Mobile-Robotic Solution Makes for Faster E-commerce Fulfillment
The rapid growth of multichannel sales has put new pressure on retailers to find a way to fulfill orders fast and inexpensively. Among the more innovative strategies is Kiva Systems’ mobile-robotic fulfillment system. Kiva’s Mitch Rosenberg, VP marketing and product management, discusses the company’s solution, which is designed to enable extremely fast cycle times with reduced labor requirements, from receiving to picking to shipping — all without conveyor.
What are some of the main challenges of traditional material handling systems with regard to e-commerce fulfillment?
The challenge with today’s e-commerce activity is that it is no longer traditional. Consumers are shopping differently today than they did even five years ago. Free shipping, overnight delivery, guaranteed product availability and vast merchandise variety are just a few of the things consumers have grown to expect from their online shopping experience. But this puts a major strain on a traditional materials handling system.
What is Kiva Systems’ solution for order fulfillment? What are the main components of the solution?
Kiva uses hundreds of robotic drive units that bring inventory on mobile shelves directly to workers, allowing easy and efficient access to all inventory items at all times. Kiva can handle products of all shapes and sizes, and automatically brings products to operators, eliminating wasteful time spent walking the warehouse floor.
Kiva is a complete order fulfillment solution that encompasses inventory control, forward replenishment, picking, packing, shipping sortation, finishing and quality assurance to simultaneously improve fulfillment center productivity, speed, accuracy and flexibility.
How does Kiva’s solution differ from traditional warehouse automation systems?
Other warehouses use conveyors or carousel systems to automate their operations, but this form of automation often involves miles of bolted-down metal and rubber equipment in winding patterns. These systems also require complicated installations, are inflexible to modifications in product shape and size, and are vulnerable to single points-of-failure. Today, business models are changing significantly with the advent of Internet and multichannel retailers. Kiva is different.It is completely portable and flexible, can handle products of all shapes and sizes, is quick to implement, and easy to use.
What are the main benefits for retailers?
The Kiva solution goes beyond traditional warehouse automation to solve real-world order-picking challenges. It is two to four times more productive than other pick, pack and ship automation approaches. Its light-directed picking, put-away and order consolidation, combined with barcode scanning and multiple methods for confirming quantity, ensure that inventory and orders are 99.99% accurate.
Also, Kiva does not require batching and waving of orders like a conveyor does, which means any order can be processed in as little as 15 minutes. And unlike traditional bolted-down automation, operators can implement the solution they need to handle current volumes, then add additional capacity quickly and easily if they need it later. With Kiva, you pay as you grow.
Can the Kiva solution scale up and down to help retailers meet changing customer demand?
For many businesses, growth is a moving target. With Kiva, you can implement the solution you need to handle current volumes, and can easily add additional capacity quickly and easily if needed over time. This is in contrast to conventional automation, which requires planning for, and even buying, capacity several years before it is actually needed. Because of this system flexibility, Kiva customers can pay as they grow, which eliminates the risk of over- or underestimating how much to buy at once.
Kiva also offers a Robot Rental Program, which solves one of the largest e-commerce challenges that fulfillment-center managers face in today’s unpredictable market: how to run a cost-effective operation that easily scales up and down to accommodate significant seasonal processing without sacrificing speed, accuracy or customer service.
Perfect Storm for Apparel Retailers
With gloomy consumer sentiment surveys reflecting dysfunction in both Wall Street and Washington, stagnant GDP growth, stubborn 9% unemployment and the ongoing housing slump, most experts are calling for a conservative holiday season.
But the American shopper? She begs to differ, at least when it comes to apparel, for herself and her family. Certainly, clothing was run through the wringer in the recession, as demand plunged 8% from its peak annual levels of 2007, bottoming in 2009. This year, apparel is suffering the further indignity of seeing the first cost inflation in decades, as cotton prices peaked at record levels in March.
Although apparel bounced off the bottom in 2010 with a 4% year-over-year rebound, sales still lagged pre-recession levels. But for the first nine months of 2011, apparel sales were up almost 6% over 2010, with little if any let-up during back-to-school. Although historically back-to-school is an imperfect predictor of holiday sales, full-year apparel sales in 2011 will, at the current pace, finally breach the sales levels achieved four years ago.
So despite the dour consensus outlook, apparel is on track for its best Christmas since 2006, if not ever. Five factors are driving apparel’s comeback:
• Pent-up demand
After four years of outfitting her kids but scrimping on herself, women are finally freshening their wardrobes — since you can accessorize that schmatta just so many times. Men, notorious for making that suit or sport coat last one more year, are returning to the haberdashery, with men’s clothing sales up about 9% year-over-year.
• Muted price elasticity
Although many retailers are now passing through most — but not all — of the cost increases, evidence to date shows little demand destruction. By Customer Growth Partners’ estimates, apparel price elasticity ranges from 0.6 to 0.8, indicating that average price increases of 10% will reduce demand by only 7%, netting a 3% revenue boost.
