Drones Start Delivering

But will they really deliver the goods?

Drone deliveries just got real. We’ve been reading about them for a good while, along with the occasional news story about a prototype drone model making a product delivery to someone’s doorstep.

But drone deliveries have suddenly taken a major step into the commercial mainstream with the announcement that the first home deliveries of packages from Walgreens have started. They’re being handled by Wing, a subsidiary of Alphabet — the parent company of Google.

Wing itself received a special certification from the Federal Aviation Administration recently that allows it to make commercial air deliveries directly to homes in the United States. That’s a first.

In addition to the Walgreens account, Wing is also delivering OTC medication, gifts and other items on behalf of Sugar Magnolia, a Virginia-based retailer.

How do these deliveries work? Customers order products via a special app, and can opt in to receive their items via FedEx Express delivered by drone, which lowers the packages to a designated spot in a yard or driveway.

Wing, Walgreens and Sugar Magnolia aren’t the only people nosing around this method of delivery. Walmart has filed a patent application for a system for retrieving packages delivered by drone, and UPS is also getting into the mix.  The FAA has given approval to UPS’s new Flight Forward subsidiary that will allow it to fly an unlimited number of drones with an unlimited number of remote operations. And right on cue, the first Flight Forward agreement for drone delivery services has just been announced, with CVS pharmacies.

So it’s pretty clear that drones have finally broken through to the point where they can be serioiusly tested for consumer use and acceptance. Next, it will be interesting to gauge consumer reaction.  Will drone deliveries break out into the mainstream, or are they destined to remain more of a curiosity?  Here’s one early read from online business owner Mark Reasbeck:

“[It’s] nice that everybody … has nothing else to do but to order stuff from Walgreens and just sit there and wait for the delivery. What happens if you’re not home?  How much [cost] for that service?  They have to pay for a ‘shopper’ and then all the pilots watching the drone.  This is not needed on so many levels.”

What are your thoughts on this latest transport frontier? Is it a flash in the pan? … or poised for phenomenal success?

Limp Fries: Restaurants Join Brick-and-Mortar Retailing in Facing Economic Challenges

Press reports about the state of the retail industry have focused quite naturally on the travails of the retail segment, chronicling high-profile bankruptcies (most recently hhgregg) along with store closings by such big names as Macy’s, Sears, and even Target.

Less covered, but just as challenging, is the restaurant environment, where a number of high-profile chains have suffered over the past year, along with a general malaise experienced by the industry across-the-board.

This has now been quantified in a benchmarking report issued last month by accounting and business consulting firm BDO USA covering the operating results of publicly traded restaurants in 2016.

The BDO report found that same-store sales were flat overall, with many restaurants facing lower traffic counts.

The “fast casual” segment, which had experienced robust growth in 2015, experienced the largest loss of any restaurant segment in same-store sales in 2016 (nearly 1.5%), along with the highest cost of sales (nearly 31%).

Chipotle’s poor showing, thanks to persistent food contamination problems, didn’t help the category at all, but those results were counterbalanced by several other establishments which beat the category averages significantly (Shake Shack, Wingstop and Panera Bread).

The “casual dining” segment didn’t perform much better, with same-store sales declining nearly 1% over the year. By contrast, “upscale casual” restaurants reported an ever-so-slight same-store sales gain of 0.2%.

Better sales increases were charted at quick serve (fast food) restaurants, with same-store increases of nearly 1%. Even better results were experienced at pizza restaurants, where same-store sales were up nearly 5%.  This category was led by Domino’s with over 10% same-store sales growth, thanks in part to its Tweet-To-Order rollout and other digital innovations.  Well more than half of the Domino’s orders now come through digital channels.

What are some of the broader currents contributing to the mediocre performance of restaurant chains? Unlike retailing, where it’s easy to see how purchasing practices are migrating online from physical stores, people can hardly eat digitally.  And with “time” at an all-time premium in an economy that’s no longer in recession, it would seem that preparing meals at home hasn’t suddenly becoming easier.

The BDO analysis contends that the convenience economy and the continued attractive savings offered by dining at home combine to slow restaurant foot traffic: “To remain afloat, restaurants will need to drive sales by leveraging the very trends that are shaping this evolving consumer behaviors.”

Tactics cited by BDO as lucrative steps for restaurants include expanding delivery options, and embracing digital channels in a major way.  BDO reports that in 2016, digital food ordering accounted for nearly 2 billion restaurant transactions, and this figure is expected to continue to rise significantly.

