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Behind the uptick in e-commerce is a little known secret: As much as a third of all Internet sales gets returned, in part because of easy policies on free shipping. Retailers are trying some new tactics to address the problem. 
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Experts think it’s inevitable that sales of many non-perishable grocery categories will eventually take place online. Retailers need to meet that demand, but also the creative challenge of what to do with the space that it will open up in stores. Thom Blischok of Booz & Co. shared his ideas about “Tomorrow’s Trends Delivered Today: Store Design Trends — The Path to 2025” at a recent Food Marketing Institute conference, and then in an interview for this section. Today, 80% of the store is in merchandise, while 20% is accounted for by services, he said. Meanwhile 75% of capital investment dollars go to the store perimeter, while 15% is spent on center store, and 10% goes to the front of the store. “Recognizing that there is a movement to the Internet, becoming world-class at what you do on the perimeter and with services is critical,” Blischok said in an interview after he presented his concepts at the recent Food Marketing Institute Energy & Store Development Conference in Baltimore. Future store designs will have to account for certain center store categories moving online, which will result in much more available space in the store; decisions will have to be made about what to do with that space.
Farid Mheir's insight:
I am a technology expert, not a retailer or a store designer. I've posted blog posts regarding this trend for a while now and find this article to provide some of the background information to indicate that store designs are changing as some of the purchase for commodity items move to online. Retailers must thus act to prepare for this.
See also
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Amazon was granted a patent for what it calls “anticipatory shipping,” a method to start delivering packages even before customers have clicked “buy.”
Farid Mheir's insight:
Retailers have been doing forecasting for a long time, predicting from previous sales and market conditions (and their best judgement), what to order for each one of their stores. When you have hundreds of stores, this is not a simple tasks, and it often requires years of experience - if you want to do it well. Because forecasting errors are very costly, resulting in lost sales or products that stay on shelves or racks and must be transferred to others stores, or worse, discounted at the end of the season. I've worked on systems - from simple excel spreadsheets to more complex applications - that automate the predictive aspect and provide tools to facilitate the forecasting process. But never were the tools using invidual client profiles to make the prediction. They always used global store-level or regional sales numbers. So, at least in theory, established retailers can have a leg up. But Amazon may (again) shock retailers into a digital transformation, bringing their individual client sales data into account when doing the forecast. This will require retailers to include individual customer transactions and possibly their "wish lists" and online search information, to include in your forecasts. Data is there but few reatilers have the systems or the integration to bring this data in a timely manner to the "forecasting team" desk. Amazon has been doing this with "replesnishment" options where they send you products on a regular schedule, so you don't have to "shop" for them: they come at your door at a predefined interval you control. And they give you rebates for sticking to your schedude (predictability is invaluable in a supply chain!). If you do, then your forecast will undeniably be better. If you don't companies like amazon, with lower overhead, will send your clients products before they even consider going to store to see what's on the shelves!
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Venture capitalists are willing to fund a new generation of online grocery shopping startups
Farid Mheir's insight:
1998 all over again?
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KPMG's Global Head of Retail Mark Larson shares 5 areas retailers should focus on to build a more customer-focused, omnichannel organization.
Farid Mheir's insight:
Useful insights especially #4 : enhance both online and in-store.
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Canadians may be the heaviest Internet users in the world but our homegrown online retailers have yet to catch up to the performance of U.S.
Farid Mheir's insight:
No surprise here. Our own Quebec CEFRIO stated the same back in november. But this report is very detailed and provides some interesting insights. Also see New CEFRIO survey results- Quebec retailers continue to leave 75% of eCommerce retail $ to others #iceq http://sco.lt/58m2wD
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Nos cartes drive sont mises à jour tous les trimestres. Découvrez sans plus attendre les nouveaux chiffres clés du parc de drive et services drive en France
Farid Mheir's insight:
(in french) mapping of grocery store pickup service (called "drive") in France for 2013. Amazing deployment considering that this trend started only in 2010 and now reaches 2655 and keeps growing. The service may be a sign of the future, offering bulky heavy items for pickup, keeping the cost of eCommerce delivery down. Also allows customers to "top off" their order themselves, selecting their tomatoes and meat themselves. The service is a sign of the times, with consumers finding eCommerce a solution for staple low cost items as well as high priced ticket items such as electronics. It marks a turning point for retailers, recently faced with showrooming and omni-channel, as they transform their stores to become more than glorified warehouses. Stores now are service delivery locations that must deliver a personalized experience. Technology becomes essential, although it may be hidden from sight. Distribution logistics must also evolve from bulk cases distribution to individual, order fulfillment. Who leads the way in this? Amazon, with its leadership in eCommerce technology, fulfillment automation, and personalization.
