Online Grocery Market is about explode. Uber wants in.

Top 5 groceries markets in the world. Source.

Top 5 groceries markets in the world. Source.

Quickly – think of one market you know is a sure bet for growth. If you guessed the groceries market, awesome! You’ve spotted the subtle hint in the title. The groceries market in the US is expected to reach $1.1 trillion in 2016. China, the largest groceries market, is expected to peak at almost $1.6 trillion in 2016. India, Brazil and Russia are growing at a fast pace and are expected to overtake Japan within the same threshold.

All in all – the US and BRIC states groceries market is expected to total $4.2 trillion within the next two years.

That’s a big market. Obviously, some of those groceries will be purchased online. For the online groceries market to take off, some disruption has to happen. Although not yet mainstream, we can see signs that consumers will be purchasing at least some of their groceries online.

Amazon is going Fresh

If there is one thing that online retailers need to get right in the groceries market – that is the logistics. From a consumer point of view, a reliable fulfillment and a guaranteed product freshness is a must. To do that, online and omnichannel retailers need to set new logistics policies to allow for a quick order delivery, without loss in product quality. Do we know a company that is really good at online retailing logistics? Of course we do:

Amazon is clearly the leader in online retailing so it was expected to move into this market. It did so 5 years ago. Its Amazon Fresh grocery service was first tested in Seattle. Now the company unleashed the grocery service in San Diego. Customers in Northern and Southern California can pick from 500.000 products, ranging from vegetables and milk to batteries and hair care products.

Jeff Bezos previously mentioned that in order to become a $200 billion company, Amazon has to learn to sell food and clothes. The obvious target was Walmart, a company with revenue north of $475 billion.

To do so, the company will continue to improve its service and increase the number of cities Amazon Fresh is available in. “We’ll continue our methodical approach – measuring and refining AmazonFresh – with the goal of bringing this incredible service to more cities over time” mentioned Bezos, addressing Amazon’s shareholders.

The methodical approach Jeff Bezos is talking about might reach New York soon enough. Re/Code mentioned the company has already prepared an warehouse in the area, instructed suppliers to ship frozen products to it and is hiring workforce for the service.

In New York, Amazon will have to face competition from online groceries retailers such as FreshDirect or popular startup Instacart.

Online Groceries in Europe are growing fast

It’s not just the US, though. Online supermarket Ocado now covers 73% of UK’s population, more than any other supermarket chain. It’s plans are outrageously ambitious: take the world by storm through a global marketplace, similar to Amazon’s. Only for groceries.

Whatever it is they’re doing – it must be right because the company jumped from being evaluated at less than £300 million to a £2.3bn valuation in less than 13 months.

Uber rides into ecommerce, brings groceries

Uber's Groceries Order interface

Uber’s Groceries Order interface

You’ve probably heard a bit about Uber. It’s that company that’s turning the cab industry on its head, enraging french cab drivers and linking riders with drivers.

Now it’s testing a new service, called Corner Store, in Washington. Customers can order from a limited inventory right now, 100 products only, ranging from “drinks” to “feminine care” to “first aid”. Not in that particular order.

And it’s not just Uber. Just like with omnichannel payments, it seems all the big boys want in. Google carefully nurtures Shopping Express, Ebay promises 1-2 hours delivery from local shops with Ebay Now and Walmart has Walmart ToGo ready for orders.

Now if anyone can actually make online groceries profitable …

 

 

 

 

Showrooming Markets

Showrooming is a trend more and more retailers recognize. Most online retailers piggyback on consumers trying on merchandise in physical stores, only to search for the best price and then purchase the product online.

Although hard to fight, the trend might be actually beneficial for larger retailers that need to attract customers to their online stores and can afford price matching.

On one hand we have large retailers fighting to keep customers purchasing. Walmart for example, rolled out Savings Catcher in 2014 and now its pushing it across US. The tool allows users to compare prices on Walmart.com to those of its comepetitors. Any difference found is stored as store credit for the customer.

The likes of Amazon are trying to allow showroomers even more space to find the best prices online. Its recently launched Fire Phone has a built in mechanism that allows users to scan products (not just barcodes) and find the best deals online.

Showrooming around the world

Showrooming around the world

In this battle the ones that suffer most are the small retailers or retailers unadapted to omnichannel operations. This companies cannot afford customers trying on merchandise only to buy it some place else, while still keeping the shop open. It’s not just a passing thing either. 33% of customers worldwide report being showroomers, with 21% using their mobile phones to do it ( Source ).

