WHY IT MATTERS: Digital Transformation

Amazon announces it will open 100 popup stores.

WHY THIS IS IMPORTANT

This is one piece in the vision for the future of retail. Here are the components:

1. great online store where you can find anything you want under one roof with a single payment and account profile - amazon.com
2. 2-day free delivery - Amazon prime
3. low cost delivery network based on grocery delivery - Amazon fresh
4. small friendly stores where you can browse products, try them out, get help - Amazon popup stores (same principle as apple stores)

All retailers should copy this recipe. For example grocery supermarkets should shrink in size, provide customers with tasting stations and chefs and mini-restaurants (think Eataly) and cooking classes, along with butcher and other fresh produce. The rest (all packaged food that has a barcode) is delivered from a warehouse on a schedule right to your door at no cost if you are a member.

Also see Amazon's dedicated site for its popup stores: https://www.amazon.com/b?node=14303222011&tag=bisafetynet-20

Amazon and Morrisons grocery store partnership in the UK is growing. I can see it be very good for Amazon, but is it for Morrisons? Typical reaction would be to think they are inviting the enemy within their stores.  Maybe not. Here is what I think:

- Morrisons is a grocery fulfillment and distribution fighting to remain relevant in the digital age. Amazon brings orders and leverages its supply chain and procurement and expertise in buying fresh products;

- Amazon most likely will pay to host its lockers in stores, a new source of revenue;

- Amazon will bring customers to stores, something that is more and more difficult to do

- customers have an infinite aisle, able to shop online to Amazon when in stores, which may represent a new revenue stream

- competitors are investing heavily in money loosing or barely break even online ecommerce for grocery: morrisons can use this cash to do other, more profitable ventures, until the business model for grocery ecommerce becomes profitable

Who knows, this may be a wise move from Morrissons executives.

Google research on the topic of eCommerce includes so many topics that I use it as guidance on the different aspects I need to cover when building an eCommerce strategy: just look at the table of content below.

You should too.

If you don't have a Gartner account or would like a free resource, start with their primer https://www.gartner.com/binaries/content/assets/gml/ki-pages/research-primers/94142c1d-730d-4251-97c7-938ce27b304c_gartner_for_marketers_digital_commerce_primer.pdf 

or go to one of the major solutions such as Hybris to get access to analyst reports that favor them positively (!): https://hybris.com/en/downloads?q=:prioritySort:type:Analyst+Report 

Table of Contents

• Analysis
• Digital Commerce Market: Definition, Growth and Trends
• Definition
• Growth
• Trends
• Digital Commerce
• Digital Commerce Platforms
• On-Premises (or Hosted) Software
• SaaS
• Digital Commerce for Midsize Businesses
• Digital Commerce for B2C Organizations
• Digital Commerce for B2B Organizations
• Open Source
• Marketplace Commerce Sites
• Digital Commerce Services
• Digital Commerce Service Providers
• Hosting Services and Managed Services
• Digital Commerce Ecosystem
• Distributed Order Management
• Payment Solutions
• Commerce Search
• Web Content Management
• Personalization Engines
• Digital Analytics
• Customer Journey Analytics
• Digital Customer Acquisition for Service Industries
• Marketplace/Channel Integration Platforms
• Social Commerce
• Subscription Management
• Configure/Price/Quote
• Master Data Management
• Warehousing, Logistics and Fulfillment Service Providers
• Marketing Automation
• Assisted Selling
• A/B and Multivariate Testing
• Cool Vendors in 2014 and 2015

To succeed in eCommerce you need to master one thing: delivering products to your customers rapidly at the lowest cost possible.

This is why events such as this one have become essential. I would even say that delivery is the single most important aspect of an eCommerce solution, as it is where your margins are made or lost. Ensure you have a comprehensive last mile model and you will be guaranteed not to loose money.

A great blog on different elements regarding eCommerce, from strategies to solutions and statistics. Here, one post that identifies the issues that prevent ecommerce deployment.

One post from a great blog on all things related to eCommerce, Amazon, Google, and others.

A recent survey and study confirms that shoppers want to receive notifications on their mobile phones when they are in store.

related article: http://www.the-cma.org/resource/leadership/enhance-customer-experience

study: https://www.the-cma.org/Media/Default/Core/Library/Publications/Using_Digital_Solutions.pdf 

1Atelier leverages a fully digital customer experience and strong back office systems to provide one-of-a-kind luxury handbags in 21 days instead of many months for traditional firms such as Hermes or Louis Vuitton.

