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The Tompkins International Blog

Parcel Rate Increases Defying Logic?

January 22, 2015

By Tony Nuzio, Founder & CEO ICC LogisticsParcel Rate Increases Defying Logic
& Jim Tompkins, CEO Tompkins International

At FedEx Less is Now More!

Parcel shippers are still trying to digest the impact of the huge freight rate increase implemented by both UPS and FedEx by changing the way they price ground services for packages measuring less than 3 cubic feet. The packages are now being charged on a dimensional weight basis for the first time ever. And now some parcel shippers will have to also assess the impact of the next significant rate increase based on FedEx’ announcement that their fees for Fuel Surcharges will increase on February 2, 2015.

What’s so strange about this latest increase being implemented by FedEx is that fuel prices have been dropping significantly for both diesel and jet fuel over the past several months. Fuel prices are currently at their lowest level since May of 2009. Typically, when fuel prices drop the fuel surcharge percentages also drop, resulting in lower fuel surcharge costs for shippers and lower carrier revenues. Many oil industry experts are predicting that fuel prices will remain low for the foreseeable future, (whatever “foreseeable future” means.) And, that appears to be precisely why FedEx is implementing this increase.

Another interesting fact is that this increase is being put into effect without any press releases to the public; to date there has been no specific notifications to FedEx’ customers. We’re not insinuating that FedEx is trying to “pull one over” on the shipping public, but they surely know this is not going to be a very popular move among their shipper customers.

The current Fuel Surcharges were initially instituted as a “temporary” fuel surcharge adjustment back around 1999 to compensate the freight carriers for the sharp rise in fuel costs. 15 plus years however is hardly a temporary situation and we do not see any indication that fuel surcharges will disappear anytime in the future. Another bone of contention is the fuel is a major part of parcel carriers’ business and therefore fuel costs have to be an integral part of the parcel carrier’s rate structures. If that is true, then is the assessment of fuel surcharges on top of the base rates, the annual General Rate Increases a case of “double dipping?” That’s a question shippers have been asking for quite some time now.

The shipping public and their customers have had to bear the brunt of these fuel adjustment increases over these past 15 years as fuel costs have climbed significantly. Now that fuel prices are taking a dip for the first time in a very long time, FedEx is asking its customers to dig deeper into their pockets so that FedEx does not lose the significant revenue it generates from assessing these fuel surcharges. You have to also consider if this is FedEx’ way of ridding itself of less profitable or unprofitable business.

As you can see from the detailed charts below, FedEx is modifying their Fuel Surcharge scales so that the Fuel Surcharge will now kick in at a lower fuel cost per gallon. This increase has many folks wondering if UPS and other parcel carriers will take a similar stance and increase their Fuel Surcharge tables to bump up their revenue as well.   For now there is no indication they will, so stay tuned. Only time will tell.

If you would like some help with assessing your parcel spend and contract ICC Logistics and Tompkins International are available to advise you.

Parcel Rate Increases Defying Logic

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Supply Chain Network Design: Picking the Right Tool for the Job

January 21, 2015

By Bruce TompkinsPicking the Right Tool for the Job
Partner

Supply chain network design activities are essential for keeping supply chain operating efficiently and effectively.  The days of doing a network design every two or three years is quickly being replaced with a need for frequent, smaller scoped design activities to fine tune performance.  Clearly a key point of this process is picking the right tool or tools for evaluating the network.

I sometimes find myself shaking my head in disbelief when I hear about hundreds of hours being spent collecting and analyzing data for a network design that just doesn’t need that kind of detail.  That is not to say that all network designs can and should be done on the back of a napkin, but common sense must win out and the right tools need to be used for the network being studied.

Ask yourself some simple questions to understand where in the continuum from napkin to advanced simulation model is right for your network design.

  • How complicated is the network design?
  • How many of the puzzle pieces are in effect fixed due to cost or service or capital needs?
  • How well does the past historical transaction data represent the future?
  • What are your real objectives for the network design?
  • When did you last do a network evaluation covering the same part of the supply chain and what were the results?

There are certainly more questions that we could ponder, but hopefully you get the point.  Completing a network design and what tools are used are an important decision.  Make informed decisions about the right level of tools for your network design.  Experts like those at Tompkins International can be your guide for these decisions.

