Shipping Expectations in the Age of Amazon

Jeff Bezos, with a relentless focus on innovation, efficiency, and quality, drives the e-commerce world, and everyone else who wants to succeed needs to learn how to flourish in the ecosystem he has largely created.

Shipping is one area where Amazon's gravitational pull  defines the landscape. An expectation with consumers has been created of cheap (if not free) shipping and speedy delivery, though surveys show that most customers prefer low cost over speed. 

Most e-commerce companies can't afford to give away the shipping. They need a certain level of purchase before they can offer it, but whatever your free-shipping rules, make sure they are prominently displayed on your website. One of the biggest causes of shopping-cart abandonment is  customers not finding out about  delivery options until the checkout phase. So advertise your options early in the process, and if there is a free-shipping one, make a big deal out of it.

Does everybody  have to match Amazon's free two-day shipping policy (though it's not really free)? The answer is, sometimes, but not always. It depends on the product. Niche products have more shipping leeway because they are perceived to be special, while everyday household products are held to a different standard   because a behemoth like Amazon can easily stock and sell them.

So what is the best strategy for competing with Amazon?

You have a choice -- set up your own operation or find a third-party provider. People who want to spend most of their day managing fulfillment might choose the first option, but keep in mind the expense involved -- a multi-year warehouse lease, equipment purchase, systems development. Figure a million-dollar investment to get up and running, plus ongoing overhead costs (rent, employees, benefits, etc.). And a startup is unlikely to receive favorable shipping discounts from the major carriers until volume is reached.

Third-party providers get you there faster, both because the above-mentioned overhead is already in place and they have existing contracts with the shipping carriers that  provide lower shipping costs.

The key factor with a third-party provider is reliability. Since this provider will house  your inventory,  it must be  rock-solid. Referrals are important here.

To summarize, you can compete with Amazon, especially if you are offering a niche product that can't be reduced to a commodity (like laundry detergent), either by setting up your own fulfillment operation (if you are an operations-oriented person with the the funds to invest) or by leveraging the experience and contracts of a reliable third-party provider who gives you quick turnaround and  less- expensive shipping options.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Retailer of the Year Was Your Smartphone

2017 was the tipping-point year for smartphone shopping.  Almost half of online Black Friday purchases came from smartphones, and increase of more than 15% from last year. Traffic from desktops decreased, making smartphone purchasing the most popular method of ordering online.

The trend continued during Cyber Monday, when 45% of site visits and almost 20% of revenue came from smartphones. This represented a 21% year-over-year increase in site visits and a whopping 41% increase in revenue. And here's another statistic - conversion rates from shoppers buying instead of just browsing increased by 12%, meaning that more people are getting used to converting the purchase on their smartphone.

Why the increase? Because more people own smartphones and have them available at all times. Also, the e-commerce apps have improved. Retailers continue to invest in the mobile shopping experience, streamlining processes, reducing steps, and improving security.

2018 should be an even bigger year for smartphone e-commerce.

 

Improving Inventory Management

 

Inventory management plays an important role — too much inventory creates unsold inventory costs, too little inventory leads to customer dissatisfaction. Here are some important metrics for maintaining manageable inventory levels.  

  1. Inventory Turnover Rate - This measures how many times inventory has been sold and       replaced in a given period of time, either as Cost of Goods Sold divided by Average       Inventory or Sales divided by Inventory
  2. Average Days to Sell Inventory - This measures how long it takes to turn inventory into sales. (Inventory divided by Cost of Sales times 365).

  3. Average On Hand Inventory - To calculate for a given month, add beginning inventory to ending inventory and divide by 2.

  4. Holding Costs - This measures the cost of unsold inventory. To arrive at this number, include damaged inventory along with storage, labor and insurance costs

  5. Out-of-Inventory Costs - This measures the cost of running out of inventory. The calculation is simply one of estimating lost sales due to lack of inventory.

  6.  Overstocking - In order not to run out of inventory, companies need to maintain stock. The question is how much. The metric here is to have the cost of  overstocked goods (including storage charges) be less than the cost of running out of inventory.