• Discretionary spending rotation
Through 2007, the twin drivers of discretionary retail spending were home improvement projects and consumer electronics. Both sectors remain about 11% below their 2006 to 2007 peaks, freeing up almost $50 billion in annualized demand that is being redeployed, largely at fashion or outlet malls instead of The Home Depot or Best Buy.
• New technology
Although not always visible on runways, apparel technologies have made great strides in recent years, from Lululemon’s nylon and no-sew seaming innovations to “heat-tech” styles from FAST’s Uniqlo. The advances have enabled higher price points and margins, and consumers have not objected — since the merchandise is a “materially” better value.
• Fashion excitement
Last but not least, fashion is, after all, a fashion business, and apparel has finally doffed recession-era boring basics to enter a new creative cycle. Consumers are seeing innovation in everything from beauty and fragrance to designer excitement at post-recession, savvy-shopper prices, in retail formats from fast fashion to once-dowdy department stores. Doubters need only witness Macy’s Lagerfeld collection full-price sell-through, Target’s website-crashing Missoni blow-out, or Kohl’s high-profile J.Lo and Marc Anthony launches, to understand that newness is back big time.
In short, well-managed apparel merchants will enjoy a positive perfect storm this holiday season. Continued pent-up demand, recession-originated cost controls, fashion innovation and moderate cost inflation — combined with modest price elasticity — augur for strong earnings leverage in the holiday quarter.
Craig R. Johnson is president of Customer Growth Partners (customergrowthpartners.com), a consulting and research firm serving the retail and consumer industries. Founded in 2001, CGP also conducts both proprietary and public forecasts of holiday, back-to-school and full-year retail sales.
Focus on: E-commerce
Christmas may be right around the corner, but retailers can still do a lot in the final weeks leading up to the big day by making last-minute tweaks that can impact how and where consumers shop this season. Thanks to the flexibility of the Web, e-commerce, mobile and social networking channels are rich with opportunities for retailers to lure shoppers in and keep them coming back for more.
U.S. consumers are expected to be cautious with their holiday spending this year, as 72% expect their gift giving to be “controlled” in 2011, according to Accenture’s annual consumer holiday shopping study. Discounts, sales and prices are still top-of-mind this holiday season, with 40% of consumers saying an item being on sale is the single most important factor in their decision to purchase.
Lauren Freedman, president of Chicago-based the e-tailing group inc., said that companies can cash in on shoppers who are looking around for the best deals by making small additions to marketing strategies. For example, it’s key to reinforce value proposition through email campaigns.
“Retailers should send emails to shoppers that promote value, such as touting 300 gifts for under $25,” Freedman said. “Make it very simple for budget-minded customers by packaging that information before they have a chance to navigate away.”
Research shows that email marketing is still an effective way to drive traffic and sales to sites. According to data from a study conducted by Petaluma, Calif.-based e-commerce solutions provider MarketLive, shoppers are indeed receptive to receiving emails from retailers, with 39% wanting it weekly and 13% wanting it up to six times a week. In fact, 8% are open to daily emails from merchants.
Meanwhile, the majority of consumers said they are most likely to respond to emails this holiday season if they include free shipping offers (80%), sales and markdowns (79%), and coupons (73%).
With many consumers reading email on mobile devices these days, Freedman noted that messages should be easy to read on smartphones and provide a direct link to a retailer’s mobile site. From a mobile site design perspective, retailers should display familiar logos that fit well on screens so shoppers know they’re on the right site. In addition, pages should be simple and uncluttered, allowing consumers to navigate through products and find the information they need.
Finally, the mobile checkout process should have as few clicks as possible to make sure shoppers don’t get frustrated and navigate away.
“There are still some big challenges for retailers in the mobile category,” Freedman said. “Smartphone usability isn’t always seamless, and shoppers need to feel comfortable when making a purchase. Make it easy on shoppers by keeping mobile sites simple and playing up the convenience factor.”
Once shoppers have made their way on to e-commerce and mobile sites, it’s the retailer’s duty to ensure they find what they need and get all of their questions answered. Even pages that retailers often overlook can be utilized during the holiday season to make a difference.
“The customer service page is often a place for missed opportunity,” Freedman said. “Take advantage of that real estate by touting gift cards, providing a calendar with shipping cut-off dates and always list contact information.”
Retailers also should be well aware of the major online shopping days of the season. Ranking second to Cyber Monday, “Green Monday” — the second Monday in December — is the most popular day for online shopping. The first Monday in December ranked third, followed by “Free Shipping Day,” which falls this year on Friday, Dec. 16.
“Those that offer free shipping — even if it’s just for a promotional period — should definitely get that information out as much as possible to target audiences,” Freedman said. “People love free shipping, and it helps retailers better compete during the holidays.”
Finally, consider two-dimensional quick response (QR), which gives consumers access to related digital information on the Web. When an image of a QR code is captured by a quick-response scanner or mobile phone camera, the user’s device is directed to a website where companies provide shoppers more information about products and services.
“Retailers can use QR codes in stores by placing them next to products or tout them in catalogs and newspaper circulators,” said David Javitch, VP marketing for New York City-based Scanbuy. “It takes about a minute to create a QR code, so if merchants have content to link a code up to, it’s a no-brainer and very fast way to reach customers.”