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Confusion Reigns as the Question Persists: What Exactly Is Omnichannel?

August 27, 2014

Confusion Reigns as the Question Persists: What Exactly Is Omnichannel?

By Jim Tompkins
CEO, Tompkins International

I recently read a July 2014 report titled “On Solid Ground: Brick-and-Mortar Is the Foundation of Omnichannel Retailing.” While there are a few points in the report that show some understanding of omnichannel, I also disagree with many of the points it presents and believe it only adds to today’s confusion surrounding omnichannel.

Consider the following quotes from the report, as well as my thoughts:

  • “Digital retailing is capturing headlines and inspiring spirited debate as retailers plan how best to invest for future success. But beyond the headlines, physical stores remain the foundation of retailing, evidenced by the fact that 90 percent of all retail sales are transacted in stores.” This is simply untrue. Omnichannel means all channels work together to provide a great customer experience. Most customers use multiple channels to shop, so to credit the channel where the actual transaction takes place indicates a total lack of understanding of omnichannel.  In fact, where a sale is transacted has nothing to do with the importance of omnichannel. Think about it this way: If a customer finds an item that they like online and then goes to the store to buy it, is this an online sale? No. Is it an in-store sale? No. It is an omnichannel sale. Accounting systems that track where a sale takes place have nothing to do with the concept of omnichannel. Therefore, it is critical to identify the capabilities of your many segmented supply chains and enable them to achieve omnichannel sales potential at a minimal cost.
  •  “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.” This is also completely untrue. Place this in the context of the August 8, 2014 Wall Street Journal article “Shoppers Flee Physical Stores.” The opening sentence reads: “US retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online.”  Omnichannel is not about a competition between channels.  In fact, retailers need to realize that customers do not even think about channels. Channels are the retailers’ issue. Customers want to buy from you and use your various channels to support that purchase. Shopping is not about having a preferred channel—it is about finding the price, selection, experience, and convenience that fills your needs. Shopping must be omnichannel! Look at requirements of today’s final delivery to customers and you can see the major transformation that is occurring with same-day, next-day, second-day, and local delivery service providers. Innovation in final delivery is clearly being driven by the shopper fleeing the physical store and preferring alternative shopping channels.  This may lead to a need for retailers to be creative in driving traffic to the stores, but clearly how retailers make innovations in their delivery capabilities is the key to future growth.
  • “The store plays a crucial role in online purchases, as two-thirds of customer purchases online use a physical store before or after the transaction.” The whole point is that all channels work together for omnichannel success.  All channels are critical, and a strong channel management strategy is the answer to the success of retail.  Stores that support online are what omnichannel is all about. In a similar way, online helps stores: more than 60% of all retail purchases are influenced by online. But, this does not mean stores or online are the keys to success. This means that omnichannel holds the true key to success.
  •  The future of retail is solidly anchored in the brick-and-mortar channel.” Again, this is nonsense. If a portion of your channel management strategy is to have stores, then these stores will play a key role in your omnichannel strategy. But the future of retail is not in one channel or another, but in omnichannel.  Retailers that do not recognize this will not only operate with a channel strategy that is inflexible and unable to adapt to the rapid changes in customer preferences, but the supply chain will be a huge driver for escalating costs and act as a bottle neck to achieving best-in-class customer satisfaction.

When I first read the article, I was confused. But then a second, more careful read brought an answer: A short excerpt about the study reads: “This independent survey of consumers and retail executives was funded by, and completed in cooperation with, leading U.S. shopping mall real estate developers.” There you have it—so much for trying to make sense out of nonsense.

Photo Credit: Tim Reckmann

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Doubts About Alibaba and Jack Ma? Find Out Why the Critics Are Mistaken

August 18, 2014

By Jim Tompkins
CEO, Tompkins International

Jack Ma

Jack Ma, Alibaba founder

I was fascinated this past week when it was reported by the The New York Times (among others) that “Doubt is Cast on Vetting of Deals by Alibaba.”

As everyone knows, I am a keen student and researcher of Alibaba. In my recent video, The Alibaba Effect, I discuss not only the amazing story of the e-commerce giant—nearing its announced IPO in just a few weeks in the U.S.—but I also comment on the intelligence, entrepreneurship, foresight, and risk-taking of its renowned leader, Jack Ma.

