Demand Sensing is a $1.1 Trillion Opportunity for Retailers

Consumer demand is the one thing that can decide whether a retailer is successful or not. Of course, there is a whole field of marketing studies to determine how we can influence consumers to purchase. But a really important aspect of how good retailers fare in the market is their ability to “sense” demand, not just influence it.

In a recent study, IHL Group claims Overstocks and Out-of-Stocks cost retailers almost $1.1 trillion world-wide. To put it in perspective, that figure is the size of Australia’s GDP.

What that means is that Overstocks and Out-of-stocks, collectively defined as Inventory Distortion, are a problem that cost retailers world-wide 7.5% of their gross revenue.

The most important overstock causes

The figures translate into poor performance, decreased customer satisfaction, decreased sales and increased costs of inventory warehousing and inventory spoilage. Basically there are two really simple outcomes:

  • Either retailers stock up on too much inventory which turns to increased warehousing costs and spoiled products.
  • …Or they don’t and they miss on sales opportunities

Either way, one thing is for sure: Inventory Distortion leads to poor retail performance.

How do you solve Inventory Distortion? (Not exactly) Simple: Demand Sensing

Demand Sensing is a concept and set of technologies that make use of analytical and prediction models to estimate … well … demand. Imagine a retailer that runs a network of 10 stores, one online store and has a mobile app that drives sales also, along side a call center.

Said retailer probably has an inventory management system, an warehouse management system, a sales reporting tool and probably some type of integration with suppliers and manufacturers.

Let’s imagine this retailer selling a type of red shirts that is available in one of the 10 stores and that inventory is not available online. If a customer will visit 3 of the stores in search of that particular red shirt and then search for it online and still not find it, it will probably consider it to be out of stock and the retailer would lose a sale opportunity.

You probably see where the problem lies: even though the product was available, it was not available to the customer and opportunities were lost. The same thing goes for products that are not exposed to the customers, or they are, say, unreachable on the shelf or unfindable on the web store if the search engine is not fit for the job.

The opposite situation, where demand is not correctly estimated and out-of-stocks become a reality, are just as bad as sales opportunities are lost.

The solution lies in gathering enough data across all sales channels, compiling this data and using models to predict demand. That easier said than done because …

To make demand sensing a reality, inventory transparency has to be achieved

As you are reading a blog on omnichannel retail, the term was bound to appear somewhere along the line. So here it is. You can’t have Demand Sensing without a connected sales operation and inventory transparency. All inventory sources have to be connected and data should be generally available. So should sales data across channels.

The picture below shows an example of omnichannel supply chain, one where all the operational pieces work together and share data. When such a structure is implemented, demand is easily “sensed” and estimated and thus inventory distortion can decrease.

So now we have the data. Implementing omnichannel retail can lead do a better demand sensing and therefore improve inventory distortion, a small glitch in the global retail system costing “only” $1.1 trillion.

3 Factors Slowing Down Omnichannel Adoption

Across the globe, retailers have picked up on the omnichannel trend and try to give the customers what they want: the same level of service across all sales channels.

Some are doing better than others but everyone’s trying. Especially for multi-channel retailers, the switch is essential in keeping up with an increasing competition from online pure-plays.

The switch is not easy and certain bottlenecks stand out:

1. Omnichannel is sometimes treated as a marketing or tech buzzword. Hint: it’s not

When you say omnichannel, you have to think of all the sales and distribution channels. Hence the “omni”. That certainly looks like a marketing area and to a certain degree, it is.

But to make omnichannel a reality instead of long consultative talks, you have to go beyond marketing and into the dark woods of technology systems and process management. That’s the hard part. The change comes when companies and especially executives leave aside their differences and interact to connect cross-department processes.

Yes, omnichannel is marketing driven but it needs inventory transparency, it needs technology investment and updating and it needs a change in internal processes and culture.