  7. Lead Time - Calculate the sum of the time it takes a supplier to deliver product once the order has been placed plus the time that transpires between the need to order again

  8. Returns - This is the percentage of orders that are returned and restocked.

  9. Accurate Order Rate - This metric measures the percentage of orders fulfilled correctly, meaning correct items and quantities with no complaints or follow ups from customers.

     

     

 

Alibaba Sold a Massive $25 Billion Worth of Merchandise in One Day

It's called Singles Day, when single people in China celebrate being single. Created by Chinese university students as sort of an anti-Valentine's day, sales on Singles Day tripled the volume of Black Friday and Cyber Monday combined. 

Alibaba reported that at one point shoppers spent $1 billion  in just 2 minutes.

November 11 is Singles day because the numerical date is represented as 11/11.

Alibaba has used the event to lure international companies onto its platforms. More than 40% of participating brands on Singles Day came from outside China. The massive shopping holiday is also spreading to other Asian countries.

Significantly, Alibaba is using the holiday to help leverage its significant investment in brick-and-mortar stores, promoting Singles Day in the stores as well as online.

The success of this online/offline partnership might presage looming battle between Amazon/Whole Foods and Walmart over grocery delivery.

 

 

 

 

 

 

Amazon Courts Indian Merchants

In the past two years, Amazon has signed  more than 27,000 Indian merchants to sell goods directly on its American site. The program is profitable in both directions. The merchants gain hassle-free access to the American market, avoiding export/import, marketing and distribution costs that go along with international commerce, and Amazon gains a huge influx of third-party sellers who manufacture quality products at a low cost.

Amazon handles everything for the Indian merchants, including  an e-commerce platform, advertising, storage and fulfillment. In return, Amazon takes approximately one-third of every transaction. Since production costs are low in India, this arrangement results in lower prices for U.S. consumers and profits for the merchants. 

Some merchants with contacts in the U.S. work with a hybrid business model, letting Amazon host their products but fulfilling through a U.S. domestic 3PL, resulting in lower costs for the merchant.

 

The 12-Minute Window

 

Marketing agency Tangent Snowball surveyed 1,000 customers and found the average time customers spend browsing a website before placing an order is 12 minutes.  Tangent commissioned the survey  to pinpoint key customer-engagement areas and to develop effective strategies for ushering customers out of the browsing phase and into purchasing.

Here are some of their insights:

Use Personalization to Attract

Data will be the differentiator going forward as marketers learn to decode the massive amount of information available to them. One case study is where Microsoft worked with a bank to determine who was in the market for car loans. Microsoft was able to determine how many searches served as  the tipping point for customers who were  really in the market for a new car rather than just browsing. 

Going after customers with personalized messages who have abandoned their shopping carts is another effective strategy, since more than a quarter of online shoppers prefer to leave a site  before coming back to buy.

There is a split between consumers who like to receive targeted ads based on their previous searches (26%) and those who believe it is an invasion of privacy (22%).  The key to avoiding the invasion-of-privacy trap is to give the customer good information without overdoing it. 

Personalized emails are also effective. Research showed that 42% responded positively when asked if a personalized email affected their decision. That is a  higher number than TV ads (36%) or online advertising (22%), which came in second and third as motivating factors.

Improve the User Experience

Ease of navigation is another important area. One-third of respondents said they bailed out if the  checkout process grew too complicated. Almost a quarter  of customers saw  value in online support.

One-click purchasing and Guest Checkout also improved the shopping experience.

Another sticking point is shipping costs. On many sites  customers only learn about shipping costs at checkout, which creates two problems - 1) customers will advance to the checkout phase just to find out the shipping cost and then leave (increasing the abandonment rate) or they will bail out at checkout because they weren't expecting the extra charge.

Next Steps

The new frontier of e-commerce is changing all the time, and online merchants need to keep abreast of  the latest developments. This requires ongoing education about e-commerce strategies. The industry continues to change at a rapid pace, and those who keep learning stand the best chance of prospering.

 

 

 

We're Using Less Packaging

Never before have so many products been sold (and shipped) to so many people, yet statistics show that  we are using less packaging per person than before.  According to  the EPA and the Census Bureau, from 2000-2014 the amount of discarded packaging in the U.S. increased by only 1.1%  while the  population grew by 13%. 

How has that happened?

