Who needs brick and mortar sites? E-retailers do

Amazon.com may have had the head start in e-retailing but traditional brick and mortar retailers have caught on and have invested heavily by expanding services online and creating an “omni-channel” experience for customers.

Now pure-play e-commerce players seem to be taking a page out of traditional retailers’ book and are introducing their own “omni-channel” strategy by opening brick and mortar locations. However, these locations are not your typical retail stores.

For example, Zappos tested the waters in time for the 2014 holiday season. Along with its partner, retail logistics startup, OrderWithMe, a 20,000 sq. ft. popup store was erected for the season at Las Vegas’ Western Hotel. Open 24/7 and consisting 16 rooms, the store offers a showroom of shoes and apparel. A kiosk is available with OrderWithMe’s ShopwithMe technology for customers to simply scan items to order.

Amazon is also dabbling with store-fronts. It’s partnership with Purdue University has resulted in two physical locations on the campus for pick-ups, returns, customer service and a handful of Amazon devices available for students to demo.

In addition to its partnership with Purdue, it’s rumored that Amazon is in talks with bankrupt Radio Shack to purchase some of its stores (Ok, forgive me… I’m going to take just a minute to pat myself on the back because this is something I suggested earlier in 2014). Anyway, a potentially good move for Amazon to not only to allow customers to test, feel and experience goods in-person but also a good move logistically.

For e-retailers such as Zappos and Amazon, these physical locations can serve as shipping and return hubs – they are closer to customer and thus can also allow for same day or perhaps even less than same day delivery. Not to mention, this reverse “omni-channel” approach may serve as a different type of “click and collect” location perhaps, but one that will also benefit delivery companies such as FedEx, UPS, USPS and regional carriers. In any case, these locations are altering the supply chains for e-retailers much like the omnichannel strategy that many brick and mortar retailers have adopted.

Expect more e-retailers to follow or to even partner up to open physical locations. However, caution is needed as many of these e-retailers have yet to turn a profit so this maybe the point in which we see a consolidation within the industry.

Interested in finding out more on e-commerce logistics? Be sure to check out Ti’s latest report, Global e-Commerce Logistics.

UPS Looks to Cut Costs and Implement Peak Residential Surcharges

UPS’ recent earnings release was hardly inspiring. While revenue and volumes were up, the costs associated with these increases were a set-back for the company. For additional details on the financial aspects, my colleague, Thomas Cullen, will provide his thoughts in Ti’s newsletter while I enjoy a few days of vacation.

But of course, I’d like to put down a few thoughts of my own. It’s been well documented the investments UPS has made throughout 2014 to avoid a repeat of the 2013 holiday season. However, this time around, instead of leaving customers empty-handed, UPS left its investors empty-handed. I applaud UPS for going all out to make sure packages were delivered on a timely basis during the 2014 holiday season. But, a concern I have is the fact that this is a company that has been built on the talents of industrial engineering. Its pride and joy has been the efficiency of its hubs and networks all the way down to the likes of measuring and timing of how long it takes to get from the package car to the front door of a delivery spot – and in the most cost effective manner. How could they have gotten it so wrong?

An interesting comment from the earnings call caught my ear – it’s difficult to forecast e-commerce – and I think for right now that’s correct. But a word of advice to UPS and other traditional delivery providers (i.e. FedEx), figure it out and fast. Regional carriers, start-up companies and Amazon are all growing and expanding delivery networks. Technology is playing a fantastic role and all are taking advantage of it. The key is being agile.

So, to get to that agility, UPS announced how it would proceed in 2015. Cutting costs where it can is priority while expanding hub capacity in key areas, continuing its implementation of ORION and the use of SurePost Redirect and Access Points in taking costs of its system. In fact, it was noted in one publication that it cost three times as much to deliver packages to a home than to a business which receives more packages in a single stop.

UPS also announced it would implement peak residential surcharges on a customer segmented basis. These surcharges will focus on SurePost and residential packages. According to the CEO, “pricing strategies will be designed to ensure we’re properly compensated for the value we provide.”

There’s no denying the value UPS provides in delivering packages but these residential surcharges along with the recent annual rate hike as well as the change in price calculation to dimensional weight pricing may lead one to ponder alternatives. For retailers, the existence of “free shipping” may be in jeopardy and with no “free shipping” the risk of losing customers may rise.

In addition, UPS’ international business, particularly Europe, also noted increased in-country expenses because of demand during peak season exceeded network capacity.

2015 will be another year in which UPS has its work cut out for them. Cost cutting, enhancing its network and changes in product demand are among the issues facing the company. During the earnings call, UPS noted that products distributed closer to consumers resulted in some trade down from premium products. This will be a trend that the company will have to pay close attention to as this where a lot of start-up companies, in particular, are focusing on and could be competitive threat to UPS.

For more thoughts, be sure to sign up for Ti’s newsletters. Just visit the website at http://www.transportintelligence.com for more details.

Report back from Cargo Logistics Canada

This year has started off on a great note. Ti published its first report of the year a couple of weeks ago – Global E-Commerce Logistics – which has proven quite popular. And, for me an opportunity to speak at the Cargo Logistic Canada Conference which was held January 28 – 29 in Vancouver. Ti was a media sponsor for this event as well.

