RTG Newsletter
Published quarterly by The Retail Technology Group
November, 2016
From the Principal’s Office
Didn’t notice this before but who gains the most from big eCommerce sales during the traditional holiday shopping season? The delivery companies! They get the business on the way out and on the way back! It is an interesting dynamic. The carriers collect for delivering too much product to the consumer and they collect again for delivering the returns back to the point of origin. What a great business!
Bob Amster – Principal, RTG
The Pluses and the Perils of Drop-Shipping
An old term applied to a new paradigm is ‘drop-shipping’, wherein a retailer selling online routs the order to the supplier who then ships directly to the consumer.
There is good and bad in this paradigm. Among the benefits to the retailer are a lesser investment in inventory and possibly, a wider assortment of the same product, less warehouse space required, and _____________.
The benefits to the supplier are an increased knowledge of the consumer base. Now the supplier knows who is buying what and where he/she lives. Another benefit is that the supplier may sell more colors and sizes of a product than the retailer may have bought in the first place.
The consumer may or may not see the difference.
Among the disadvantages to the retailer is the sense that it is giving up on some of the control over its customer base, and possibly on the quality of the service provided the customer such as packaging.
A disadvantage to the supplier is that it now has to have a facility to fulfill small orders to individual destinations whereas, when selling to retailers it packs and delivers in more efficient larger orders and single shipments to the same destination.
The whole paradigm shift requires an additional degree of coordination between retailer and supplier. Leaving staple items such a razor blades or reams of photocopy paper which are manufactured in large quantities, and for extended periods of time, and not likely to run out, there are factors the rear their ugly head when dealing with more fashion or fast fashion items which, by definition, have shorter manufacturing runs and are not around forever.
What guarantees does a retailer have that the manufacturer or supplier will have a specific product in inventory when the retailer shunts an ecommerce order to it for fulfillment? When a retailer commits to a purchase order, at least it knows what it has to sell. If the supplier is shipping direct, does the retailer know how much inventory the supplier has on hand of any given SKU? Shouldn’t the retailer know? Will retailer and supplier have to develop new lines of information exchange in order to avoid a potential problem? It used to be that CPFR (Collaborative Planning Forecasting and Replenishment) did exactly that, but in the opposite direction. The retailer provided on-hand and sales information to suppliers so the suppliers could keep the retailers in stock. Under the new paradigm, the suppliers would have to tell the retailers what they have in stock so that the retailers wouldn’t oversell the inventory available!
These are diametrically opposite concepts.
The drop-ship-of-ecommerce-orders concept solves some problems. As Nikki Baird of RSR rsearch said to the WSJ: “Heavy, bulky things are better to ship from the supplier.” But the concept may also create new problems. Maybe the concept only works for basic, staple products because their availability is more predictable.
It will be interesting to see how the retail industry, with a growing eCommerce business, manages to address the new challenges.
What are we seeing?
Paradigm Shifts in Retail
It has been reported that fast-food retailer Sweetgreens is going cashless in all its stores in 2017. This is one to watch! What do you think is the fastest method of payment today? (Hint: they started out making personal computers.)
Amazon is experimenting with with dirigible-like warehouses to supply drones in the area so they can deliver quickly. Sounds ambitious. Also sounds like a possible mess in the air!
Is your automobile the next shopping device? It is being touted as such. Smart apps, voice activation, built-in Wi-Fi all combine to provide a new avenue to do things (like shop) while you are (hopefully) sitting in traffic. Dangerous?
Consolidation continues
The Limited, owned by Sun Capital P-E firm, is closing all its stores as of early January 2017.
Yogasmoga, a New York-based fitness apparel brand, filed for Chapter 11 in a bankruptcy court in Manhattan.
New-York-City-based Gracious Home has filed for Chapter 11 bankruptcy reorganization, its second filing in six years.
Macy’s closing stores and laying off 10,000 over time. Oh boy!