Yes, culture because…

2. There’s a lot of sales cannibalization between channels

Mid to large retailers that switched from brick and mortar to multi-channel did this by adding silo-ed sales structures one after another. First came the brick and mortar operation, then came the online store, the call-center, the mobile sales and so on.

Each of these channels eventually developed into a full-fledged sub-organization. It is not uncommon to see, for example, ecommerce departments with full operational structures from purchasing, warehouse management, picking and packing, sales, marketing and others.

When such structures emerge, a certain type of independence emerges also and this can lead to channel cannibalization. Simply put it’s one channel stealing sales from another, instead of working together for the customer and the common (company) good.

That’s why a change in culture is much needed when striving to implement omnichannel retail policies. Any customer should be encouraged to buy from any channel, as long as it stays within the retailer’s domain.

3. BAGA is a lot more complicated than it seems

BAGA stands for “Buy Anywhere, Get Anywhere“. Buy online, pick up in store. Or at home. Buy in the physical store and receive at home. Place an order on the phone and pick up in store.

It’s complicated just working with two or three of these scenarios. When you add general inventory transparency, cross-store orders and supplier availability it gets a lot more complicated.

That’s why a BAGA policy should be built after implementing:

  1. inventory transparency policy and technology. This should spread across the full inventory spectrum including warehouses, stores, in-movement goods and suppliers.
  2. customer master-data management. The customer is the same across all channels and should be recognized and its treatment personalized on demand. Think of this area as a CRM on steroids that spreads across all channels.
  3. product master-data management. Product information should be available on all channels, when needed and in the right format.
  4. cross-channel marketing policies. Think marketing independent of channel and at the same time available on all.

These are just three of the most important factors that slow down omnichannel adoption. The fourth is probably the fact that some companies are just so tired of working their way through ecommerce adoption that they are unwilling to move forward.

It takes willingness to discover the benefits and what omnichannel is. For many, the switch is rather simple in terms of technology. It does bare costs in willingness to learn new concepts and implement these concepts within the company.

Apple Music is Big News for the Music Industry and a Direct Blow to Spotify

Where does a 800 pound gorilla sit? Anywhere it wants to.

That 800 pound gorilla is Apple and today it introduced what is probably the biggest change in music business since 2001, when it launched the other big change in music business, iTunes.

Though some might undermine the impact Apple Music will have, that would be a mistake. Apple Music is a huge change for music and it will by a serious blow to Spotify and other streaming services.

Here’s why:

1. Apple has at least 800 million iTunes user accounts. Lots of them are paying customers.

Last year Horace Dedieu of Asymco tweeted this chart, comparing the number of Amazon and Apple accounts:

Compare this to Spotify’s 60 million.

2. Apple owns the platform. And it’s spreading to other platforms.

The biggest asset Apple has is its software-hardware platform. And I’m not talking about iTunes only. I’m talking about iPhones, iPods, iPads, Macs, OS, iOS, Watch OS etc. Anyone willing to compete against Apple, has to compete on Apple’s turf, with its hands tied.

Why is this so important? Say Apple decides to optimize its streaming process for certain apps and also decides not to share this info with outside app developers. Such developers may be left in the dark regarding optimum hardware usage for a better sound or longer battery time. By the way – iOS 9 comes with a better battery time. What a coincidence.

Even more, Apple Music will be available on Android too, coming this fall. So there you have it. It’s spreading.

3. Apple is closer than ever to artists and labels

Jimmy Iovine

But this is just the cherry on top of more than 14 years of continuous business development with global labels. The fact that Apple Music will be available in 100 countries is an extraordinary business feat. Anyone knowing just how complicated licensing is, knows how hard it is to stream, collect fees and distribute revenue to and from 100 countries.With its Beats / Jimmy Iovine / Dr. Dre acquisition, Apple also purchased a certain level of influence it previously lacked within the music industry. The proof is today’s event, showcasing the deep integration and the many people involved in launching Apple Music.

4. Apple is not stepping on Spotify’s toes alone, it also steps into Facebook and Youtube territory

Apple unveiled more than just a streaming service. Just like when Steve Jobs launched the iPhone, today Apple launched a product that never existed before.