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Startups are loving the exposure that comes with joining the e-commerce giant's grocery-delivery business. But is dealing with technical hassles and giving up a large cut of revenue really worthwhile?
Farid Mheir's insight:
What is most useful here is the opportunity for small and local businesses to leverage a large, well known brand like amazon (or Walmart, or another). This has been happening for years in other industries (electronics, books, etc.) and now food and CPG are finding their way into Amazon's amazing marketplace where shelf space is infinite and listing fees are small.
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Cyber Monday exceeded all expectation with a record setting day, according to IBM's digital analytics. Over the full day of online shopping, retailers raked in 20.6% sales growth over last year.
Farid Mheir's insight:
Very good insights on the latest eCommerce xmas craze.
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Pantry will help Amazon expand more in the huge consumer package goods market and take on warehouse club stores Costco and Wal-Mart's Sam's Club, sources say
Farid Mheir's insight:
Alone this sounds like the dummest idea on the planet: go compete on low cost, low margin, high volume, bulky and heavy products (read difficult to ship) against the lowest price market leaders (Costco, Sam's). True in isolation. Step back and consider those facts: 1- Amazon does not have retail stores, but is building warehouses close to its customers to reduce delivery costs 2- You can only do #1 when you have volume 3- How do you build volume? staples, stuff that people order on a regular basis 4- Amazon has a Prime programme where delivery is free for a yearly membership 5- Amazon is build Fresh to deliver groceries to home - easy to tag Pantry products in the same vans - additional cost in marginal 6- Amazon has a very successful replenishment programme - and what do you replenish most? pantry items! After careful consideration, Amazon Pantry makes perfect sense, doesn't it?!
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Amazon got a lot of ink for its sci-fi drone delivery idea this week, but a more real and immediate robot effort underway in the Seattle retailer’s warehouses could save it as much as $916 million a year, according to one analyst.
Farid Mheir's insight:
How can brick and mortar retailers compete with this level of automation when they must support real estate and HR costs? They can 1- invest in similar automation (but onlny if they have volume to scale) for comparable products in their online operations 2- provide an in-store experience that is fully linked with the online information: order picked and return in store, value added services in stores (training, support, etc.) 3- embrace local and niche products from small businesses to bring unique personalized products and solutions to shoppers Anything else?
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Needle leverages your best advocates, certifies them to sell your products, and enables them to do it from anywhere.
Farid Mheir's insight:
Needle is part of a new set of solutions and companies that provide tools, technologies and services to help retailers enter the world of "fan sourcing" or "curated commerce". The concept is simple: there is too much offering on the web and it is difficult to decide what to buy online, even with enhanced descriptions, high definition pictures, reviews and ratings. This due in part because we have come to not trust them, and in part because we rely on recommendations from people we know or from experts, rather than the promotion marketing material that brands and retailers prepare. This is what needle appears to provide. It facilitates the creation of a network of "advocates" that can speak to your potential customers and inform them on the products you have to sell and determine which is best for your customer. One on one, personalized shopping. OK in reality they are pimped-up sales reps, paid when they sell you a product. Nothing new here. But the way in which they sell, online rather than in store, may mean that shopping for a TV on amazon wesbite tomorrow will feel a lot more like going to a Best Buy store today.
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Nespresso is a machine-and-pod coffee concept for making espresso, developed by the food multinational Nestlé. By fitting an aluminium coffee pod into the machine, perfect espresso can be made at t...
Farid Mheir's insight:
Nespresso has grown into a powerhouse by leveraging the digital tools: eCommerce website, community, third party logistics, etc. Yes it oepns stores for the experience and the product feel. But it also leverages the digital tools to grow into a huge business with little overhead. Wondering how the business model canvas can be leveraged? Here is a great example.