 

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Breaking Down the Future of Internet Marketplace Success:

January 15, 2015

Looking in the Rear View Mirror to See What is in Front of You

Future of Internet Marketplace Success

Breaking Down the Future of Internet Marketplace Success

By Jim Tompkins
CEO, Tompkins International

To start, here are six indicators of Amazon’s success that can predict the future of retail:

  1. The number of units sold on the Amazon marketplace doubled in 2014.
  2. Amazon marketplace sellers sold 23% more units on Cyber Monday 2014 vs. the same day in 2013.
  3. In 2014, Amazon marketplace sellers from over 100 countries sold products to customers in 185 countries.
  4. Chinese sellers on the Amazon marketplace grew 80% in 2014.
  5. Holiday deals offered by Amazon marketplace sellers increased 250% in 2014.
  6. Units sold on Amazon Marketplaces in 2014 increased 400% over 2013.

So, what does this tell us?

  • Items 1 & 2 tell us that Marketplaces REALLY WORK.
  • Items 3 & 4 tell us that Cross Border Trade REALLY WORKS.
  • Item 5 & 6 tells us that the promotional environment of holiday 2014 was CRAZY.

I find this all very interesting since these are the exact same points that I have made over and over again when discussing Alibaba.

If you look at the most successful internet companies in the US and China you see the same three things:

  1. Marketplaces are a big deal, a really BIG DEAL.
  2. Cross border trade is a big deal, a really BIG DEAL.
  3. Promotions can be huge to an organizations growth and profitability.

To be successful you must turn these factors in assets. The only way to make this happen is to create a plan your firm. To do this, you MUST have:

  1. A PLAN FOR MARKETPLACES
    1. What marketplaces should you sell your products?
    2. What products from others should you place in your marketplaces?
    3. How should you handle the supply chain for your marketplaces?
  1. A PLAN FOR CROSS BORDER TRADE
    1. In what countries should you sell your products?
      In stores
      Online
      On marketplaces
    2. In what counties should you sell through others?
    3. How should you handle the supply chain for your cross border trade?
  1. A PLAN FOR PROMOTIONS
    1. Promotions are marvelous when done correctly, but can destroy a brand when done poorly
    2. Promotions must contribute to Profitable growth, not to unprofitable growth
    3. Promotions need to be done in the context of an omnichannel strategy and not as a knee jerk reaction to competition

So Amazon and Alibaba are both doing many things well.  We need to learn from these giants and put forth a plan for marketplaces, cross border trade, and promotions that allow us to grow both our top and bottom lines.

 

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Location is Critical for Same Day Delivery

January 13, 2015

What Works in New York City Only Works in New York CityLocation is Critical for Same Day Delivery
(Please no emails about how great or how terrible NYC is, NOT my point)

By Jim Tompkins
CEO, Tompkins International

I did not do any research on this, but I think the first thing Dorothy from The Wizard of Oz said upon waking up in Oz was “I don’t think we are in Kansas anymore, Toto.” It is my view that if Dorothy had instead landed in New York City (NYC) she would have said they same thing. My point is that customer service is dependent based upon location. In fact, I recall:

  • Writing a blog saying that NYC was not in Wyoming (and I did get emails from folks saying I should not be negative about Wyoming)
  • Giving several speeches where I discussed the three types of customers;
    • Customers who live in the Top 40 Metropolitan Statistical Areas (MSAs) live in major cities and make up 50% of US population
    • Customers who live in the next 60 MSAs live in big cities that are 17% of the US population
    • Customers who do not live in the top 100 MSAs that are small rural cities and make up 33% of the US population

The point is that I have recently discovered several articles about the “new on-demand customers” of NYC being impressed with eBay, Deliv, Uber, Amazon, etc. All I can conclude is the folks writing these articles do not live in New York City. I mean WOW! There are thousands of companies that offer same-day delivery and, even “instantaneous delivery” in NYC. Of course there are the flowers, gifts, wine, breakfast, lunch, groceries, books, camera, etc. folks who have done this way before e-commerce, but now there is nothing you can’t get in NYC “on-Demand.” So, the relevance of the NYC discussion about “instantaneous delivery” escapes me. Let me be clear, the population of the New York City MSA is over 20 million people, with over 8 million living in NYC – What happens in NYC or the NYC MSA has no impact on the rest of the US. So:

