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10 Facts You Didn’t Know about China’s Super Consumers

November 11, 2014

10 Facts You Didn’t Know about China’s Super Consumers By Tompkins International Staff

China’s super consumers are the biggest and most important consumer class in history. In his new book China’s Super Consumers: What 1 Billion Customers Want and How to Sell it to Them, Tompkins International Principal Michael Zakkour explores the extraordinary birth of consumerism in China and explains who these super consumers are. Take a look at 10 interesting insights from the book:

  1. No matter what products or services you are selling, you cannot succeed in China or with Chinese consumers without first mastering culture, history, language, and philosophy.
  2. There is no “how to succeed in China” formula. Every company must start with the above to determine strategy, then implement structure and adjust every six months.
  3. China is not a “market,” but rather it is comprised of 22 distinct market clusters. The old model of marketing to Tier I, Tier II, and Tier III cities no longer applies.
  4. China has the second highest number of billionaires, only surpassed by the US. It also boasts 2 million millionaires and the world’s largest middle class at 350 million (will grow to 500 million in the next 5-10 years).
  5. China went from Sandpaper to Sephora and Feudalism to FENDI in 30 years. Consider this: in the late 1970s, Chinese women used sandpaper on their faces because there was no makeup. French cosmetics retailer Sephora now has more than 250 outlets in China. 
  6. There is now a “China Global Consumer Demographic.” Companies must have a “China-US-World” strategy to engage them everywhere, not just in China.
  7. China has more e-shoppers (400 million) than the US has people (320 million).
  8. Alibaba, the world’s largest e-commerce company, generated $100 billion more in revenue than the second and third largest e-commerce companies (Amazon and eBay) combined in 2013. (Click here to watch The Alibaba Effect)
  9. The Chinese are thirsty—they drink more beer and wine than any country on Earth and have made China Starbucks’ #2 market in the world.
  10. Companies must rethink their global, regional, and local supply chains for China as the country is now a market as well as a production hub.

Click here to order your copy and visit www.chinasuperconsumers.com to learn more.

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What’s the Big Deal: 9 Most Interesting Alibaba Facts

November 10, 2014

9 Most Interesting Alibaba FactsBy Tompkins International Staff

Alibaba made a big splash with its recent IPO and subsequent publicity. But that’s not the only reason this company is such a big deal. The more you learn about Alibaba and its leader Jack Ma, the more fascinating the story really is.

We’ve outlined nine of the most interesting facts about Alibaba, with more happening on a regular basis. Let’s check them out:

  1. Alibaba boasts 81% of online business in China, also known as the world’s largest e-commerce market.
  2. In 2014, Jim Tompkins estimates that U.S. e-commerce with reach $475B, China will be at $540B, and Alibaba will be at $450B. Alibaba alone will nearly equal all e-commerce in the U.S. in 2014.
  3. By 2020, we believe China’s e-commerce will be larger than that in the U.S., UK, Japan, Germany, and France combined. That is the power of China’s super consumer. Order your copy of Michael Zakkour’s new book, China’s Super Consumers, to find out why we think this will be true.
  4. We predict that Alibaba will be the world’s largest retail platform next year. Yes, bigger than Walmart.
  5. Alibaba is the fastest growing e-commerce company in the world in the fastest growing market. The company’s growth rate since 2003 has approached 120%/year and has grown at a rate of 70% between 2009 and 2013.
  6. In the 24 hours of “Singles Day” (11/11/2013), Alibaba handled $5.75B in sales. This was 80% more than 2012 and 3 times what U.S. retailers sold on Cyber Monday. Tompkins’ prediction for 2015 “Singles Day” is $8B in sales.
  7. Last year UPS and FedEx handled 5 billion packages. In China, Alibaba spurred the delivery of 5 billion packages.
  8. Alibaba is profitable with 2013 revenue of $8B–a profit of $3.6B for a profit margin of nearly 45%.
  9. Alibaba’s September 2014 IPO was the largest IPO in history.