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This section will give you a quick background how Distributors, Retailers, and Brand Direct E-Commerce work as businesses and their corresponding relationship to the brand who makes the products available for retail.
Farid Mheir's insight:
Simply amazing paper that describes so well the different fulfillment models. Essential read for any eCommerce professional... and who isn't in this day and age? ;-)
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The retail industry is more dynamic than ever. US retailers must evolve to succeed in the next decade. A McKinsey & Company article.
Farid Mheir's insight:
McKinsey lays down actions that forward thinking retailer should apply to survive the digital transformation. They include:
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In an effort to catch up, Target this year is spending about as much of its $2.3 billion U.S. capital budget on improving its technology, developing mobile apps and modernizing its supply chain as it is on opening and remodeling stores. Next year, the company will spend more on those investments than on stores, an acknowledgment that future growth will increasingly depend on digital sales.
Farid Mheir's insight:
2.3B$ in technology to try and increase its online sales (now at 2% of 73B) is proof of the need by retailers to transform their ways or disappear. Then again Target used to let Amazon run its website.
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In a recent article for MIT’s Technology Review, I argue that Amazon is approaching retailing as an engineering problem — not as the old-fashioned domain of inspired hunches and showmanship. After all, Amazon doesn’t have three crucial ingredients of a traditional store: showrooms where customers can touch the goods; onsite salespeople to talk up the wares, or an ability for customers to take purchases home with them instantly. As a result, I wrote, “everything that Amazon’s engineers create is meant to make these fundamental deficits vanish from sight.”
Farid Mheir's insight:
A glimpse into some of the reasons why amazon may in the future be known more for disrupting physical stores than for leading the eCommerce revolution. In a nutshell, Amazon works hard to make the traditional brick and mortar store irrelevant, which in turn will force traditional retailers into doing two things: 1- embrace eCommerce, and remove all the non value adding aspects from the physical stores (replenishment, staple items, etc.) 2- transform the physical stores to make them useful again, probably with a focus on some of the aspects where Internet has limitations: showrooming electronics, cars, etc., or educating customers on ways to use their products, making recipes in grocery stores or training newbies on new iPads. By the way, this is exactly what is now happening at Walmart and other retailers. Also see this Amazon warehouse & operations and Apple stores trace the future of brick-n-mortar stores via @bi http://sco.lt/5pCgBl
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For most people, waiting at home for a package to be delivered is largely infeasible during the workweek, leaving Saturday as their best hope for catching the parcel truck. But thanks to Amazon, consumers can now get their e-commerce shipments on Sundays, too.
Farid Mheir's insight:
I've been writing about this trend of same-day or next-day delivery, making the point that most customers are not willing to pay for same-day delivery but that affordable or free next-day delivery could make inroads into brick-and-mortar business, forcing them to transform the way they sell and what they sell. 7-day a week delivery is part of this essential service that a store-less, online pure play must make if it wants to fight without opening physical stores.
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Farid Mheir's insight:
This informative but shallow post (as is often the case with BI.com) nevertheless made me realize how much amazon warehouse and fulfillment process will transform physical stores in the future. No more will we go to stores for the mundaine and the repetitive shopping (replenish peanut butter or buy a computer cable). We will go to stores for the "experience": we will be entertained, trained, or pampered. Visit an Apple store today and you'll get my point. You do not go there to buy a cable (this can be done online) but you go to see a new product, try it, get help and explanation from the genius bar or get insight from sales persons. The store is small and already has the highest sales per square feet of any store in the US. What does this mean for brick-n-mortar retailers? Move all the non-value-adding sales real estate (all those middle aisle with shelves full of non-descript low margin products) to online eCommerce store (with low cost fulfillment and delivery/pickup), then transform the freed-up store aisles into customers-focussed training, entertaining, pampering, etc. areas. This represents a huge challenge for organizations as they will need to transform their merchandising, store operations, marketing, HR, etc. into a digital world (customers will expect online and in-store experience to be seamless) where customer service will become more important (sales clerks will need to know more about their products and not only be shelf stocking low paid employees). Fun times ahead!
