I have a long-standing interest in Black Friday — less because I want to go shopping but more because it poses some interesting questions on how firms compete and how they manage customers. The news this year is that Black Friday is creeping evermore into Thanksgiving proper as retailers keep moving up their opening times. So why are they doing that? Two posts on Businessweek.com put forward theories. The first posits that this is being driven by customer segmentation (The Game Theory Behind Macy’s Thanksgiving Opening, Oct 15).
Traditions are being trampled on by the Corporate Retail Complex! Of course, consumers don’t have to go. Some won’t, and that’s precisely what the strategy folks at Macy’s are betting on.
The purists scandalized by the thought of shopping on the holiday itself aren’t likely to avoid Macy’s altogether. And with the die-hard bargain-hunters swarming the stores on Thursday, Friday shopping will likely be much more pleasant for those who are a little less committed.
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Much has been written Angela Ahrendts leaving Burberry to take over Apple’s retail operations but the Guardian has something of a unique take. They argue that a pressing concern is simply managing the queue for tech support (Apple stores await Ahrendts touch as outlets struggle with growing demand, Oct 18).
It’s only a two-hour wait. An ordinary Thursday afternoon at Apple’s flagship UK store in Regent Street, London and a long line of customers snakes across the first floor. The hip technology brand is used to queues for the launch of its latest must-have product, but these people have come carrying faulty iPhones and malfunctioning laptops, desperate for help from one of Apple’s increasingly hard to reach “Genius” experts.
When it opened in Virginia in 2001, the first Apple store was hailed as a retail revolution, allowing shoppers to play with expensive technology without any sales pressure. The emphasis on service, with blue-shirted Geniuses on hand to answer queries and fix broken products, has become almost as important to the Apple brand as the aesthetic appeal of its products. But the whole experience is under pressure as a relatively small number of shops struggle to cope with rapidly growing customer numbers. …
The Regent Street outlet, for example, employs at least 120 Geniuses. Each sees up to 30 customers a day but it is impossible to book an appointment less than a week in advance. If the problem is urgent you can turn up and queue, but it could be a very long wait. This week, a gaggle of well-trained, polite and friendly staff worked their way along the line trying to answer simple queries and advise people on alternatives to queueing. But it is hard to redirect people when every nearby shop has its Geniuses fully booked for days on end.
The article goes on to note that this is not just an issue in London. It certainly can be an issue here in Chicagoland. While a quick check of my nearest Apple store shows that they currently have a number of appointments open for tomorrow, Friday morning already has no availability. There are even reports of scalpers hawking Genius Bar reservations in China.
So is there an easy fix to this problem? It seems like there are two issues here. First, to what extent should Apple accommodate walk-in customers? Second, is there any easy fix to expanding Genius capacity? These are related. If capacity is expanded then the ease of getting a reservation should take care of the walk-in issue. On the other hand, if capacity cannot be easily expanded, then there is a question of how to allocate it between walk-ins and appointments.
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A few months ago I had a post on stair-step incentives. These are incentive schemes that car manufacturers offer dealers that essentially pay rebates on cars that have been sold once sales cross a specified threshold. In that post, I noted that these schemes had the potential to skew competition in local markets:
If you and I own competing dealerships across town, I have a serious leg up on you if I am the first to reach a threshold. I can price more competitively since I know that I am guaranteed to get a rebate while you are still striving to make the threshold. Note this makes everything all that more sensitive to how individual dealer thresholds are set. If mine were skewed low while yours were too high, it’s game over and I eat your lunch.
Obviously, from a dealer’s perspective, this is an issue. Dealers don’t necessarily know how car makers set their targets. They, for example, may be basing targets on national trends that may not apply locally. Further dealers may be facing challenges that the automakers don’t know (e.g., a top sales person just left). Even if a dealer knows how his target was set, he may not know what the target is for a neighboring dealer of the same brand or what is happening with a competing brand. Hence, he could be blind sided when a competing dealer reaches her threshold and starts pricing very aggressively. Is there an easy answer to this dealer’s conundrum?
Enter the New Hampshire state legislature. (more…)
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I love self-service checkout, but it is again under attack. Here in Chicago, Jewel-Osco (one of the major local supermarket chains) is pulling self-service checkout lanes from some of its stores (Jewel scrapping self-checkout at some stores, Chicago Tribune, Sep 25). Their stated goal is to “reconnect personally with all of its customers.” Now the Wall Street Journal is piling on with an article declaring that computers just aren’t up for the job of letting people buy green beans (Humans 1, Robots 0, Oct 6).