Mostly through more efficient (and recyclable) packaging. Gone are items like clam- shell  packages that are both impossible to open and non-recyclable. Most plastic packaging today, in addition to being customer-friendly, is recyclable, even the ubiquitous plastic grocery sacks.

Then there are  outer shipping boxes. On the e-commerce side, dimensional charges by FedEx, UPS and the USPS add cost (the bigger the box, the more expensive the shipment, regardless of weight). Because of this, reducing shipment sizes has become a focus, both with the interior package and the outer  shipping box. Plus, inside protective filler these days tends to be composed of recycled materials. 

There has been a lot of progress in reducing waste, though we still have  a long way to go in achieving the the ultimate objective -- sustainability.

 

 

Free Shipping Strategies

It's not that everybody wants free shipping,it's that they  expect it.

So how do you solve the free-shipping issue when a company like Amazon is willing to lose $12 billion a year on shipping, delivering goods for free through deficit spending.

Here are a few strategies:

 

Minimum Order Amount

Set a purchase threshold before free shipping kicks in, which involves careful analysis of cost-of-goods and profit.  What is your typical per-order amount, and what is the profit on that? Setting a purchase threshold slightly higher than your typical order might cause customers to order more than usual in order to get the  free shipping. 

 

Targeted Free Shipping

Only offer free shipping on certain items (or certain categories), preferably  ones that cost you the least to ship (smaller and lighter).

 

Charge for Expedited Shipping Only

Depending on how you structure your shipping, you can give away the slow option (Ground, SmartPost, USPS, etc.) but charge for expedited (two-day or overnight). This will at least limit the damage.

 

Build  Shipping Costs Into the Product Price

This is the equivalent of charging $0.99 instead of $1.00, but it works. People love free shipping and will sometimes ignore companies that don't offer it. If you check out the prices for items that qualify for Amazon Prime vs. those that don't, you'll find there is often a jump in price for Amazon Prime orders. So Amazon isn't giving anything away, just creating the perception.

 

Offer a Subscription Program

If you have a product that requires regular replenishment, a subscription model can be a very cost-effective offer, allowing you to batch orders and send them all out at once. It is cheaper to assemble 250 orders on one day than 50 per day spread out over the work week. If you have enough volume, you might qualify for a remailer who offers  lower shipping costs, and if not, the resulting labor efficiency will at least cancel out some of your shipping costs.  

 

Perception is an important part of reality, and people always like to believe they are getting something for free, even if they got lured into making a bigger purchase than usual or paid for the shipping through a higher item price.

The E-Commerce Silver Lining

It is fashionable these days to complain about   online retail mowing down beloved brick-and-mortar fixtures,  causing massive layoffs and disrupting the economy.

But here's the silver lining. E-commerce transactions by definition require shipping and warehousing, and those businesses are booming.

And how about job creation? Virtually all e-commerce jobs exist beyond major urban centers (though near major highways) for the simple reason that land is cheaper there. Building an enormous warehouse off of exit 8A of the New Jersey Turnpike makes more sense than plunking one down in the middle of Brooklyn. The places hardest hit by manufacturing's decline are also the ones most attractive to e-commerce distributors.

According to the New York Times, warehouses have produced jobs at four times the rate as the rest of the economy since 2010.

And it's not just Amazon. All of the big players are erecting enormous warehouses in the hinterlands and staffing them with workers. 

And the pay is at least decent, certainly less than the old manufacturing jobs, but roughly equivalent to what can be earned in  brick-and-mortar retail.

It's not a perfect picture (it never is during transition periods), but as one area sinks, another rises up. It is the new industry's job to figure out how to make the whole thing work better for everybody.

 

 

 

The Last Mile Delivery Race Is On

Ten years ago, people thought two-day shipping was unbelievably fast. The new "unbelievably fast" standard is turning into same-day or even one-hour shipping.

There has been a 15% increase in e-commerce sales during the past year, and the delivery infrastructure is having a hard time keeping up.  The so-called Last Mile presents particular difficulties because of delays, repeat delivery attempts and "front porch" theft, which accounts for nearly 1% in lost revenue for retailers.

A titanic battle for dominance is taking place in this market, not only among established players but with numerous startups  attempting to get a foothold in this fertile territory.