Is Alibaba more than you thought it was before reading this blog? Keep the bigger picture in mind of how significant this company is to retail and e-commerce. To learn more, watch The Alibaba Effect video.

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Why Have 80,000 People Watched The Alibaba Effect?

November 6, 2014

Alibaba-Effect-Video-Goes-Over-80kBy Jim Tompkins
CEO, Tompkins International

More than 130 days ago we released the video The Alibaba Effect. Yesterday, the video surpassed 80,000 views. Yes, 80,000!

Why? The majority of business videos do not get 80,000 views in a little over 130 days. If you search Alibaba or Alibaba.com, you’ll find only a handful of videos with more than 80,000 views and many of them were released years ago.

So the question is: Why have 80,000 people watched this video? We went straight to the source and asked viewers. Here are the top 8 reasons:

  1. I had never heard the name Alibaba and I wanted to understand what they do.
  2. I saw the 60 Minutes show on TV and I wanted to learn more about Alibaba.
  3. My co-worker said the video was full of startling facts that he felt I needed to understand.
  4. I was looking at doing business in China and a search of online businesses in China led to this video.
  5. A friend felt this was a big deal and suggested I needed to see it.
  6. I read an article about Alibaba and the article said if you were in retail I needed to watch this, so I did.
  7. My boss sent me a note saying: “Watch this video and then let’s discuss.”
  8. I heard a speaker at a conference mention the video and so I wanted to see what all the excitement was about.

Very interesting!  I would love to hear your feedback and why you watched—or are going to watch—the video. Let me know in the comments section below or tweet me @jimtompkins.

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Five Retail Industry Statements that Missed the Mark

November 5, 2014

e-commerce fulfillment centerBy Jim Tompkins
CEO, Tompkins International

There was a brief news article last week (read it here) about the future opening of an e-commerce fulfillment center. What made the article jump off my computer screen were the uninformed statements made about American retail business. Let’s take a look:

  1. On the third line, there is a quote from the Governor of Illinois: “We are in the middle of the United States, with excellent transportation, and great air and rail connections.” The Governor does not seem to grasp the e-commerce mandate of “Get local” or the reality that the Illinois-based fulfillment center has nothing to do with air or rail transportation.
  1. The next quote is from a Senator from Illinois: “This is also our history — it’s Sears, Montgomery Ward, every retail giant comes here because they understand Chicago is the focal point when it comes to retail operations.”  The Senator is actually suggesting that a reason for locating a fulfillment center close to Chicago is so you can follow in the footsteps of the “retail giants” Sears and Montgomery Ward.
  1. Quoted from lines 10 and 11: “The trends include the reshoring of manufacturing to the US…” is a reason to locate the new fulfillment center “into the middle of the US…”The “reshoring” thing has not been a huge success. Yes, some companies are bringing manufacturing “back” to the US, but more are moving manufacturing offshore or via nearshoring to Mexico. Nevertheless, this has nothing to do with a fulfillment center in the middle of the US.

There were several other areas that missed the mark about e-commerce:

  1. E-commerce sales only being only 3 to 10% of total sales, thus meaning e-commerce is not that important.  Shopping is not about online or in-store, but omnichannel. The reality is that 94% of all US retail sales start online. So to say that e-commerce is not very important is far from reality.
  1. Similarly, the next statements about retail were made recently in a report entitled “On Solid Ground: Brick-and-Mortar Is the Foundation of Omnichannel Retailing.” The report includes mind-blowing statements such as:
    • “Physical stores remain the foundation of retailing.”
    • “Physical stores are clearly customers’ preferred shopping channel and a place where the most significant consumer and retailer value continues, and will continue, to be created.”
    • “The future of retail is solidly anchored in the brick-and-mortar channel.”

Let’s be realistic about changes happening in retail and get informed on the consumer expectations facing the retail industry today. Today’s consumer won’t wait for anyone to catch up.

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Alibaba‘s Third Quarter Numbers Show Major Growth – Are You Surprised?

