An eCommerce growth chokehold?

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You may have taken note recently of the flood of advertising seeking seasonal labor for the upcoming 2016 holiday shopping season. Amazon, UPS, Fedex and many other national retailers and distributors have recently flooded national media outlets with ads seeking seasonal help. The increasing frequency of these ads and the significant investment being made to recruit seasonal workforce members gives evidence of the increasing challenges companies are experiencing in meeting seasonal labor demand needs. This trend should not be ignored and leads to the broader conundrum that business leaders need to carefully evaluate …. Could the lack of sufficient seasonal labor become a choke-hold that derails the future of eCommerce growth in the USA?

In our strategic visioning conferences (www.strategic-visioning.com), we teach our clients to table their biases and assumptions that are most often centered around a view of times past, and become “futurists” by objectively assessing research resources and the growing universe of Big Data that gives them a vision of the future. Long tail successful businesses must encourage a culture that includes “visioning the future”. Investing in and developing internal talent that can identify and intellectually debate various probable future outcomes from big data and other resources and then assimilate theories as to how those outcomes might impact or provide opportunity for the company itself, is a critical cultural skill set that the next generation of successful companies must actively cultivate. This article will allow you to experience a glimpse of being a futurist as it leads you through a mini version of the structured “visioning” sessions that we facilitate for client companies.

Outlined below are 3 “futuristic visioning” points of discussion, with supporting data, that allow us to intellectually debate the question … Could the lack of sufficient seasonal labor become a choke-hold that derails the future for eCommerce growth in the USA?

  1. eCommerce requires more labor “touch” than traditional retail commerce – Recently I completed research that shows that a direct to consumer (D2C) eCommerce transaction can require as much as 4 times more labor than that of a traditional brick and mortar retail transaction for the same item. How can this be you might ask? There are many complex factors at play, but simply stated, the D2C eCommerce model actually goes against the grain of “economies of scale” in terms of manpower requirement. Because shipment sizes from the distribution center are smaller and individual units are touched multiple times more through the supply chain at various distribution and carrier sort/delivery facilities, the research showed that the total manpower required is between 1.1 and 1.6 additional minutes of labor per unit versus the traditional brick and mortar retail model.
  1. Demand for eCommerce seasonal labor could materially outpace the labor supply – Various sources project US eCommerce holiday season sales (the period of Nov 1 to Dec 31) will grow by close to $50 billion by 2018, from around $100B in 2015 to nearly $150B in 2018. In my research, I built several models that project the additional seasonal labor requirements to handle $50B of D2C eCommerce and the results are stunning. The results indicate that firms could be seeking between 125,000 to 200,000 ADDITIONAL seasonal workers to support the 2018 eCommerce volume projections. (As a comparative data point, the entire US economy only added 161,000 jobs in October of 2016.) If current low unemployment rates continue (currently at 4.9%), I believe it becomes increasingly difficult, arguably impossible, for companies to construct any viable plan to meet the hiring demands for seasonal workers. This phenomenon in the next year or two could place a choke-hold on eCommerce growth as companies are unable to find labor to move the projected increases in volume. Further, one can reasonably expect quality metrics will suffer as well, increasing total costs and souring consumer satisfaction.
  1. Wages for seasonal labor are likely to increase substantially – Data already shows us that hourly wages for seasonal workers over the past 3 years has increased by $2-3 per hour. As such, it is only logical to conclude that if the demand for seasonal labor continues to outpace available supply, wages will continue to increase as companies fiercely compete for the scarce seasonal labor resource. The increase in this labor cost component will create a reason for pause as companies question higher cost resource investments in their eCommerce business channel, potentially resulting in another choke point in eCommerce growth.

There are endless other data points (e.g. check out the shortage of long haul truckers) that can be formed into additional “futuristic visioning” points of discussion such as the 3 outlined above. But given our short venue here, let’s now shift this visioning debate and discussion around this seasonal labor topic towards 2 “futuristic actions” that can be taken to open the door of opportunity for companies.