Even more, markets that are earlier adopters of this trend seem to be even more into it. 71% of shoppers in developed Asia, 60% in North America and 54% of European consumers report showrooming practices.

As probably small to medium retailers won’t just roll over and disappear a new type of partner will probably appear in the near future

Showrooming markets as outsourced product display

Traditionally, retailers evolved to outsource everything that didn’t make sense handling within the company. Things as manufacturing or logistics are now commonly outsourced to reliable partners, companies that handle more than one retailers.

It’s not just manufacturing or logistics. If you think about it, most retailers outsource vital areas of their operations. Financial reporting, IT services and sometimes even human resources are outsourced to partners providing reliable service and economies of scale. Globalization has helped push this trend as companies can find cheaper, reliable work offshore.

But so far stores were pretty much left untouched. Retailers still feel the need to control and manage stores as they see fit, even if sometimes it is not the most economically reliable thing to do. As showrooming decreases the need and efficiency for the self-managed store, as online retail becomes increasingly popular and outsourcing gains traction in the future product display in store will also be outsourced.

[Article extracted from "Understanding Omnichannel Retail". Download the report here.]

Millennials as well as older demographics still favor B&M stores. They also like to see and touch the products they are buying. But they don’t always buy from the shop displaying the product. There is a solution that will probably become commonplace in the future, especially for small and medium retailers.

As retailers need to optimize their pricing in order to compete to only pure plays and online retailers need to establish a physical presence, a new type of company will emerge. The showrooming market.

The showrooming market is a place that aims to provide customers with extended information on the product, as well as the full product experience. The concept is already available online, with markets such as Ebay providing product display space for smaller retailers, as well as online pure plays willing to try an additional sales channel.

The primary function for the showrooming market is product display, rather than sale. Its revenue sources would be retailers paying and competing for shelf space, but generally paying less than they would displaying the products  on their on. Retailers, on the other hand, would benefit from an affordable B&M space, as well as a logistic point in product delivery, outsourced to companies that can do it better, due to economies of scale and process optimization.

Prestashop 1.6 Review – A Great Choice for Small Ecommerce Startups

Ecommerce startups need flexible, easy to set up and cheap solutions when it comes to software. A few companies provide such solutions and probably the best known is Magento, which can accommodate a wide array of startups.

However, Magento does have some issues and when it comes to small ecommerce companies, it might not be the best choice. Issues ranging from bloated code, unreliable support when it comes to finding the right development team make it hard for small companies to implement it. As you’ll see below there is one contender to Magento’s reign that you should definitely check out if you’re planning on starting an ecommerce company.

Prestashop and Magento keep rising as the former leader, OS Commerce, seems to have its glory days behind it.

Prestashop and Magento keep rising as the former leader, OS Commerce, seems to have its glory days behind it.

That contender is PrestaShop, a flexible and easy to setup open source application.

A brief history of PrestaShop

prestashop-logoThe company that now develops the product was founded in 2007 by Igor Schlumberger and Bruno Lévêque. The duo thought they could bring a better open source solution to the market and they did just that. Bruno, having a background in both tech and business, developed the first version of PrestaShop, which was downloaded 1000 times in the first month. Now PrestaShop runs on more than 185 000 stores world wide and has more than 600 000 registered contributors.

As Bruno Lévêque, founder and company CEO was unavailable at the time for a statement regarding the company vision, I’ll just go ahead and assume that they’re planning on increasing the install base and further develop the application. As they’re pushing forward with the new version, it’s becoming obvious that the two main opensource applications that small and medium companies will be able to chose from in the future will be Magento and PrestaShop. So it’s probably a good thing to know a thing or two about the upcoming champion.

PrestaShop’s Business Model

When deciding what platform to run your store on it’s important to think about the company developing it. How is it organized, why does it exist and of course – what’s the business model? What keeps the company afloat? That way you can know whether it’s here to stay or not.

Fortunately – PrestaShop is developed by a growing company, with offices throughout the world and a very interesting business model: they give out the application as open source but they charge for special modules and themes in the … aham … PrestaShop shop.

The company also charges for support and training services, which might come in handy when the online store or the development team evolves. If you’re more into online documentation – there are plenty resources out there, starting with the Developer Guide.

PrestaShop Version 1.6 has a great back-office design

Well – enough with the talk about the company – let’s get busy reviewing the new PrestaShop v 1.6. I’ll just stick to the back-office but you can have a look at the default responsive frontend theme.

