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Posts Tagged ‘Retailing’

Here is an interesting graph. It comes from Goldman Sachs by way of Quartz (A new generation of even faster fashion is leaving H&M and Zara in the dust, Apr 6).

It is showing that how sales growth relates to lead time. And while I am obliged to say that correlation is not causation, it seems pretty clear that it is good to be fast; firms with shorter lead times have distinctly higher sales growth.

The focus of the Quartz article is on Boohoo and Asos, two British web-based apparel retailers that target young shoppers. As seen in the chart, their recent performance has been smoking everyone — even Inditex, the parent of Zara. An obvious consideration here is that both Boohoo and Asos are younger, smaller firms so it is easier for them to generate rapid growth than older, larger firms. It also seems that at least Asos has done some things recently to juice its sales that are independent of its operational expertise. For example, the Financial Times reports that they took advantage of a week British pound following the Brexit vote to cut price in international markets (Asos cuts its cloth for growth but leaves less margin for error, Apr 4).

But it is still an interesting question of how a web-based retailer can benefit from its distribution structure to execute fast fashion faster.

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As we have posted about before, retailers using store inventory to fulfill on-line orders is a thing. It is also a thing that raises an interesting question: At what level of store inventory should a retailer stop using store inventory to fulfill on-line orders? That is, should everything be available first-come, first served or should some store inventory be held back only for those customer that wander into the store? According to the Chicago Tribune, different chains are following different strategies on this (With Hatchimals scarce, who gets dibs — online shoppers, or those in the store?, Dec 13).

Target ships online orders from 1,000 of its stores, up from 460 last year. To avoid empty shelves, Target will turn off the order pickup or ship-from-store option on some items when a store’s stockpile falls below a certain threshold, said Target spokesman Eddie Baeb. Stores that ship also get extra inventory.

An online customer likely doesn’t care which store or warehouse handles their purchase. The shopper already walking the aisles does. Exactly how many items Target holds back depends on the product and how quickly it typically sells. …

Other retailers, like Toys R Us, don’t try to guess how many items to hold back for in-store customers.

Even on Christmas Eve, the retailer doesn’t bump back online orders to help procrastinating brick-and-mortar holiday shoppers. Purchases, whatever the format, are first-come, first-served, said Toys R Us spokeswoman Jessica Offerjost.

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It’s the end of the year so it is clearly time to see what is up with how retailers are handling holiday logistics. A useful starting point is this graphic from the Wall Street Journal (As Web Sales Spike, Retailers Scramble to Ship From Stores, Dec 1).

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This shows how Toys R Us fulfills its web orders. And, yes, that says that over 40% of the web sales were fulfilled from stores. (To put that total in perspective, the company’s revenue last year was $11.8 billion.) (more…)

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It’s not every day that you see a video about supply chain contracting, so I cannot resist posting about it:

The video comes from Vox and they have an article that goes with it (The hidden war over grocery shelf space, Nov 22). That article, in turn, was at least partially inspired by a report written for the Center for Science in the Public Interest (Rigged: Supermarket Shelves for Sale, Sep 28, 2016).

The contract in question is a slotting allowance. Slotting allowances are paid by food manufacturers to retailers in order to get items onto shelves. The money is paid upfront and often varies with the number of stock keeping units (SKUs) introduced and the number of stores in which the products will be stocked. The term comes from the act of creating a space — i.e., a slot — for an item in a warehouse or on a store shelf. The origin story is that retailers at some point started demanding that vendors compensate them for the costs they incur in helping launch new products (which often fail). The reality is that the money involved is now significantly higher than the cost of rearranging products. In effect, retailers are selling off their real estate.

So are slotting allowances good or bad for markets and customers?

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I must confess that I have never really been enthralled by Trader Joe’s. I have never lived close by one so it was a convenient option for shopping nor have I ever been desperately loyal to their private label products. But there certainly are people who love Trader Joe’s and their stores can be quite busy. As consequence, the check out lines at some locations can be a special sort of experience. McSweeny’s offers a parody “Trader Joe’s Waiting in Line App” asking user to rate their overall shopping experience on the following scale:

  • 4 stars: Took a while, but got what I needed.
  • 3 stars: Eerily friendly cashier weirded me out; there was hardly any bagged lettuce left.
  • 2 stars: Constant gridlock. Teeth gritted the whole time.
  • 1 star: Anarchy. Like the ending of Lord of the Flies.

What does the ending of Lord of the Flies look like? Check out BuzzFeed’s “The Nightmare Of Shopping At Trader Joe’s In Manhattan.” It’s one thing to have to mark where the line starts; it’s another to need a sign marking the middle of the line so clueless (or super-aggressive) shoppers don’t cut the queue.

What then is a shopper to do? According to a recent Slate piece, the answer is to shop while in line (The Six Rules of Line-Shopping at Trader Joe’s, Aug 24).

Not long ago I was waiting in line at the smaller-than-average and perpetually mobbed Trader Joe’s near Union Square in Manhattan when I noticed the shopper in front of me had come up with a clever, possibly devious solution to the crowd problem. Upon entering the store, she claimed a shopping cart and staked out a spot in the checkout line (which snaked around almost the entire perimeter of the store). She proceeded to do all her shopping from her place in line: picking up produce as the line crept through the produce aisle, frozen goods as it passed by the freezer case, cereal when it neared the cereal section.

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IKEA has big growth plans. According to the Wall Street Journal, it aims to increase its revenue by €50 billion by 2020 — 74% higher than its 2014 revenue (IKEA Can’t Stop Obsessing About Its Packaging, Jun 17). Part of that growth is going to come from expanding into new markets, some may come from new formats, but a lot of it has to come from selling more stuff through existing stores. And that is going to require finding ways to cut prices to move more volume.

That’s where design comes in. IKEA is reviewing products in order to find ways to reduce their production and — importantly — their distribution costs. As this graphic demonstrates, this is pretty much a war on air.

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About a year ago, we had a post on Zulily and how they managed their order fulfillment. It featured a nifty graphic from the Wall Street Journal showing just how much longer their delivery times were relative to other interet retailers. Now, the Journal has another story — with a spiffy updated graphic — discussing how their delivery times have gotten even worse (Zulily Nips Business Model in the Bud, Mar 23).

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