  1. Awaken the “dormant” workforce by embracing their values – US Department of Labor statistics identify that there are 92 million Americans who are dormant or “non-working”. These individuals are not considered in the Department of Labor unemployment statistics because “they are not actively seeking work”. A large majority of this group is made up of either retired persons or students and those who have chosen to stay home to raise children or care for other family members. Another interesting angle to consider in this dormant workforce is the “Gig or You Economy” trend. You and I know this group as those working with the likes of Uber, Task Rabbit and other fractional/self-employment opportunities. Recently the Department of Labor acknowledged the difficulty in statistically tracking individuals they labeled as having “contingent work arrangements”. As such, this group is likely included dormant workforce category as well.

Huge opportunity to connect with additional seasonal workforce candidates may exist for companies who can successfully engage with these “dormant” workforce members. While higher wages are one obvious method, more imaginative and sustainable incentives could lie in how jobs and work environments are structured to provide a high appeal that awakens the dormant workforce. Companies need to consider elements like low cost child care alternatives, self-determined work schedules and policies and work task designs that diminish age driven limitations on your labor force. Companies that invest in creative technology solutions (e.g. Uber) and embrace disruptive organizational structure redesign could catapult themselves into a strong and competitively advanced position by engaging this “dormant” workforce.

  1. Redesign retail supply chains to create efficient alternative product delivery options – On the top of almost all consumer surveys about eCommerce shopping we find a point that relates to “better product selection” as a primary reason why consumers choose to shop online. With brick and mortar retail locations diminishing like snow in spring, and the remaining retail footprints getting smaller, there is an argument that better product selection online is becoming a self-fulfilling prophecy. Given our future points of discussion herein, I believe a viable solution is a redesigned supply chain that provides a more optimal balance of channel choice by consumers between brick and mortar retail and the D2C eCommerce shipping model. For example, retailers continue to lag in their investment in technology and supply chain design that embraces convenient alternative options to obtain product (the “omni-channel”), such as in-store pick up and store to consumer shipping. Too often consumers find cumbersome processes and technology, unreliable in-store inventory balances, poor in-store product selection and availability, and brick and mortar retail facilities that are not efficiently designed to service alternative eCommerce delivery models. There is a key role for brick and mortar retail locations to play in the shopping solutions of the future. Companies must vision an entirely different retail facility that is designed to provide an efficient solution to the shopping requirements of the future while also investing in the underlying technologies necessary to provide a convenient top-shelf experience for the consumer.

I wish you all a very happy holiday shopping season and I welcome your comments and additional thoughts on this subject.

About the author – Mr. Mark C. Layton is a Strategic Visionary, Management Consultant and entertaining speaker based in Dallas, TX. He serves his clients as a strategy consultant & facilitator, board member and trusted adviser. In a professional career spanning over 30 years, Mr. Layton is recognized as a highly successful entrepreneur, executive leader, supply chain expert, eCommerce pioneer and an innovator of digital, web and mobile commerce technologies and services. Layton founded one of the first ever internet focused supply chain firms, PFSweb Inc. in 1992 and lead that firm as its CEO for over 20 years. Mr. Layton is a faculty member at the University of Texas at Dallas and at Texas Christian University.  To book Mr. Layton’s as a speaker, facilitator or management consultant, please contact him at marklayton@sbcglobal.net .

Sited Sources: Internet Retailer, eMarketer, Forrester, US Department of Labor, The Wall Street Journal, Yahoo! News

 

Effective Strategy or Hopeful Discovery? 6 Key Characteristics found in effective Corporate Strategies.

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Need help developing an effective Corporate Strategy? Contact Coach Mark Layton @ marklayton@sbcglobal.net

As a leader of your organization, do you ever find yourself wondering why your team seems to not be on the same page or has just kind of lost its way? Have you ever experienced any of these quite common corporate phenomena’s within your corporate team?

  • New products, geographies or channels are developed and launched but they don’t ever seem to achieve their predicted potential or they don’t address market demands as your team sees it?
  • Modifications to incentive compensation programs are announced but they don’t incent the actions necessary to achieve the company’s goals as you understand them?
  • Annual financial goals and/or spending constraints are communicated that are in direct contrast to growth plans that your department set out for the year?