Every discussion has to begin with Amazon. E-commerce accounted for 42% of retail growth last year, with Amazon - whose sales grew by over 30% - holding the majority of that increase.  The acquisition of Whole Foods gives Amazon a brick-and-mortar logistics hub that will greatly assist in Last Mile delivery. Combine that with the returns-policy arrangement it recently signed with Kohl's, and Amazon is well on its way to solving the two biggest e-commerce problems  dislike -  delivery time and returns.

Other retailers are responding.

Target's program Restock allows customers to choose from thousands of household items and have them delivered the next day for a $5 delivery charge.

Walmart is experimenting with large kiosks that allow customers to order online and then pick up at the nearest Walmart location, plus it has launched a program where Walmart employees can make deliveries on their way home from work. Walmart is also partnering with Uber for on-demand grocery deliveries.

Both Amazon and Walmart are experimenting with smart-lock programs that allow delivery personnel to  enter customers' houses to deliver packages.

Can startup delivery companies survive against these behemoths? Possibly, but success will probably depend on improved personalization and bundling with other services. 

The large retailers focus on more densely populated areas for obvious reasons, which makes for opportunity in the exurban and rural areas.

Either way, the bottom line will continue to be - whoever is faster and cheaper wins the race.

 

 

 

 

 

Same-Day Delivery Options

Same-day delivery has always been possible through specialized (and expensive) courier service, but now major established delivery as well as several startup companies are getting into the act.

FedEx just announced it has expanded same-day delivery service to 1,800 cities. The deliveries are made by FedEx drivers in FedEx trucks (in other words, they aren't outsourced to other carriers), and the service includes a mobile app for tracking. 

Deliv is an example of a startup company offering same-day e-commerce delivery. Deliv is present in 19 markets, and Walmart's purchase of Parcel gives it the ability to same-day deliver in New York City.

With the emphasis now on speed-of-delivery, expect these companies and more (including, of course, Amazon) to continue to improve their delivery systems, making them as fast and inexpensive as possible.

 

  

 

Three E-Commerce Platforms

Thee-commerce explosion has led to an equal profusion of shopping platforms. Here are three:

1. Shopify

Shopify hosts over 325,000 online stores with a focus on social commerce and mobile shopping.  It provides over 100 store templates and 1,500 plugins/extensions that improve functionality, such as integrating with other systems. 

For sites that want to sell through Facebook, Shopify will also connect your store directly to Facebook.

On the downside, if you don't use Shopify Payment, there is an additional transaction fee on every sale. This, in fact, is how Shopify makes its money, offering a low entry feebut generating revenue with every transaction. 

Bottom line, Shopify is probably the best and most cost-effective solution for startups.

 

 

2. BigCommerce

BigCommerce hosts over 55,000 online stores and caters to companies of all sizes. It is probably the best solution for people with little or no technical knowledge.  It includes many add-ons, such as newsletters, coupons, analytics, etc., but unlike Shopify, does not charge extra transaction fees.

Bottom line, BigCommerce is best for those without technical skill who do not want to deal with issues like integrating plugins, plus it costs less because of the lack of a transaction fee.

 

3. Magento

Because of its scalability, Magento is the market leader for bigger brands. With its open source platform, the site is customization-friendly (unlike Shopify and BigCommerce) and offers over 9,000 plugins/extensions to help scale your business.

Magento includes a free Community version, but the real action is with its Enterprise version, which costs a minimum of $20,000 per year. With Magento, you will need skilled developers because of all the customization features.

Bottom line, Magento is best for companies with large volumes of items. Not for beginners.

 

 

Amazon Testing Its Own Delivery Service

Amazon is experimenting with a new service called Seller Flex that will allow it to control shipments from third-party warehouses to home delivery. Currently, Amazon allows third-party merchants to ship however they choose, primarily through FedEx, UPS, or the USPS. Shipments may still travel via these carriers, but it will be under Amazon's direction and on Amazon's account.

The service began two years ago in India and has operated on a trial basis on the west coast this year. It is expected to be rolled out nationally some time in 2018.

Seller Flex offers several benefits to Amazon - greater flexibility and control, more income through improved volume discounts, and less congestion at its own facilities.

 Last year Amazon introduced Seller Fulfilled Prime, which let merchant fulfill under the Prime label as long as they committed to Prime's two-day delivery pledge. Under Seller Flex, merchants will still fulfill from their own warehouses, but Amazon will control the shipping.

