So why not bet everything on ecommerce? Why change direction again and include those “old” brick and mortar stores, and warehouses and such? Why build omnichannel retail facilities?
Short answer: because the customer is not a robot. The customer does not have to shop online. It will shop online when it feels better.
Ecommerce is indeed a revolution in the way we do business and indeed it has changed the retail landscape but consumers still exist in the physical world. Consumers do spend time online but they also walk by store fronts, they like to touch the products they buy and they like to see how fashion items, for example, look like in real life.
That means that real life stores will continue to exist. But so will online stores, sales call centers, interactive kiosks and marketplace outlets.
Retailers need to figure out how to connect all these channels. This new wave of customer centric retail is called omnichannel retail. The term means that no matter the sales channel, everything behind the scenes is connected. The inventory is universally available to all stores. The customer info is available on all channels also, so he or she can be instantly recognized and offers personalized. Product info is also available cross channels but most important – Fulfillment can be managed on all possible points so as to serve the customer in the timeliest and most effective manner.
Managing Omnichannel Fulfillment
One of the biggest challenges in omnichannel retail is fulfilling orders cross channels. Today, retailers that deal with both online and offline sales have to split fulfillment in two separate areas, each with specific operations.
The first is offline fulfillment, namely what happens in brick and mortar stores. Offline sales have been optimized to run on a pretty specific supply chain, not very flexible. It starts with the manufacturer, continues with forwarding merchandise to the wholesale buyer and then products end up stored in the retailer’s warehouses and stores.
Because ecommerce came as an addition to existing sales channels, it was added to the existing supply chain as a type of extra store, with its own specific operations.
However things got complicated when the web store had to split into the mobile store, the interactive kiosk, the marketplace outlet and others. Then customers wanted to buy online and pick up offline. But they didn’t stop here: they wanted to order in the store and receive home, ask for inventory info in the offline store and more. Pretty soon they started demanding it so now omnichannel retail is a question of customer service.
Retailers realized that what the retail world is facing is both a huge challenge in terms of customer demands and a huge opportunity. Those companies shifting their business strategies to fit the new, empowered consumer, will be the leaders of tomorrow.
But to do that, retailers need to develop new order management software hubs. These order management hubs need to connect all fulfillment options to all sales channels. That means that all stores, all warehouses, all suppliers, all drop shippers need to be connected and managed by an order management tool that filters orders from all stores, both online and offline, interactive kiosks, call centers, mobile apps and others.
Some companies are handling omnichannel orders just great. Others need to improve their policies and most of all their IT infrastructure. To do that they have to figure out what factors need to be taken into account when fulfilling orders. Here are the top 6 most important:
Most important factors in omnichannel fulfillment
1. Proximity to customer – this obvious indicator will track which is the closest fulfillment outlet that can ship orders to customers.
2. Inventory levels across all fulfillment outlets – that includes inventory levels in the warehouses, stores, goods in consignment, drop shippers or even supplier and manufacturers. Yes, sometimes it can be more effective to ship directly from the manufacturer or the supplier than it would if the goods were shipped from the store or the warehouse.
3. Order split costs – orders that have more than one product per customer sometimes need to be split to multiple locations that have the products in stock. Products can be shipped individually or shipped to a single fulfillment facility (store or warehouse) and then shipped to the customer. Ideally, orders are fulfilled from the same point but sometimes that is not possible. In this case, the order management software should recommend the most efficient route products should take to the customer.
4. Information on customer history – fulfillment has to factor in the customer previous purchases and behavior. Retailers have loyalty programs that offer better costs and features to more loyal customer. A speedy fulfillment, complimentary gifts or just a thank you note may be outputs from the customer history.
5. Fulfillment capacity per location – estimating the maximum fulfillment load for each location can help prevent overload situations where store associates have too much orders to fulfill and can’t manage their day-to-day tasks. It can also prevent overloading several warehouses and leave others with zero workload, just because a specific area has placed more orders.
6. Seasonal fluctuations – stores get really crowded on holidays and store associates are way better answering customer questions than they are packing orders. Seasonal fluctuations need to be taken into account when implementing omnichannel retail.
There is no shortage of logistics needs in the world. As the world gets smaller, more products have to be moved. Recent changes in consumer behavior helped increase the volume of moved goods. Almost $19 trillion worth of goods were imported and exported in 2013, 5 times as much as in 1990.
This 19 trillion market is stuck for the moment with two very big problems leading to ineffectiveness. The first one is technology infrastructure. As goods move to and from very different countries and cultures, there is no unified backbone for making shipments happen. As such, logistics are somewhat slow, compared to other areas in the commerce landscape.
