapan’s Toyota Motors was the world’s best-selling brand in 2012 and 2013. In 2013, Toyota sold over 9.98 million new cars and trucks alone. The company’s bestselling model was the Toyota Corolla.

Toyota has continued to target specific market segments using innovative specific products ranging from two-seater cars to luxury SUV’s. Their current emphasis is on increasing their presence in North America, while maintaining existing markets.

General Motors

  • gm-logoAmerica’s General Motors sold 9.71 million units in 2013, with its popular Chevrolet brand selling just over five million units.
  • General Motors aims to target emerging markets as the new frontier for sales.

Volkswagen Group

  • volkswagen-groupSales of 9.7 million units in 2013 places the German corporation at third position.
  • It has been touted to surpass GM and Toyota as the world’s number one car-maker by 2018.
  • The firm has continued with its focus on the traditional European market while not forgetting emerging markets like Brazil, India and China (which is its largest market). Volkswagen sold over 3.2 million units to China in 2013.
  • The firm also hopes to introduce new products. It markets the products on the platform of quality.

Renault-Nissan Group

nissan-renaultThis alliance between Renault from France and Nissan from Japan sold more than 8.2 million units in 2013. The alliance between Nissan and Renault is strategic given their geographical locations and key markets they each control.

Renault hopes to ride on Nissan’s hold of markets in Asia, China and Africa while Nissan hopes to penetrate the European market by benefiting from Renault’s existing structures.

Hyundai-KIA

  • hyundai-kia-logo1The Korean auto company sold more than 7.5 million units in 2013. Their top selling model was the compact Electra/Avanti which sold 866,000 units, making it the fourth most sold unit worldwide last year.
  • The firm is trying to avoid a situation where the Hyundai and Kia brands, which are mostly mechanically similar, compete for the same markets.
  • The firm also aims to focus on the European market, where its sales have doubled over the last five years.

Ford Motor Company

  • Ford-Motor-Company-logoThe American car-maker sold over 6.3 million units in 2013, an 11% increase compared to the previous year.
  • Ford has continued with its focus on the North American market, which is its biggest market. The F-series pickup was Ford’s best-selling vehicle in Canada last year.
  • It has also announced a plan to expand into the Middle-East, Latin America and other emerging economies in Africa.
  • Ford also aims to continue making popular models, given that its compact focus was the world’s bestselling vehicle in 2013.

Fiat-Chrysler

  • fiat-chryslerThe merger between Italy’s Fiat and America’s Chrysler resulted in the sale of more than 4.3 million new units in 3013. Much of the firm’s growth came from Chrysler’s 14% increase in US sales.
  • The car-maker plans to improve existing brands while also introducing new ones. The company also aims to boost sales by 60% over five years, mainly by expanding into emerging markets, with particular focus on India and China.

Author Bio:

Stacy Eva lives in Birmingham, UK and is an avid reader and blogger. Since her early years she had a passion for writing. Her articles have been published in leading UK newspapers. Her areas of interest are Culture and Tradition, Food and Travel, Fashion and Lifestyle. As of now she is working as a freelance content manager for dsa practical test.

Home Depot discloses 56 million Credit Card Numbers lost in Security Breach

Home Depot, the largest home improvement retailer, has announced that 56 million credit card numbers have been compromised. In what is now known to be the biggest security breach in corporate history, Home Depot has been the target of an attack that lasted from April to September 2014.20140916_homedepot

Home Depot managed to beat the previous record, held by Target with 40 million compromised credit cards. As a result of Target’s security breach, the company laid off its CIO. Chairman, President and CEO Gregg Steinhafel then announced his resignation as a result of the security breach and previous unfortunate events, like losing $941 millions in a failed Canadian expansion.

Background

September 2nd: the same man that announced Target’s breach, Brian Krebs, announces a new security breach. This time on Home Depot. The same day, Home Depot starts digging through its POS systems and on the September 8th announces that indeed, a breach has happened.

Krebs reports that the same group of Russian and Ukrainian hackers that managed to steal Target’s data were responsible for the hack. The same day a new batch of credit cards shows up online. The batch’s code name: European Sanctions.

Implications

16 days later, Home Depot announced that it managed to clear all infected systems and has “has completed a major payment security project that provides enhanced encryption of payment data at point of sale”.

The company worked with security firms, banking partners and the Secret Service to find out as much as possible about the breach. Results show that hackers used custom built, never before seen malware. This was not the work of some isolated hackers group, acting on its own. A very well organized attack has been put in motion.

Home Depot has worked with banks to provide customer support to those in need. A small local bank, Dollar Bank, as well as larger banks such as JP Morgan Chase and Capital One, have started replacing credit cards.

Although Home Depot has not been hit by the market just as heavily as Target, one can still feel the tension looming over the retailer’s security actions. Consumers are more careful in how they use their credit cards and banks have jumped on board the Apple Pay system, which promises better security.

Is there a cyber war out there?

The fact that the same group of hackers seem to have been involved in attacking Target, as well as Home Depot points to a maybe. But then you have the Secret Service involved. You have an ex-Homeland Security contractor acting as CIO with Target. You have the FBI investigating whether Russia is behind the recent JP Morgan Chase cyber attack.

But most of all – you have Edward Snowden, defected to Russia with a few gigs of classified information on US cyber intelligence actions. Some of those actions may have included packing backdoors and security flaws into US digital infrastructure. Too bad.

Yes, there there probably is a cyber war going on and the US and Europe are extremely exposed. Retailers should pay a lot more attention to their security backbones and check each potential backdoor, should they not want to suffer the same unfortunate events Home Depot, Target and others have faced.