Apple Music is a music streaming service, a video streaming service, a social network, a global radio and most of all, a curated music experience.

Let me just emphasize the “video streaming service” area. If you didn’t know this already, iOS alone dominates online video streaming. So Apple is already king of the hill on lots of user behaviors and now it just collected them all into one big service. Maybe that’s why Google never could pull a decent Youtube streaming experience on iOS.

And it’s not just Youtube Apple is going after. Facebook should be a bit worried also. Artists get a little more reach on their Facebook pages than, say, commercial brands. But if they want to share their news with all their Facebook fans, they still have to pay.

Apple Music makes a point by letting artists and fans connect in a seamless way. And this should send some chills up Mark’s spine. Once the artists are gone, there is also a big gap left within the social network.

5. Apple gets that technology is useful, but it’s not core

Let’s face it. Technology can be boring and frustrating. The best thing Apple has done so far is teach the world that great products happen when technology meets the arts. And its Music service does just that. From curated lists to making sure artists get an way to connect to improving the battery time so users can have a better experience, it all ads up to a human experienced enhanced by technology, rather than the other way around.

Technology and humans

This is where most of the recent tech companies have failed to understand their place in the world. Maybe Google can get away with being the Lovable Borg, but Spotify can’t. Facebook can’t. The lesson Apple Music will teach to the tech world is that technology is just not enough anymore.

6. Apple is rolling in cash and it’s rolling out cash

Say what you will but one thing is for sure. Apple has deep pockets. With more than $194 billion in cash it can survive the end of the world on champagne and cigars (that’s not really a great combination, is it?).

Even more, it just reported it paid out $30 billion to its app developers. I’m not exactly sure how much it paid to record labels, but I can bet it’s a liiiiitle bit more than Spotify’s $3 billion.

What is Pretail and How Does It Impact Retail?

Ever thought what happens behind the curtains before a new product hits the shelf? Or what makes customers decide they love product A but definitely hate product B, although they are almost identical? Or what makes great products … well … great?

Many have and there is no clear answer to these questions. What works when Apple launches a music player may not work when Microsoft does it (Remember Zune?). There are many variables involved and no matter the size of your R&D budget, sometimes things are not going to go right.

But there’s only one way to see if the product is really fit for the market. That way used to be simple and a bit risky. Teams including marketing, product development, engineering and manufacturing experts would dream, design and build products. They would test the products on selected customer groups and if the results would look good, they would push the product to the market.

However even involving budgets, experts, consumer insights and marketing bucks, sometimes products flop.

Jamstick is a “portable guitar that teaches you to play”. It asked for $50.000 in crowd-funding. It received $792.000. Jamstick is a pretail success.

Two things changed this: crowd-sourcing and crowd-founding. Together they’ve formed a type of customer experience previously unknown: the pretail.

Testing the waters with crowd-sourcing and crowd-founding

In the past, teams were involved in trying to guess what customers would want. Now we can just go ahead and ask the them.

Pretailing is a term describing any activity introducing customers to brands or products, before the retail process. It assumes that using crowd-founding sites such as Kickstarter, inventors and innovators can test their concept before involving big budgets. Essentially they are asking potential buyers to invest their dollar-power in their product.

This, in turn, creates an experience previously unknown to the consumer. The consumer is effectively buying into a vision. Pretailing creates a new type of sales channel that works before the product is even manufactured. Unlike traditional retail, this type of commerce can shed light on what the market wants at any given time.

Pluck is a simple egg-separator and it was invented by Mark Fusco, a Quirky member.

Online stores such as QuirkyThreadless or Japan-based Muji have one thing in common. They use their communities to find the right ideas and products to design and develop. Quirky is focused on inventing cool gadgets, Threadless leverages its designer community to create t-shirts and Muji sells home&deco products designed by the consumers.

