Insights

Tech Guest Viewpoint: E-Commerce Means Life of a Salesman for Retail

BY Carl Prindle

With a tremendous swath of the retail economy moving to or exclusively launching online, is the traditional role of the brick-and-mortar salesperson becoming obsolete?

Studies show consumers consistently gather information and make educated decisions when making everyday purchases through online research at home or via mobile comparison shopping. In fact, today the Internet influences more than half (52%) of U.S. retail sales – and is expected to grow to 64% by end of 2015.

How does this trend impact the future of the salesperson in a virtual economy? At first glance, the outlook may not look good. However, when it comes to items that are larger and more expensive (furniture and cars) there is an everlasting demand for salespeople with particular expertise, especially when the purchase involves both an emotional and long-term commitment.

A high-quality sofa or car can last 10-plus years, which means the salesperson is more often than not the difference-maker when it comes to making such complex, committed purchases.

While consumers want the convenience of online shopping, they also want the experience of in-store shopping. The Container Store, Best Buy, Target and Banana Republic are just a few examples of major retailers who have realized this desire and have responded by offering cross-channel shopping options, such as, “find it in a store near you,” “buy-online, pick-up-in-store,” or “reserve in-store.”

Particularly for high-ticket purchases, in addition to immediacy and convenience of access to local inventory, consumers still want to touch and feel products, immerse themselves in brand experiences, and engage with a sales expert who can provide information, make suggestions, answer questions and reaffirm their decision to buy.

Savvy retailers no longer task salespeople with the “hard sell” to make their “numbers;” instead, they want them to establish a human connection, act as a brand ambassador, and integrate into the shopper’s journey both online and in-store.

One category where this transition is especially evident is furniture. Online furniture sales are still a hugely untapped market. While over 80% of all furniture sales are influenced by the Internet, online sales of “real” furniture account for only about 4% of the $100 billion furniture industry. Shoppers still head to brick-and-mortar stores for furniture because they need to see and touch the merchandise in person – and they value the expertise and assistance of the salesperson.

Retailers need to keep their sales associates relevant throughout a shopper’s multichannel journey. This means training salespeople and helping them embrace the digital age to engage in more thoughtful conversations via digital channels. It’s an investment that will results in more qualified sales leads and integrates the online experience in a process that allows the consumer to decide whether to make a purchase on- or off-line.

The future success of the 21st century salesperson relies heavily on retailers’ willingness to leverage technology to adapt to the way consumers are shopping today and will shop tomorrow and rethink the role of the salesperson. Leveraging technology to make in-store experiences as personalized and efficient as online shopping – that’s the future, particularly in big-ticket categories where stores play a critical role. Imagine:

A shopper researches sofas online, and decides she wants to see the sofas she’s considering in person. Without having to explain a thing, she’s greeted by name at the store by a sales associate with expertise in sofas, who brings her directly to sit in the three sofas she’s considering as well as a few personalized alternatives he has prepared. Our shopper decides to buy, and her order is completed in one click.

A shopper drives to three stores to compare sofas. At the first store, she finds a sofa (and a salesperson) she likes, but feels compelled to shop around. Leaving the store, she receives a message on her phone from the salesperson, thanking her for her visits and providing her a one-click way to purchase the sofa she liked, which she promptly does after returning home and thinking it over.

Behind the scenes, the technology that provides these seamless experiences is learning more about the shopper, personalizing merchandising, marketing and sales online and, for the first time, in stores. As the shopper moves towards her purchase, the quality of her interactions with the brand are always improving. And, the marketing and sales touch-points that ultimately help convert the shopper are measured and rewarded accordingly.

While the advent of an online economy might seem the nail in the coffin for the ‘traditional’ salesperson, in reality, it’s the advent of a new incarnation as not everything we want to buy fits nicely into that Amazon Prime box.



Carl Prindle is the president and CEO of Blueport Commerce.

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Insights

Commentary: Urban Outfitters Sparks Employment Controversy

BY Joe Kefauver

There has been a bit of controversy lately regarding Urban Outfitters' recent request that some of their salaried employees “volunteer” to fill normally hourly roles in fulfillment centers and retail outlets. The labor community and their activist friends have been crying foul over what they perceive is the manipulation of salaried junior managers by forcing them to work “hourly” jobs and getting no additional pay or benefits. They have used this platform as a rationale to validate the Department of Labor’s pending expansion of the federal overtime requirements.

The labor community contends that over the last 30 years, employers have deliberately blurred the lines between what constitutes legitimate managerial responsibility and its corresponding pay structure with what are actual front-line tasks properly performed by hourly employees.

Like anything in politics and policy it’s not a black and white issue. It is true that in some retail industries, some employers have aggressively stretched the definition of what is considered “managerial” in an effort to limit overtime and therefore labor costs. No question about it. Was some level of remedy necessary? Again, yes. But the Labor Department’s proposed remedy goes ridiculously too far and over corrects.

With a threshold of just over $51,000 (among other stipulations) to determine exempt/non-exempt status, the net result will be a mixed bag. Some workers will likely take home a few more dollars than they used to but in the end, employers, especially entry-level employers under very tight margins, will always find a way to control their labor costs as a percentage of sales. Limiting hours and leveraging more part-time workers is an obvious response. At that point, the whole overtime reform effort backfires.

While some may benefit in the short-term, the more significant result will be far fewer management opportunities for countless workers trying to work their way up the ladder. And any approach that results in less upward mobility and fewer pathways to the middle class is just bad policy. So the whole faux uproar in the lefty blogosphere over the actions of Urban Outfitters was a fairly obvious ploy to put more attention on the overtime issue. But it was largely a tree falling in the forest.