Over the past 30+ years I have worked with countless numbers of leadership teams from corporations, local to global, small to large, public and private I’ve seen over and over again how the lack of an effective Corporate Strategy results in a myriad of departmental team and individual actions along with compensation plans that are misaligned and inconsistent that effectively render the well-intentioned Corporate Strategy into a journey of Hopeful Discovery.

From these experiences I have found six (6) key characteristics that are present in a majority of companies who have highly effective Corporate Strategies. In your next leadership team meeting, plan some agenda time to ask your team about the effectiveness of your Corporate Strategy using these 6 key characteristic questions as discussion guidelines.

  1. Does your Strategy allow for clear and tangible action plans to be built from it that in-turn support the measurable outcome?

Effective strategies have a clearly stated objective with measurable outcomes. Too often I Continue reading Effective Strategy or Hopeful Discovery? 6 Key Characteristics found in effective Corporate Strategies.

5 “Big Picture” Technology Trends

5 “Big Picture” Technology Trends                                                

While it drives my family and friends crazy, there’s always been a pioneer spirit in my soul driven to continually explore, hone and define the “big picture” of trends in the world of technology. As I explore and learn, I search for the primary dImagerivers, the colors and hues if you will, that make up the picture and I attempt to assimilate those into blogs, stories, presentations and general discussions from which we all can benefit.

It is hard to believe that at the end of this month it will have been a full year since I left the helm of PFSweb, the web commerce company and all things commerce think-tank, I founded with  my team in 1994. I truly miss the great team of people at PFSweb but I am extremely excited about the progress they continue to make in evolving our business. For me, the time away this past year has allowed me to refresh, explore, study, network, attend conferences and just spend loads of time learning and reflecting.

Recently a large company executive and close friend of mine asked me what I had been up to lately. I told him I had been spending Imagemost of my time listening, watching and learning in the technology space. He laughed and uttered that he wasn’t a techy and didn’t really get it all, but then he asked me if I could sum up what I had learned for him in something he could understand and take action on at his company. I chuckled, thought for a minute and then told him that I was really excited because what I’ve learned from my time spent this last year is that the next several years promises to bring waves of disruptive trends and technologies that will drive a pace of change in people, companies and policies we’ve not seen since the late 1990’s. He looked at me startled and then said “OK you’ve peaked my interest, what is it you are talking about”?  Herein is a very high level recap of our conversation and what I see as 5 “big picture” disruptive technology trends that sit at our doorstep.

Leaders & Innovators, ask yourself “How’s my firm doing in preparation for these changes”? “Are we having these discussions in our strategy sessions”? “Are boards inquiring to management about how they are preparing for these trends”? Be honest now…

  1. Omni-Channel Commerce

This is a topic that I’ve been blogging about for a couple of years that is now truly beginning to hit its stride in terms of consumer expectation. The concept of Omni-Channel is most easily defined as commerce without channels or barriers or said another way, commerce that allows the consumer to interact/purchase from your brand or offering from when, where and how they want, and further be able to see your entire supply chain of inventory from whatever display from which they at the time have access. Can your consumers see your entire Supply Chain?

 

  1. Mobile First Development

Internet transactions from mobile and tablet devices are conquering share like Goliath eats buildings, yet 90% of the companies I work with continue to develop technology designs from the desktop or laptop first and then rely on responsive design to render a graImageceful degradation of their site as the screen size diminishes. Most every piece of research I’ve read recently is showing combined Mobile/Tablet transactions now at near 50% of all transactions and growing at double digit rates. When I speak to developers about this topic, so many of them look at me and say, “won’t happen” because they believe the screen size is too small to deliver the breadth of experience the consumer desires. My come back to that is “pull your head up and look around” and think about how voice, gesture and the use of the camera on the mobile device can completely revolutionize how we as consumers interact with devices. Keyboards could be as obsolete as typewriters by 2020. Has your firm changed to Mobile First Development?  (My blog entitled “The Paradigm Shift has Arrived” provides more detail about this trend.)

