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Posts Tagged ‘Retailing’

Wal-Mart has had a tough go over the last few years. Sure, they are still a huge force in retailing but they have run into a variety of operational problems largely related to in-store execution. (See. for example, this post.) Now the Wall Street Journal reports that Wal-Mart is gearing up for the holidays by trying to address some customer service pain points (Returning to Wal-Mart: Human Cashiers, Aug 15).

In an attempt to lure more customers this holiday season, Wal-Mart Stores Inc. is promising to staff each of its cash register from the day after Thanksgiving through the days just before Christmas during peak shopping times.

The move, called the “checkout promise,” is aimed at addressing one of the retailer’s biggest customer complaints: long waits in checkout lines, which can cause even more frustration when positions aren’t fully staffed. The pledge will cover hours typically on weekend afternoons but which can vary by store.

“We feel good about price and having the top gifts of the season, so the next priority is about getting customers in and out of the stores quickly,” Duncan Mac Naughton, Wal-Mart’s chief merchandising officer, said in an interview. “Taking the possibility of waiting in long lines off the table will attract more people into stores.” …

On Thursday the retail giant said it allocated more hours to the front end of the store, to overnight stocking, and to deli and bakery to improve customer service during the most recent quarter.

Here are two questions that are worth thinking about. (more…)

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I have never really given T.J. Maxx much thought. I can’t recall the last time I was in one of their stores, and going to T.J. Maxx has not been an obvious choice to me since I was in high school (and that tells you more about the shopping options in Manchester, NH, in the early 80’s than anything else). But now Fortune has an article singing the praises of T.J. Maxx — or more accurate its parent company TJX, which also owns Marshalls among other retail chains (Is T.J. Maxx the best retail store in the land?, Jul 24). The article is full of all sorts of interesting nuggets (TJX is basically the successor company of Zayre, another retailer from my childhood, who knew?!) as well as laying out seven “secrets” from the company playbook. Some of these are about positioning in the eyes of the customer (e.g., Put real treasure in the treasure hunt) or management talent (Find a CEO who gets retail). But many of their points go right to the stores operations and how it manages its supply chain.

The off-price business is a volume game: selling a ton of goods and selling them fast. The measure of speed here is how quickly a company turns over its inventory: TJX does that every 55 days, vs. 85 for its peer group, according to Morningstar. Indeed, the company is structured to whisk items through its distribution centers and stores—and a lot of items they are: TJX shipped some 2 billion units to its stores in its 2014 fiscal year (which ended on Feb. 1), up from 1.6 billion in fiscal 2010.

Former employees say that the stuff moves so rapidly that merchandise is often sold before TJX has paid its vendors for it. The busiest stores can take daily delivery of product, which employees put out on the floor right away—a “door to floor” approach that cuts down on the amount of space needed for backroom storage. Sources say items typically go on markdown if the turn rate is slower than about seven weeks, which also contributes to the rapid flow.

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Shop on Amazon.com and you will find a lot of items sold by lots of different sellers. For many of those sellers, Amazon isn’t just handling acting as a store front; it is also handling the logistics of order fulfillment. Now suppose that Amazon has a particular product which both it and several third parties are selling out its warehouses. How should Amazon physically manage the inventory? Should it keep the inventory it is selling physically separate from that offered by third-party sellers? In many instances, Amazon chooses to do just the opposite, allowing for “stickerless, commingled inventory.” Here is an Amazon video explaining just what that means.

And here is how the Wall Street Journal explains the benefits of the program (Do You Know What’s Going in Your Amazon Shopping Cart?, May 11).

The system has enabled Amazon to make better use of its warehouse space and keep a wide variety of items in stock around the country. The idea is to give Amazon flexibility to ship certain products based on their proximity to customers, speeding delivery times. For third-party sellers, it saves them the trouble of having to label individual items sent to the Amazon warehouse.

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Gustin

One of my favorite topics to teach is the newsvendor problem, an inventory model for very short-lived products like newspapers and fashion goods. One of the points that gets made in that class is that variability is costly. Having to commit resources before knowing what will sell means risk and risk may be a reason not to be in the business. But that risk also suggests an opportunity: If one can find a way to reverse the order of things and commit resources only after knowing what will be demanded, then an otherwise unprofitable business can be a profitable one.