This will reduce logjams at Amazon's own warehouses, where merchant ship goods for fulfillment by Amazon.

The bottom line is that Amazon continues toexpand its logistics operations, gaining control over the entire supply chain.

 

 

 

The History of Sears Is the Future of Amazon

In the last two years, Amazon has opened 11 physical bookstores while purchasing Whole Foods's 400 retail locations, and last week, it announced a partnership that will allow returns to be delivered to selected Kohl's physical locations. 

Why is Amazon doing this? If history rhymes, as one philosopher posited, then maybe the best thing to do isstudy the history of Sears, which startedas a mail-order business and evolved into retail. 

It started with mail. After the Civil War several innovations (such as railroads and parcel delivery) made it possible to deliver items directly to people.  Thus was born the catalog,which consumers could browse at leisure at home and then order what they wanted and have it delivered.

The greatest catalog of them all belonged to Sears. There were other catalogs, but none as big as Sears, which, like Amazon today, marketing itself as the place where you could purchase almost anything and have it delivered.

Between 1895 and 1905 Sears revenue grew from $750,000 to $38 million, a factor of 50. By comparison, Amazon has only grown tenfold in the last ten years.

Then Sears moved into brick-and-mortar retail, opening its first stores in existing mail-order warehouses, and then expanding from there, mostly to the suburbs where land was cheap. 

At the start of 1925, there were no Sears stores in the United States. By 1929, there were 300. Like Amazon, then Sears began expanding into adjacent businesses, such as car insurance under the Allstate brand.  The shift from selling products to selling services is analogous to the creation of Amazon Web Services.

Sears, like Amazon, fueled its growth through efficiency and low prices. 

So how does Sears's past predict Amazon's future?

First, the Sears brick-and-mortar business did not diminish its mail-order sales. Just the opposite. Both expanded, and it is probably a safe bet to expect Amazon's e-commerce business will only be helped by a brick-and-mortar presence.

Second, its gargantuan size will make it a target. 

Third, will it be able to evolve when technology and the economy change? Sears could not make the transition to the digital age? Will Amazon be able to adapt to whatever comes next?

 

Amazon's 1-Click Patent Is Expiring, Good News for Mobile E-Commerce

Amazon’s patent on 1-click ordering has expired, creating opportunity for mobile ordering on apps and websites - specifically in the area of consistency.  The patent forced other e-commerce sites to pay Amazon a licensing fee. 

It will now be easier for retailers to implement their own 1-click ordering systems and streamline the purchase process and potentially reducing cart abandonment. 

Mobile commerce continues to grow at a rapid pace, with U.S. sales forecast toincrease more than 50% this year. Shopper conversion rates, however, are not keeping pace and many think the culprit is a difficult checkout process. Mobile shopping cart abandonment hovers around the 78% mark, while desktop abandonment is 70%. 

Mobile payment technology has continued toimprove. There are now many competing systems, such asWalmart Pay, Apple Pay, Android Pay and Samsung Pay. 

High Delivery Expectations for the Holidays

(This article was written by Daphne Howland for RetailDive).

Dive Brief:

  • Two-thirds of frequent online shoppers have used Amazon Prime in the past year, and that has fueled expectations that shipping should be fast, free and trackable, according according to new research from public relations firm Walker Sands. A massive 81% say that free shipping is a primary motivator for shopping online more frequently, according to the report, which was emailed to Retail Dive.

  • For retailers that, unlike Amazon or Walmart, don't have a vast fulfillment network of their own, shoppers are open to getting their packages from third parties. A majority (57%) are willing to pay at least $5 for next-day shipping while another quarter (24%) would pay between $6 and $20, according to the report.

  • Frequent online holiday shoppers are demonstrating other intriguing behaviors, like a willingness to buy bigger ticket items without seeing them first. Nearly a third (30%) reported having spent more than $500 online without seeing an item first, and 13% have spent more than $1,000 without seeing an item first.

 

Dive Insight:

Shoppers are using their phones, voice assistants and other online searches to find items at the same price anywhere, and they want to ensure timely delivery of their gifts, according to Walker Sands. That makes high-quality images, up-to-date inventory and transparent delivery tracking critical.