  •  If people desire “on- demand delivery” in NYC, then it has no impact on what is desired by other customers in the US
  •  If companies can be profitable doing “on-demand delivery” in NYC, then it has no impact on the economics of “instantaneous delivery” in the rest of the US
  •  Whether companies offer “On-Demand Delivery” in NYC or not has no impact on what these same companies do elsewhere in the US.

So, we need to be clear, NYC is not a relevant leading indicator of anything “on-demand driven.” New York City and the NYC MSA are unique and what works in NYC and what does not work in NYC has nothing to do with Kansas, Wyoming, Chicago, Oz, or anywhere else.

The bottom line is you need to be very careful when reading the articles that try to translate some aspect of business in NYC to business elsewhere. This did not work before e-commerce and it will not work after e-commerce.  The strategy to be successful in business in NYC and in e-commerce in NYC is different than anywhere else and any attempt to translate “business lessons” from NYC to the rest of the US will not work. Dorothy would have understood this the minute she woke up in New York City. New York City is not in Kansas.

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Getting To the Truth About Alibaba: Three Whoppers and a Good One

January 7, 2015

By Jim TompkinsGETTING-TO-THE-TRUTH-ABOUT-ALIBABA
CEO, Tompkins International

Three of the leading news and business publications recently wrote related stories on Alibaba. Between November 30 and December 22 three articles on Alibaba were published that are just plain wrong. I let the first one pass, I took exception to the second, but now with the third one I just can’t hold back.

In brief:

  • On November 30th, a column on China’s Cyber Monday fake sales claimed that Alibaba’s sales numbers for 11/11/14 were fabricated. The author believes that the Alibaba Singles Day numbers were inflated through a buy and immediately return scheme, and “Outright fakery.” The only source in this article is a research assistant at a capital firm and the report cited is nowhere to be found.  So, in my view, the sales as reported by Alibaba of $9.3 Billion during China’s 11.11 Shopping Festival are accurate and this article is incorrect.
  • In another column, published on December 1st, a lobbying group of big-box retailers said that Alibaba “may decimate local companies unless Congress closes tax loopholes for online retailers.” Don’t forget: 1) it has been the big-box retailers that have been putting main street retailers out of business, and 2) Alibaba is not a retailer. So, I understand that big-box retailers want to place a tax on internet sales, but to say that Alibaba is putting local companies out of business is just baloney.  
  • The one that pushed me over the top was a December 22nd piece on Alibaba’s Tmall Global Site. The writer clearly confuses Tmall with Tmall Global. To set the record straight, Tmall is a highly successful website for companies who are registered as a business in China (Chinese and non-Chinese), whereas, Tmall Global is a site for companies who are not registered as a business in China. The article states that Tmall Global “could be a black eye for China’s best known internet company.”  The priority for Alibaba is Tmall. They began Tmall Global as a secondary route to enter the Alibaba ecosystem last February, but they also have other secondary routes through ePass, Borderfree, ShopRunner, and others. Also more than 100 overseas brands are working to set up stores on Tmall Global. Sales on Tmall have soared since being launched. So, Tmall Global is not a black eye for Alibaba, just a lower priority secondary path.

Just before Christmas, a story was published by a host of leading news and business publications that accurately reported on how Alibaba took down 90 million counterfeit products before its IPO.  However, several major sources have yet to report on how Alibaba spent more than $160 million in the last two years to fight fakes. So, credit goes to most major publications on this positive story on Alibaba’s pursuit of counterfeit products.

My concern with the three inaccurate claims listed above has to do with educating business executives on the importance of globalization, technology, and supply chain. These three megatrends are changing how business works. As a leader of analyzing these trends, I see Alibaba as a critical company to follow and feel it is important to do so accurately.  To help executives understand the impacts of Alibaba, you need to see the The Alibaba Effect video. You can count on me to continue to point out the whoppers, the truths, and the stories that are not covered by major publications.