The newspaper reported, essentially, that Alibaba has been on a buying spree since 2013, spending billions to acquire stakes in businesses such as department stores and mapping services in China, as well an array of technology start-ups in the U.S. In addition, the article indicates that its recent acquisition control of a Hong Kong film company just two months ago (now called Alibaba Pictures Group) might not have been “fully vetted,” and that “possible non-compliant accounting issues” have since been discovered.

The article further asserts (via “experts”) that “Alibaba has little expertise in many of the new businesses,” which means that it has to rely on incumbent managers in business decisions; and, that “Alibaba, like most Chinese companies, does not have the ability to manage the increasing number of unfamiliar yet decentralized divisions and people.”

I find these assertions fascinating because the so-called “experts” are most often those who do not take risks, do not experiment, and do not learn by doing.  Jack Ma has been pushing the envelope, out-learning them, and moving forward with a speed unheard of by Western analysts. He has a great vision, is on a path to learn rapidly, and is following that with passion.

Whether or not a financial or accounting detail was missed by his highly qualified advisors is not the point, and it is certainly not any criticism to be considered in the soon to be conducted IPO.

Interestingly, the critics have also recently reported certain structural weaknesses or irregularities in Jack Ma’s corporate organization. Amazingly, he acted within a week to adjust these to provide more clarity and transparency, as well as reorganize them to meet more “commonly accepted standards.”

Jack Ma has publically discussed his goal of growing a major global business for the long term, while moving quickly to build his presence in the short term. As I discuss in some depth in The Alibaba Effect, he is doing just that. The ramifications for any business in the world are significant, and we are encouraging, and working with, many companies to prepare for and take full advantage of these effects.

As Alibaba’s founder follows this rapid roadmap, he is quickly learning about different industries—e-commerce, Internet and store retail, banking, Internet video, mapping services, microblogging, web browsers, and now entertainment, as well as learning more and more about different countries and cultures.

I very much doubt this fast-paced “study, acquire, learn, and profit model” will slow down, either before or after the IPO. He is taking calculated risks to apply this model and turning it into a big advantage.

Others can criticize and use old-school criteria to find faults, but Alibaba and Jack Ma are changing the world while the debates persist. As some wise people have stated before, “Either get on the fast-moving train or get out of the way.” And as the video conveys, smart companies will prepare now for the growth and profit ride.

What are your thoughts on Alibaba’s fast track towards success? How are you preparing to compete?

 

More Resources

Article: Alibaba Group Seeks Market Share

Blog Post: Flipkart: A Threat to Alibaba? Not Really

Article: Alibaba: The New Face of American e-Retail?

Photo Credit: World Economic Forum

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Thoughts on Upcoming Alibaba IPO: What’s in a Name or Number?

July 7, 2014

By Jim TompkinsNYSE

Since 1999, when Alibaba first started their marketplace of Alibaba.com, it has been clear that the Chinese company has a strong passion for the U.S.

With the recent news of Alibaba going public, some are surprised that they selected the New York Stock Exchange (NYSE) over NASDAQ, that the ticker symbol will be “BABA” and in my view, puzzled as to why the date and price of the IPO will involve the numbers “8″ and “9″. None of these things come as a big surprise to me.

A few revealing points to consider on the Alibaba IPO:

  1. There was an active discussion about where Alibaba would go public. To some, the two finalists were New York and Hong Kong. Unless there were compelling business reasons to the contrary, the answer was always going to be New York because Jack’s vision has always been to be a global firm with a Chinese philosophy and an American base.
  2. The selection of the NYSE over the NASDAQ. For the same reasons that #1 is not a surprise: the NYSE is the largest stock exchange in the world by market capitalization and can also be classified as “more American.”
  3. The ticker symbol “BABA” also was predictable. The two Chinese translations for the word BA are “8” and “fortune”, “wealth” or “prosperity.” Additionally, 8s are very prominent in China—from flight numbers ending in 8, to the opening ceremony for the Beijing Olympics on 8/8/08. Telephone numbers with 8s are also valued, as is the 88th floor of buildings. This significantly stands out in pricing as many ending with 8 (1.88, 2.88, etc.).
  4. Consistent with #3, I anticipate the date and price of the IPO to involve the numbers “8” and “9” (the number 9 translates into “long lasting”). Also, for the exact opposite reasons, I do not expect to see the “unlucky numbers” 4, 5, or 6 associated with the date or offering price for the stock.
  5. The new “All-American” name of the Alibaba marketplace, 11 Main. We get that 11 Main is on Main Street, as in Main Street USA. So, the connotation is not a supercenter or a mall, but rather on Main Street. This is a clear indication that 11 Main will be anti-big box, anti-mass merchant, and a pro-neighborhood shop—a place not to buy everyday common products, but a venue to buy unique and exciting products. But what is so special about 11? This instantly makes me think of 11/11, which is Singles Day in China. Before November 11 was the big Chinese shopping day, it was the big relationship day in China. November 11 was traditionally the day that boy meets girl, who then lived happily ever after. The number 11 then, not from Chinese tradition, but from Singles Day, means a personal relationship. So, what the 11 in 11 Main translates to is a neighborhood place where there is a strong relationship between the merchant and customer. It is a very cool marketplace for the first wave to hit the American shore. But it is not BABA Main, I mean 88 Main, it is 11 Main.

And finally, it is fascinating to watch how Alibaba is changing the way supply chains are viewed in the U.S. In my new video, The Alibaba Effect, I discuss these points in more detail. What you will hear is critical and will help you plan your counteroffensive now and lead your company to success in omnichannel.

 

More Resources

Blog Post: Who Are Today’s ‘Titans’ and ‘Industry Leaders’ in Omnichannel? – Part 1

Blog Post: The Final Delivery Game: Ship from Store, In-Store Pickup, or Lockers?

Paper: Final Delivery – A Roadmap: Drivers and Enablers for Moving Ahead of the Competition

Photo Credit: Daniel Foster

Top 6 Reasons Why You Should Watch The Alibaba Effect

June 27, 2014

By Tompkins International Staff

5652699228_68587eb26c_zHow many of you have heard of Alibaba, the Chinese e-marketplace? Alibaba is the fastest growing e-commerce company in the quickest growing market in the world. CEO Jim Tompkins recently sat down to discuss how Alibaba is changing the way supply chains are viewed in the U.S. Here are the top 6 reasons why you need to watch The Alibaba Effect:

  1. Alibaba does 80% of the online business in the largest e-commerce market in the world.
  2. Out of every dollar of revenue, Alibaba makes 43 cents profit.
  3. Alibaba marketplaces have more than 10 million sellers and more than a billion product listings.
  4. Jack Ma, founder of Alibaba, and Alibaba itself have invested over $1 Billion in businesses in the United States.
  5. Alibaba is planning to invest more than $20 billion in logistics over the next eight years.
  6. Most importantly, Alibaba will either be your competition or your biggest ally. You have no choice but to respond.

What you will hear in The Alibaba Effect video is critical and has never been discussed in detail from a supply chain perspective. Alibaba is changing the game when it comes to supply chains in the U.S.  Watch this video so you can plan your counteroffensive now and lead your company to success in omnichannel.

 

More Resources

Video: The New Demand-Drive Operations – The Only Operations Strategy for Success in Multichannel

Paper: Demand-Driven Supply Chains – Getting It Right for True Value

Video: The Right Fulfillment Center for E-Commerce

Photo Credit: epSos .de

With Skyrocketing Online Retail Sales, What Is Happening to Real Estate?

May 15, 2014

By Jim Tompkins
CEO, Tompkins International

Fork lift operator w boxes_smallerOnline retail sales in B2C are estimated to grow by nearly 75% by 2018, and today’s B2B sales are more than twice the sales of B2C—and growing faster.

Increasingly, consumer product companies are selling goods online. Specifically, consumer packaged food companies are moving to online retail sales as traditional grocery stores and the Walmarts and Targets of the world transition into private labels. But can these changes affect the real estate industry? Absolutely.