Speaking personally, I think there is a glut of dining options presented to consumers across the various segments of the restaurant trade. One local example:  In one stretch of highway on the outskirts of a county seat just 20 miles from where I live (population ~20,000), no fewer than six national chain restaurant locations have opened up in the past 24 months strung out along the main highway, joining several others in a string of options like exhibit booths at a trade show

There’s no way that market demand can satisfy the new restaurant capacity in that town.  Something’s gotta give.

What are your thoughts about which chains are doing things right in the highly competitive restaurant environment today – and which ones are stumbling?

All those narratives about Amazon? They’re not exactly accurate.

abI doubt I know a single person under the age of 75 who hasn’t purchased at least one item of merchandise from Amazon over the years. And I know quite a few people whose only shopping experience for the holidays is a date with the Amazon website.

Still, some of the breathless stories and statistics that are put forward about Amazon and its business model seem almost too impressive to be true.

I’m not just talking about news reports of drone deliveries (a whole lot of “hat” and far less “cattle” there) or the idea that fully-robotic warehouses are just around the corner – although these stories do make for attention-grabbing headlines.  (Despite the continued need for human involvement, the way that robots are being used inside Amazon warehouses is still quite impressive.)

Moreover, a study published recently by BloomReach based on a survey of ~2,200 U.S. online consumers finds that Amazon is involved in most online shopping excursions, with nine out of ten online shoppers reporting that they check Amazon’s site even if they end up finding the product they want via another e-commerce resource.

More than half of the BloomReach survey respondents reports that they check on the Amazon site first — which is a new high for the company.

But are all of the reports about Amazon as credible?

Doug Garnett
Doug Garnett

Recently Doug Garnett, CEO of advertising agency Atomic Direct, penned a piece that was published in the December 2016 edition of Response Magazine. In it, he threw a dose of cold-water reality on some of the narratives surrounding Amazon and its business accomplishments.

Here are several of them that seem to contradict some of the commonly held perceptions:

“Amazon is a $100 billion retailer.”

Garnett notes that once subtracting Amazon’s non-retail revenue for 2015 (the last year for which financial data is available), the worldwide figure is more like half of that.

In the United States, Amazon’s retail sales are closer to $25 billion, which means it makes up approximately 6% of total retail sales.

That’s still very significant, but it isn’t the dominating presence as it might seem from all of the press hype.

“Amazon is profitable now.”

Yes, it is – and that’s after many years when the company wasn’t. However, approximately three-fourths of Amazon’s profits are due to selling cloud-based services, and the vast majority of the remaining profit dollars come from content delivery such as e-books plus music and video downloads.  So traditional retail hard-goods still aren’t generating profits for Amazon.

It turns out, just as retailers like Wal-Mart, Target and K-Mart have discovered, that replicating a retail store online is almost always a money-losing proposition.

To underscore this point, Garnett references this example of a merchandising campaign in 2016 as typical:

“When one unit was sold on Amazon, eight were sold at the retailer’s website and 80 were sold in the brick-and-mortar stores. The profit is in the store. 

For mass-market products, brick-and-mortar still dominates. Amazon is a nice incremental revenue stream, [but] not a valid alternative when you’re playing in the big game.”

It also means that companies that are looking to Amazon as a way to push their products into the marketplace should probably think twice.

At the very least, they should keep their expectations realistically modest.

America’s shopping malls struggle to avoid becoming dinosaurs.


America’s department store chains – and anchor stores at countless shopping malls across the country – are reporting another rounds of disappointing sales and profit figures following the 2016 holiday season.

It underscores what we’ve been seeing all over the country – dead or dying malls.

In fact, retail industry analyst Jan Rogers Kniffen predicts that about one-third of malls in the United States will shut their doors in the coming years.

That’s about 400 of the ~1,100 enclosed malls.

Equally startling, of the ~700 that remain, all but around 250 are expected to continue to struggle.

The problem is multi-faceted. At an estimated 48 sq. ft. of retail space for every man, woman and child in America, that’s a footprint that gotten too big.

“On an apples-to-apples basis, we have twice as much per-capita retail space than any other place in the world,” Kniffen says, adding that the United States is “the most over-stored” country anywhere.

The oversupply of retail space is challenged by changing customer tastes, too. Online shopping is a huge problem for malls, as is the rising popularity of off-price stores in lieu of the department stores like Macy’s and Penneys that have served as important anchors for mall properties all over the country.

Now we hear reports that Macy’s is planning to close numerous store locations during 2017, joining Sears and Penneys which have been doing the same thing over the past several years.