A great crowd was on hand at the conference. It seems there was something for everyone with sessions going on all day both days. I’m not sure what the final count for the attendance was but I was told it was in the neighborhood of 2,000.

I was lucky enough to be on two panel discussions:

  • Global Trade Impacts & Trends
  • Which Canal are You?

Great conversation in both of these sessions – Shifting trade lanes, the growing importance of emerging markets and how Canada is and will be affected were among the discussion points.

Also of great interest was the US West Coast port situation which seems to have positively affected the Canadian West Coast ports, Prince Rupert and Vancouver. However, Vancouver is going through a bit of rough patch with its truck drivers and that was evident with some demonstrations outside of the convention center by the time I left for the airport.

Prince Rupert has been a true success story as I mentioned to a couple of publications. In addition, I had the great pleasure of chatting with the Port’s marketing manager and learned more about the Port. Speaking of ports, I enjoyed a great chat with the folks from the Port of Halifax and with the Port of Charleston. Paul McClintock, COO of the SC Port Authority which oversees the Port of Charleston was on a panel discussion with me. Wow. The things they are doing to get truck drivers in and out quickly, deepening the harbor for the big vessels and expanding port operations was amazing to hear. Definitely a strong competitor for Savannah but I still can’t help but think a “Super Port”, combining the two ports would be a great move for them both. But, unfortunately politics have to play into all of this.

Anyway, a quick trip around the trade show to check out the many vendors resulted in a great conversation with the folks from AAL – Austral Asia Line. Being a container type of person that I am, they were happy to give me a quick lesson in break bulk, project cargo and heavy lift operations. They have operations world-wide and are in expansion-mode but seem to be particularly strong within the Asia-Pacific region. Not bad considering all the opportunity there!

The trip ended too early for me but I am happy to say the organizers are bringing the event to the US in December. So, mark your calendar for Dec. 2 and 3 for Cargo Logistics America in San Diego and for those of you planning for 2016, Cargo Logistics Canada will be Feb. 17 and 18 in Montreal.

My special thanks to Peter, Tiffany and Gennifer for making me feel so welcomed! You all did a fantastic job in organizing a great event. Thank you so much.

A survey request from a freight forwarding start-up

Yes. Another freight forwarding survey request but one from a start-up company here in the US. It’s completely anonymous and only takes a couple of minutes to take. Also, if possible, feel free to share the survey link with others.

So, please help an up and coming freight forwarder out. If there are enough responses, perhaps a nice blog post will be in order to summarize the findings.

Purpose of the survey: According to the company, the survey is designed to learn about the challenges ocean consolidators face in their sales and marketing processes and the role of technology in the current ocean freight sales and marketing process.

https://www.surveymonkey.com/s/Z8GWPZT

Thanks again,

Cathy

Return to Sender

This is the final post in the “Retailers, Supply Chains and the Holiday Season” blog post series and it addresses one of the most difficult parts of the supply chain that retailers have to deal with each holiday season – returns.

An article from the Wall Street Journal offers some interesting data surrounding returns:

  • According to Optoro, more than 20% of returns happen during the holiday season—about $60 billion in merchandise.
  • Furthermore, Optoro estimates retailers see a 5% to 10% return rate on in-store purchases. For online purchases it’s typically 10% to 15% and for apparel brands, the online return rate can be much higher, in many cases closer to 20% to 30%.
  • The U.S. Postal Service handled 3.2 million returns in the two weeks that followed the 2013 Christmas season.
  • United Parcel Service Inc. expects to handle four million returns the first full week of January, up 15% from two years ago as online sales continue to grow.

Returns are expensive for retailers. As noted in a previous post, “Supply Chain to the Rescue for Best Buy”, on average returns cost Best Buy $400 million.

How to handle this meddlesome problem? Evidently in a number of ways…Companies such as Overstock.com initially sold surplus and returned merchandise on an online e-commerce marketplace. In recent years it has expanded to sell new merchandise, as well.

For FedEx, it went out and bought one of the best known reverse logistics management companies, Genco. Meanwhile, others, such as Best Buy, build an online marketplace and resell returns that are determined resalable.

Optoro, an IT company based in Washington DC, helps retailers and manufacturers manage and sell returns and excess inventory. Optoro’s cloud-based system takes those returned and excess goods and sells them directly to consumers over a variety of platforms, such as eBay, Amazon, and Optoro’s site BLINQ.com. While most clients have their own distribution centers, although Optoro has one for companies that need it. Retailers also can see where the goods are at every step of the way.

And, in India, Reverse Logistics Corps, which operates GreenDust.com, is planning to expand its global footprint by entering Africa, South Asia and CIS. It has already started a pilot in Dubai, the U.S., and Hong Kong. “Returns and refurbished market are a $500-billion opportunity worldwide, and we want to be the Alibaba of this space,” said GreenDust founder and CEO Hitendra Chaturvedi. Founded in 2008, GreenDust refurbishes damaged or defective products and sells through its online channel and offline franchisee. The company sells products under three categories such as end of life products, factory seconds and refurbished products at a discounted price. The company had recently partnered e-commerce companies such as Flipkart, Snapdeal and Amazon to manage their reverse supply chain.

So, as noted above, there are numerous ways in which to handle returns. To find out more about this topic, topics in previous blog posts in this series and more, be sure to check out Ti’s upcoming report, Global Ecommerce Logistics scheduled for publication in January.