 

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Will 2015 Be a Good Year for Supply Chain?

December 30, 2014

By Jim TompkinsWill 2015 Be a Good Year for Supply Chain?
CEO, Tompkins International

2015 has the potential to be a great year for the supply chain. There’s good news and there’s bad news, but it’s how companies approach strategy that will determine supply chain success in the coming year.

The Good News:

  • The Consumer Confidence Index (via The Conference Board) peaked to 93.5 this December, which is the second highest level in 7 years.
  • The University of Michigan’s Consumer Sentiment Index was up to 93.6 in December 2014. This is a great improvement compared to prior years.
  • Employment is on the rise, gas prices are down, and the majority of business leaders are optimistic about 2015.
  • The economy is more stable than the last 5 years and businesses are confident about 2015 growth.

The Bad News:

  • Promotions were over the top for Holiday 2014; this will impact profitability going forward.
  • E-commerce/private label shifts continue, and the future is very different from the past.
  • The consumer is being trained to expect a level of customer service that does not beget company profitability.
  • Amid a segmented economy, more than 65% of all families are in a “survival mode.”
  • Global risks are high and the chances of international supply chain disruptions have increased, from regional conflicts to weather emergencies.

Supply chain leaders are entering 2015 with many of the same thoughts as the past. I hear a lot of folks discussing the same supply chain challenges, such as: customer focus, cost reduction, agility and flexibility, improving inventory turns, operations efficiency, and network planning.

These are all important, of course, but they are all about structure and execution. The reality is that structure is the second step of supply chain excellence and execution is the third step. Unfortunately, pursuing structure and execution before fully grasping strategy will result in a poor 2015 for the supply chain. Strategy must come before structure, and structure must come before execution.

For 2015 to be a great year for supply chain, strategy must come first. You must lay the foundation with strategy. Most importantly, to optimize your supply chain in 2015, continue to ask yourself (and establish the answers to) these questions:

  • What are you going to do about marketplaces?
  • What are you going to do about Asia?
  • What are you going to do about promotions?
  • What are you going to do about omnichannel?
  • What are you going to do about getting local?
  • What are you going to do about channel management?
  • What are you going to do to grow?
  • What are you going to do to provide benefits to your costumers?
  • What are you going to do to beat marketplace expectations?

Please don’t jump into the “structural trap” of the past. Answer the strategic questions listed above and then with this strategy move on to structure.

GO! GO! GO!

Jim

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Is a Put System Right for Your Organization?

December 18, 2014

By Tompkins International StaffPut System

Competition among retailers is rising. Delivery is getting faster. Customer expectations are surging.

What do all of these factors lead to? Organizations across all verticals are looking to cut warehousing costs while maintaining a high level of order accuracy—which is an (understandably) difficult juggling act.

The best way to cut costs while keeping strong order accuracy is to choose the right technology to drive your organization forward. We face so many complexities today, from the presence of multichannel, to seemingly endless new technologies. It can be difficult to navigate your way toward the best solution.

Consider Tompkins’ newest paper your “roadmap” for facing this challenge. Put Systems: How a Put System in Your Distribution and Fulfillment Operations Can Overcome Key Challenges explores the advantages of implementing a put system and can help you decide whether it is right for your operation.

Put systems are an innovative and smart solution compared to the cost and complications of a full sorter. They are a game-changing solution for retail store fulfillment, promotions/flash sales, multichannel operations, high growth operations, and operations that are highly volatile. Consider some of the top benefits of a put system:

  • Exceptional order accuracy
  • Improved labor management
  • Reduced training requirements
  • Time phased investments

It all comes down to developing processes and operations that are flexible enough to effectively meet all of the requirements to deliver personalized logistics. Download the paper to learn more about put systems and start thinking about the best way to ensure a multichannel operational design that can meet—and exceed—your customers’ expectations.

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Exciting Announcement About The Alibaba Effect

December 17, 2014

By Jim Tompkins
CEO, Tompkins International

We have an exciting announcement here at Tompkins International: The Alibaba Effect video has surpassed 100,000+ views on YouTube! This is a huge milestone for Tompkins, and it’s something we’re really proud of. But more important than video views is the hundreds of companies that have transformed their strategy and their supply chains as a result to achieve great success.