What’s really outstanding about the PrestaShop’s new back-office is that it’s designed for humans. It’s uncluttered (looking at you, Magento), it’s responsive (great for quick use both on the Desktop and mobile devices) and the team managed to arrange the dashboard elements in a way you can quickly access what you need.

The PrestaShop Dashboard

The PrestaShop Dashboard

The top most used reports (such as sales, orders, cart value and others) are displayed on the dashboard and users can quickly check, refresh or change settings for them.

It’s not just the dashboard – all back-office sections are redesigned to provide quick access to data, in a beautiful interface:

orders-prestashop

With the new version users can get access to PrestaShop’s best features without any hassle. My two favorites are:

  • the customers area – there’s a great benefit in having all customer data in one place. With the new version you can get all kinds of info on the targeted customer – previous purchases, groups he’s in, internal memos about the customer, vouchers and more. Back-office operators can thus have access to a birds-eye view on the customer interactions;
  • the stock management – a great feature in PrestaShop is the fact you can also use it as a starting point for inventory and supply chain management. It’s light interface does the job when keeping track of inventory, inventory movement, stats and supplier orders.

PrestaShop is probably a very good choice for small and medium companies that look for open-source solutions. With the new version you’ll have an uncluttered view of your ecommerce operations and you’ll be free to upgrade your system with the help of a growing contributors community.

Book Review: The World is Flat, by Thomas Friedman

“In China today, Bill Gates is Britney Spears. In America today Britney Spears is Britney Spears. And that’s our problem”. These three sentences perfectly describe the point I believe Thomas Friedman tries to get across in “The World is Flat“.

the_world_is_flatThe world has been radically transformed by politics, technology and economics in the past five centuries. The industrial revolution helped western countries and than companies rule the world. It all lead to a disparity between developed and underdeveloped countries. In the past century the force of governments was overcome by the force of companies spreading globally. And that is about to change.

The past three decades or so, the companies themselves helped a new entity rise above, in a connected world: the motivated and empowered individual.

“The World is Flat” is about the global individual and how he can rise above his own limits, when given the chance. Thirty years ago the birthplace was a pretty good predictor on the chance one has for success. Not anymore. Things have changed and Friedman shows the ten factors that lead to the new status quo:

The ten Flatteners (Forces that Flattened the World)

Thomas L. Friedman

Thomas L. Friedman

This global change didn’t happened all at once. Neither was it caused by one single force. Thomas Friedman lists ten factors that made the world a flat (or more connected) world:

No.1: 11/9/89 – The day the Berlin Wall fell became the day when communism started to crumble. Following the fall of the Berlin Wall, countries grew closer together and the world became smaller.

No.2: 8/9/95 – The day when Netscape went public. We know that the world wide web changed the way computers talked to each other and how people connected to these computers. Few of us know how important Netscape, the company founded by Jim Clark and Mark Andreessen, and its Mosaic browser were when Netscape had its IPO. Before Microsoft embeded Internet Explorer into Windows, Mosaic was the tech wonder that allowed people to access websites in a friendly manner.

No.3: The Workflow software. We are now all familiar with some kind of workflow software, be it Microsoft Word, Adobe Photoshop or some 3D rendering software. But at some point such things didn’t exist. When people started using them they could split parts of business processes and outsource them

“Open-source is nothing more than peer reviewed science. Sometimes people contribute to these things because they make science, and they discover things, and the reward is reputation” – Marc Andreessen on open source software

No.4: Uploading – the power of communities. When people first got online they were using the web just like they were using the TV or other “old media” – consuming. But the Internet was a two-way highway – it allowed for downloading, as well as uploading. Soon people started building websites, writing blogs and developing open-source software. It allowed for better collaboration and a new type of empowerment for the individual that was previously nonexistent.

No.5: Outsourcing. In 1999  three seemingly unrelated but soon to be very important events started to converge in India. The first – the country started producing more and more software developers in its IIT college. Second – fiber optic extended all across the globe and reached Indiay. Third – the Y2K scare was pushing every large company to update its software. As India’s software support was way cheaper, companies started hiring new people to help with the update. The outsourcing movement accelerated and then spread throughout the world.

No.6: Offshoring. On December 11, 2001, China joined the World Trade Organization. By doing so it agreed to the WTO terms governing exports, imports and foreign investment. That became one of the biggest steps in global commerce in the past millennium. Companies started offshoring companies to China where they could manufacture products at lower costs, lower taxes and export them worldwide.

