By the time you read this, you will probably have already completed your holiday shopping—whether you stood in line at 4 a.m. on Black Friday with the other brave souls outside of Best Buy; or added items into your virtual shopping cart over a cup of Joe on Cyber Monday. Then again, we can’t eliminate the number of last minute shoppers who get to enjoy bumping into fellow consumers at the checkout line days before Christmas. Whatever the case, this month we’re giving you the exclusive on the conditions and trends that are changing the retail industry; what consumers need to be prepared for in the coming years; and how businesses and supply chain service providers must compete in order to stay in the game.
From your local store to the Web
Whether you’re a brick-and-mortar store, an exclusive online retailer or a combination of the two, at the end of the day, retail comes down to two things: profit for global businesses; and meeting consumer demand on both products and services.
And how retailers address such factors continues to change due to a generation of new consumers.
Today’s digitally-empowered consumer continues to drive retail business models from traditional brick-and mortar stores to an omni-channel marketplace. We felt the impact when such retail giants as Borders and certain Best Buy and Staples locations closed their doors across the country in recent years. Such developments come as no surprise when 82 percent of consumers across the country agree that mobile shopping is the way to go—whether via tablets, mobile apps or computer, according to Apigee Corp.
About 48 percent of consumers use their mobile device to do a price comparison on an item from inside a store. Additionally, 40 percent also using a mobile device to find a retail store, according to the API platform provider.
But perhaps even more indicative of the mobile demand putting pressures on retailers, is the increasing number of online retailers who do bring different service to market.
Most recently, eBay delivered a major platform redesign to provide consumers added features for online shopping—the biggest of which impacted its homepage, which now enables visitors to “follow” brands, product type and any items sold via eBay.
Earlier this year, Amazon.com Inc. made its move into the B2B marketplace with the debut of AmazonSupply. And as the new Website is designed to provide customers with competitive prices on a wide selection of products in business and industrial categories—from drill bits to polyimide tubing—it also has a major impact on distributors.
“What AmazonSupply has done, is they’ve gone out after several large companies that service the aftermarket parts—things like air conditioners, hot water heaters and furnaces,” said Dr. James A. Tompkins, Founder and Chief Executive Officer, Tompkins International, Raleigh, N.C. “And that is very dangerous because many of the companies make the majority of their money on the aftermarket service—not on selling the original unit. The B2B sector has to be aware that this is a huge potential impact on them and on distributors.”
In the case of Yumani, sellers compete to bid for the customer, instead of traditional online retail platforms. With nearly 400,000 items available in the Yumani database, sellers work to deliver the lowest price on an item to provide the closest match that a consumer can pay. As a result, the price of an item actually goes down. Launched this past October, the company already met its January 2013 goal.
“Of all of our visitors to the Website, 10.8 percent of all unique traffic registered,” explained Michael O’Hara, Chief Executive Officer, Yumani. “And 76 percent of those actually request an item. That is another extraordinarily high conversion metric.”
Designed to benefit both consumers and sellers, the platform differentiates in the marketplace because it does allow sellers to compete to match for a consumer’s purchase. Via a Yunite group, consumers can post an item they want to buy, then recruit others interested in the same item to buy with you—adding to its value.
“The platform is not only for the consumer but also for the seller,” said Henry Zilberman, Founder of Yumani. “My idea was to provide them both with a win-win situation. We worry about the customer getting the right price and we worry about the seller who should not have to spend so much money and pay fees they shouldn’t have to. Yumani will increase business. Manufacturing will go up. Jobs will go up. And this is only the beginning.”
In preparation for pre- and post-holiday season, such findings serve as an important wake-up call not just to retailers across the company, but their supply chain enablers and key partners as well.
Online shoppers in the U.S. will spend $327 billion in 2016, up 45 percent from $226 billion this year and 62 percent from $202 billion in 2011, according to Forrester Research Inc.
But while the increase in e-retail spending makes up a large part of the increasing shift in retail, businesses must understand that a one-size-fits-all approach to bring goods to market does not work.
“There are two things we have to think about here,” said Tompkins. “One is multi-channel—so brick and mortar is a channel; online is a channel. But what we need to do is not only have a supply chain that deals with the multichannel but we also need to have an omnichannel, which gives the customer a complete view of our offerings any time, any place they want.”
“But we can’t just view online retail versus in store,” he continued. “The mistake companies make is they think that the objective is to be really good at omnichannel. But they have to be great at all three aspects—online, in store and at omnichannel. Brick and mortars have to figure out ‘how do I make my brick and mortar an asset with my multi-channels to allow me to gain market share.’ That is the key,” said Tompkins.
In fact, the move to omnichannel was largely compounded by the fact that certain consumers preferred different channels—many of which had different preferences for shopping and different preferences for buying.