BCBG|MaxAzria is consolidating by closing stores and emphasizing eCommerce. Cash crunch and disappointing holiday sales are contributing factors. Maybe bankruptcy…?
California-based Wet Seal is closing all stores and laying off HQ personnel. The company has undergone two bankruptcy filings.
Shoes.com suddenly shuttered operations on January 30th. how much did Amazon;s Zappos have to do with its demise?
Eastern Outfitters, the parent of Eastern Mountain Sports and Bob’s Stores, filed for Chapter XI bankruptcy protection. Eastern Outfitters is owned by Vestis Retail, in turn, formed by private-equity firm Versa Capital Management.
Retailers in Transition
Nasty Gal is on the auction block and UK pure-play e-tailer Boohoo is the stalking horse.
Meanwhile pure-play e-retailer Warby Parker is now a multi-channel retailer with 43 stores and threatening to open 25 stores more this year!
Mergers & Acquisitions
Destination Maternity to be acquired by French Retailer Orchestra-Premaman SA.
Private-equity firm Warburg Pincus has agreed to acquire Gabriel Brothers (Gabe’s) from Alvarez & Marsal Capital.
Emerging Technology
7-Eleven conducts drone deliveries. Same day? How about same hour?
Mercedes Benz enables the use of Google Assistant on Google Home to control certain function in their vehicles without setting foot in the automobile.
Square in agreement with Apple to accept Apple Pay with its virtual payment card. That’s an important development for Apple Pay (the fastest payment method we have experienced) and it expands Square’s realm of acceptance of tenders.
On the bright side
Apple broke a quarterly record with iPhone sales.
Dollar General announced that it will open 1,000 stores and 2 distribution Centers in 2017. Someone’s growing…
Wait and see
Digital Gifting is an idea worth watching. The concept is that the gift giver arranges to give a gift to the gift recipient through the e-retailer of choice. The recipient is notified, and can then change color or size, or even ‘trade in’ the item for another.
What’s new with us?
We are helping a start-up, New-York-City-based retailer transition to a new merchandise management and POS system.
Visual Retailing – We are actively looking for retailers to pilot this visual merchandising software application. This SaaS solution enables retailers to deliver concise and consistent standards to their stores to ensure that the brand image and the nuances of the product offerings are accurately represented in every store. The software can be used as early in the process as design, to planning and buying, through merchandising to operations, to develop these concepts and then to communicate clear visual merchandising directives to every store under the company umbrella. The software has been successfully deployed at mark & Spencer, VF, Preca Brummel, Italy and others. We would be happy to work with you. Let us know of your interest.
We are working with Overheer Systems, an ITL company to run item-level RFID proof-of-concept projects. Overheer offers a unique suite of SaaS applications – Reflect RFID – to deploy RFID and reap the benefits of this technology with minimal impact on existing systems and processes. In today’s omni-channel environment, inventory accuracy is paramount in maintaining customer satisfaction and RFID delivers that and more. Through its association with ITL, Overheer Systems is now also able to deliver RFID tags in addition to the software, RFID scanners and RFID printers/encoders. The proof-of-concept can be implemented at a single store with a limited range of garments in order to validate assumptions built into the business-case analysis. We are most excited to have the opportunity to work with retailers wishing to develop and prove the case for RFID.
We continue to be enthusiastic about Theatro. The Theatro Communicator is a wearable, hands-free, voice-activated, Wi-Fi-based devise designed with the hourly retail employee in mind. This smaller-than-a-credit-card device enables store operations personnel to use a voice-controlled interface to call for backup, check inventory, locate a manager, or simply communicate with a team member – enabling them to do more, eyes-up/hands free. The product is already fully deployed at Cabela’s, and The Container Store, and being piloted at numerous other well-known retailers. As evidenced by Google’s Home, Amazon’s Echo and Alexa, and on-board automobile technology, voice activation is an effective, emerging technology. Call us to discuss how we can help you pilot this unparalleled product.
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