The second big problem is the last-mile delivery. The likes of FedEx and UPS are great at moving goods from New York to Shanghai and the other way around. They’re not really that great at building local delivery networks, able to ship goods fast and cheap. As you might notice, this is a bit of a problem for ambitious retail companies such as Amazon, Walmart or Alibaba, aiming for global dominance.
But worry not.
Investors have picked up on the opportunity to disrupt the $19 trillion market and have turned their investments to logistics companies. According to Crunchbase, investments in logistics startups went from 0.1% of total investments in 2012, to 1.37% in 2014. The total amount invested in 2014 in logistics startups ($1.8 billions) means an increase of 1370%. That is a sure sign that something big is really just around the corner.
As the market is ripe for disruption and investors are generously tapping into logistics, a lot of companies will be showing up on the logistics radar.
Among all these, here are 5 companies that might be the model these investors are looking for:
No.4: Amazon is trying to ship goods with drones
After Jeff Bezos announced Amazon is building a drone-delivery service, a lot of people (me included) were questioning whether this could be real or just a PR stunt. It seems that not only is Amazon serious about the drones, but it is also very focused on building the model for the next generation of logistics operations. It has invested more than $14 billions since 2010 in its warehouses.
It has invested in robotic fulfillment operations, purchasing and integrating Kiva Systems. Becoming one of the most automated fulfillment and shipping company, it leads the way in large scale ecommerce logistics. As a result, the company is improved its operations vastly. In 2012 it managed to ship 10 million products per day, leading to 1.05 billion products shipped in the last quarter of 2012.
No. 3: Freightos takes a shot at a trillion dollar market: the cargo industry
It may come a shock to those reading this but the cargo industry is really in need of some technology updating. A lot of work in the freight (cargo) industry is done with the help of emails, spreadsheets and … fax machines.
Freightos aims to change all that with a SaaS product that connects those in need and those offering freight services. Unlike the previous way of managing shipping costs, Freightos provides a cloud application that can allow for real-time responses.
No.2: GoGoVan connects vans, delivers the last mile
Remember the thing about the last mile the likes of FedEx just can’t handle? It turns out they really don’t want to handle that last mile. Large logistics companies in Hong Kong outsource 70% of their local operations, estimates Gabriel Fong, CEO of Hong Kong GoGoVan.
The company employs Uber’s taxi-hailing model to connect van drivers and those in need of moving goods. They basically replace the old and ineffective call center with a mobile app.
GoGoVan estimated that 35 000 of Hong Kong’s vans are owned by freelancers. These freelancers usually subscribe to a call center which can forward requests and lease radio communication equipment. It’s usually ineffective for both the van-driver and the customer so GoGoVan decided there is a market there.
Right now GoGoVan has 18 000 vans registered with their service so things are going great.
No.1: Uber has transformed the cab industry, it can go further
Uber started as a car-sharing service but soon turned into a multi-billion company, available in 45 countries and 200 cities. It has done that by allowing those with an acceptable vehicle play cab-driver for anyone willing to pay.
The company so far successfully dodged cab regulations and managed to change the way people move in the urban environment.
Lately they have figured out that if they can move people from point A to point B they can also do that with merchandise. After experimenting with a fast delivery service called UberRUSH, trying on a Corner Store service and shipping Christmas Trees, Uber got it: It can do logistics.
Specifically – urban logistics. After all – it really is not that hard to adapt the model to minivans (see GoGoVan above).
I can’t wait to get my online orders delivered in a black luxury sedan. Hear that, Uber?
Think about this – is there actually such a thing as an online customer? Or an offline customer? Or even a mobile customer? Definitely not. Consumers like to skip sales channels and fulfill their goals in the best way possible. Your customer can research for products online, ask friends for references on social media, test them in the brick and mortar shop and finally purchase in the web store. So it makes no sense treating customers as stuck in a sales channel. The Omnichannel experience, where every consumer can use given sales outlets as she sees fit, is now pretty close to utopia for many retailers.
But others are dedicated to making omnichannel a reality for their customers.
“Our goal remains to help our customers shop whenever, wherever and however they prefer, and to use the entire inventory of the company to satisfy demand,” Terry Lundgren, Macy’s CEO
As other retailers are facing declining sales and decrease in customer loyalty, Macy’s seems to be thriving. The company has seen recent increase in sales overall and a sharp increase in online sales (48% in 2013).
How did they do it?
Improve customer experience with technology
Macy’s has lots of experience in customer service but the digital revolution took most retailers by surprise. Macy’s has dedicated a large portion of its yearly budget to improving customer experience through technology.