How will malls survive in the future? Recently, the McKinsey & Co. consulting firm issued a report that highlighted five ways malls can remain relevant to consumers today and in the future:

Mall of America (Bloomington, MN): Expansion Rendering
Mall of America (Bloomington, MN): Expansion Rendering

Entertainment – Even in the age of “interactive everything,” consumers – particularly younger ones – continue to seek out gathering places and “experiences.”  It’s one reason why some shopping malls have had to deal with large numbers of young people flooding their spaces – not always with pleasant results.  Malls seeking out tenants that provide entertainment hubs — such as theme parks and gaming parlors, edutainment, and even virtual-reality content and immersive experiences — will be able to draw customers from a wider geographic area who crave social interaction.

Food and drink – “Food is the new fashion,” some people like to say.  Successful malls are getting in on that action, incorporating popular dining options along with unique ones as a way of becoming destination locations.

Retail – Still a core aspect of malls, but with new twists, such as creating retail centers that are also learning zones that bring together consumers, retailers and entertainment.  McKinsey uses the example of a sporting goods store that also includes a fitness studio, or offline showrooms for online retail players.  More reconfigurable spaces that can be used for pop-up stores, special product launches and seasonal offerings are also options with potential.

Transportation – Getting to and from mall properties with ease is growing in importance, and where some creative thinking might go a way towards making some malls more attractive than others.

Technology – The more that malls can create a “seamless chain” between online and on-site shopping, the better their chances are for staying relevant in the new retail environment.  McKinsey posits a number of initiatives, such as creating “virtu-real” formats that provide consumers with a more interactive retail experience through the use of touchscreen navigation portals, virtual fitting rooms, allowing smartphones for e-checkouts, and click-and-collect services to help blend the offline and online shopping experience.

In sum, for shopping malls it means fundamentally rethinking their role — and then adapting their strengths to those of the virtual/interactive world.

If we check back in another five years or so, we should have a pretty good idea which tactics have been successful – and which mall properties, too.

Hopefully, the shopping mall closest to your home won’t look like the one at the top of this article.

Online customer care: Is retailer responsiveness going in opposite directions at once?

waiting for a responseAn interesting shift is happening in online customer care:  Response times are improving on social media while they’re getting worse in e-mail communications.

That’s what a new analysis by customer interactive software provider Eptica, as outlined in its 2015 Multichannel Customer Experience Study, is showing.

What Eptica has found is that retailers’ response times to answer customer queries posted on Twitter have improved dramatically in the past year.

Today, a customer query is being answered in an average time of a little over 4 hours.

That’s more than twice fast as in Eptica’s 2014 study, when the average response time clocked in at just over 13 hours.

In addition, the number of tweets successfully handled by retailers stands at around 43%, which is a full ten percentage points higher than what Eptica found in its 2014 study.

While more improvement is needed, the trend line is looking pretty good.  And it makes sense, since the “immediacy” of social media platforms is where many people believe a quick response should be forthcoming.

Crossing Lines

lines crossingBut while customer care response times via social media are improving, the opposite appears to be the case in e-mail customer service – and startlingly so.

Eptica’s evaluation shows that the average time it takes to respond to customer service queries submitted via e-mail is significantly longer than just a year ago.

Then, the average response time was ~36 hours.  Now, it’s nearly 44 hours – or nearly two days.

And while more e-mail customer service queries are successfully handled via e-mail when compared to tweets (~58% versus ~43%), that figure is worsening as well.  Last year, the percentage of e-queries successfully handled was ~63%.

More broadly, there continues to be a pretty significant disconnect between the “ideal” and the “reality” when it comes to online customer care and service.

Nearly all retailers provide an e-mail channel through which consumers may contact them.  But … less than three-fourths of them actually answer the e-mail messages they receive.  Moreover, the responses they provide – often automatically generated – don’t answer the customer’s question.

For a consumer with an issue or a concern, there’s little difference between getting no answer at all and receiving one that’s a “non-response response” in answer to a specific query.  Both seem to convey this message, “We don’t much care, because your issue just isn’t that important to us.”

Turning to social media, nearly 90% of major retailers have a presence on Twitter.  There, the “ignore” factor is even bigger than with e-mail:  ~45% don’t respond to their customers’ queries.

So while the social media figures certainly look better now than they did a year ago, it turns out there’s still a good ways needed to go.

Burgeoning social activity is no reason for retailers to take their foot off the gas pedal when it comes to supporting their customers via e-mail.  E-mail may not be the most exciting channel, but it’s the way millions of consumers prefer to communicate with retailers, companies and brands.  It’s counterproductive and foolish to diss them or treat them like second-class citizens.