Join us in celebrating and check out the fun comic strip below on the video. We hope you enjoy it and we wish you a happy holiday from the Tompkins International team. Exciting times are ahead in 2015!

[click to view larger]
The Alibaba Effect Video

Selecting the “Right” Carrier/Partner to Handle Your Shipments

December 15, 2014

By Tony Nuzio – Guest Blogger
Founder/CEO, ICC Logistics Services, Inc.Selecting the “Right” Carrier/Partner to Handle Your Shipments

In today’s very competitive transportation environment, the decision to select the right carrier/partner to handle your company’s shipments should be much more than a financial decision.  Yet, in many companies the “assumed” bottom line is usually the decision maker.

Price vs. Service – is there a trade off?  Should there be?  We think not!  In fact the primary selection criteria should not involve price but rather servicing capabilities.  This is not to say that price is not important, it just should not be the primary selection criteria.  You see, if the carrier cannot meet a shipper’s service needs, what difference will the price make?

So, how should carriers be selected to handle a company’s shipments?  We have some thoughts.

The first issue to address is to seek out long term and mutually beneficial business relationships.  It should never be “we win, you lose.”  And yet we consistently see from both sides of the fence, shippers and carriers alike, where one party is seeking to gain “power” over the other to control the relationship.  These types of relationships usually do not last very long.

Take a recent example where a parcel carrier insisted that their customer continue to pay excessive declared value fees for their shipments from the carrier.  When the shipper challenged the carrier that they could significantly reduce these costs by obtaining a cargo loss policy from their own insurance company, the local sales representative insisted that was not a good idea.  He contended that when a shipper purchases the insurance from the carrier the carrier does a better job of monitoring the shipper’s packages.  So, does that mean that if the shipment is not insured, the carrier does not take the same care in handling a shipper’s packages?  An absurd approach to a business relationship!

How about the shipper that attempts to convince its carriers that they are true business partners, but each year re- bids his business to obtain the lowest possible rate.  Certainly there is no real partnership here.

So, what other considerations should shippers and carriers take into account when seeking to do business together?

  • Since carriers must continue to invest in new equipment and technology, they certainly need to make a profit. The question is how much of a profit is the shipper willing to have them make on their business?
  • Shippers and carriers should be willing to do business together on an “open-book” basis. That means sharing comprehensive and sometimes confidential data with each other as any true business partners would.
  • Shippers need to provide comprehensive and exact shipping requirements to their freight carriers so that there will be no surprises once they begin to do business together.
  • Shippers and carriers must be willing to drive down costs together. When there is an honest and open line of communication between both parties there should be an ability for both parties to understand cost drivers and to examine opportunities to reduce those costs.
  • Establish “No-Fault” communications. Shippers and carriers should work together to solve problems rather than pointing a finger at each other.  True and successful, long term business relationships never involve finger pointing.
  • Perform on-going measurement. In real estate it’s always location, location, location.  To create successful carrier/shipper partnerships its due diligence, trust and on-going measurement to make sure all is going as planned.

Both sides in the carrier/shipper partnership should consistently seek out ways to be a better customer or service provider.  In business meetings at Amazon there is always an empty chair in the room, representing their customer.  What a great way to ensure you never lose sight of the importance of the customer.  What’s your company doing to strengthen its relationship with its customers and business partners?

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

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Reprinted from ICC Logistics Services, Inc. with permission.
Photo credit: www.graphicstock.com

Alibaba is an Opportunity (Not a Threat) for U.S. Retailers

December 9, 2014

By Jim Tompkins
CEO, Tompkins International

Update (December 11, 2014): USA Today published a column yesterday written by small business owner Rex Solomon. The column, “Local Retailers Face New China Threat,” depicts Alibaba as an online retailer and major enemy to American “Main Street” businesses. As I previously discussed in my blog post below, Alibaba is not a retailer or the enemy. Alibaba will flourish in the U.S. with or without tax benefits from Congress. The column discusses Alibaba as if it has not yet arrived on U.S. soil—but you and I both know this is not true. Alibaba.com has been in the U.S. since 1999, and it has been making key investments since 2009 and growing the 11 Main marketplace. Therefore, while I agree with the author’s stance that Congress needs to address tax incentives for online retailers, we need to remember that Alibaba is not the “bad guy” in this discussion. In fact, Alibaba isn’t even related to the discussion of online retail tax incentives at all. Alibaba is an online marketplace, not a retailer.