No.7: Supply Chaining. What do Walmart, Amazon, Zara and HP have in common? Probably a lot but one of the most important things that makes these companies what they are is their supply chain. When the world got connected companies such as these spread their supply chain all over the world, to the places where products can be manufactured cheapest and at the best quality. Their supply chains brought the world together in a way governments and armies never could.

No.8: Insourcing. While you might not know this, companies such as UPS or FedEx are doing a lot more than just moving things from point A to point B. Of course, they do that but they also fix your Toshiba laptop, pack, inspect and deliver your Nike shoes and all in all handle logistics for many of the companies you love. How do they do that? They get inside the companies that contract them and help them be better at delivering value.

No.9: Informing. We take Google for granted. We can navigate to the answer for any question. We can access content written all over the world. Information became accessible as never before in human history, to anyone with access to a computer and Internet. Google, Wikipedia and others allowed information to flow everywhere in the world.

No.10: The steroids. Digital, virtual, mobile. When the book came out in 2005, the author listed the HP’s iPaq as a steroid for flattening the world. The device was supposed to be omnipresent allowing for constant connectivity. The irony is that the iPaq is now dead and another i-something (the iPhone) became the revolutionary device HP went for. These steroids are the digital enhancements that allow all the others to converge constantly and empower the individual.

The World is Flat is a book that might feel unpopular …

…especially for anyone in the western world, people that were told all their lives that they will have a job, they will have a house, they will drive a good car and they will have a happy family. And then comes Thomas Friedman and says – not so fast. There is a kid in China, or India or Eastern Europe that will work 3 times as hard for half your pay and he will be happy about it.

Thomas Friedman gets some very unfriendly reviews on this book and sure, some may be true (the writing style tends to get a little boring and repetitive at time) but most are unfair. It is not Friedman’s fault that jobs are outsourced. You shouldn’t blame the book for having to work harder for the same pay. The world IS flattening (it is not yet flat) and soon we will all need to run a little faster, just like a gazelle and a lion in Africa ….

“Every morning in Africa, a gazelle wakes up. 

It knows it must run faster than the fastest lion or it will be killed. 

Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. 

It doesn’t matter whether you are a lion or a gazelle: when the sun comes up, you’d better be running.”

 

The book is a must read for any retailer looking into understanding how the global world shapes the global commerce and what ecommerce has to do with it. Before long – it might become mandatory to understand retail on a global scale if you’re willing to survive in business.

Why Do Online Retailers Fail?

A couple of weeks ago someone asked me a great question. It came from an entrepreneur interested in opening an online store. She had a brick and mortar shop, some experience in offline retail, great merchandise. Previously she’d noticed her customers were asking why can’t they order online, so she decided to give it a try.

So there we are – discussing the necessary steps to open the online channel and integrate it with the offline store. As she previously noticed that success in online retail is seemingly random, she asked a question I was not accustomed to:

Why do online retailers fail?

See – most people want to know what makes Amazon, Staples and other large online retailers successful. They figure that if they study these companies carefully they will get to be successful also. It seems intuitive – see who the leaders are and than copy them.

Companies such as Shopify or BigCommerce thrive on the idea that anyone can start a shop online and be successful. If Jeff Bezos can – why can’t I?

amazonjeff-bezos

Jeff Bezos – Amazon

Browse the internet and you’ll find dozens of blogs (this one included) on this particular subject. “How to be successful when selling online”? You’ll get thousands of posts on what makes online retailers succeed. The harsh truth, however, is that most online retailers fail.

You should know that …

Amazon is an exception.

Staples is an exception.

AliBaba is an exception.

Ebay is an exception.

Multi-billion online retailers are exceptions. They are market anomalies. They are not the norm. The harsh truth is that beyond logistics, most of these companies have done totally different things on their way to becoming successful online. They will continue to do so. And they probably won’t share their plans and strategies online.

Even if these strategic plans and key performance indicators were available online – what good would it do? Say you had all the information on how Amazon works. What good will it do? There already is an Amazon on the market. You’ll be a challenger at best.

So there is really no way of making sure your store will succeed. But there is something you could do: minimize the chances of failure.

There are patterns in online retail failure

There is a saying that goes something like: Tell me where I’ll die so I will never go there.

While successful online retail business models are really different from retailer to retailer, failures, I’ve noticed, have common traits. Companies ignoring basic product management, employees not engaged in client service, poor merchandise – they are all things easy to spot when retailers close shops.