The company’s cost of sales rose to $139 million in 2014 second quarter. This increase was caused by “omnichannel business and the resultant impact of free shipping” which means Macy’s is betting big on its customers’ experience.
The results are great. Just short after Apple Pay was announced, Macy’s announced it will implement the technology in all stores. The company already allowed customers to store their coupons on the Mobile Wallet, that could be accessed anywhere – online, on mobile devices or in store.
Macy’s also partnered with Shopkick to increase brick and mortar traffic in its New York and San Francisco stores and now the company is rolling out the shopBeacon technology. The beacons give retailers the ability to push information directly to the consumer’s mobile device. It can welcome shoppers as they walk inside Macy’s stores, send out specific deals and recommendations and can be used as a way to redeem loyalty rewards.
Interactive kiosks were used to improve customer experience throughout brick and mortar stores. The kiosks vary in size and complexity, ranging from simple browse and order applications to more complex features. The “Beauty spot” kiosk, for example, improves Macy’s cosmetics section with an electronic make-up consultant. The system advises potential buyers on makeup and skin products that are best fitted for their needs.
Even store associates are empowered when answering customer needs. The company is now testing mobile and tablet POS that can connect to real-time inventory and offer quick responses to customer needs.
And if we’re talking about real-time inventory, you should know that Macy’s has been working hard at improving cross-channel operations:
Improve fulfillment and inventory management
In 2010 Macy’s piloted a store-fulfillment program in 10 stores. The idea was that if the company can connect inventory from individual stores, it can manage inventory better. As merchandise was sold sold online, stores would be able to ship orders directly, depending on their inventory levels or allow for in-store pick-up.
The program was a success and the company increased the number of stores that could ship orders. 13 more stores were added to the program in 2011. In 2012, 292 stores were shipping orders. In 2013 – roughly 500. The process will be finally completed in 2014 when all 800 stores will be able to fulfill customer orders.
As these stores began fulfilling orders two things happened. First – orders could be shipped faster, with the ultimate goal of same day delivery, thus improving customer experience. The second big change in Macy’s fulfillment was that using stores meant inventory turnover greatly improved.
With store associates empowered with real-time inventory data, orders began to increase. The store associates could locate items in other stores, and ship that item from that point, directly to the consumer’s requested address.
Macy’s discovered that the nearest store may not always be the best choice to ship the product. Sometimes a product sold in point A could have a really slow turnover so it should be shipped whenever possible. On the other hand, the same product could be in high demand at point B, closer to the customer.
The company didn’t stop here. With stores able to fulfill orders, the Order Online / Pick Up in Store program began in 2013. It was first tested in 10 stores during fall 2013 and began rolling out to all stores in 2014.
It’s not just the stores that improved their fulfillment functions. Macy’s is now expanding its direct-to-consumer fulfillment center in Goodyear to a mega-facility of 960 000 square feet which will be soon followed by an even bigger fulfillment center in Tulsa, in 2015.
So Macy’s is quick to implement omnichannel policies but is it worth it?
Macy’s is winning the retail game
It’s worth it, all right. As you can see in the chart below, Macy’s revenue has been steadily rising, as opposed to some of its main competitors. It seems that 2010 was a real turning point for the company. And what year is that? Right, the year the company began to implementing omnichannel retail.
The ex-gay Yelp, ex-gay Social Network, ex-gay Amazon, ex-Design Flash Sales site struggles on its death bed. The company’s spectacular rise and fall is a lesson in how to go from rags to riches and back to rags again. It is a story on how growth can sometimes make investors, founders and management oblivious to threats.
I was never a big fan of the concept of flash sales. I covered it, I studied it but I didn’t like it. It is short-sighted way of running online retail operations. It is a great way to create market demand. It may even be a good way to develop customer base. But it will not handle growth forever.
Flash sales need three things to function: good-to-great products, relatively low prices and consumers willing to try overpriced merchandise at a discount. All of these factors come at the expense of two very “un-scalable” variables:
a people based supply chain. To make products available at a discount, someone has to find great products, has to estimate demand for those products and then negotiate purchasing. This is a tricky bit because these guys have to take into account a price that is relatively small but helps the flash sale site turn a profit and and allows the manufacturer to actually ship the product. This is very, very hard work and can be done only by skilled individuals who can evaluate demand, find products, negotiate prices and make sure merchandise is delivered.
a demand based on human wants, not needs. No one needsdesigner shoes or designer furniture. People needshoes and furniture. Sometimes they wantdesigner shoes because we live in a shallow society that makes people feel that objects buy them happiness. And most business pray on these wants. Flash sales sites promise products that say “I am a successful individual”. They promise brands and designer items at a low(er) cost. As a novelty – it will work for a while (for Fab that meant about 2 years). But customers will eventually want new products, at lower costs.