 

  1. Big Data & First Person AnalyticsImage

We’ve long wondered if “big brother” is watching. Wonder no more, he is! Think of every step and action you take as being recorded, in effect creating a massive map or “digital footprint” of data about you and your behaviors. Over the next several years the emergence of what is being called “first person” analytics will permeate and several of the technology software entrants in this “Big Data” space are working to provide ways to harness this mass amount of data about you. No longer is it groups or subsets or demographics (called 3rd person analytics), its real life first persona behavior patterns. I’ll even go as far as predicting that most of us have no real idea who we will really are in terms of many of our behaviors, we just chalk it up to “urges and impulses”.  But today’s “Big Data” scientists suggest differently and they believe they can harness this huge amount of data into tools that will forever change the way brands market to consumers. Toss in the rapidly growing trend toward internet/streaming television & radio and now brands can effectively market to you one on one. Imagine both you and your spouse are watching the same show in two different rooms and the adverts shown to each of you are specifically tailored to you. Your wants, your desires and your behaviors done so using data about YOU that has been thoroughly analyzed. This could revolutionize traditional ad spend and set a whole new benchmark for response and conversion rates. I don’t often see much that I think Google needs to worry about given their market position, but this trend has the potential to be tremendously disruptive to the golden goose of “Search” that is Google today.

 

  1. Tagging

Tagging is not a new concept and we have seen proliferation of various technologies like UPC, RFID, Splat, 2D, 3D, QR and more for many years, none of which are particularly attractive or user friendly but they have served a purpose. Recently though, I’ve seen vast improvements in the application of tagging technologies by several companies that will be critical pieces of accelerent for the trends discussed in this blog as they aid in the ease in speed at which users can interact with the web. Check out these two companies that I am watching closely; Layar and Powa . I’m particularly intrigued by the inaudible tagging technology that Powa is bringing to market that allows for your mobile device to “hear” the tag as its broadcast on a TV or Radio or in a Stadium or Church and immediately link to the site for a one touch completion of a transaction. How is your firm incorporating the advancements in tagging technologies into its future?

 

  1. Cyber & Personal Information Risks

We’ve all read about the horrors of the Holiday Season 2013 and the theft of personal data and the large amount of credit card fraud proliferated by criminals who continue to find ways to penetrate the systems of credit card merchants across the globe. The problem in the US has been particularly exposed not only because the size of our market is highly inviting, but also because the US is light years behind most of the rest of the first world in terms of card and terminal technology. And when private industry does a poor job of protecting consumers’ data, guess who comes knocking…you got it Uncle Sam! While the US hasImage probably the best consumer protection laws on the globe as it relates to financial exposure for fraud, billions are being lost annually by merchants to fraudulent activity and the US merchant banks and payment processors have been miserably slow to evolve. I expect that we will see a horde of legislative interest and action on both the cyber fraud and personal data protection topics over the next 12 to 18 months that could materially impact how POS and other card terminal systems, email marketing, shopping cart designs and other payment interaction processes function. Much like the fervor in development over Y2K in the late 90’s, you can expect a long list of expensive and critical resource diverting system enhancement requirements coming from this trend. Merchants slow to respond to this trend will more than likely end up bearing a greater cost for fraud transactions, including fines and penalties. How well is your firm’s payment system architecture prepared for this evolution?

 

From the front door of the world commerce, I wish you peace and prosperity.

The Paradigm Shift Has Arrived!

 

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Having left the leading web commerce company I founded (PFSweb, Inc.) this past April, this Thanksgiving weekend was quite a different environment for me (and my family) given this was my first “cyber weekend” not participating on the front lines as a service provider or merchant for the kick off of the holiday shopping season. While it allowed for much more time with family and friends, it also provided me the opportunity to view the industry from a different lens and to spend a lot more time digesting the results of the weekends shopping trends.