In my own personal experience I’ve experienced the exact dynamics as described by Eptica at work – and I’m not afraid to name names.  TruGreen® Lawn Care did a stellar job of avoiding responding to my e-mail and phone queries … but it took less than two hours to get a response from someone at the firm after I posted a not-so-happy tweet about the company’s (lack of) responsiveness.

For me, the “public shaming” aspects of Twitter turned out to be far more of a squeaky wheel than the “private pleading” of an e-mail or phone message.

Do you have personal anecdotes of your own about the dynamics of online customer care?  Please share your thoughts and experiences with other readers here.

Getting Bunky with Retail Marketing

digital circularsAre the days of the lowly printed sales circular numbered?

Judging from the flurry of newfangled activity by key retail marketers, it would seem so.

This past week, CVS Pharmacy announced a complete makeover of its weekly circular.  The new digital version, dubbed myWeekly Ad, incorporates customized promotions focused on the products that are deemed of greatest interest to individual consumers.

The personalized sale items are determined from scanning the trove of customer buying behavior information housed in CVS’s ExtraCare Rewards database, which now numbers more than 70 million active users.

The myWeekly Ad circular determines which items to feature based on the products that each targeted consumer buys most frequently, along with showcasing deals on other products in related categories that may also be of interest based on the purchase history of each customer.

CVS’s digital circular provides other user-friendly options as well:

  • Consumers can scan the savings and rewards currently available to them, and print coupons or digitally send special offers to their card before visiting a CVS store. 
  • Shopping lists can be created, shared and sent to mobile devices. 
  • Shoppers can view their own purchase history showing all products bought at CVS previously going back 18 months.

And CVS is hardly alone in digitizing its MarComm materials.  Thanks to the continuing evolution of rewards cards and the voluminous customer data they can collect, new personalized circular announcements are coming with regularity now.

Here are some of the latest new developments:

  • Shoplocal is a Gannett-owned print and digital circular publisher.  It has gotten together with personalized video firm Eyeview to create a new digital ad promo piece known as V-circular.  This vehicle allows retailers and major brands to target customers on a local level based on geographic, demographic and behavioral data – along with factoring in “real-time” conditions like the weather.
  • National coupon clearinghouse Valpak has introduced a novel “augmented reality” feature for its digital circulars.  Simply pointing a smartphone toward the horizon will enable shoppers to see which nearby businesses are offering coupons.
  • Direct mail media and marketing services firm Valassis has unveiled Geo-Commerce Retail Zone, a new ad-targeting capability that applies transaction and behavior data from consumers to local store trading areas, enabling targeted advertising to be delivered cross-platform.

No one questions the fact that more and more information on individual consumers is being collected, archived and applied on an individualized basis.  Anonymity is fast becoming a quaint notion of the past.

Of course, this couldn’t happen without the cooperation and willing engagement of consumers. 

Considering the benefits – special discounts and even freebies on goods and services – is it any wonder that these programs have been able to grow in size and comprehensiveness over time?

What are your thoughts about the tradeoffs?  Feel free to add your thoughts to the discussion.

The Bad News Just Keeps Coming at JCPenney

JCP logo (JCPenney)
The name change from JCPenney to JCP was just one of many miscues made over the past 18 months during the tenure of CEO Ron Johnson — one of the most spectacular failures in recent retailing history.

The folks at JCPenney (JCP) just can’t seem to catch a break.

It turns out that the resignation of the company’s CEO in the wake of disastrous sales and profitability results caused by an ill-fated change in retail strategy was just the biggest clanger in a string of bad news.

Not only did the company’s sales plunge by $4.5 billion to around $13 billion, employment fell to only 116,000 workers — a huge drop from more than150,000 just a year earlier.

A centerpiece of the failed CEO’s retail strategy — opening boutique “stores within a store” — has been under constant fire, not least in the courts, where Macy’s has sued to prevent Martha Stewart-branded merchandise from being sold at JCPenney (citing a pre-existing exclusive sales agreement).

But there’s more.

We also have a report from STELLAService, an independent research company that gathers information on how well the nation’s Top 25 retailers are doing when it comes to delivering merchandise ordered online.

STELLAService has found that Staples, Zappos and Office Depot deliver merchandise the fastest.

And it’s fast all right:  these retailers achieve an average delivery time of one day.

On the other hand, who scored dead last? JCPenney. Its online division was the slowest of the 25 retailers, clocking in at an average delivery time of nine days.

That’s pretty miserable.

Is JCPenney filling the role that Montgomery Wards once played in U.S. retailing? Squeezed by big box discount stores on the one hand, and on the other by department store brands like Macys and Nordstroms the public considers far more exciting, JCPenney is trapped by its its own brand history.