Alibaba is an Opportunity Not a Threat for US RetailersThis month a series of videos and ads hit the airwaves and the Internet from a group calling itself “The Alliance for Main Street Fairness.” The ads are meant to pressure Congress into passing the Marketplace Fairness Act, which would end sales tax exemptions for online retailers. The group is using scare tactics about a “foreign invader” (i.e., Alibaba), who will “destroy” main street businesses across America, to move lawmakers to action.

Let’s be clear about who is behind this effort. It is NOT an alliance of small and mid-sized “main street” retailers. The truth is that it is a lobbying group fronted by FP1 Strategies, a political consulting firm, and funded by many mega-retailers. There is nothing Main Street about this campaign.

Its efforts to date have been less than successful, so it is now turning to nationalism, protectionism, and xenophobia to move the ball forward.

Previously Amazon, eBay, and other major U.S. e-commerce companies were its targets and illustrated as the villains—to largely no effect. This new campaign inserts China as the threat (with Alibaba as the proxy).

In our ongoing effort to educate U.S. retailers and brands about what Alibaba is and to shed light on the opportunity it represents, I offer these points regarding this story:

  1. Contrary to the Alliance pronouncements Alibaba is NOT a retailer. Alibaba provides platforms for retailers and brands to sell to customers primarily in China (i.e., Tmall for big companies and Taobao for individuals and small businesses) and secondarily to more than 200 other countries, including the U.S. But Alibaba does not sell anything—it is a pure marketplace. It makes its money only via fees and advertising.
  2. Alibaba provides opportunities for U.S. retailers to connect with new customers overseas and opportunities for U.S. customers to connect with companies from around the world. But, again, Alibaba does not sell anything.
  3. Alibaba has no immediate plans to enter the U.S. as a retailer, or to compete with retailers.
  4. It is ridiculous to believe that U.S. retailers, under the banner of “fairness,” would use Alibaba as a scare tactic for domestic legislation. After all, Alibaba is not even in the market, and the Alliances real targets are online retailers.
  5. Retailers need to remember that omnichannel sales and omnichannel supply chains are the key to success. The Alliance needs to get on with pursuing its tax agenda with more integrity and its omnichannel evolution. It needs to stop viewing brick-and-mortar and online as competitive channels.
  6. Demonizing Alibaba as an online retailer risks alienating 1 billion Chinese speaking consumers in China and around the world. This is not a good position to take as China becomes the largest economy on Earth.

The misunderstanding and disinformation propagated about Alibaba and online retail in general by retailers indicates that many of them still do not understand the role of retail in a globalized marketplace.

Borderless e-commerce will be the defining opportunity of the next five years. I encourage retailers to seek ways to profit from Alibaba, not demonize it. A good starting place is to watch The Alibaba Effect video.

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Photo credit:Graphic Stock

Is Alibaba the Global Farmers Market?

December 4, 2014

By Jim Tompkinsglobal farmers market
CEO, Tompkins International

A week after Alibaba’s mid-September IPO, Jin Jianhang (Alibaba Group President) said: “Business-customer e-commerce in the agriculture sector, along with big data and cross-border e-commerce, will be the company’s main business focuses after the stock market listing.”

Mr. Jianhang also explained Alibaba’s commitment to establishing a dedicated agriculture platform on Taobao.com for farmers to sell products. They could enjoy services including marketing and logistics support, as well as product tracing.  These comments are of significant interest to all consumers, farmers, and grocery businesses even though they are not new thoughts coming from Alibaba. In fact, they are a continuation of many of Alibaba’s philosophies and actions in the past few years:

  • Alibaba’s philosophy of helping small business in China.
  • Alibaba’s focus on cross-border trade: China to the world and the world to China.
  • The growth of the Alibaba cold chain agri-food business that has grown 18 times from 2010 to 2014. It will be greater than $13 billion in 2014.
  • Alibaba is harnessing the desires of the fast-growing middle and upper classes; they are hungry and thirsty for delicious agricultural products. (See the new book China’s Super Consumers by Michael Zakkour to learn more.)
  • The evolution of Alibaba’s interest to expand upon its online grocery business.  Two interesting facts here:
    • My search on Alibaba.com for “Sell Fruit” yielded 4,764 suppliers. These suppliers were 72% East Asia, 6% South Asia, 6% Southeast Asia, 2% North America, and 14% other. The markets included 3,612 wholesalers in North America, 3,502 in Western Europe, 3,373 in Eastern Europe, 3,302 in South America, and many more throughout the world.
    • Alibaba’s Taobao grocery business continues rapid growth in both “center-of-the-store” pantry items and “outer ring” cold chain items. Add to this the prediction made in the video The Alibaba Effect that Alibaba will be entering the U.S. online grocery business over the next two years, and the importance of the role Alibaba plays in the global food chain is clear.

Online grocery in the U.S. today is only 3.5% or about $23 billion per year. Over the next 5 years, I believe this number will surge to more than $100 billion. Alibaba has good experience in this sector in China and has a good start working with suppliers, plus a strong desire to pursue the U.S. market.

So, is Alibaba the global farmers market? I’m not convinced yet, but stay tuned. I do know that Alibaba will soon have a substantial outreach in filling your pantry, refrigerator, and freezer in the years to come.

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Michael Zakkour Talks “Top Gear” TV Show in China

December 3, 2014
Top Gear TV Show

www.bbcamerica.com/top-gear

By Tompkins International Staff

Ever watched the British television show “Top Gear”? If you haven’t, you are missing quite the party.  The show is hosted by three presenters who offer a humorous, quirky, but factual dialogue about motor vehicles of all shapes and sizes.

In the past few years, the “Top Gear” show platform has spread to other countries, including the United States, Russia, and Australia. The BBC recently announced that it has signed a deal to produce a local version of the car series in China. The first episode premiered in November of this year and is hosted by three Chinese celebrities.

Michael Zakkour, a principal at Tompkins International and author of China’s Super Consumers, recently spoke with the BBC about the motoring show debuting in China. Watch the video below and learn how Chinese consumers who love cars and foreign entertainment will make “Top Gear” a huge entertainment success in the region.

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Retail E-Commerce: Don’t Get Your Head Buried in the Sand

December 2, 2014

By Jim TompkinsRetail E-Commerce
CEO, Tompkins International

Would you be surprised if I told you there are still many who are in denial about the reality of retail transformation? There are business leaders with their heads buried in the sand, refusing to accept and understand that retail and shopping are forever changed. What is most interesting is that many North Americans are those that are in denial. The U.S., Canada, and Mexico are all very different, but they all have their “retail heads” equally buried in the sand:

  • United States: A recent Businessweek article argued that Singles Day will not catch hold in the U.S. because 1) November 11 is already Veterans Day, 2) There is not room between back-to-school sales and holiday sales for even more sales, and 3) We already have enough U.S. holidays. But I disagree with all three of these arguments. I am a proud U.S. Army veteran, but that does not occupy my entire November 11. Also, most Black Friday Sales, Thanksgiving Sales—and yes, even Cyber Monday Sales—begin in early November. I think November 11 would be a smart U.S. sales date because it is roughly 90 days after back-to-school sales and 45 days from December 25. In addition, the Alibaba Group 11.11 Shopping Festival is not considered a holiday or an official day off work.  
  • Canada:  Last week I wrote a blog post about Alibaba in Canada and how the Canadian Prime Minister met with Alibaba’s founder Jack Ma to discuss the possibility of selling Canadian agricultural products to China. This resulted in very little feedback, with some even focusing on why Canada would want to “have a relationship with a Communist country.” (Sigh.)
  • Mexico: In discussions with several business leaders in Mexico, I was told e-commerce in China is not and will not be relevant because most Mexicans do not have credit cards and logistics for e-commerce delivery in Mexico is difficult. But that would mean Alibaba could never have been successful in China because fewer Chinese people had credit cards in China than in Mexico, and the logistics for e-commerce delivery in China was impossible. Some leaders in Mexico are clearly overlooking an important opportunity.