They all engage in pretailing. By tapping into the collective minds of their communities they can ask for the type of products most customers would purchase. Before they manufacture and sell, they ask what to manufacture and sell. This in turn creates a sense of belonging to the community for the customer. For the retailer, it decreases the risk of manufacturing and stocking up on lousy products.

Crowd-founding is another way of tapping into the market and pretailing. We all know Kickstarter but other, more product-oriented crowd founding platforms fare even better for this concept.

CrowdSupply and OutGrow.me are just two places where you can see what customers have backed before manufacturing. The products we can see there range from open source toothbrushes to one-wheel skateboards.

The results are amazing. With unlimited creativity comes an unlimited supply of innovation. And by tapping into a large market of early-adopters, only the products that are really fit for distribution get funded and survive.

Crowdfunding exploded after 2011.

Big retailers have picked up on the trend and are now using pretailing to test new products and improve their logistics to fit the estimated demand. Apple, for example is one of the companies that showcases products before they are available in retail stores, interacting with developers and customers to improve the experience.

Pretailing is a thing of the crowds

Beyond the crowd-founding and crowd-sourcing, pretailing can come from anything involving large numbers of potential customers. By tapping into online traces, retailers can get insights on potentially succesful products.

Pretailing can start with a simple research with Google Trends. It can be an analysis on the search trends on your own web store.

Who would have known? Apparently there is a growing demand for egg separators.

It can just as well be an overview of the most popular trends on Instagram. For example Crane & Canopy releases new high quality duvets basing their decisions on Pinterest and social media trends.

The conclusion is that in this highly competitive market, retailers need to engage their customers before they start the retail process. Pretailing means tapping into the wisdom of the crowds and extracting the perfect products before competitors do. It is not only a matter of product development but a matter of understanding the customer and providing the best experience on the market.

What do Uber, Tesla and Global Logistics Have in Common?

We expect historic changes to be a bit dramatic. We think of “Evrika!” moments when inventors discover new technologies that make our lives better.

The reality, however, seems to sneak up on us. We now know how important the Internet is but few would have guessed it when it was used to exchange short bits of information between academics. Same for Google – it is now easy to see how important having the global stream of information at your fingertips actually is. But it was a lot harder when the concept was still in its infancy.

Not even Steve Jobs could have predicted the impact the iPhone would have on the world. And I believe Elon Musk will look back on these days and be surprised by the changes Tesla brought to the world.

When Elon Musk announced the Powerwall, the world shook a little bit. Its beautiful design and promise of energy independence seemed almost dreamlike. But the Powerwall shows a far larger vision than just making the home energy independent.

Powerwall 2 & Solar Roof Launch from Tesla, Inc on Vimeo.

It is a promise that we could harness the virtually unlimited energy of the Sun and store it. Storage, you see, is the real problem. The complex systems we use are powered by energy that is consumed almost instantly. Our cars, our electronics, our planes – they feed on streams of energy as it is formed. Even the best energy storage systems fail after a short while.

The batteries that can save the world

The promise that one day a company (could it be Tesla?) can find a way to harness and store the sun’s energy (or any type of green energy for that matter) has an impact we can hardly predict.

The implications range from pollution reduction to geopolitics to economics. Especially economics. To understand how much we could save by switching to green energy, have a look at this estimate for an average Tesla car compared to one running on fossil fuel:

Think that’s a lot? That car “only” logs 120 000 miles. Compare that to the 397.8 billion miles logged by all trucks used for business purposes (excluding government and farm)In the US alone.

Now mix the numbers and add the savings Tesla’s technology can bring.

Add something else: sun-powered electricity. Think of trucks and ships that can move goods around without any need for refueling.

Because that’s where the real change comes in. When products are manufactured and shipped at a tiny fraction of what they are today, everything changes.

When we take out the distribution costs, the energy costs and any other costs associated with energy from our current commerce paradigm, everything changes in the world.

The products we buy would have costs that would be driven to the ground. Without costs associated with energy consumption and storage, goods would be manufactured cheaper and faster (instant energy), shipped cheaper and faster and consumed by more. We could have cheaper products, consumed by more and believe it or not, more profitable to sell.