WHY THIS IS IMPORTANT

Niche retailers and small handmade manufacturers should look into this new disrupting company for clues into how best to transform traditional industries that are based on hand-made, custom, high quality solutions and products. Going digital does not mean sacrificing customer interactions or hand-made manufacturing: it can revamp, improve and recharge the back office support systems and processes.

Amazon has invested heavily in warehouse automation to reduce costs and improve quality. It holds an event every year to select the best robots to accomplish warehousing tasks, this year to pick different items from store shelves.

WHY THIS IS IMPORTANT

Looking at the video it is clear that the technology remains primitive. That being said, with large investments made by Amazon in Kiva autonomous warehouse robots in the past, it is clear they are serious about warehouse automation.

It is clear that order fulfillment and delivery remain the 2 bottlenecks of eCommerce providers, adding costs and delays to the process compared to brick and mortar retailers. If Amazon could develop fully autonomous warehouses and have low cost delivery by leveraging Amazon Fresh grocery delivery trucks, it could have a profound impact on the viability of online pure plays and mark the decline in store-based commerce, which still account for 95% of all sales in the USA today.

Gartner has mapped the different skills, technologies and functional areas that digital marketers should master.

WHY THIS IS IMPORTANT

Although I've never been a fan of the transit map analogy, I find this one captures one key message for marketing professionals: digital marketing is different than traditional marketing in the tools, technologies and skills required. As the diagram shows, they are more akin to software programming than they are of the traditional marketing curriculum. For those  that do not yet have those skills in-house, get help. For those that have the skills, make sure they are sharp and remain up-to-date because this technology world changes rapidly.

Gartner research provides 3 recommendations of digital merchandising.

WHY THIS IS IMPORTANT

Merchandising is the least considered element of the digital eCommerce pillars (others are strategy, marketing, selling, fulfillment and support). This paper reminds us that eCommerce relies on detailed, accurate, and timely information about products because it is what consumers rely on mostly when making buying decisions. It is thus important to include merchandising activities as part of a balanced digital transformation roadmap.

Gartner survey of marketing leaders provides insight into where marketing organizations spend their budget. Their analysis shows that having an impact on sales has become more and more important for marketing departments to demonstrate the value of their spending.

WHY IS THIS IMPORTANT

No longer can marketing be just about drawing customers to the store doors. This survey shows that data and analytics now provides the means to measure the impact on sales that marketing activities provide and that leaders are asking their marketing department to demonstrate the return that their activities have on sales.

Explains how runkeeper uses eCommerce to reward customers and achieve impressive conversion rates of 4% to 7%.

WHY THIS IS IMPORTANT

We too often think of eCommerce in classic, undifferentiated terms: catalog of products, shopping cart, checkout. This paper offers an interesting twist to the whole thing, embedding eCommerce within the mobile app and unlocking certain products based on goals achieved by customers. Retailers should apply this approach to leverage their eCommerce platform beyond the classic website: behaviour-based rewards, special categories, loyalty-based commerce, mobile commerce, social commerce, etc. The eCommerce platform should become a platform not merely a transactional tool.

Jeff Bezos said during Code conference that Amazon will not get into the delivery business to replace partners - but will supplement it heavily.

I wrote before that amazon will get into the grocery food delivery business because it is the only way they can reduce their delivery costs - costs they have to give to fedex, purolator, USPS and others. So basically they will go into grocery business to break even and get free local delivery in certain key market areas. 

Recently, Walmart has begun pilot tests to deliver groceries using UBER (http://www.reuters.com/article/us-wal-mart-groceries-idUSKCN0YP0H6?il=0). This sounds like a great idea, focussing on each other's strength (walmart = products & logistics, uber = delivery) with no investment to access huge volume. This option may not be as efficient as the Amazon model however but be a great solution in periods of high volume.

To see what I wrote about this, see http://www.scoop.it/t/digital-transformation-of-businesses?q=amazon+fresh 

WHY THIS IS IMPORTANT

Delivery remains the biggest cost for online retailers. Between 10% to 20% of retailer costs are sunk into delivery. This remains a huge hurdle for both retailers and consumers compared to physical stores. I expect online retailer to be more and more creative on the delivery front to reduce costs and deliver faster.

Established eCommerce retailers should look for opportunities to improve delivery and newbies to never underestimate delivery as it is the CORE to make or break their online retail business. Mark my words... 

Useful data and insights from the US census survey. Essential for anyone thinking of going into eCommerce, the data shows the steady growth of eCommerce but its different penetration by category. For additional information on apparel retail, see also http://www.marketresearchworld.net/content/view/4681/48/ 

The link to the US census data will provide you with the actual numbers in excel format. 

http://www.census.gov/retail/index.html

This is not an article about grocery retailing but rather a demonstration of what the future holds for retailers and the stores they have.