My new article, “From Malls to Click-and-Collect: How Today’s Pace of Change Is Impacting Real Estate,” explores this rapid growth in online ordering and fulfillment and how it is affecting the real estate industry.

Retail stores and malls are experiencing some of the biggest impacts of online sales growth. We see this almost daily with store closing announcements—the biggest being Radio Shack with 1,100 planned store closings for this year. There are also significant effects on distribution and fulfillment as supply chain networks grow substantially more complex due to the sales channel switch from direct to online.

How have you seen the real estate industry impacted by growing online sales? How will your company respond to this pace of change?

 

More Resources

Article: Final Delivery: A Roadmap — Drivers and Enablers for Moving Ahead of the Competition

Article: How Consumers Are Affecting Today’s Logistics Service Providers

Case Study: Growing E-Commerce Company Seeks Distribution and Network Plan

 

Why Data Is Not Information

May 12, 2014

By Jim Tompkins
CEO, Tompkins International

13904995945_7612901f95_bThe five of us sat around a conference table.  My colleague and I were meeting with the CEO, CFO, and Chief Supply Chain Officer (CSCO) from a multichannel fashion and apparel retailer.

The discussion was lively and interactive. We talked about omnichannel, “get local,” and store fulfillment. Just as the CSCO began to make a point on the opportunity to combine distribution and fulfillment, the CFO interrupted the discussion:

“I have not said much in this conversation as the four of you have gotten all excited about e-commerce,” the CFO explained. “To tell you the truth, I don’t think you all know what you are talking about. You guys think the tail should wag the dog. I don’t understand all this discussion about e-commerce, since e-commerce is less than 5% of our sales. What’s the point and why all the discussion?”

My partner and I did not want to push back on the CFO, so we waited for the other two to set the record straight. But to our amazement, the CEO replied: “Wow, yes I guess you are right. E-commerce is only 4.74% of our sales.”

Obviously we could not let the discussion end so far from reality. I had no choice but to speak up.

“I am sure your data is correct with respect to the channel whereby you capture the order,” I said. “For your retail sector, a 4.74% of order capture on e-commerce is typical for a firm with your e-commerce experience.  But a common misconception is that the importance of a channel is somehow related to the revenue recorded in that channel.”

The CFO tried to interrupt me at this point, but I continued. I told him today’s reality is that the majority of customers in the store have shopped their merchandise via e-commerce before they come to the store. In fact, the majority of sales that they call “in-store” are sales that were significantly influenced by e-commerce. So we are not talking about the tail wagging the dog. I explained that we are talking about the value they deliver to their customers and therefore their company’s profitable growth by succeeding in omnichannel and in all channels.

Can you guess what happened next?  Yup, there was a very awkward pause that seemed to last five whole minutes. (In reality, it was probably only about five seconds.) Finally, the CFO started to speak.

“Yes, e-commerce is very important to our customers,” he said. This statement was followed by another awkward pause before the CSCO rewound the discussion to where it was before the CFO interrupted him.

Thirty minutes later as the CEO was thanking us for coming, he asked my partner and me if we could prepare a proposal to help them develop their omnichannel operations strategy and related supply chain capabilities.

Later, as my partner and I sat in a car on the way back to the airport, we both reflected on what would have happened to the interaction if the CFO’s 4.74% data point was viewed as information, and if the company never began the pursuit of their omnichannel strategy.

We will never know, as we are now scheduling the project kickoff. But it reinforced a good message for all companies to remember: never treat data the same as information.


More Resources

Video: The Right Fulfillment Center for E-Commerce

Blog Post: Transforming Operations to Exceed Retail Customer Expectations

Article: The Omnichannel Retail Supply Chain

Photo Credit: Tim Reckmann

If Customers Find E-Commerce Experiences ‘Uninspiring’, Check Your Supply Chain for Remedies

April 14, 2014

4936790096_0584c4d6e4_mI don’t know much about filters or “discovery experiences” as they relate to e-commerce, but an article published on RetailWire the other day caught my attention.

In a recent study of shopping experiences on top retail sites, Compare Metrics and the e-tailing group concluded that most participants find their current shopping experiences “uninspiring.”