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Edmonton-based startup Granify, a software as a service (SaaS) company that improves ecommerce conversion rates, has raised $1.5 million in seed funding from several investors, including Peter Thiel's Valar Ventures, iNovia Capital, Klass Capital,...
Farid Mheir's insight:
Not sure if this technology works but it sure sounds interesting. Not having to rely on coupons or price breaks to improve conversion sure sounds nice. The idea of digging through data to identify reasons why shoppers leave (such as return issues) and presenting them with messages that help sounds a lot like what a sales person will do in a physical store. Hmmm...
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Sending packages to loved ones doing time can be, as thousands of local families know, a Kafkaesque process. Sendapackage.com helps get the goods behind bars.
Farid Mheir's insight:
Sounds like a great niche. And everything an online commerce should be: well defined audience, real need, (rules, regulations, families not being inside, inmates not being outside, etc.), and long-term customers (in certain cases). Makes me think of those special orders flown into northern territories from stores in the "South" where products are cheaper and airfare, in bulk, less expensive than the many intermediaries in typical retail.
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While WalMart and Amazon are just starting to see how tricky the online grocery business can be, 20-year-old Peapod has already figured it out. Read this article by Donna Tam on CNET News.
Farid Mheir's insight:
I have not seen so many papers and articles regarding online grocery shopping since the late 1990s when webvan was a big thing. And the angle remains the same (everyone needs to eat, the market is huge, just 1% is enormous, etc. etc.). There is a huge difference however: now the Internet is real. With Peapod getting 30% of its orders from mobile, Ocado fulfilling 180K orders per week (yes per week), there may be now the right conditions to make online grocery a reality. We should know soon enough. The real question is raised here as well: what will be the role of brick and mortar grocery stores? Certainly they will remain but for what? High end and niche products, where low-cost staples get delivered from a warehouse (who needs to see the peanut butter before you buy)? Recipe demonstrations and culinary tips, with a focus on hands-on experience and expert recommendations? Where will technology fit in all this?
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Internet Retailer - E-Retailers/Retail Chains - Staples expands e-commerce via marketplace sales
Farid Mheir's insight:
Great way for brick and mortar retailers with a known brand to leverage the Internet by creating marketplaces and act as an online "magnet" for consumers that go to their site to find everything they're looking for, often bypassing Google. This is what has been happening at Amazon for past few years, Amazon being top destination for searches related to books, videos, and other related items. Easy to understand when you consider Amazon has 600K SKUs in its warehouses but over 8M in its online catalog!
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Last year, Walmart Labs jumped on the subscription commerce bandwagon in an effort to compete with a range of startups offering monthly boxes of goodies to..
Farid Mheir's insight:
Looks like subscription models from online retailers have limitations. Or is it because walmart has failed to deliver the products people really are looking for?
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L’Indice du commerce électronique au Québec (ICEQ) a interrogé chaque mois, d’août 2012 à juillet 2013, 500 adultes de 18 ans et plus ayant réalisé au moins un achat sur Internet au cours du mois précédant chaque collecte.
Farid Mheir's insight:
An essential snapshot of Quebec's eCommerce market and maturity was presented this morning. Results are clear: retailers in Quebec are leaving 75% of the retail spend $ go to other Canadian and US retailers. Apaling!
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Curated by Farid Mheir
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Very interesting insight from WSJ, the 33% figure appears to be very high and probably only applies to certain retailers or industries - apparel is the one feature in the article. One interesting figure from the article says "Rue La La said dealing with returns cost the company $5 million last year", which stresses the importance of the "transformation" component in your digital transformation plan.
In fact, things like returns may come and bite you in the rear if they are not planned for and addressed properly early on. Poster child for this was Zappos (now Amazon) that built returns as part of the normal ordering process, making certain that returns were fast, easy and profitable. This was an essential component of the digital transformation because buying shoes online has a very negative aspect for the customer compared to in-store: they can't try the shoes before they buy. So Zappos *had* to make return a part of its process.
Any digital transformation carries similar issues that must be accounted for early in the plan to make sure they do not kill your digital business model.