Alibaba Profitable GrowthBy Jim Tompkins
CEO, Tompkins International

Alibaba reported its third quarter results yesterday. The results surprised some, but then again, many Americans still do not understand Alibaba. To better understand the e-commerce powerhouse that is Alibaba, I recommend watching our latest video The Alibaba Effect.

Alibaba’s results should not be a shock. The company has a firm understanding of the concept of Strategy-Structure-Implementation. Just take a look at a few highlights of the third quarter results compared to the third quarter of 2013:

  • Sales Growth: Up 48.7%
  • Number of Customers: Up 52%
  • Revenue Growth: Up 53.7%
  • Adjusted Net Profit (non-GAPP as one-time costs are removed): Up 15.5%
  • Mobile Revenue: Up 10 times
  • International Sales: Up 98.8%

The first quarter after the world’s largest IPO is over, and the results presented indicate huge growth.

And just imagine what is to come—November 11 (Singles Day) is in the next quarter.  As Alibaba’s numbers continue to climb, watch The Alibaba Effect video and create your game plan. You need to grasp the power of Alibaba as your business “rides” this wave.

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Smoke and Mirrors – What is the Actual Discount?

October 20, 2014

Freight Shipping Costs

By Tony Nuzio – Guest Blogger
Founder/CEO, ICC Logistics Services, Inc.

For years now the transportation industry has been using the “Retail Sell” to attract customers. Do you know what we mean by the “Retail Sell?” Does this sound familiar? 

“Buy 1 at regular price and get two free!” Or on the TV Infomercials “But wait, if you order within the next 10 minutes we’ll double your order at no additional cost, just pay the additional shipping and handling charges!” These are just two examples of how we, as consumers, are constantly being bombarded by the “Retail Sell.” The “Retail Sell” attempts to convince the buyer they are receiving a great deal and not to pass it up.

Well, not much is different for transportation service providers who use their version of the “Retail Sell”, (which we call the “Discount Game”), to attract their customers. Today, it’s not uncommon for shippers to be receiving discounts in the high 80% range. Wow, that’s impressive….maybe.

You see if the carriers are offering discounts at these high percentages, one has to question just how high are the base rates their carriers are discounting.  How else can these carriers afford to offer these huge discounts? Unfortunately, many shippers just accept these discounts as being a great deal for their company and the truth is; they very well may be, but wait, there’s more.

There is much more shippers should be doing to make sure they fully understand what their actual discounts are and, more importantly, what they should be.  There are several reasons for this: 

  • Most shippers are not aware of the fact that each carrier publishes their own base rates to meet their individual revenue needs. So comparing discounts from one carrier to another carrier is of no use. And, shifting business to a carrier with a higher discount, may actually cost the shipper more money in the long run.
  • Secondly, each carrier establishes their own fuel surcharge percentages to again meet their individual financial needs. In fact, some carriers add the fuel surcharge to the gross rate, (before the discount is deducted) and some add the fuel surcharge to the net rate, (after the discount has been deducted) these calculations can result in a huge difference. And, carriers also begin to assess the Fuel Surcharge at different Diesel Fuel Price per Gallon points.
  • In addition, each carrier establishes their own Accessorial Fees for the ancillary services they provide. Again, the differences in these fees from carrier to carrier can be significant.

So how can a shipper be sure they are getting “The Best Deal” for their company? The only true way is to benchmark their rates against the competing carriers in their respective service areas. Shippers can attempt to do this by creating Requests for Proposals from competing carriers to see how each carrier’s rates stack up against the competition. But this too may leave the shipper wondering, do they really have the “Best in Class” rates for their specific business.

To properly perform this analysis, shippers really need to work with transportation and logistics consultants and freight invoice auditors who have extensive knowledge of carriers’ pricing structures. Firms that maintain huge data bases of carrier rates and fees that can provide the shipper with a comprehensive benchmarking analysis to ensure they obtain the lowest possible rates for the services they require to run their business. An actual case in point is a manufacturing client of ours that had a pricing agreement that provided a 78% discount for all of their LTL shipments. After we assisted our client in re-negotiating their LTL contract, the manufacturer’s LTL freight costs were reduced by a whopping 50% utilizing the same LTL carrier the manufacturer had been using for several years. The client could not obtain “Best in Class” rates on their own; they needed our expertise to get them there. 