How can this be? How can purchasing anything one desires from the comfort of his or her couch be uninspiring?  And how does this relate to supply chains? It all boils down to the customer experience and how it relates to e-commerce. Innovations that benefit consumers, such as same-day delivery or customized ordering and delivery methods, help personalize customer experience.

Obviously, personalized customer experience is what’s missing here. And it can be remedied by a supply chain that is flexible enough to meet changing customer demands. If you have an inflexible, cookie-cutter supply chain backing your e-commerce efforts, then customer experiences are more likely to be “uninspiring.”

If you have a distribution facility that can only serve one channel, then you will be challenged to effectively meet the needs of today’s multichannel consumers. If your operations are not demand-driven, then you will struggle to keep up in a complex retail environment where customer expectations change as quickly as new technologies take hold.

What are your customers saying about their online shopping experiences? I’d be interested in hearing how your supply chain and fulfillment operations are changing to meet new demands.

More Resources

Article: Personalized Multichannel Logistics: Moving Beyond Traditional Distribution and Fulfillment Centers

Video: The NEW Demand-Driven Operations

Case Study: Growing E-commerce Company Seeks Distribution and Network Plan

Photo Credit: Michael

Cosmetics: The Glamour of Great Supply Chain & Logistics Strategy

March 13, 2014

6800270382_8ce32f0004_n[1]There’s some real beauty in an optimized supply chain. In a recent Inbound Logistics article, Justine Brown gets it right on the importance of effective supply chain and logistics management for cosmetic companies.

But what makes a supply chain for cosmetics different from any other industry? Most cosmetic products need specialized storage amenities such as temperature controlled environments, and even in some cases, experienced professionals with specific expertise in storing and distributing particular items. Cosmetic products are also sold in a variety of retail streams, which affects packaging for promotions and medical purposes.

Not to mention that consumers want the most popular products right away – and a smooth logistics operation is the key to achieving customer satisfaction in industries such as cosmetics.

Valerie Bonebrake, SVP here at Tompkins International, says it’s essential to know what happens to products when they leave the distribution center. “Cosmetics companies have to understand the process before they can improve it or reduce costs, and that comes down to good information management,” she notes.

I encourage you to read Brown’s column for a full explanation of how cosmetics and related companies need efficient supply chain strategy and logistics in order to get their products to market.

More Resources

3PL Consortium: Benchmarking for Profitable Growth

Video: Fulfillment Centers and E-commerce

5 Steps to Establish Outsourcing Targets

 

Photo Credit: Tasselflower

Good and Bad News for Luxury Market in China

January 20, 2014

luxuryThe luxury market is on a downturn in China— down to only about 2 percent growth—but that doesn’t mean brands and retailers should forget about doing business in China.

In his new Forbes column, Tompkins International’s Michael Zakkour explains that while the premium luxury market has definitely slowed, it will pick up again soon. Zakkour also believes it may grow even faster in the next 10 years because of the established luxury demographic and the fact that millions more potential buyers are coming online.

But you are probably wondering what spiked this downturn in the first place, aren’t you? There are so many different reasons. For one, online sales growth has surged product values down for many of the previously highly desirable brands. Chinese luxury customers are also focusing on spending their extra income on other items, such as lifestyle products (in addition to products for social status).

I encourage you to read Zakkour’s column, where you will find the full explanation of how the Chinese market has swayed, and also why companies shouldn’t make any major moves to stop conducting business in China. It’s not about jumping ship, but rather reconstructing both your short-term and long-term strategy for growth.

Has this downturn in China affected your company? Has your organization needed to readjust its China strategy? Leave me a comment or let me know on Twitter (@jimtompkins).

Best,

Jim

More Resources

Podcast: E-Commerce in China

Podcast: A Successful China Strategy for Profitable Growth

The Dos and Don’ts of Selling to Customers in China

Photo Credit: epSos.de

Realism and Final Delivery for Holiday 2013

December 27, 2013

fragileboxBeing realistic means being practical and/or pragmatic.

For holiday 2013, there were five really big factors that were going to impact final delivery. And yet UPS and FedEx still failed to be realistic, practical, or pragmatic in communicating their failure to deliver on their promises for holiday 2013.