The human supermarket checker is superior to the self-checkout machine in almost every way. The human is faster. The human has a more pleasing, less buggy interface. The human doesn’t expect me to remember or look up codes for produce, she bags my groceries, and unlike the machine, she isn’t on hair-trigger alert for any sign that I might be trying to steal toilet paper. Best of all, the human does all the work while I’m allowed to stand there and stupidly stare at my phone, which is my natural state of being. …
In a recent research paper called “Dancing With Robots,” the economists Frank Levy and Richard Murnane point out that computers replace human workers only when machines meet two key conditions. First, the information necessary to carry out the task must be put in a form that computers can understand, and second, the job must be routine enough that it can be expressed in a series of rules.
Supermarket checkout machines meet the second of these conditions, but they fail on the first. They lack proper information to do the job a human would do. To put it another way: They can’t tell shiitakes from Shinola. Instead of identifying your produce, the machine asks you, the customer, to type in a code for every leafy green in your cart. Many times you’ll have to look up the code in an on-screen directory. If a human checker asked you to remind him what that bunch of the oblong yellow fruit in your basket was, you’d ask to see his boss.
Let’s take this in two parts. First, if people prefer a conventional check out experience because that allows them to zone out then I have to wonder how Jewel’s plan to reconnect with its customers is going to work. I remember as a kid my mom having what seemed like endless conversations with cashiers. Of course, we were in a relatively small town and most of the women (they were virtually all woman) working the registers had either gone to high school with my mom or had a sibling who did. Now we live in a more class divided society. I suspect that none of the cashiers at my local Jewel are actually from the neighborhood or that the store’s staffing policies actually build in time for cashiers and customers to catch up on how their respective in-laws are doing.
But what of the claim that the information needed to run checkouts cannot be simply encoded for computers? (more…)
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Big data is, of course, one of the business world’s most in vogue buzz words. It may even be having an impact on how various industries function. Case in point, today’s Wall Street Journal reports that several firms are selling data and services to fashion brands and retailers (Fashion Industry Meets Big Data, Sep 9).
The forecasting companies offer analysis of fashion shows, data on the current market offerings and—for an added fee—bespoke research and consultancy services. The data are generated by teams of staff employed to trawl art exhibitions, events, restaurants and even scientific journals.
Fashion companies use the data to plan their latest collection or catwalk show, with the online services replacing the bulky and intermittent style books that designers and merchandisers used to receive. …
“[Fashion forecasters] have always been used but they’re more accessible now because of the technology,” says Marks & Spencer creative director Belinda Earl, who has just launched her first collection for the U.K. high street bellwether. “They are important, not always to lead but to re-evaluate and help confirm you’re on the right track.” …
Retailers are also turning to number crunchers to improve execution. U.K. start-up EDITD trawls the Internet to gather data on who’s selling what, how many products are flying off the virtual shelves and how much are they going for to guide companies in their merchandising decisions.
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Long lines at check out can spoil a shopping trip just as a bad dessert can spoil an otherwise fine dinner. Either can, if you will, leave a bad taste in your mouth. So what can a retailer do besides throw (expensive) bodies at the problem?
As the Wall Street Journal tells it, there are quite a few options. A recent article discussed process changes and new technologies different firms are using to try and reduce customer waits (Retailers Wage War Against Long Lines, May 2). The most interesting to my mind was what supermarket chain Kroger is trying.
Supermarket giant Kroger Co. is winning the war against lengthy checkout lines with a powerful weapon: infrared cameras long used by the military and law-enforcement to track people.
These cameras, which detect body heat, sit at the entrances and above cash registers at most of Kroger’s roughly 2,400 stores. Paired with in-house software that determines the number of lanes that need to be open, the technology has reduced the customer’s average wait time to 26 seconds. That compares with an average of four minutes before Kroger began installing the cameras in 2010.
“The technology enabled us to execute at the front of the store without that additional (labor) expense,” said Marnette Perry, senior vice president of retail operations for Kroger.”It’s remarkable that we’ve been able to improve execution as much as we have without a big price tag.” …
The system includes software developed by Kroger’s IT department that predicts for each store how long those customers spend shopping based on the day and time. The system determines the number of lanes that need to be open in 30-minute increments, and displays the information on monitors above the lanes so supervisors can deploy cashiers accordingly.
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Another day, another Wal-Mart story. This one is from Businessweek and deals with troubles Wal-Mart is reportedly having getting goods on the shelves (Walmart Faces the Cost of Cost-Cutting: Empty Shelves, Mar 28).