One final point; a shipper should NEVER sacrifice service for lower rates. If the carrier(s) cannot provide the service the shipper requires, they should not be part of any benchmarking analysis. This is another critical area the transportation and logistics consultant can assist the shipper with. An extremely valuable service they may not be able to obtain on their own.   

Please take a moment to check out ICC’s Blog @ http://www.logisticsstrategies.com to check out previous articles.

Reprinted from ICC Logistics Services, Inc.with permission.
Photo credit: Thomas Hawk

What 3PLs Need to Know about Alibaba

October 16, 2014

By Tompkins International StaffThe Alibaba Effect: What Today’s 3PLs Need to Know

You’ve been hearing a lot about Alibaba lately. The Chinese e-commerce giant has burst on to the global scene and it is poised to make a huge impact on today’s marketplace. What does this all mean for third-party logistics providers (3PLs)? What opportunities and challenges will retailers and consumer product manufacturers face with the changing omnichannel scene?

Our new white paper, The Alibaba Effect: What Today’s 3PLs Need to Know, details key points that 3PLs must consider when planning their e-commerce strategy. It also explores what makes Alibaba different from other e-commerce giants.

Alibaba gives merchants the opportunity to reach thousands of new customers. As online and mobile e-commerce continues to skyrocket, more retailers will need 3PL services, and they will need new options for fast and efficient fulfillment and delivery. This creates a tremendous opportunity for 3PLs who have their sights on the future.

It’s clear that Alibaba has changed today’s e-commerce marketplace. Today’s 3PLs need to adapt in order to protect existing business and take advantage of new business opportunities. Download the new white paper for more exclusive insights into how 3PLs can endure and grow during this e-commerce evolution.

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For 3PLs, New Market Trends=New Opportunities

October 10, 2014

3PL-New Market Trends

By Tompkins International Staff

Big opportunities lie ahead for today’s third-party logistics providers (3PLs).

These new opportunities (and challenges, too) are a result of evolving market trends such as omnichannel and personalization. In turn, these market trends drive today’s supply chain trends (think: cloud computing or speed of delivery).

All of these trends are affecting how 3PLs and shippers work and function. There is a sharper focus for 3PLs and shippers to be able to deliver via omnichannel, inventory flexibility and agility, faster delivery time, and customer-centric services.

The current rising trends mean new opportunities, and it’s time for 3PLs to make some critical changes. According to new research by Tompkins Supply Chain Consortium, 64% of 3PLs surveyed say reinvention is occurring in the industry.

In addition, today’s top three challenges for 3PLs are: 1) competitive rate pressure, 2) profitability, and 3) the need for information sharing between 3PLs and customers.

Find out more about changes in the 3PL industry by downloading Tompkins Supply Chain Consortium’s latest report, “Reinventing the 3PL Model: Trends, Challenges, and Opportunities.”

What do you see as the biggest challenge(s) for 3PLs? What new capabilities and services do you think should be considered for the future?

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Holiday 2014: How to Avoid Last Year’s Disaster

October 2, 2014

By Jim Tompkins
CEO, Tompkins International

Holiday 2014 - How to Avoid Last Year’s DisasterIt’s no secret that Holiday 2013 was a disaster for final delivery. The debacle was the result of the perfectly brewed storm, combining forces from inadequate delivery capacity, lack of discipline at several points in the supply chain, over-promised delivery times by retailers, and poor weather conditions across the U.S.