Last-mile delivery — that great separation of online and in-store shopping that is eating into many retailers' margins — can be rationalized somewhat if retailers take into account consumers' willingness to pay for super-fast delivery and leverage their stores for pickup services for online orders, Walker Sands' research suggests. 

"Shoppers are more concerned with timely delivery than a reasonable delivery charge," according to the Walker Sands report. "Other options to consider include in-store pickup and third-party delivery services such as Uber or Deliv."

Some 41% of shoppers say they want hyperlocal delivery and 38% would pay for it, according to the "State of Shipping in Commerce" survey released earlier this year from fulfillment software company Temando. Just 24% of retailers offer it now, though 18% of retailers would like to offer it in the next 12 months. Almost 100% of shoppers also say they would like delivery date estimates, yet more than half of retailers currently don't offer this feature.

Voice has also emerged as a powerful ordering tool among frequent online shoppers. Nearly a quarter (24%) of self-identified frequent online shoppers 'often' or 'always' purchase through voice-controlled devices, and that could rise further this year, Walker Sands said. Some 44% of total survey respondents said they are 'somewhat' or 'very likely' to make a purchase through a voice-controlled device in the next year.

Amazon's Echo is dominating in that space, but Google Home is fighting hard with new retail partnerships. Amazon devices like the Echo and Dot speakers, along with apps in mobile devices, could provide some $10 billion in revenue by 2020 and be a "mega-hit," according to a note published this spring by investment bank RBC Capital Markets. That said, Google has been working hard to add features that Alexa doesn't have and enjoys a wide-open ecosystem.

The Home Depot said last week that it's joining Google Express this fall, adding Google Assistant's voice shopping ability for customers via the the Google Express website and app. Last month Walmart similarly announced its partnership with Google to bring voice shopping to Walmart customers. Some 35.6 million Americans will use a voice-activated assistant device at least once a month this year, according to research released in May from eMarketer. If that forecast proves correct, it would be a 129% jump in voice engagement with virtual assistants over last year. 

The battle is just getting started and will be fueled by the upcoming holiday season, according to Luke Starbuck, vice president of marketing at customer care automation platform Linc, who notes that the perception of voice assistance as futuristic has become a reality. A huge majority (87%) of retailers expect to be using AI for customer service and engagement within the next 24 months, while 41% are using it or experimenting with it already, according to Linc's research.

"This increasing popularity, coupled with retailers' desire to partner with voice platforms, will continue to snowball until voice platforms are the norm and an essential asset for any brand," Starbuck told Retail Dive in an email. "Especially following the announcement of the Walmart's partnership with Google Home just a few weeks ago, [Home Depot's] latest move indicates that there will be an ongoing battle for market control between Amazon Alexa and Google Home, especially as we head into the 2017 holiday sales season."

Amazon Predicted to Triple in Value Within 8 Years

This article was written by Tae Kim for CNBC).

One Wall Street firm predicts Amazon will be worth significantly more than $1 trillion in the coming decade.

MKM Partners reiterated its buy rating for the internet giant, saying Amazon will continue to dominate the e-commerce and cloud computing markets.

We think Amazon "should continue deploying all available capital until reinvestment opportunities become more limited or more risky," analyst Rob Sanderson wrote in a note to clients Thursday. "Our detailed scenario analysis implies that AMZN could exceed a $1.6 trillion valuation over the next 7-8 years."

Amazon has a market value of $465 billion through Wednesday, according to FactSet. Its shares have rallied 29 percent this year, compared with the S&P 500's 10 percent return.

Sanderson reiterated his $1,275 price target for Amazon, representing 32 percent upside from Wednesday's close.

He said Amazon's market share of U.S. retail spending rose nine times from 2008 to 2016, to 5.1 percent. He predicts the e-commerce company will reach 15.5 percent retail spending share by 2025 and "surpass Wal-Mart over time."

Sanderson is also bullish on the growth prospects for Amazon Web Services. He forecasts the company's cloud computing business can grow its sales 20 percent annually for the next eight years.

"We agree that cloud is the largest redefinition of computing since the PC-era and will significantly redistribute value across the tech food chain," he wrote. "AWS is growing much faster than Microsoft did on its path to PC-era dominance."