Wal-Mart Stores (WMT) has been cutting staff since the recession—and pallets of merchandise are piling up in its stockrooms as shelves go unfilled. In the past five years the world’s largest retailer added 455 U.S. Walmart stores, a 13 percent increase, according to company filings in late January. In the same period its total U.S. workforce, which includes employees at its Sam’s Club warehouse stores, dropped by about 20,000, or 1.4 percent. …
At a Feb. 1 gathering of Walmart managers, U.S. Chief Executive Officer Bill Simon said Walmart was “getting worse” at stocking shelves, according to minutes of the meeting obtained by Bloomberg News. Simon said “self-inflicted wounds” were Walmart’s “biggest risk” and that an executive vice president had been appointed to fix the restocking problem, according to the minutes.
Note that this is not a supply chain issue. Rather it is a store operations problem. The goods are getting to the stores; they are just not getting out to the shelves.
At the Kenosha (Wis.) Walmart where Mary Pat Tifft has worked for nearly a quarter-century, merchandise ready for the sales floor remains on pallets and in steel bins lining the floor of the back room—an area so full that “no passable aisles” remain, she says. “There’s no manpower in the store to get the merchandise moving,” says Tifft, who oversees grocery deliveries and is a member of OUR Walmart, a union-backed group seeking to improve working conditions at the chain. “Customers come in, they can’t find what they’re looking for, and they’re leaving.”
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So Lululemon has a problem with its yoga pants. It is of the I-see-England-I-see-France variety (Lululemon Yoga Pants Pulled From Stores for ‘Sheerness’, Wall Street Journal, March 19).
The yoga-apparel retailer’s shares tumbled late Monday after saying it has pulled some of its popular pants from stores, after a mistake by a supplier left the pants too see-through. …
“The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that falls short of our very high standards,” Lululemon said in a release.
Lululemon said Monday it has used the same manufacturing supplier on key fabrics since 2004 and is working to understand what happened.
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As the New York Times tells it, supply chains are changing (New Hubs Arise to Serve ‘Just in Case’ Distribution, Feb 12).
Major storms like Hurricane Sandy and other unexpected events have prompted some companies to modify the popular just-in-time style of doing business, in which only small amounts of inventory are kept on hand, to fashion what is known as just-in-case management. …
Just-in-case is a response to the vulnerability of just-in-time supply chains, said Rene Circ, CoStar’s director of industrial research. Since the 1990s, just-in-time has made sense for many companies looking to reduce the cost of keeping large inventories on hand. Technology enabled retailers and manufacturers to closely track and ship items to replace merchandise sold or components consumed in production.
This model also reduced transportation costs, because goods would be shipped only as necessary. By combining the just-in-case with just-in-time strategy, Mr. Circ said, companies are trying to strike a balance between “carrying the minimum inventory possible, yet never running out of things, because inventory equals cost.”
I’ve been trying to think what I should say about this article for several weeks. I have felt conflicted because, on the one hand, it hits on some interesting points. On the other hand, it also leads with one of my pet peeves of business reporting. Specifically, it links any change in inventory management to some failure of just-in-time management. However, I am not convinced that is actually a good description of what is going on here.
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Check ou this quote from the Wall Street Journal (Bad Roads, Red Tape, Burly Thugs Slow Wal-Mart’s Passage in India, Jan 11):
In the world of perishable goods perishing, India has few rivals. Lacking proper storage facilities, enough refrigerated trucks and adequate highways, the world’s second-largest fruit-and-vegetable producer loses about one-third of its produce each year to spoilage, the government says, roughly $10 billion worth.
India also is bogged down by an entrenched system of government-imposed middlemen, the scope of which has few parallels, essentially an army of traders and agents who charge various fees along the way. That alone can increase farm-to-store costs sixfold, analysts estimate.
Just what does this system look like? The video below (which regrettably you have to go off the Ops Room to see) gives you an idea:
Obvious a contorted supply chain like this doesn’t arise over night, so why is the Journal writing about it now? In a word, Wal-Mart!
Last fall, following a relaxation in India’s foreign-investment rules, [Wal-Mart] said it was planning to open its first stores in the country in the next two years, tapping into a prized $490 billion retail sector. But to cash in, Wal-Mart and other foreign retailers will have to solve a fundamental problem: how to move goods into stores efficiently in a country that offers big retailers little in the way of modern logistics and is plagued by dilapidated infrastructure.
The hurdles are particularly daunting in the food sector, which makes up more than half of the revenues at the Bentonville, Ark.- based company.
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