I thought I’d share a couple of my thoughts about some interesting conclusions I drew from this past weekends’ results:

  • The paradigm shift has arrived – Probably the most impactful item I took away from this past weekend was the incredible growth in the use of smart phones and tablets to conduct online purchases. While reports varied across online retailers and brands, anywhere from a third to a half of all online commerce conducted this weekend was completed on a tablet or a smart phone. And while one might think that tablets would be leading the way, given their larger screen size, its actually the smart phone segment where usage grew the fastest. So what does this mean for retailers and their web development teams? In short, adopt a MOBILE FIRST design strategy ASAP. For years we’ve been developing user interfaces from the lens of a desktop or laptop screen and over the past few years we’ve used responsive design  to effectively and efficiently replicate that interface onto a tablet or smart phone display. While not perfect, responsive design eliminated the practice of developing on multiple platforms (ie. disparate code bases to maintain…ick). The paradigm shift that now faces us is that soon, if not already, a majority of online shopping will be conducted from mobile devices and the brands and retailers who embrace a mobile first strategy will win more of the hearts (and share of wallet) of consumers.
  • As I have discussed in previous posts, brands and retailers who are embracing the ever evolving impact of technology on commerce early and proactively will win greater share. Omni-channel commerce is here to stay and obviously so is mobile commerce. Yet I see many brands and retailers who have yet to aggressively embrace either. So for that audience, here’s one more tidbit of data I learned from this past weekend that should slap you awake … According the Deloitte 2013 Holiday Survey, released earlier this week, Smart phone, tablet and Omni-channel shoppers will spend 80% more this season on gifts for others (and themselves) than traditional brick and mortar buyers. So what’s this say? Well it says that if you are the brand or retailer who is not embracing these technology trends, not only are you just risking losing share, you risk losing the most attractive portion of the market share, that being buyers who buy the most.
  • One last note, I work with a lot of business to business clients/companies, both small and large, who’s actions indicate that they are generally immune to the radical change in buying habits that are impacting the business to consumer space. If this describes your company, please go scream in the hallways and get the attention of the brass and tell them to wake up, Maybe sing them the tune “Santa Clause is coming to town” and change the words to “Amazon is coming to town”. Yes Amazon is coming to your town, your space, your customers. Contractors, farmers, painters, hairdressers, grocers and _____ (insert your industry) will be impacted and those who embrace and prepare, put themselves in the best position to gain or at least maintain share and those who don’t….read the history of Blockbuster Video?

From the front door of Omni-Channel Commerce, until next time!

 

Is Grocery the next big thing for eCommerce?

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I’m just back from Las Vegas this week after attending an industry event called Xchange hosted by the leading SaaS eCommerce software provider Demandware. Even after having been in this industry over 20 years myself, I continue to be amazed at the pace of innovation as well as the broadening of industry segments that are embracing the eCommerce channel. I met industry players from Fashion, Footwear, Coffee, Cosmetics, Consumer Package Goods (like P&G), and many more, including one eye opener, Grocery. Yes Grocery!

It’s been over 10 years since I’ve seen any signs of eCommerce life in the Grocery channel in the USA. Early grocery channel pioneers Webvan and GroceryWorks both made substantial efforts to pioneer this industry segment into the mainstream of eCommerce during the early part of the 2000’s, but neither had much success at all in wooing consumer buying patterns or in defining a sustainable business model. Technology limitations & the lack of wide spread broadband telecom in homes in the USA, both of which were particularly exposed with the huge range of products in grocery, along with channel conflict from traditional grocers and a lack of decent rich content media destined their efforts to failure. Since their fall out, we’ve not seen much focus by any key players to truly promote grocery online. While Walmart and several others offer some range of grocery products online, its pretty clear from shopping their online stores that its more of an afterthought than any area of focus.  But is the tide soon to change?