Are we fully prepared to tackle Holiday 2014 in a better way? Well, to put it simply, I’m not certain. Consider where we stand as of today:

  • Delivery capacity: E-commerce has continued to grow in the double digits this year. The Alibaba Effect (watch the video here) is resulting in even more e-commerce growth, and additional capacity added by national parcel carriers does not even cover last year’s shortcomings. The final delivery capacity problem for Holiday 2014 does not result in a solution to the Holiday 2013 problem. Unless the rest of this “perfect storm” subsides, the problem will repeat this year.
  • Lack of discipline: There is hope that nationwide parcel carriers have better discipline in 2014 than 2013, but this is not yet clear. Parcel carriers need to say no sometimes, rather than accepting parcels that cannot be delivered to fulfill the customer promise.
  • Over-promised delivery times by retailers: We are hopeful that retailers have better control over this issue for Holiday 2014 than last year, but it remains unclear. 
  • Bad weather: Unfortunately this is out of everyone’s control, so we cannot make any kind of educated prediction at this time.

It is unclear whether we have adequately addressed the Holiday 2013 disaster, so what can retailers do at this point to avoid a Holiday 2014 disaster? 

The path forward is different for pure play online retailers than it is for omnichannel retailers. But the solutions both have to do with not over-promising. More specifically, pure play online retailers must adopt an order entry cut-off date for Christmas delivery that is realistic. The date that works depends upon how well the retailer has “gotten local” to the customer’s location. Of course, all order entry cut-off date scenarios are dependent upon distance.

If the retailer has only one fulfillment center in the U.S., the cut-off date for delivery on Christmas Eve must be Friday, December 19. If the retailer has two or three fulfillment centers, the cut-off date can be Saturday, December 20. If the retailer has four or more fulfillment centers, the cut-off date can be Sunday, December 21.

Omnichannel retailers fall into two categories, both of which depend on how “local” they have gotten with their fulfillment. The first category is retailers who do a good job with store fulfillment. For products that are picked from the store, the cut-off for click-and-collect is December 24 at noon. For products that are picked from stores and shipped to customer, the cut-off is December 22 or 23 at noon, depending upon the local carrier. Products not picked from the store but picked up by click-and-collect, the cut-off is one day quicker than for the pure play retailers. Product not picked from store but sent to the customer has a cut-off that is the same as for pure play retailers.

The second category is retailers who do not do a good job with store fulfillment. They follow the same as pure play online retailers.

If you are a retailer, it’s critical to recognize the importance of getting local. For omnichannel retailers, it’s all about store fulfillment. This will be true in dictating cut-offs going forward into Holiday 2015 and beyond. But for retailers who have not done well with getting local, the only tactical solution that can be impactful for Holiday 2014 is to select certain products for store fulfillment and place sufficient inventory of these products into the stores to approximate getting local. I’m crossing my fingers for good weather this Holiday 2014 for the people who have not adequately planned for being local and store fulfillment.

What is your Holiday 2014 plan? Tell me in the comments or tweet me @jimtompkins.

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A B2B Question from the Floor (that Almost Knocked Me to the Floor)

October 1, 2014

globalization

By Jim Tompkins
CEO, Tompkins International

I was speaking at a large conference about the major impacts of globalization, technology, and supply chain on commerce. At the beginning of my presentation I defined commerce to include retail, consumer products, wholesale, and distribution.

At the end of my presentation, someone asked: “I really understand what you are saying for B2C, but is there anything happening in B2B? Is anything you said relevant for B2B?” 

My first reaction was, Good question, I really need to help B2B people grasp the magnitude of what is coming their way.

But then the words “is anything happening” and “anything relevant” burst into my mind. To be honest, I was speechless for the first time in many years. I answered the question by explaining how B2B is in as much of a transition as B2C, and everything in my presentation was relevant to both B2B and B2C.

Obviously I was totally floored by this question. Over the next few days, I contemplated my response. Now that I’ve (figuratively) gotten up from the floor, I’d like to share what I think is the best answer to that question.

The B2B space is undergoing massive transformation as a result of major changes in customers, distributors, and technology. In fact, every aspect of B2B is changing and B2B players who are doing the same things today as they did 5 years ago will become obsolete.