Adding more to the all-encompassing omnichannel are the requirements consumers place on their retailers, affecting their supply chains. Customers no longer solely rely on five-business-day shipping standards. Now, they want same-day shipment and generally free shipping—the latter of which often times proves beneficial to retailers as shoppers spend an average of 30 percent more when free shipping is available, according to Kevin Reader, Chief Marketing Officer, Invata Intralogistics.
“Retailers looking at the omni-channel customer recognize that they have to control their delivery channels,” said Reader. “They are building and operating new distribution channels themselves in order to make sure that the customer experience—from research and info on the Web to order entry to delivery and receipt of a package by the customer—is consistent across both brick-and-mortar and ecommerce and that they have control of that channel. The opportunity is pretty significant.”
Consequently, the competitiveness in the retail space is putting pressures on those retailers to provide efficient shipping services as, again, customers want their purchased items sooner rather than later.
“Free shipping is where it is headed,” confirmed Curtis Mitchell, Director of Business Development, ShipStation. “It’s very smart marketing and we’re starting to see that from some of the big boys out there like Amazon and Wal-Mart and Sears. And the average small-to medium-sized business owner who is trying to sell products on the Internet—they are feeling the pressure from the free shipping and are feeling like they need to do something to compete as well. It’s getting to the point where some of these small-to-medium-size business owners are trying to increase the price to offer the best rate that they can so they can offer the free shipping without it having too much of an impact on their product price,” said Mitchell.
And Web-based shipping service provider ShipStation helps such business owners realize the better options that are available to handle small or batch shipping orders for a price that won’t necessarily cause huge financial strain on the company. The startup—just over one year old—services over 2,400 online retail stores, processes an average of $1 million shipping labels per month and cuts online customers’ shipping time anywhere from one half to one third.
In addition, ShipStation has five different levels of plans—all of which come with a free DYMO Endicia account to provide a value-add for current and up-and-coming online business owners.
“While we are primarily focused on the postal service and all of its different sub-features, we really depend on companies like ShipStation to fit into applications of partners who offer ERP systems or multi-carrier shipping systems alongside the postal service,” explained Amine Khechfe, General Manager and Co-founder, DYMO Endicia.
In return, DYMO Endicia, which offers online postage and shipping solutions for online sellers and warehouse shippers, becomes the United States Postal Service (USPS) expert for ShipStation, taking care of the logistics so ShipStation can focus on their core product and customer base.
“ShipStation has taken our technology and integrated it into their great user experience,” said Rick Hernandez, Senior Manager of Business Development for DYMO Endicia. “And in their environment, they’ve taken the best of both worlds. We make it easy to work with the postal service and integrate that technology into what you do and they make it easy to integrate into all of these order management systems, all of these online shopping carts—they basically allow you to connect the postal service to the ecommerce solution that an online professional seller needs.”
Despite nationwide reports of eliminated USPS jobs and many businesses questioning the existence of the service provider five years from now, the growth of ecommerce validates the postal service company’s position in the market.
“The e-commerce part of the business and the e-shipping—that is the growing part of the postal service business,” said Khechfe. “As ecommerce goes up 45 percent in the next four years, the postal service will take a big chunk of that. The postal service is less expensive than all the other carriers because they already deliver to each household. And not only that, but they pass that rate to the shippers. And that is why you see some of the larger companies growing their volume with the postal service. So in the last year, the postal service shipping business actually gained market share points against the private carriers. And because of that, the postal service is putting a lot of money and effort around improved tracking and shipping which is really where the Endicia growth story is: focused on B2C, shipments under five pounds—the sweet spot of the postal service—and the growth part of the business,” confirmed Khechfe.
In addition to improving tracking data provided to customer, logistics service providers must also be able to release orders faster and package items in a much different way as labor costs must be managed more quickly, Reader added.
“Relationships are going to have to change as the 3PLS are feeling the impact of the growth in ecommerce,” he continued. “Either the 3PLS are going to have to make investments themselves in facilities that handle e-commerce business efficiently or they are going to have to engage in contracts with their retail partners that are longer in term. And that is the only way to get the efficiencies out of the distribution center that are required to service the mobile customer in ecommerce,’ said Reader.
Actions speak louder
In order to control the factors that affect the changing landscape of retail, the retailer must have clear visibility within their supply and demand chain. In addition, all customer touch points need to be connected and in real time as possible, referenced Reader. The retailer must also have an intimate understanding of their individual customer—their needs, and engagement—to respond according.
Systems must also be in place to control key cost drivers. To do that, it will take more than automation—while very beneficial to cut costs and improve supply chain efficiency—for all retailer and supply chain players to understand and prepare for the changing multi-channel commerce landscape.
Holiday season or not, consumer demand will continue to drive the changing landscape of retail. Today’s always-connected consumer wants their information yesterday. They no longer want the goods that were present one year ago—they want the innovation of the future. As a result, a retailer’s three- or five-year plan no longer works as customers continue to drive changes in the commerce space. Instead, the retail industry must bring to market new strategies and services and act now to survive.