Let’s first take a step back. What were the five big factors impacting final delivery?

  1. 26 days between Thanksgiving and Christmas to shop: This is a fact that will only be repeated four times over the next 33 years. It has been widely discussed because it meant this year’s available days to shop were compressed, which forced more people to shop online.
  2. 26 days between Thanksgiving and Christmas to deliver: This is the same fact as #1, but keeping into consideration that the increasing number of online orders reduced the number of days to make these deliveries. I call this the “double-whammy” of the 26-day minimum number of days between Thanksgiving and Christmas.
  3.  Growth of online shopping: Online shopping increased by approximately 10-20% from 2012, depending upon which survey you read. This is not controversial and is broadly accepted. So in addition to #1 and #2, the overall volume of online shopping and home delivery is up.
  4. Retailers’ behavior: Although not as well substantiated, there is a clear sense among consumers that delaying online shopping is a good thing because the availability of great promotions and free shipping became more and more prevalent in 2011 and 2012. Why buy early when it is better to wait and get a better deal? For holiday 2013, retailers did little to dissuade this notion, and many consumers held out to the last minute to shop online. They were playing a waiting game with the big retailers.
  5. Weather: The least clear and predictable of the five big impacts on holiday 2013 final delivery is the weather. It was only nine years ago when an ice storm crippled Memphis and Louisville, resulting in major final delivery problems for Christmas. But it is December, so it would be foolish to not have a contingency plan for holiday 2013.

Factors #1, #2, and #3 are based on fact, well-known, and non-controversial. These three factors alone were significant challenges for the peak planners at UPS and FedEx. But in addition to the first three factors, #4 (retailer’s behavior) was beyond what peak planners could handle. Additional volume overflowed into the sacred ground of the contingency planners—essentially, the retailers’ behavior pushed UPS and FedEx into their contingency buffer. This could have still allowed for a successful holiday 2013 final delivery if, and only if, the fifth really big factor (the weather) had fully cooperated.

As we all know from Murphy’s Law, going into a peak period with a portion of your contingency plan already consumed and reliant on good weather to not implode, is a great way to ensure that the weather will not cooperate. The bad weather not only hit hard, but it also covered a wide geographical area several days in a row. Peak planners failed and the contingency planners ran out of contingency. The results are still not well known, but essentially it was a failure.

We need to do a better job at three things:

  1. Peak planning
  2. Contingency planning
  3. Communications

There will be many meetings and numerous articles over the next several weeks about the failure of holiday 2013 final delivery. These meetings and articles will focus on fixing the planning for 2014 and beyond. However, a key point I make in today’s post has to do with realism—the practicality and pragmatism of holiday 2013 communications. The weather became a factor, starting with the winter storm that lasted from December 5-10. Interestingly, this storm was a factor for two reasons. First, many folks who were hit by the storm did not want to go out to shop, so they spent this busy shopping period at home shopping online. The storm also sparked the beginning of the final delivery problems for transportation providers, and they were never truly able to recover.

As if this was not enough, the winter storms of December 19 to 22 hit UPS and FedEx hard for the same two reasons. But here is the worst part: on Sunday, December 22, there were no communications from UPS or FedEx that said they were in trouble. In fact, on December 19 UPS was published in a nine-page spread in Bloomberg Businessweek titled “UPS’s Holiday Shipping Master: They Call Him Mr. Peak.” Of course this is ironic, since by December 19 UPS knew (or should have known) they were in trouble.

I understand the need for better peak planning and better contingency planning, and we will hear more on these topics, but how can folks who claim to deliver “The World on Time” and to “Love Logistics” do such a poor job of communicating their failure to perform, even after it is clear they are failing? Those of us involved in final delivery need to take more control of it so that our customer promise does not disappear in the lack of realism of our final delivery providers.

Best,

Jim

 

More Resources

Paper on Final Delivery: A Roadmap – Drivers and Enablers for Moving Ahead of the Competition

Video on Amazon and Walmart: Facing the Titans

Paper on Final Delivery: A Technology Perspective on Omnichannel Retailing

 

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