Having salaried workers (exempt employees) sometimes perform tasks usually set aside for hourly workers (non-exempt employees) is nothing new. Many retailers, especially in peak shopping periods such as “Black Friday” and the month-long holiday shopping season, ask their managers to pitch in and adopt an “all hands on deck” type of attitude.

During my tenure at Walmart, it was common for home office management throughout the holiday season go out into the stores and just help out anyway possible, from rounding up carts in the parking lot to greeting customers, and also helping them load their cars. Now you would be hard pressed to find someone more cynical than me – in fact, I doubt the sincerity of most cynics. But it never occurred to even me that I was being exploited and soaked for “free hours.” And that’s because I wasn’t. What I was doing was demonstrating leadership, demonstrating my understanding of what is critically important to the business, and demonstrating my willingness to do whatever was possible to help the teams in our stores be successful.

We once had a place here in America where that kind of ridiculous rigidity would not have let me help out my hourly colleagues. Where based on your job classification, you were eliminated from performing certain tasks. Where based on your pay grade, you couldn’t pinch hit for a fellow employee regardless of immediate need. And where the ultimate success of the enterprise played second fiddle to lunch bells and break times. These days, we refer to that place as the “Rust Belt.”

This whole argument plays into the false narrative that the unions perpetuate for their own financial gain – that all workers are miserable, all workers are exploited and that employers keep workers from getting ahead. The trouble for the labor community is that is simply not the case.



Joe Kefauver is managing partner of Align Public Strategies, a full-service public affairs and creative firm that helps corporate brands, governments and nonprofits navigate the outside world and inform their internal decision making. Align Public Strategies specializes in service sector industries.

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FINANCE

Walgreens buys Rite Aid in $17.2 billion deal

BY Michael Johnsen

Walgreens Boots Alliance and Rite Aid Tuesday evening announced that they have entered into a definitive agreement under which Walgreens Boots Alliance will acquire all outstanding shares of Rite Aid for $9 per share in cash, for a total enterprise value of approximately $17.2 billion, including acquired net debt.

The purchase price represents a premium of 48% to the closing price per share on Oct. 26, the day before the agreement was signed. Earlier Tuesday morning, trading in Rite Aid had halted briefly pending a significant corporate news announcement, but not before Rite Aid shares were up almost 40% to $8.34. Walgreens Boots Alliance shares were similarly up almost 5% to $94.31.

Walgreens Boots Alliance is highly focused on building a differentiated in-store experience for health, wellness and beauty, and this combination will help accelerate Rite Aid’s own efforts toward that end, the companies said. Once the acquisition closes, Walgreens Boots Alliance plans to further transform Rite Aid’s stores to better meet consumer needs.

“Today’s announcement is another step in Walgreens Boots Alliance’s global development and continues our profitable growth strategy," Walgreens Boots Allliance executive vice chairman and CEO Stefano Pessina said. “In both mature and newer markets across the world, our approach is to advance and broaden the delivery of retail health, wellbeing and beauty products and services. This combination will further strengthen our commitment to making quality healthcare accessible to more customers and patients. Our complementary retail pharmacy footprints in the U.S. will create an even better network, with more health and wellness solutions available in stores and online. Walgreens Boots Alliance will provide to Rite Aid its global expertise and resources to accelerate the delivery of integrated frontline care, and to offer innovative solutions for providers, payers and other entities in the U.S. healthcare system. Finally, this combination will generate a stronger base for sustainable growth and investment into Rite Aid stores, while realizing synergies over time.”

The boards of directors of both companies have approved the transaction, which is subject to approval by the holders of Rite Aid’s common stock, the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions. The transaction is expected to close in the second half of calendar 2016.

“Joining together with Walgreens Boots Alliance will enhance our ability to meet the health and wellness needs of Rite Aid’s customers while also delivering significant value to our shareholders,” Rite Aid chairman and CEO John Standley said. “This transaction is a testament to the hard work of all our associates to deliver a higher level of care to the patients and communities we serve. Together with Walgreens Boots Alliance, the Rite Aid team can continue to build upon this great work through access to increased capital that will enhance our store base and expand opportunities as part of the first global pharmacy-led, health and wellbeing enterprise.”

The transaction is expected to be accretive to Walgreens Boots Alliance’s adjusted earnings per share in its first full year after completion.

Upon completion of the merger, Rite Aid will be a wholly owned subsidiary of Walgreens Boots Alliance, and is expected to initially operate under its existing brand name, with collaborative decisions being made over time regarding the integration of the two companies, with the ultimate goal of creating a fully harmonized portfolio of stores and infrastructure.

Walgreens Boots Alliance expects to finance the transaction through a combination of existing cash, assumption of existing Rite Aid debt and issuance of new debt.

Citi acted as Rite Aid’s exclusive financial adviser, with Skadden, Arps, Slate, Meagher & Flom acting as its legal counsel on transaction legal matters and Jones Day acting as its legal counsel on antitrust regulatory matters.

UBS Investment Bank acted as Walgreens Boots Alliance’s financial adviser and provided a fairness opinion to the board of directors of Walgreens Boots Alliance, with Simpson Thacher & Bartlett acting as its legal counsel on transaction legal matters and Weil, Gotshal & Manges acting as its legal counsel on antitrust regulatory matters. UBS Investment Bank will be the sole arranger on the bridge financing to Walgreens Boots Alliance.

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