Before going online and browsing around for the latest marketing gimmick, have a look at six of the most common things that lead to failure:

1. Lousy and/or not enough products

Commerce hasn’t changed much in the past … umm … thousand of years. The basic concept is simple: you buy a product from the manufacturer, bring it to the customer, get something in return. Of course – the customer needs / wants to be provided with the best merchandise he or she can afford.

Failing to put the product first is the one biggest mistake retailers make. It’s easy to believe that it’s all marketing and you can sell anything. You can’t. At least you can’t do it for a prolonged period of time. Eventually people will start asking for their money back. They will post bad reviews. Your store will fail.

So focus on the product. Find manufacturers that will deliver upon high standards.

Having great products is not enough, though – they have to be plenty. Customers need choices. Of course – you might think Apple does not need variety but the industry Apple is in does. There are plenty of PC’s, laptops and smartphones out there. All at the right price.

2. The wrong price

Pricing is one of the areas most sensitive to error because it can swing both ways. You can either charge too much or not enough.

You can be charging too much and there is nothing wrong with selling expensive products but make sure they’re worth it. Remember – online, anyone can track prices. Customers can feel cheated if your markup is too large.

You can also be charging too little – remember, prices are not weapons, unless you’re the market leader. Even then – prices should be used as a last resort. A cheap product remains a cheap product. Do the math – see if your supply chain and procurement can handle low prices. If not – differentiate with services, a curated selection of products and great customer service.

3. Not paying attention to customer care

Actual Zappos Call-Center

Actual Zappos Call-Center

As an online store there aren’t too many points of contact between you and your customer. Probably the most important is the customer care team. Operators answering the phone are one of online retail’s biggest assets. Or liabilities.

For every Zappos-like company that thrives on great customer care, there are thousands of online retailers ignoring it.

Having a customer satisfaction – oriented team can work wonders for online retailers.

4. Ignoring logistics

Quick – do you know what makes Walmart the largest retailer in the world (both online and offline)? Prices? Sure, but that’s just part of it.

The answer is logistics. Walmart was not always the company we know today. Between 1980 and 1990 the company started a quick expansion program to enable it to match its competitors. In 1981 they tied their stores through a satellite communications system that would enable real-time reporting, as soon as products were purchased. By 1988 90%  of all stores were using barcode readers to handle inventory tracking. It doesn’t seem like much now but back then there was no internet to connect the stores and barcode reading was only just taking off.

Now, Walmart is an astonishing logistics company. This is the key to keeping the company well supplied and one of the most important factors in keeping the prices down.

Amazon, too, is much more than meets the eye. Between the print on demand options, huge warehouses, robotic warehouse management and integrated supply and demand – Amazon means logistics. Retailers failing to improve their logistics will have problems staying afloat.

5. Outdated or limited technology

You wouldn’t be expecting technology to be an issue when it comes to online retailers. After all – online stores are … well … technology based – right? Indeed, but there is much more than a front end when it comes to online retail technology.

Here are a few things retailers need to invest in, if they are to expect to stand a chance:

  • CRM software – you need to know as much as possible about customers and make sure they are satisfied with your service
  • Inventory management – this is a combination between hardware, software and know-how. Online retailers need to know in real time what’s in stock, what is expected to go out-of-stock and where are the slow movers. For starters.
  • Supply chain management – dealing with suppliers is not always easy. Technology can help streamline the relationship between suppliers, retailers and end-consumers. Automated order placement and processing, barcodes, RFID readers and tags to help track packages, inventory inflow and outflow management – these things sound boring and complicated. They are, however, necessary for any online retailer.

6. Bad management

No technology will save a company lead by bad management. And as you might expect this is a combination of factors. There is no single individual usually guilty of sabotaging the company.

One can notice in failing online retailers some patterns – a combination between managers focusing too much on marketing or PR, a rigid organizational structure and the lack of senior expertise.

There is little data on the impact of rigid and poorly prepared management when it comes to online retail. This is due to the fact that online retail is still in it infancy and performance indicators can be  misguiding. It is, nevertheless, one of the most important factors in failing online retail companies.

6 things that can lead to failure for online retailers

So there you have it – the 6 big things that you need to focus on. Notice there are no tips on marketing, website design, search engine positioning and such. These are not critical problems. Marketing, design, accessibility – they can all be easily spotted and fixed.

Unfortunately – it is harder to understand and improve the product range, prices, logistics, customer care and of course – management. But this is where you need to look for a chance at building a successful retail company.