With the vast improvements in technology capability and the common place of powerful broadband telecom now in the hands of the consumer, along with the huge propensity for US shoppers to shop online, it seems to me that the stars are aligning. A recent Nielsen report sited that the intent of US consumers to buy grocery and beverages online has grown 44% since 2010. Further, the rapidly evolving trend by brands and retailers to meld together their traditional channels into a single image or Omni Channel* I believe puts grocery at the cross section of industries ripe for a major change. As I look at the foundational concepts of the Omni-channel commerce movement that I helped define a few years ago that include, shopping without channels, delivery without limits & conversations without confusion, I see huge potential for a forward thinking grocery chain (hey Whole Foods, HEB are you listening?) to launch a successful market shifting strategy that will bring new definitions of convenience and time saving to one of the most frequently occurring shopping events in every household across the USA. Imagine a well organized display of grocery products online, suggestive baskets, real time coupons, highly relevant predictive ordering, event & theme shopping (how about a Fondue evening with friends…what do I need?) and being able to chose when, where and how you want to get your products. All of this activity could leverage existing store fronts and inventory, reconfigured to support the changing trends.

Alas when my wife wants me to grocery shop, I can do it while watching my Dallas Cowboys lose another game and then run out at half time, select my own steaks in the meat market to go along with my already prepared online order and be back before the 2nd half kick-off. Now that’s a great consumer experience!

From the front door of the web, until next time!

* A trend being touted under various industry buzz words including; multichannel, omni channel, iCommerce, showrooming.

Lessons Learned from the 2012 Holiday Shopping Season

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By: Mark Layton, Chief Executive Officer, PFSweb

The holiday shopping season is no longer relegated to in-store shopping on Black Friday; rather, it has snowballed into an entire weekend where consumers demand both mega-deals and convenience. Black Friday and Cyber Monday are the powerhouses in the retail world and can account for a significant percentage of a retailer or brand’s annual sales. In the last five years the percentage of holiday shopping that has taken place online versus in traditional brick-n-mortar retail has increased 10-fold. Further, this consumer preference paradigm shift has now given rise to another important shopping frenzy day – Green Monday – the Monday at least 10 days before Christmas. For some retailers, this is last day that standard ground shipping will assure that gifts will arrive by Christmas Eve. In 2012, Green Monday was the third heaviest shopping day of the holiday season with more than $1.2 billion in sales.

Because these few days are absolutely critical to an e-retailer’s financial success during the holiday shopping season, here are a few lessons we’ve learned that will help ensure that a retailer can both optimize sales and please their consumers throughout the season (and next).

1.    Early planning and the use of a task force of experienced cross-functional team members are essential to a successful holiday season. While this point may seem to state the obvious, over and over again we see retailers and brands caught off guard from unexpected volumes of sales resulting from poorly coordinated promotional activities. Early planning and the use of a cross-functional team assigned the responsibility of ensuring that your organization is properly prepared for the holiday season is essential. Planning and preparation for logistics and traffic requirements, technology, coordinating promotional schedules, reviewing issues that arose the prior season and having the group charged with the responsibility to implement changes and enhancements to avoid similar issues again this year is essential in guaranteeing a successful experience.

2.    Plan for a 100X volume spike? A common oversight is that the shopping behaviors of consumers over Cyber weekend combined with an aggressive and successful promotional campaign from the retailer or brand may result in site traffic and order volumes 50 times greater than any other day during the holiday season. Depending on the design of the promotional campaign, site traffic could very well end up concentrated into a very short time window (e.g. a flash event), resulting in the potential of a 100 times (or greater) load requirement on the technology footprint. Oftentimes we see planning determined based on averages for months, weeks or days, which can disguise the true peak requirements for resources during those critical time splits leaving a retailer hugely under-resourced at the most important success point(s) of the shopping season. The result can be a very poor consumer experience that tarnishes the retailers’ brand.

3.    Consumers are increasingly expecting coordinated promotional activity across all channels. Nothing infuriates a consumer more than finding out the day after buying an item at a 25 percent discount that this same item is now on-sale at 75 percent off. It is critically important for retailers to coordinate their promotional campaigns to give consumers a “heads up” that a sale is coming and to ensure that the promotional discounts are consistent across channels. While it is acceptable to offer a “store only” or “online only” promotion, it’s not acceptable to offer 25 percent off through one channel and 75 percent off through another during a single period of time. Retailers who don’t coordinate these activities will experience a higher return volume and increased call center traffic from an audience of unhappy consumers who will find a way to get the best discount.