No amount of “polishing the apple” in the mode of Apple’s fabulously successful retail branding can change the simple fact that the JCPenney brand name speaks to an older, middle-class demographic and psychographic audience.

Just-sacked CEO Ron Johnson has now experienced this brand reality first-hand.

One wonders how he could have missed it in the first place. Did his prior positions directing retail strategy at “go-go” brands Apple and Target blind him to the facts on the ground?

Can anyone who rubs elbows with real middle-class shoppers — even tangentially — seriously have thought that dropping store discount coupons would do anything other than turn off loyal customers?

There’s a reason coupon flyers continue to be so popular in the Sunday newspapers … and it has everything to do with millions upon millions of middle class and older consumers.

But unfortunately, JCPenney’s woes go much deeper than mere brand identity. Things appear to be seriously amiss on the operational side as well.

Any top retailer that can’t manage to deliver merchandise faster than an average of nine days deserves to have consumers snap their pocketbooks shut in response.

The next 18 months will tell us a good deal about where JCPenney is headed. Will the retailer end up regaining its brand strength … or will it die a slow death and ultimately be swept into the dustbin of retail history?

To me, the latter scenario seems more likely.  What makes it a particular shame is that the company has made so many unforced errors along the way.  Its own people, strategies and tactics have contributed as much as anything to its current plight.

Data-Driven Pricing: Biting the Hand that Feeds

Data-driven-pricingWe hear the claim all the time: Online shopping gives you the best opportunity to find the best pricing on goods.

But here’s the rude reality: Developments in “data-driven pricing” is putting the lie to that assertion.

Although it’s a turn of phrase that hasn’t received very much play – at least until now – data-driven pricing is the latest method by which sellers are hankering to extract every last dollar they can from buyers.

Think of it as the digital version of global zone pricing in the petroleum industry, wherein gas companies charge filling stations in well-heeled areas more for the exact same gasoline product that they sell for less elsewhere.

But in the digital realm, online retailers like travel sites are keeping track of customer IP addresses and recording past shopping activities in order to serve up higher prices to the people who are interacting with their sites.

These retailers are taking customer loyalty … and standing it on its head.

Using browsing and shopping data collected about each customer – including every time a site is visited via Google search results – retailers can determine in real-time if they can get away with charging a higher price.

And that may well be why you paid $75 more for your air ticket than the person seated next to you on the plane who also purchased their ticket online on the exact same day.

Now, this scenario isn’t universally true. When there are many retailers to choose from on a particular item, along with ample supply of a good, the consumer can usually hold out for the lowest combination of price, shipping (hopefully little or none), and sales taxes (hopefully none).

But on items ranging from airline tickets to concert tickets, the online consumer is often up against a stacked deck.

Believing that online shopping is the slam-dunk way to extract the lowest price from the retail channel is a notion that’s out of date at best … and naïve at worst. Simply put, data-driven systems have gotten a whole lot “smarter.”

Some consumers might respond by hesitating before buying – no longer assuming that the price they’re being offered is the “lowest available” one.

So here’s a question: When consumers become more cautious about buying online, who’s hurt more?

The consumer? Or the suddenly smarter retailer?

Retailing Comes Full Circle … Courtesy of Amazon

Amazon’s been busy revolutionizing the world of retailing for well over a decade now. So what’s its latest trick? Bricks-and mortar stores.

Yes, you read that right. Amazon’s going into the physical retail game.

What’s behind this seemingly bizarre turn away from 21st century online retailing back to something that seems almost quaint? It’s pretty fundamental, actually. There are many products that consumers find easier to purchase after being able to interact with them physically and personally.

From apparel to electronics to sporting goods, sometimes there’s no substitute for the visceral, sensory experience. Online images, videos, product ratings and customer reviews all have their place, and Amazon doesn’t see those aspects becoming any less important over time.

Indeed, the Amazon store concept builds on all that, attempting to create a multi-channel retailing structure that truly serves the needs to consumers whenever and however they wish.

If what Amazon is developing is “just another” retail shop, it’ll be much ado about nothing. But it’s more likely that Amazon will try to create a retail experience in the manner of an Apple store – creating an environment that has its own special personality and attracts shoppers because of it.

Amazon may generate a good deal of buzz about its newest venture and the novelty of it all. Good for them. But the Amazon initiative also speaks to a more fundamental truth: reminding us that the marketplace is made up of human beings, not machines. People are social … and sometimes we hunger for more than just looking at an image on a computer screen.

If Amazon can successfully integrate its new physical stores concept with its phenomenally successful online retail business, it’ll be another step forward in the creation of truly integrated, multi-channel retailing.

It’s good to see that people are at the center of the model – literally and figuratively.