The analyst noted that Microsoft was able to grow its sales by more than 20 percent annually for 23 years after first reaching its leading technology position.

Post-Modern Nordstrom

(This article was written by Phil Wahba for Fortune).

Nordstrom is trying a smaller store on for size.

The upscale department store on Monday announced that it was opening a tiny 3,000 square foot store—a small fraction of its typical 140,000 square-foot emporia—in Los Angeles that will not carry any clothing merchandise but instead offer services like personal stylists as well as refreshments like beer and wine. Nordstrom, which operates 121 full service department stores along with a chain of Rack discount stores, said the move was a reflection of changing customer tastes and behavior. The Nordstrom Local store, as will be called, is set to open Oct. 3.

"As the retail landscape continues to transform at an unprecedented pace, the one thing we know that remains constant is that customers continue to value great service, speed and convenience," said Shea Jensen, Nordstrom senior vice president of customer experience, in a statement.

Nordstrom is just the latest major retailer struggling with declining sales at its physical stores, a particularly acute problem at department stores, and looking to smaller format stores as way to reach more customers - comparable sales at Nordstrom's full-service department stores fell 7% in the first half of the current fiscal year.

Such retailers include the likes of Target, which is focusing those efforts on city centers, and Kohl's  and Sears  which are shrinking many existing stores. Amazon.com has opened a number of bookstores with a far more limited selection than a Barnes & Noble  store on the bet that shoppers don't want to be overwhelmed by a physical store and that an e-commerce site can fill any gap.

This isn't to say Nordstrom will not continue to focus on its department stores- it is opening a new location in Toronto this week. Nor will one store, a small one at that, move the needle. But what it does show is Nordstrom's efforts to test out formats and services to anticipate where shoppers are going in terms of habits.

The Nordstrom Local will have eight dressing rooms to allow shoppers to on clothes and accessories like shoes, even though that merchandise will not be stocked at the store. Personal stylists will instead collect goods from nine area Nordstrom stores or via nordstrom.com. That harkens back to the more traditional approach of selling luxury goods, where a shopper trusts an expert to help select items. Still, that is not without risk at a time shoppers have ample tools at their disposal to figure out what trends are hot and appealing and are more likely to trust Instragram influencers that a store employee.

The store will offer services like manicures, as well as wine, beer, coffee or juice from an in-store bar in the hopes of turning a trip to Nordstrom into an outing. The notoriously tight-lipped company didn't say whether it had plans to expand the concept to more location. But Nordstrom Local would certainly provide a boon in terms of getting into new submarkets and providing new points of pick up for customers, crucial as the e-commerce wars heatup. Any orders placed on Nordstrom.com by 2 p.m. can be pick at the Nordstrom Local, and the store will also accept returns of items bought online or from other Nordstrom stores. What's more, Nordstrom Local will staff tailors to provide alterations.

Should You Fear the Robot Apocalypse?

(This article was written by Kevin Drum for Mother Jones).

People  need to be very clear on the difference between automation and artificial intelligence. You can’t just casually refer to “the job-destroying potential of robots, artificial intelligence and other forms of automation.” These are totally different things.

Plain old automation does indeed usually produce more jobs than it destroys. This applies to more than just steam engines and electricity, and an ATM is nothing special in this regard. It’s ordinary, old-school automation even though it relies on microchips and communications networks. Of course ATMs can’t do relationship banking. How could they?

Artificial intelligence is entirely different. If you don’t believe we’ll ever get it, that’s fine. Make your case. But if you do believe it’s coming in the near future, then you need to treat it as a completely different thing. Pretty much by definition, true AI will be able to do anything a human can do. So no matter what new jobs you think AI will create, then by definition AI will be able to do those jobs too. If true AI is in our future, the robot apocalypse is very much something we should worry about.¹

 

 

Google and Walmart Partner Against Amazon

(This article was written by Daisuke Wakabayashi and Michael Corkery for The New York Times).

SAN FRANCISCO — Google and Walmart are testing the notion that an enemy’s enemy is a friend.

The two companies said Google would start offering Walmart products to people who shop on Google Express, the company’s online shopping mall. It’s the first time the world’s biggest retailer has made its products available online in the United States outside of its own website.