But how could the system change?

There is only one thing stopping this: the current transportation and energy system. Musk’s vision has already stirred things a bit with car dealers. What happens when the company will go against the global leaders in energy and transport companies, the ones still relying on fossil fuels? These companies would have to change or fight the change. The former is what one might expect.

That’s where the Uber concept comes in. Uber connects, as you know, smaller professionals that provide transportation services. Right now this is limited to personal transportation. Uber, today’s Uber, acts as a glorified cab dispatcher.

But tomorrow’s Uber may have bigger ambitions. Somewhere behind the scenes, investors know that there’s more to Uber than meets the eye. The reason the company landed a $41 billion valuation is that it has the potential to change the global transportation system. Not just personal transportation but all kinds of transportation.

That includes making sure goods are quickly moved from manufacturing to storage to the consumer. Don’t take my word for it. Uber has been experimenting time and again with logistics. And if Uber won’t, there are other companies that will.

So you have virtually unlimited power. You have storage. You have the a system that makes sure goods are sent to the right destination by the optimum freight. This means the kind of change we now can’t fully comprehend.

It means that good is now in motion.

DHL, FedEx and UPS Provide Support Following Nepal Earthquake

As you know, a disastrous 7.8 magnitude earthquake has hit Nepal. The earthquake claimed the lives of thousands and left many more wounded or without shelter. In an effort to bring relief to the area many nations, individuals and global companies joined hands.

Nepal Rescue Efforts. Source.

Among these were global logistics companies DHL, FedEx and UPS. Since disaster hit, they have been providing logistics support, know-how and even funds.

Their humanitarian efforts are worth recognition and their philanthropic commitments need to be known:

DHL Group responded in just 48 hours after the tragedy. Their Disaster Response Team was deployed on the scenes to help with incoming international aid and provide logistics support in distributing goods.

FedEx was also among the first to provide support to disaster relief agencies. Their efforts included assessing needs, shipping water treatment systems from Water Missions, water chlorinators and large water tanks, thus providing fresh water for up to 70,000 people per day. FedEx soon followed with logistics support for medical treatment, serving 10 000 people per day.

Last but certainly not least, The UPS Foundation committed to providing both logistics support and $500 000 in funds to aid recovery efforts. The foundation, acting as the philanthropic arm of UPS, provided these funds to “United Nations High Commissioner for Refugees (UNHCR) to secure shelter supplies and solar lanterns as well as to The World Food Programme for emergency food assistance such as high energy biscuits, and to CARE for the purchase of supply kits including tarps, blankets, jerry cans and toiletries.”

These efforts show just how important logistics support can be in helping those in suffering, especially in such times of distress.

Three Robots that will Change Ecommerce

The term “robot” essentially means “worker”. It was coined by Czech author Karel Čapek in his science fiction work R.U.R. and since then it has become the standard term to define semi-autonomous machines.

It really is hard to define what we actually think of when we say robot. It may be an anthropomorphic fun figure such as Honda’s Asimo or a somewhat creepier animal version of it, such as Boston Dynamics’ Big Dog.

Fetch Robotics. Now reporting to Skynet.

But it can also be a simpler and more applied machinery. Robots can be built to handle some of the most menial and repetitive tasks, including those that have to do with ecommerce fulfillment.

In terms of operations, fulfillment means everything that has to do with getting ordered merchandise to the customer. It includes picking and packing and let’s face it – it’s boring and repetitive. The robots below do just these things. Robots, unlike people, require no pay and are available 24/7. Whether using robots is effective or not, moral or not, it’s up to you to decide. But no matter your view on the subject, you have to admit they look awesome.

1. Fetch and Freight from Fetch Robotics

Not longer than two months ago, Fetch Robotics was non-existent as a company. Than they’ve got $3 million in founding and started working on a mysterious warehouse robotics project.