None of these variables scale very well, because they are human-based. Fab and especially founder Jason Goldberg, the one taking most of the heat have learned this the hard way.
Of course, it easy for me and other bloggers to watch events unfold and point fingers at who done what and why the business model was wrong. It was a bit harder when Fab.com was getting millions and millions in financing and customers were anxious to find new products and buy on Fab in 2012.
But this post is not about pointing fingers. It’s about looking beyond the failure, at what lies ahead for Fab.
Fab.com: the road so far
Fab started as a gay community service that reviewed local business. In 2011 it pivoted and went on to offer daily discounts to its users, later on connecting users in a form of social network. As the model didn’t really took off, founders Jason Goldberg and Bradford Shellhammer decided they need to pivot yet again and rethink their market.
As it seems, the duo thought the company was great at a very specific thing and decided to focus on that: design. Specifically: interior design. They re-positioned Fab.com as a source for inspiration and sales of design-related products.
One can of course notice the stereotypical positioning (being a former gay community) but it nevertheless worked. The response to this new pivot was great. The number of registered users went form 175 000 in June 2011 to 350 000 in just a month. In just 12 days the company sold more than $600k worth of merchandise.
The new Fab.com was available by invite only and when it opened more than 125 000 had already registered to receive offers. The reviews were awesome and in just a short month after the Fab relaunched, Menlo Ventures invested $8 million in the company.
Fab’s usage of social networking and social-shopping features further increased the number of users and sales for the company. In just 5 months since launch (nov. 2011) the company boasted over 1 million registered members. Then came the holiday shopping season and sales skyrocketed. As a result of fabulous sales and increasing media traction, Andreessen Horowitz invested … wait for it … $40 million.
After just 7 months since relaunch, on Dec. 7, legendary Andreessen Horowitz VC’s are chosen by Fab.com foundersfrom 15 willing investors.
At the end of 2012 numbers are in and they show a spectacular growth fueled what went from a 4 people company to a 140 employee design force.
CEO Jason Goldberg then posted on its now gone blog “Betashop” a slideshow detailing the successful year his company had. It shows the brave startup growing from a small yet promising group of passionate people to a company selling in 26 countries, with 10 million members.
In 2012 Fab sold over 4.3 million products. During the holidays that meant a rate of 17 products sold per minute. While other companies still try to cope with the idea of mobile commerce, Fab’s sales in 2012 had 33% of all sales coming from mobile. During holidays, 56% of sales came from smartphones and tablets.
The customer lifetime was great and two out of three purchases came from repeat customers. In 2012 sales grew 600% over 2011 and Goldberg boasted that Fab’s 15.000 products were 33% more than IKEA’s. Fab was the largest design store.
In hindsight, past the astonishing numbers, some statements showed something was not exactly right. There was a sense of too much pride: everything Fab was doing was absolutely great and everybody else was just the loser left behind. Jason felt like Fab was the only company with the right attitude and operations. Even Amazon and IKEA didn’t seem like a match for them.
The company was so incredibly self-assuring that it was doing everything internally. In 2012 it employed more than 600 people across the world, it built and operated its IT systems in-house, it even built its own warehouse. How ’bout renting, man?
The 2012 presentation goes on and on about the greatness of Fab, about superstar employees, about the huge vision ahead, about how Fab has to beat IKEA and Amazon at design and deliver more than $30 billion in sales. In the end Jason shows a 6 point plan on how they’ll achieve that:
Sell stuff they don’t
Lead on mobile
Lead on social
Be the best company to work for
These 6 points up there – these are the reason Fab failed. What they leave untapped is just what matters. They are all great for rallying the troops but they lack substance. Amazon and IKEA’s steady growth happens from the ground up. The infrastructure these companies rely on to build, handle, ship and sell products – these are their secret weapons.
Marketing is just the illusory panacea startups reach for when hoping it would suffice in their struggle against the big guys. It doesn’t. That’s where they get their smaller competitors.
Retail, even if it happens online, is a logistics game. Walmart, IKEA and Amazon manage to stay on top with a lot of help from their supply chain. Everything moves smoothly behind the scenes and that’s what Fab failed to acknowledge. By spending too much time on social media, mobile and interviews, the management failed to see the large logistic wall that suddenly halted their growth.