 

 

 

 

Using the Mobile Revolution for Marketing

We’re reaching that point in the world where technology has evolved to a micro-level. Computers that used to be the size of large walls are now as sleek and light as a stack of papers, and what was once a brick-sized mobile phone has become the size of a small child’s palm. By now, computers are practically mobile phones.

US teens mobile usage. Source: Nielsen

US teens mobile usage. Source: Nielsen

More people in America use and own mobile phones than toothbrushes. Fifty-four percent of these phones are smartphones, and by 2017, there will be over 10 billion mobile devices. As mobile traffic rises, so too does the need for mobile apps. With 90% of Tweets and 40% of Google searches coming from mobile phones, the way to get and spread day is becoming handheld. While two years ago most of this traffic was coming from teens with cell phones (teens increased mobile consumption in 2012 by 256%, with the standard teen sending an average of 3339 texts per month), mobile usage has extended far beyond teens. Most recently, with the continual creation of mobile apps reaching out to various targeted consumers, many companies have begun a new form of marketing for the mobile online shopper.

In fact, four out of five consumers use their smartphones to shop, and the majority claim that shopping from their phones is more enjoyable than shopping in person. No more long lines, parking tickets, unnecessary purchases, or exhausting traffic jams – consumers can buy what they want, when they want, how they want. And it gets shipped straight to their homes. 56% of consumers use their smartphones to search for a store’s location and directions, 51% to look up product information, 59% to do price comparisons on products, 45% to write up product reviews, and 41% to search for coupons. Smartphones make shopping easy and reliable, even more so than shopping in person. With many stores creating apps or green “Buy Now” buttons, shopping no longer requires physical salesmen.

Not only do mobile apps make shopping easy, but it also allows for information about products to be spread more reliably. 78 – 84% of consumers rely on social networks when researching new products. By 2015, it’s predicted that the amount of goods and services consumers purchase through their mobile phones will total roughly $119 billion. Mobile coupon usage is expected to rise to 53.2 million, and retailers say that 67% see a greater value in having their customers use mobile apps to shop rather than shopping in person. Overall, mobile apps bring five times more engagement – both in the product being sold and in the dialogue between targeted consumers.

Ivan Serrano is a web journalist and infographic extraordinaire from Northwest California. He particularly likes to write about the technology world, social media and global business. 

Book review: Delivering Happiness by Tony Hsieh

In Delivering Happiness we get a glimpse of how a promising startup becomes a multi-billion company and the life events that shaped its leaders. Tony Hsieh, author of Delivering Happiness, is CEO of Zappos.com, one of the largest online retailers in the US. The company he built, alongside other co-founders, was acquired by Amazon in 2009, in a deal valued at over $1.2 billion.

delivering-happiness

You can also get more resources on building your startup at deliveringhappiness.com

If you’re planing on buying the book you’re definitely not wasting money. It is a great insight in the mind and life of the man that drove Zappos from a great idea to a company worth billions. But Tony Hsieh is an entrepreneur, a story teller and probably a great leader for his company. There’s plenty to learn from him. But he’s no writer. At least not yet.

From a literary perspective – don’t expect too much. „Delivering Happiness” is fun and easy to read, it’s packed with practical advice and real-life stories to get the point across. But Tony is no Hemingway.  The writing sometimes rushes through some really important events and sometimes lags behind boring details. For example there is a bit more info on how Tony decided he should build a worm farm when he was nine years old than there is on how actually did Amazon decide on acquiring Zappos.

Literary style aside, Tony Hsieh’s life story and Zappos growth is nothing less than amazing. The book cycles through three very important areas on building a business, overlayed on top of Tony’s life story: Profits, Passion and Purpose.

It seems as if the book is less about Zappos and more about Tony’s search for purpose. From an individual point of view I believe anyone can relate to striving for purpose. Just as the title hints, Tony Hsieh’s purpose was ultimately delivering happiness to the people around him: employees, vendors, customers.

You’ll get a feeling of just how entrepreneurial Tony is from the first chapter, Profits. He shares funny stories that show his drive for profits. Be it an worm farm, a newspaper delivery operation or the pizza delivery business he created in college, we see a clear drive for profits that ultimately leads Tony to cofound LinkExchange, a media business ultimately sold to Microsoft for $265 million.

But it wasn’t all great. Building LinkExchange, Tony felt the initial energy and culture in the company ultimately faded away. In the days leading to the company being acquired by Microsoft, many employees became unexpectedly greedy, trying to squeeze as much as possible from the transaction. This fact left a bitter taste with Tony. However, the patient took the bitter medicine and applied the lesson to Zappos.

One of the most important aspects to Zappos is clearly the focus on customer service, something impossible to build without a spotless company culture. It was the bitter taste Tony felt in the days leading to closing the LinkExchange transaction that set the tone for Zappos „fun and a bit weird” culture, one of the assets that helped the company reach more than 1 billion in sales in less than 10 years.

It was the culture that helped the company evolve, kept its employees with the company when the going got tough and it was the culture that drew attention of Amazon CEO Jeff Bezos.

It was the culture that showed Tony and other executives that they have to steer away the company from previous investors, which wanted more profits and less customer focus. This ultimately lead to what Tony calls a „marriage” between Zappos and Amazon – the transaction that tied the knot on two of the largest online retailers, two companies that take pride on being customer centric.

„Delivering Happiness” is a great  book for any entrepreneur. It outlines the struggles and hard times that are usually invisible in the media. It shows how painful and energy draining it is to build an world class company. It also shows how important passion and purpose are when trying to scale beyond the startup phase.

Delivering Happiness shows Tony Hsieh’s struggle to go beyond being an one-shot entrepreneur. It shows the struggle to go beyond profits and build an organisation that brings together passionate people that ultimately share a common purpose. It is the story of how this purpose came to improve the lives of those inside and outside the company.