Today they’ve unveiled not one, but two robots aimed at helping warehouse staff make it through the long corridors. Their names are Fetch and Freight. Below is Freight, my favorite, a little guy following around picking staff and going back to base when orders are finished picking:

Fetch & Freight from Fetch Robotics on Vimeo.

2. Omniveyor from Harvest Automation

You would think that farming and ecommerce fulfillment don’t have too much in common. Maybe they don’t but they do have the Omniveyor robots from Harvest. The company was founded by former iRobot executives, the company that brought you house cleaning wonder-robot Rumba.

The company developed a fulfillment robot, called TM-100, which will be available spring 2016. Here’s TM-100 in action:

3. 15 000 Kiva Robots fulfill Amazon orders

In 2012 Amazon paid $775 million for Kiva Systems, a Seattle based company manufacturing warehouse robots.

In just two years Amazon has fully digested the technology and now has 15 000 Kiva robots doing the picking and packing job twice as fast as humans could. Inventory moves twice as fast and products are delivered to packing stations in just under 15 minutes, faster than any human could.

Here are the little Kiva robots plotting to take over the world, while picking orders:

Omnichannel retail will transform distribution

A very important part of retailing is pricing and the most important part of pricing is the cost. To get a complete view of how much a product would cost, retailers think in terms of net landed cost.

The net landed cost is the sum of costs associated with manufacturing and distribution. When thinking in terms of net landed cost you have a better chance of understanding your total cost.

A common fallacy is thinking of costs just in terms of manufacturing, either from a purchase only point of view (how much you pay your supplier for a given product) or a more inclusive manufacturing point of view. The manufacturing point of view assumes that even if you are not manufacturing the product yourself, you still have the liberty to choose another supplier or change merchandising altogether.

The most important advancements in retail, in terms of supply and cost effectiveness, have focused largely on manufacturing costs in the past decades. This has lead to increasingly efficient production lines, a more competitive manufacturing market, shifting manufacturing overseas and many others.

A key to Walmart’s success is selecting suppliers with an optimum manufacturing cost / quality

This manufacturing improvement trend has had beneficial results on the customers life through more accessible, more diversified merchandise. It also meant companies managed to sell more, to more people. Companies such as Walmart have grown to their existing magnitude thanks to a wide network of suppliers, providing them with products manufactured at the best possible cost.

Distribution lagged behind

As retailers improved on the manufacturing, there was one part that has been left mostly untouched. That was the distribution. Distribution costs have decreased but not dropped.

To get a better view of why, get a glimpse of what are the factors that weigh in the distribution costs basket. Here you have costs associated with getting a product from the manufacturer to the customer. This includes freight, stocking, customs, costs associated with store development and maintenance, marketing costs, customer support and others. This is a very large area and a lot of work to be done.

Distribution is changed by technology, data and omnichannel retailing

Today, distribution is changing, and it’s changing fast. As a result, the associated costs will follow.

At the forefront of this change we have several factors, one of which is omnichannel, another being technology and the third being data. This is how they weigh in and these are the areas that will be soon transformed:

Improved logistics

Logistics have not been fully transformed by technology. For example, freight has been virtually unchanged in the past decades. Think about it this way: cargo ships are still loaded after excel files are checked, faxes are sent and handshakes seal deals. For a large part, the industry is archaic and it’s but a question of time until it will be transformed. There is a lot of room for disruption and companies such as Freightos have challenged the status-quo and promise 10-17x ROI. In weeks.

And it’s not just freight. Fleets of small vans contractors have taken up the Uber model and are now roaming the streets of Hong Kong to deliver goods the likes of DHL and UPS can’t.

GoGoVan is a Smart Logistics company, connecting individual contractors to larger companies in need of their services

Omnichannel retail decreases distribution costs

Omnichannel makes possible and desirable a few things the previous retail models couldn’t. First of all it allows for a better inventory transparency and improved shipping effectiveness.