In 2013 things got from great to bad and then to awful. The company did raise an additional $150 million in venture capital in July 2013 but as CEO Jason Goldberg these were definitely not great news:
“What a lot people don’t know is that we set out to raise $300 million. […] And when you set out to raise $300 million, and you raise $150 million, you have to change your business plan. And that’s what we did.”
The change of business plan meant a lot of things that hurt the company’s credibility. Layoffs throughout its offices left employees unhappy. The company had to reconsider its position. At the turning point it was burning through $14 million each month and still not reaching sales projections.
The job cuts took Fab from more than 750 employees to less than 380 at the end of 2013. It started in Europe and than spread through its offices. Every office was restructured to help the company reach a balance point. It didn’t. Even C-level executives had to take a hit. It’s unclear if they left willingly or have been laid off but Co-founder Bradford Shellhammer and COO Beth Ferreira left the company.
Meanwhile traffic came down abruptly and so did sales. The company was heavily relying on ad spending to reach customers. Its 2012 marketing costs were $40 million. In 2013, the figure dropped to $30 million. But as the chart on the right shows – that was not the only factor that lead to the drop in traffic and sales. People were just not interested in Fab’s products anymore. Buzzwords and social media didn’t cut it anymore.
Hem.com – The rebirth?
All these bad news took the company by storm. A lot of people took shots directly at Goldberg for shifting focus, delaying layoffs and generally the could-be death of Fab.com. It was not surprising: he was the one taking the spotlight when Fab was growing, he would be the one taking the heat for the fall.
The media took turns at hitting Fab.com whenever it could and it was obviously an easy task. There were plenty of laid-off employees out there to leak inside info about how bad the company was being ran. They were jobless, pissed-off and needed someone to take the blame.
How could a company with $336 million in funding fail so bad? Where did the company on everyone’s lips go? What happened with all that value investors just … lost?
All these questions left out some seemingly uninteresting investments Fab was running in Europe. While dealing with layoffs, decreased sales, management layoffs and media hits, Fab acquired custom furniture companies MassivKonzept and One Nordic Furniture Co..
By doing so the company combined the MassivKonzept’s mass customization tools and One Nordic Furniture Co.’s talent and technology. The new company took over Fab’s sales in Europe and now leverages Fab’s customer base, experience and of course – cash.
Fab’s European venture received the name Hem (Swedish for “Home”) and now employs 150 employees in Berlin, Helsinki, Warsaw and Stockholm. Some of them are previous Fab employees, some are new hires.
Hem is a designer, manufacturer and retailer and it is an integrated company. It is the technology company that Jason Goldberg wanted to build for a long time.
But most importantly, Hem is something Fab never was: its own company. An unique organization that goes beyond comparing itself to others. It is not the Amazon of Europe or the IKEA of online. It is Hem. It allows its customers to build custom, beautiful furniture and products for the home and it can now deliver on this promise. It seems to be a company that may lack sales and the buzz Fab had but it has something more important: purpose and substance.
It seems that a more mature Jason Goldberg has finally decided to leave marketing and PR aside and focus on building a real company. An unique company that goes beyond buzzwords and solves real problems, in a real environment, where the team is not made of superstars but rather a group of passionate people that put the product ahead of their own egos. And it started with its leader.
I believe Hem has a bright future, unlike Fab. It is built to last, just like its products. I must say that when I set out to write this post, it was going to be yet another bashful take on Fab’s fall. But the more I read about it, the more I found about Jason and his company and the more personal it felt. And a lot of it resonated through this interview he gave at TC Disrupt. A sense of grit and humility echoed through this talk. As an entrepreneur I know what it feels to fail. I too made mistakes and I too delayed laying off people. I too mistook marketing for product and company development. I too believed sky was no limit and failed. So there is a lot of Jason’s actions that I get from being in a similar, yet smaller scale, place.
Yes, Fab is dying and it’s a great thing. Hem now takes its place and it has the potential to be a far better company. In the end this might be not a cautionary tale of entrepreneurship gone bad but a lesson in resilience and willingness to adapt.
Jason Goldberg took some courageous steps into transforming the company he’s built and it will probably pay off in the future. After all, he runs a company that is pretty close to break even, with $120 million in the bank and a large customer base. And now it has a real business model. How hard can it be?
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.
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:
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.
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.
Japan’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.
America’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.
Sales 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.
This 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.
The 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
The 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.
The 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.
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.
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
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.
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.
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.
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.
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.
That contender is PrestaShop, a flexible and easy to setup open source application.
A brief history of PrestaShop
The 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 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:
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.
“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 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)
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.