That is essentially the idea behind Gustin, a maker of high-end jeans. It initially sold its jeans trough boutiques, which bought jeans at a wholesale price near $80 but then marked them up to around $200. Gustin had to front all the cost of production and then wait for stuff to sell. Now, they have reversed the order of things and take orders directly from customers ahead of production. As the founders tell it on Marketplace, they have positioned themselves as a totally crowdsourced fashion company (Burning down the house that Levi’s built, Apr 8). You can hear the story here:

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I have become increasingly taken with the question of what constitutes a good job. Various parts of operations in many industries have become automated over time and that trend will continue. But firms will still need people. Some production steps will be sufficiently nuanced or require too much dexterity that using a robot is (at least for now) impossible. Other setting like retail will favor resources who can move more or less seamlessly between restocking shelves to checking out customers. So what do these jobs look like? Unfortunately, the answer can be fairly grim.

The Atlantic has an article written by an ex-Politico reporter who lost his job and ended up (mostly out of desperation) working at sporting goods store (My Life as a Retail Worker: Nasty, Brutish, and Poor, Mar 11) and found the experience rather dehumanizing.

Of course, I had no idea what a modern retail job demanded. I didn’t realize the stamina that would be necessary, the extra, unpaid duties that would be tacked on, or the required disregard for one’s own self-esteem. I had landed in an alien environment obsessed with theft, where sitting down is all but forbidden, and loyalty is a one-sided proposition. For a paycheck that barely covered my expenses, I’d relinquish my privacy, making myself subject to constant searches.

“If you go outside or leave the store on your break, me or another manager have to look in your backpack and see the bottom,” Stretch explained. “And winter’s coming—if you’re wearing a hoodie or a big jacket, we’ll just have to pat you down. It’s pretty simple.”

When he outlined that particular requirement, my civil-rights brain—the one that was outraged at New York Mayor Michael Bloomberg’s stop-and-frisk policy and wounded from being stopped by police because of my skin color—was furious. …

I’m not sure why—perhaps out of middle-class disbelief or maybe a reporter’s curiosity—I pressed the issue. Seriously: I have to get searched? Even if I’m just going across the street for a soda, with no more than lint in my pockets? Even if you don’t think I stole anything?

Stretch shrugged, unconcerned. Clearly he’d been living with this one for a while.

“Yeah, it’s pretty simple. Just get me or one of the other managers to pat you down before you leave.” (more…)

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Has Wal-Mart figured out how to do same day delivery? The Wall Street Journal seems to think so — at least within their Mexican operations (Mexico Delivers for Wal-Mart, Feb 20).

Has Wal-Mart really figured this all out? I have my doubts. (more…)

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Back in May I was at a conference and a colleague was giving me grief for having so many posts related Zeynep Ton‘s work on how retailers treat their workers. Today we are going back to that well because Ton has a new book out, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits. Here is the author giving an overview of her thesis.

The basic premise is that there is a coherent strategy that firms can execute that works well for both its investors and customers while creating desirable, good jobs for its front-line employees. Furthermore, this does not depend on charging customers a premium. Indeed, her focus is on low-cost retail and she discusses several retailers that price quite competitively despite treating their employees quite well. Said another way, the fact that, say, Wal-Mart offers crummy jobs is a choice on its part, not an absolute necessity for being a low-cost player.   (more…)

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What follows Christmas? Returns, of course. This is especially true for on-line retailers who must generally offer more forgiving returns polices than conventional retailers. In Europe, this is a matter of law. In the US, it is often a necessary part of gaining customer trust. But how much do returns cost retailers? According to The Economist, it can be quite a bit (Return to Santa, Dec 21).

Return rates can be alarmingly high: for some online retailers up to half of everything they sell comes back. Studies find that just handling each returned item costs online sellers between $6 and $18, and that is before the losses from items that are returned in unsaleable condition. …

A new study by Christian Schulze of the Frankfurt School of Finance and Management seeks to put some hard numbers on the scale of the serial-returner problem. Mr Schulze studied 5.9m transactions in Germany, involving 166,000 customers, for a large European online retailer. He looked only at those who had bought at least five items over a five-year period, and found that 5% of them sent back more than 80% of the things they had bought; and that 1% of customers sent back at least 90% of their purchases. Without the cost of returns, the retailer’s profits would be almost 50% higher, the study found.

But is this necessarily a bad business? (more…)

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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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apple-store-scalp-130729

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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