The first area in B2B where major changes are occurring is with the B2B customer. Today’s B2B customer demands low prices, great experience, very broad selections, and convenience that were considered unachievable only a few years ago:

  • Low prices: B2B customers have traditionally not been as sensitive to price as B2C customers. But with the power of the internet and the large number of manufacturing companies selling online, today’s B2B customer is shopping online for prices. A recent survey showed that 61% of B2B customers believe product price is extremely important and 31% think it is very important. A total of 92% of B2B customers feel that price is at least very important. If 92% of all B2B customers find their industrial distributor total delivered price is significantly higher than the manufacturer’s price, they will buy directly from the manufacturer (which was not even an option 5 years ago).  In addition, most of today’s B2B customers have more than one preferred B2B provider and more than one-third of all B2B customers shop online outside of their existing supply base to ensure competitive pricing. Contrary to traditional B2B thinking, low total delivered price is a critical factor in B2B buying decisions
  • Great experience:It’s clear that today’s B2B customers have very high expectations of their suppliers. This includes everything from real-time product availability and enhanced search to improved product descriptions and streamlined checkout/invoicing.  The B2B buying experience includes mobile ordering, ability to see estimated delivery dates, order status, order history, repeat ordering, personalization, workflow management systems and transparent shipping, and return and restocking fees.
  • Broad selection: Today’s B2B customers demand a selection of products that is both broader in variety and deeper in offerings. One of the major drivers of B2B mergers and acquisitions is the buying of distributors who offer different products and then integrating these distributorships to offer a broader selection to customers. Another way to achieve a broader selection is by acting as a marketplace. (To understand more about marketplaces, watch the video The Alibaba Effect.) Marketplaces place product offerings on your site for sale even though you do not have any inventory of these items. Orders for these “stockless inventory” items are simply passed to your marketplace partner who drop-ships the products to your marketplace customers. These stockless inventory items can allow you to literally offer an “endless aisle” of product offerings without increasing inventory.
  • Convenience: Customers generally equate “convenience” with the ability to order online and the speed at which they can obtain their order. Recent research shows that 67% of all B2B customers believe the ability to order from a website is either extremely or very important. B2B customers are like B2C customers in that 25-30% is willing to pick up their order. For both pickup and delivery of orders, the speed of delivery is facilitated by having by the “Get Local” concept of having branches near the customer’s location. In fact, 92% of all B2B customers say having a physical location where they can easily purchase or pick up product is extremely or very important. In addition, 85% of all B2B customers say that having an accurate estimate of the delivery window is extremely or very important.

In addition to B2B customers, industrial distributors have also undergone massive transformations. Just a few years ago, industrial distributors were predominately family-owned businesses built on decades of service and personal relationships. The industrial distribution industry has been highly fragmented, with the sales representatives considered the most important employees who help guide the B2B customer to the products they need. However, due to a combination of the customer wanting to deal with fewer industrial distributors and mergers and acquisitions among industrial distributors, traditional family-owned distributors are becoming a rarity.

Research shows that 68% of all B2B customers prefer doing search on distributor websites and only 58% of all B2B customers feel having that a sales representative is extremely or very important. In the 2013 white paper “Industrial Distribution at a Crossroads,” we presented the reality that for industrial distributors to continue to be successful, they need to adopt the right strategy, the right technology, and the right supply chain. Failure to do so leads to turmoil and eventually bankruptcy.

Let’s not forgot about the changes in technology too. B2B customers have forced industrial distributors to adapt technology and the industrial distributors themselves have understood and embraced this need for technology. B2B customers rely on technology, from the initial research on what they want to buy all the way to the delivery of their desired products. There is no aspect of creating a happy B2B customer that is not driven by or supported by technology.

A recent UPS report on B2B purchasing Insights concluded that e-commerce needs to be embraced (but not exclusively). Suppliers who are not yet online risk being excluded from consideration by buyers at all spending levels. While traditional selling methods should not yet be abandoned, it is difficult (if not impossible) to compete if you are not present on a platform where the majority of buyers are spending their budgets.

So let’s ask the question again: Is anything happening in B2B? You bet. In fact, as more people grasp the transformational implications of e-marketplace Alibaba, we are left considering the real question: Is there anything in B2B that is not changing?

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