Overall, the U.S. is in denial about the huge success of Alibaba and its implications on cross-border trade. To learn more about Alibaba, you need to see the The Alibaba Effect video. Next there is Canada, who is in denial about Chinese consumers and the unlimited potential for Canadian farmers to sell agricultural products to China. To learn more about China’s consumers, read the new book China’s Super Consumers. Finally, Mexico is in denial about the challenges Jack Ma faced when he began Alibaba in China. Jack has not only overcome these challenges, but he has created what will become the world’s largest retail platform in 2015.

Alibaba’s IPO this past September was the largest in the history of business and its goal is cross-border trade. China is the fastest growing economy in the world, and is in close competition with the U.S. to become the largest economy in the world. Plus, Alibaba took in $9.3 billion of retail sales on Singles Day this year.

E-commerce and omnichannel retail will change the world and the supply chains of the world. If your head has been in the sand, don’t worry—you’re not alone. Go ahead and pull your head out, comb the sand out of our hair, and embrace the largest business transformation of all time.

Photo credit: www.graphicstock.com

Alibaba: The Farmers Market for Canada and Friend to the Canadian Consumer

November 24, 2014

Alibaba The Farmers Market for CanadaBy Jim Tompkins
CEO, Tompkins International

A week after the Alibaba mid-September IPO, Alibaba Group President Jin Jianhang said, “Business-customer e-commerce in the agriculture sector, along with big data and cross-border e-commerce, will be the company’s main business focuses after the stock market listing.”

He also explained Alibaba’s commitment to developing a dedicated agriculture platform on Taobao.com that farmers can sell products on. It will also offer additional services such as marketing and logistics support, and product tracing.

These comments are important to Canadian farmers, even though they are not new thoughts coming from Alibaba. In fact, Alibaba has already been committed to expanding its presence in Canada:

  • Alibaba has a long-standing philosophy of helping small business in China.
  • Alibaba’s focus on cross-border trade, both from China to the world, and the world to China.
  • Alibaba’s cold chain agri-food business has grown 18 times from 2010 to 2014, and it will be greater than $13 billion in 2014.
  • Alibaba is harnessing the desires of the fast-growing middle and upper classes that are hungry and thirsty for delicious agricultural products. (For more on this, read the new book China’s Super Consumers by Michael Zakkour.)

A month after Mr. Jianhang’s comments, a delegation from Canada’s most populous province met with Alibaba in Shanghai. Brad Duguid, the Economic Development Minister out of Ontario, and Michael Chan (International Trade Minister) brought a surprise guest to the Alibaba meeting: Premier Kathleen Wynne.  

As a result of this meeting, Alibaba can export a variety of Canadian products to China, including cranberries, corn, pork, beef, poultry, wine, and more. Due to Canada’s high quality of produce and high food safety standards, the “Made in Canada” label is valued and works well for the China market—and therefore for Alibaba.

In addition to Canadian farmers being suppliers to China, Canadian customers now have an ally in China. Contrary to many other retailers and retail platforms, Alibaba understands that Canada, Mexico, and the United States are three unique countries. Alibaba gets this better than most because it recognizes that China is not one marketplace, but rather comprised of 22 distinct market clusters. The number of Alibaba’s Canadian customers presently sits at 1 million, but this number too will grow.

What does all of this mean? Canadian suppliers and consumers have a huge opportunity to increase their interactions with Alibaba. Watch The Alibaba Effect video for a background on these increased interactions and understanding Alibaba. Learning how to leverage the power of Alibaba for both Canadian suppliers and consumers is a big deal. For Canadian farmers, it is clear that Alibaba is the door to China’s farmers market—the largest marketplace in the world. For Canadian consumers, not only is Alibaba the doorway into China (i.e., “the factory of the world”) but also the doorway into cross-border trade.

More Resources:

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.

More Resources

Photo Credit: Andrew Burton Getty Images

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.

More Resources:

Photo credit: www.graphicstock.com

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.

More Resources:

Photo credit: Ross D. Franklin AP Photo

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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Photo credit: www.graphicstock.com

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