With eCommerce, no longer do stores need to be mini warehouses with racks and shelves full of products. Today, eCommerce and automated picking can replace this more economically - remember Amazon mantra "your margin is my opportunity". 

What retail stores will become is more like an Apple store than a costco:

1- a showroom for your products

2- a learning center on how to best use your products

3- a help center to get you out of trouble if that should occur

Exactly the layout of an Apple store. What would this look like in a grocery store? Well something like the picture in this paper

1- showroom for perishable products like meat, deli, seafood, produce, etc.

2- areas for cooking recipes, sampling, promotions, tastings, etc.

3- areas to prepare cooked meals to get you on your way without having to prepare a meal

The rest - grocery products in boxes and cans - will be prepared automatically in a fully automated warehouse in the distance by robots who know what you've bought in the past and what you are missing in your fridge or need to prepare that recipe you just tasted. Delivered to your car's trunk in the parking lot.

Give it a few years and this should become reality....

I had the intuition this was right as my personal experience with IGA very early showed growth of 25% YoY as the norm. This chart confirms it and may explain why Amazon and others have been trying to enter the market for so many years.

Grocery online is difficult to master: perishable products without barcodes mean picking an order is difficult to automate - not impossible but difficult... and costly! Remember that grocers have historically delegated the order picking to you, the client, pushing a cart across the aisles. eCommerce flips this model over its head and customers want grocers to pick and deliver their orders to their doors for the same price as before!

What happens: people start to think, start to innovate, start to transform the model. FreshDirect in NYC delivers high end high quality products - including perishables - but makes people pay for the service and the convenience. French grocers skip the delivery part and created in-store pickup service. Amazon looks at the whole thing and thinks, hmmm, if I can deliver groceries and break even then it means I have trucks on the road that can deliver all the rest of my orders for a marginal increment - that sounds like a great idea! Uber looks at this and says "hey, we have cars and drivers on the road already, we'll deliver the orders to your door in a few hours". And instacart is taking the uber model to send people to store to pick orders for you...

What does it mean? Growing at 30% a year, means it is on an exponential growth curve: things start slowly but when they become popular they explode. The hockey stick is near (or the singularity is near). Watch for it...

Very interesting chart that shows eCommerce spend growing consistently since 2009, as opposed to in-store spend which remains stable or decreases. 

WHY THIS IS IMPORTANT

If you don't have an eCommerce offer then you are missing sales. Each retail category has a different eCommerce penetration, so your mileage will vary and you should adjust your investments accordingly. (http://sco.lt/6q1Ijx)

For example, if you sell electronics and apparel, then you should be online right now with an aggressive marketing and SEO strategy to stay on top of the market. 

Conversely if you sell perishable food products, you can probably manage to leverage a prepackaged solution such as shopify.com and market your online offering to your existing in-store customers and a good mailing list.

Millenials are shopping differently than older generations. They see the value that comes from eCommerce solutions. Retailers thus should rethink their business models along the lines that innovating companies such as amazon fresh do.

Here are the reasons this millenial calls "perks" for using amazon fresh vs. walmart or other grocers. Take note:

- High quality produce
- Similar, and sometimes better product offering (for me anyway)
- Rotating inventory of local restaurants and vendors
- Custom home delivery time (with $4 suggested driver tip)
- Tracks purchases and gives recommendations
- Amazon Dash uses voice and barcodes to track groceries
- Compatible with the rest of Amazon inventory
- Comes with Prime free two day shipping and Prime Video.
- Dedicated mobile app (no need for grocery lists anymore)

It will be 20 years since I launched the IGA eCommerce solution. I was too early for sure. Now it looks things may be moving in the right direction. Will online grocery be the last frontier for eCommerce? It sure looks like it!

The future of eCommerce where your fridge automatically adds salmon to your weekly grocery basket because it has just gone on special and you are low. Sounds futuristic but really it isn't.  And much better than having to go through a catalog of product.

Retailers should thus emulate Tesco to make their product catalog more open and easier to connect to.

Amazing review of OMS, PIM, inventory management and 20 other applications that are key to transform the digital logistics in any organization.

When you make eCommerce and digital your central focus, as I do, you look for key trends to guide your strategies and roadmaps. This data is one of those key trends. It means that people find Amazon Prime to be convenient and cost effective.

If you are setting up for eCommerce and are struggling with delivery fees you should charge, then this should be your guide: people will pay to get "free shipping", and when they do they will spend more than twice what others will. You, as a retailer, win on both fronts.

Great list of solutions to help your solutions, websites and ecommerce platforms be more customer centric.