Customers that would otherwise expect orders placed online to be shipped at home with the respective costs and operational challenges, can now just pick up orders in store. Or better yet, they can have the closest store ship these items at home, instead of mixing the order in a large, central warehouse.

Omnichannel also makes possible having just a limited number of products in store and keep the most either in the warehouse to be shipped when convenient or with a supplier. By reducing store footprint companies can reduce fixed costs associated with marketing and distribution of products, thus decreasing costs.

And it’s not just these, the many aspects of omnichannel retail all converge to a decrease in distribution costs and more efficient ways to handle product demand.

Macy’s growth versus JC Penney and Sears.

Improving marketing and advertising with data

John Wanamaker was a retail innovator. He is credited with the fixed price and money back guarantee marketing concepts. Wanamaker was one of the pioneers of the department store and loved advertising. He is also credited with the famous saying :

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

Good thing that was more than a century ago.

“Show me your budget.”

Marketing is now changing rapidly and unfortunately for some advertising agencies, long gone are the days when the Mad Men of advertising charged millions for concepts that could or could not work.

With the rise of digital commerce and omnichannel retail and the smartphone to bridge the gaps, data is all around. Marketing is now data driven and the half of budget Wanamaker complained about can now be easily tracked. Companies such as Macy’s are investing heavily in omnichannel policies and marketing. The results are clear. While their competition is diving, Macy’s business is on the rise.

Advertising is data driven and marketing costs are constantly improving.

By improving distribution and decreasing distribution costs we have two very important things happening. The first is that companies engaged in improving this area will be more profitable and more inclined to continue on this path.

The second thing is that lower distribution costs mean better prices for the consumers, therefore an improved appetite for consumption. Improved profitability and decreased prices – these are two very strong forces that will shape tomorrow’s retail. And it’s happening today.

3 Strategy Mistakes by Big Online Retailers

It’s impossible to predict the future and basically that’s what strategy is. Based on historic evidence, data and outside factors, companies try to predict how the market is going to evolve and how they can best benefit from this evolution.

While strategy is rarely un-debatable and never perfectly executed, it is a very important part in evolving companies. Having a vision and the plan to achieve that vision is what makes companies such as Amazon, Walmart or Apple stay ahead of the competition.

But sometimes things go wrong and strategy mistakes happen. Here are three cases:

1. Overstock plans to develop media service, as predicted by The Onion

Overstock is one of the largest online retailers in the US. It is an Utah based retail company that has a 20 years background in commerce.

The company sells more than 1 million items on the Overstock.com web-store. The products range from home deco to jewelry to electronics to cars to insurance. Did I mention they run a pet adoption online service? And a farmer’s market?

You’ve probably guessed where I’m going with this. Focus is really not their strongest asset. The company has basically organized its strategy around the old “let’s just try everything and see what sticks” motto. This is, of course, the winning formula to tackle Amazon. This and of course Bitcoin, a surefire solution by the company’s CEO to fight the upcoming zombie revolution.

No, really, he actually said that:

“Someday, either zombies walk the Earth or something close to that[…]. Bitcoin is the solution.”

Patrick Byrne, Overstock CEO and Bitcoin Messiah. Source: Wired.

The strategy is so hilarious, Onion can predict it

Overstock’s strategy turned “un-focused” to hilarious when it announced its new media service aimed at Amazon’s Prime earlier this year. A bold move one might say, as Overstock is missing a few things called content, digital infrastructure, hardware (think about the Kindle), Amazon’s market share and media know-how. But they did get featured in the Onion a full 2 years before they’ve made the move.

2. Walmart spins off its ecommerce operation, then acquires it, then ignores it, then develops it, then makes it central. Sort of.

Make no mistake. Walmart is huge. Walmart is on top of the retail food chain (excuse the pun). It has more than 11.000 stores, in 27 countries and employs more than 2.2 million people. The company is the biggest retailer in the world with a revenue of $485 billion.

President and CEO of Wal-Mart Global eCommerce Neil Ashe

But that doesn’t mean it should be successful online, does it?