4.    Recognize the growing importance of mobile and tablet interaction. The past year has seen a dramatic increase in the consumer use of smartphone and tablet devices to browse, compare prices and order products. This past Cyber weekend, our collective statistics showed that roughly 30 percent of all sessions and nearly 20 percent of all orders were conducted from a smartphone or tablet device. Sadly, many retailers and brands have yet to properly prioritize these user-interface platforms in a manner which allows consumers true ease of use and full-site functionality. Ultimately, consumers will embrace retailer and brand sites that make shopping on mobile devices easy.

5.    Communicate promptly and candidly with consumers. Nothing is more frightening to a consumer than the unknown. Today’s world of identity theft, credit card fraud and mailbox and porch package theft has lead consumers uneasy about their e-commerce transactions, especially when communication about the transaction is delayed or unavailable. Consumers understand that delays due to high volumes or websites being temporarily unavailable are occasional inevitabilities, but the consumer expects prompt and candid information that they can rely upon to provide them the information necessary to protect their interests throughout the shopping transaction. Prompt order and shipment confirmation emails, accurate package tracking data, web site notification of potential delays due to weather or volume and clear and concise emails when issues do arise provide a consumer with the confidence that, while their order may not arrive exactly according to plan, the order is being handled correctly, and the revised delivery time frame is accurate.

As the 2012 holiday season comes to a close it is clear that online shopping will continue to be a key driver of total holiday revenue; retailers should stay focused on delivering consistent, high-quality experiences to their customers across all channels. Holiday commerce continues to evolve, as we’ve seen with the proliferation of mobile and tablet traffic, and retailers and eCommerce service providers need to be acutely aware of emerging trends in order to effectively service customers next year. Holiday planning for 2013 should begin now.

 

 

Manufacturer Direct to Consumer (D2C) trends leading web commerce growth

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“At the Front Door of the world of Commerce”

by Mark C. Layton – copyright 2012 all rights reserved

Recent US Department of Commerce (DOC) data shows the challenges that many major US Department stores, once the darlings of the industry, are now facing as consumer shopping behaviors change.  While 2010 Department stores sales fell (see chart below), DOC data shows that eCommerce sales in the USA grew over 14% during that same period to approximately $170B or something north of 4% of total retail sales.

Forrester Research released data in early 2010 showing that one of the fastest growing segments of the web commerce industry in 2008 was the manufacturer to consumer direct segment. While I don’t have the benefit of fresh 2010 data on this topic yet, I’m pretty certain that when those numbers do become available we are going to see this trend continuing to accelerate not only in 2010, but for the foreseeable future.

So what’s going on? Why are consumers turning to manufacturer sites more and more often to source their purchases? Here’s what I am seeing from my perspective inside the front door of the web.

First, its my opinion that traditional retail has continued to poorly embrace the wealth of rich content media that manufacturers make available for their products. System attribute limitations, lack of resources to massage the information into acceptable formats for their websites and just the sheer mass of products that major retailers offer make it a daunting task to tackle and as a result, most have simply darted around the issue.

Second, retailers are making decisions for their own financial agenda and as a result have reduced the range of a manufacturer’s line that they stock in their retail stores as well as on their own web store fronts. While this has generally resulted in healthier retail inventory situations, improved gross selling margins and less end of season close out challenges, the consumer is seeing an ever decreasing piece of a manufacturer’s offer both in styles, colors and sizes.

The consumer is a smart cat and what I’ve seen over the past few years is a growing reliance on the use of the manufacturers direct web site because the consumer has come to expect that it will be the best source of information of products (style, size, color) that the manufacturer has to offer. And once the consumer is in the manufacturer web store, converting them to a buyer is only a few clicks away, and increasingly that is trend.

It’s interesting that product price is generally not the key decision point driving the growth trends that the manufacturer D2C segment is experiencing. Convenience, brand experience and access to an in-stock offering of the full range of a manufacturer’s products seem to trump all.

It’s a conundrum that traditional retail needs to quickly digest, if for nothing more than to save it’s own web commerce market share.

See you soon, “At the front door of the world of commerce”.