OPERATIONS

Commentary: Amazon wants to control the shopping process end-to-end

In a move that will send shivers down the spines of the traditional delivery companies, Amazon has finally decided to try its hand at fulfillment.

The “Shipping With Amazon” service, which is slated to launch in Los Angeles over the next few weeks, will initially focus on the delivery of orders from Amazon and third-party suppliers which sell via its website. However, there is nothing to preclude the service being extended, and Amazon has said it is open to eventually making deliveries for other businesses.

Although Los Angeles is something of a trial, Amazon is likely to roll out the service to other U.S. cities later this year. In our view, this makes sense as there are many urban locations where Amazon’s order volume is so great it justifies taking fulfillment in-house.

In such areas, cutting out the middle-man is likely to save money and give Amazon more flexibility over schedules and delivery options. However, we believe this benefit will only accrue over time and as part of a broader strategy to integrate the delivery of food and non-food.

As much as it makes sense to do this in urban areas, it is unlikely that Amazon will make a move on trying to service the American hinterland. Order densities and volumes, along with long travel times between deliveries, in many parts of the country do not justify such an investment. Amazon may find technical solutions to this — such as self-driving vehicles — but this remains some way off.

The danger for the traditional delivery firms is twofold. Firstly, they are likely to lose business from Amazon; this will be slow at first but will accelerate as Amazon rolls out more of its own delivery services.

Secondly, if Amazon starts offering delivery to businesses, it will likely do this at a reduced rate. This leaves delivery firms with the unattractive prospect of losing share in their most lucrative and profitable markets, while at the same time having to offer a national service with all the expense of delivering to rural locations.

Amazon has already made moves into fulfillment, but to date, its efforts have mostly focused on bulk shipping. The current plans to deliver to consumers represent an intention to control the process of shopping end-to-end. Ultimately, this will give Amazon more power, control, flexibility, and profit.

Neil Saunders is managing director of GlobalData Retail.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Are you worried the proposed new tariffs will affect your business?
OPERATIONS

Retail jobs up by 11,000 in January

BY Marianne Wilson

Apparel and accessories stores led the industry in hiring in January.

That’s according to the National Retail Federation, which reported a net increase of 11,100 jobs in January over December. The number excludes automobile dealers, gasoline stations and restaurants.

“These numbers reflect the strong holiday season and how retailers matched consumer demand for consumption by hiring additional staff,” NRF chief economist Jack Kleinhenz said. “There’s always a loss of jobs after the holidays, but this year at least some of the extra staffing has carried over. We expect spending to continue to be strong this year, and that’s good for retail jobs.”

The largest contribution to retail employment in January came in clothing and clothing accessories stores, which added 15,100 jobs. Non-store retail, which includes online, added 3,500, while building supplies and materials grew by 3,400.

Losses of 6,300 were seen in sporting goods stores, 6,200 in general merchandise and 2,900 in health and personal products stores.

Kleinhenz noted that retail job numbers reported by the Labor Department do not provide an accurate picture of the industry because they count only employees who work in stores while excluding retail workers in other parts of the business such as corporate headquarters, distribution centers, call centers and innovation labs. Warehouse jobs, for example, increased by 3,500 in January but are not counted as retail.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Are you worried the proposed new tariffs will affect your business?
OPERATIONS

Fast-growing Untuckit in RFID pilot

BY Marianne Wilson

Untuckit, the fast-growing brand whose signature shirts are made to be worn untucked, has made the leap to bricks-and-mortar with ease. Founded online in 2011, the start-up has grown from five stores at the end of 2016 to 25 locations at the beginning of 2018 — a number it hopes to double by year-end. According to reports, Untuckit has been profitable since its second year of business.

Mirroring its strategy online, the brand’s growth and success in physical retail has benefitted from high-touch customer service, with expert associates who go out of their way to assist customers. Associates help customers choose from the selection of “try-on” sample shirts on display. When the customer has decided on the style, size and fit, the associate retrieves the fresh item for purchase.

A strong tech foundation (using the RetailNext platform) that brings e-commerce style shopper analytics to its brick-and-mortar stores is also critical to Untuckit’s success. Now the brand is taking the next step, and has entered into a pilot at its flagship on Manhattan’s Fifth Avenue with Sato Global Solutions to optimize its store inventory through RFID and inventory visibility. It uses data collected by Sato’s RFID chips on men’s shirts, combined with RetailNext traffic counters and other in-store data points, to track which shirts are tried on, if the sizing fits and purchase information. The data allows Untuckit to identify the optimal merchandising mix based on what people try on versus what they buy.

The solution gives store managers visibility into merchandise movement, allowing them to better determine customer demand. The tiny RFID tags on the “try-on” shirts collect real-time data on merchandise movement from showroom to fitting room (and back).

Using a combination of the chip data, overhead traffic counters from RetailNext and POS data, the managers can identify which shirts (right down to the exact size and style ) are being tried on and purchased, allowing them to optimize inventory levels in real time based on shopper behavior. The information also suggests which sizes or styles can be reduced in volume due to low customer demand, reducing inventory cost and allowing for the retailer to redirect its investments toward more popular SKUs and new offerings.

As part of the pilot, beacon-based traffic counters from RetailNext allow Untuckit to count, observe and measure the traffic paths of shoppers as well as store associates.

“This pilot is a great example of the IoT in retail,” said Keith Sherry, COO of Sato Global Solutions, which did the implementation of the system in the store to connect all the pieces together. “We have the ability to ‘upgrade’ the physical store in a way that captures the same kind of data we get during online interactions.”

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Are you worried the proposed new tariffs will affect your business?