Walmart’s digital strategy is a bit … puzzling, if I may. The company’s “ecommerce” store has been online since 1996, about the same time Amazon started to grow. Unlike Amazon, Walmart.com didn’t really matter in the company strategy until 1999. That’s when the company announced the customers that no orders placed after the 14th of December could be fulfilled in due time for the holidays.

Walmart then decided to spin off that pesky thing called the online store in 2000 and transferred the operations in Silicon Valley, under a partnership with Accel Ventures. The reason, as mentioned in this throw-back article from 2002, is thatonline is “not where their customer base is”.

After an unusually horrible decision to shut down the store for a month in the fall of 2000, for a revamp, the store was just as bad as before. But it did managed to miss the 2000 holidays season due to a late re-start.

The company eventually realized the blunder and in 2001 bought back Accel’s share in the ecommerce company. Good thing they’ve realized just how important ecommerce was. It didn’t even take long to improve and redesign the webstore: just 5 years, until 2006.

Walmart was also quick to realize it can make a connection between the online and offline channels. In 2007, 11 years after it launched its online store, it launched the Site to Store program, allowing customers to order online and pick up in store.

Blunder after blunder, the company eventually realized the importance of stepping into a new era, one where customers are connected to Walmart digitally. The company has since changed its perception on ecommerce, hired talent and started experimenting with upcoming technologies.

But if there’s something worse than an un-focused strategy and a rigid strategy, that has to be … no strategy:

3. Fab.com turns from gay social networking site to daily discounter to flash sales retailer to catalogue retailer to custom furniture designer. Within 4 years.

There are very few cases where the lack of strategy and extensive investments are seen so clear within the same company. Fab is one of these rare fails. The company was founded by Jason Goldberg and Bradford Shellhammer and experimented with some pivots. Five that I know of, mentioned above.

Fab’s evolution

It went on to raise a total of $336 million and for a while it could have been the next Amazon, or Ikea, or Apple, or whatever founder Jason Goldberg thought was the fad of the day. Eventually it went on to be a huge whole in the investors’ pockets and was acquired by an undisclosed sum in march 2015.

The whole story is outlined in this cautionary tale. It could be a very funny strategy fail if it weren’t such a sad story for investors, founders, employees and in the end – the whole online retail market. Fab is the story of what could have been, if someone were to lay out a smarter strategy. Or some strategy for that matter.

L’Oréal plans Digital Transformation through Omnichannel Marketing, Ecommerce

With the launch of its first digital edition of the annual report, L’Oreal steps into a new era.

The report is an impressive tool on its own, aimed at investors, shareholders and journalists. But the real change comes with the overall shift to digital as a tool to engage consumers.

For example, the “Digital” section of the annual report states just how important naming the first Chief Digital Officer actually is. This move shows L’Oreal as an up and coming major digital player. The company will probably focus on ecommerce, data technologies as well as engaging consumers both online and offline.

An example in the digital report shows just how promising ecommerce is, especially in China:

“In China – the world’s number one online-purchasing market(1) – e-commerce already accounts for 10% of L’Oréal sales, and more than 15% for brands like VICHY, LA ROCHE-POSAY and MAGIC(2). These promising results are underpinned by partnerships with online distributors like Alibaba and Tmall. On Singles’ Day, a very important day of special offers, L’Oréal’s brands performed well, particularly MAYBELLINE NEW YORK – the number 1 make-up brand in the country(3) – and MAGIC, which sold over 11 million face masks in 24 hours” 

The shift towards omnichannel marketing AND ecommerce is spectacular. L’Oreal has traditionally relied on third parties to distribute products to consumers through retail shops. Could this shift be a change in strategy with a direct-to-consumer approach or will it be an improvement in dealing with online and omnichannel retailers? Nevertheless, the move will probably ripple trough and be adopted by others.

It may be a tectonic shift in manufacturers switching from traditional models to new digital models, engaging their customers, as well as providing them with the opportunity to purchase. How will this affect traditional partners remains to be seen.