The partnership, announced on Wednesday, is a testament to the mutual threat facing both companies from Amazon.comAmazon’s dominance in online shopping is challenging brick-and-mortar retailers like Walmart, while more people are starting web searches for products they might buy on Amazon instead of Google.

But working together does not ensure that they will be any more successful. For most consumers, Amazon remains the primary option for online shopping. No other retailer can match the size of Amazon’s inventory, the efficiency with which it moves shoppers from browsing to buying, or its many home delivery options.

The two companies said the partnership was less about how online shopping is done today, but where it is going in the future. They said that they foresaw Walmart customers reordering items they purchased in the past by speaking to Google Home, the company’s voice-controlled speakerand an answer to Amazon’s Echo. The eventual plan is for Walmart customers to also shop using the Google Assistant, the artificially intelligent software assistant found in smartphones running Google’s Android software.

Walmart customers can link their accounts to Google, allowing the technology giant to learn their past shopping behavior to better predict what they want in the future. Google said that because more than 20 percent of searches conducted on smartphones these days are done by voice, it expects voice-based shopping to be not far behind.

“We are trying to help customers shop in ways that they may have never imagined,” said Marc Lore, who is leading Walmart’s efforts to bolster its e-commerce business. He came to Walmart last year after the retailer bought the company he foundedJet.com.

Google is a laggard in e-commerce. Since starting a shopping service in 2013, it has struggled to gather significant momentum. Initially, it offered free same-day delivery before scrapping it. It also tried delivery of groceries before abandoning that, too.

If Amazon is a department store with just about everything inside, then Google Express is a shopping mall populated by different retailers. There are more than 50 retailers on Google Express, including Target and Costco. Inside Google Express, a search for “toothpaste” will bring back options from about a dozen different retailers.

Google said it planned to offer free delivery — as long as shoppers met store purchase minimums — on products purchased on Google Express. Google had charged customers a $95 a year membership for free delivery. Amazon runs a similar program called Amazon Prime, offering free delivery for members who pay $99 a year.

The partnership with Google represents one of several steps that Walmart has taken over the past year to strengthen its online business.

Walmart’s app. Walmart said last week that its online sales increased 60 percent in the second quarter from a year earlier. CreditGoogle Express

In January, Walmart began offering free, two-day shipping on more than two million items — a move that takes direct aim at Amazon Prime, whose members who pay an annual fee for fast shipping and other services like movie streaming.

Walmart has also been trying to integrate its digital business with its vast network of more than 4,690 stores.

Many brick-and-mortar retailers are struggling with what to do with their increasingly empty stores, but Walmart is partially repurposing its stores into e-commerce fulfillment centers.

Customers can now order their groceries online and then pick them up at hundreds of stores. For some items that they purchase online and pick up in a store, customers receive a discount. In-store pickup reduces shipping costs for Walmart, but offers a similar level of convenience to the shopper as home delivery.

The efforts seem to be paying off. Walmart said last week that its online sales — including online grocery — increased 60 percent in the second quarter from a year earlier. It was a big driver in the company’s overall increase in quarterly sales.

Efforts like online grocery seem to be gaining traction, but Walmart hopes the benefits of other moves — like its $3.3 billion acquisition of Jet.com, an online retailer focused on urban millennials, and its purchase of the boutique clothing businesses Modcloth and Bonobos — will come down the road.

Some analysts question how Walmart will add to its core low-price retail business at the same time it is trying to manage bolt-on acquisitions. While the company’s sales were up, its profit margins in the second quarter slipped, in part because of its spending on e-commerce initiatives. With this new partnership, Google Express will offer items only from Walmart.com, and not from Jet.com or Walmart’s online clothing sites.

“Walmart can’t lose on the low-cost proposition,” said Erich Joachimsthaler, chief executive of Vivaldi, a brand consulting firm. “But convenience, convenience that is where the game lies.”

Walmart has a long way to go to catch Amazon. Walmart’s website sells 67 million items, up from 10 million early last year. Amazon sells hundreds of millions of items.

In July, about 83.6 million people visited Walmart’s website, nearly half as many visitors as Amazon had, according to comScore, a media measurement company. Jet drew an additional 10.9 million visitors.

“I am not saying Walmart is ever going to catch Amazon online,” said Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm. “But instead of being embarrassed by Amazon, it can be a strong No. 2.”