In 2020, eCommerce sales grew a whopping 44%, but not all retailers saw equal revenue gains. The businesses that boomed were the ones that identified and adapted to the change with effective eCommerce and BOPIS strategies.
Wondering how they did it?
Whether you’re new to the space and trying to institute new processes and software or you’re an established business trying to pivot or optimize, we’ve got the tech, tools, and tactics you need. In this webinar, we discussed how to:
- Implement a new BOPIS strategy or optimize your existing one
- Increase product availability and employee efficiency
- Decrease overhead & grow revenue
- Stay ahead of emerging eCommerce trends & reveal which ones are here to stay
Download the webinar slide deck here.
Full Webinar Transcript
Rich Van Patten
Welcome everyone to the Stores Consulting Group and box in regards to the retails booming brick and click: otimizing your retail e-commerce operations. We're going to talk a little bit about what’s happened in the eCommerce space today. A lot has happened over the last year. eCommerce has been born or have matured much faster than ever planned and we're going to talk a little bit about that today and a lot about some some actual opportunity with Macy's organization.
So at this point I'd like to take just a few minutes and introduce the panel: Charu Thomas the CEO of Ox, Paul Wyatt the former senior vice president of operations for Macy's. And then myself I'm a director with stores Consulting Group. So again, welcome everyone today - Charu if you could introduce yourself that would be great.
Charu Thomas
Thank you Rich, I really appreciate the opportunity. Welcome everyone to our webinar, it's great to virtually see you all today.
My name is Charu and I'm the founder of a company called Ox. We build the tools retailers need to build micro distribution centers. I’m sure everyone here is aware that retail is fundamentally changing and retailers just don't have the tools and processes in place to operate under this new demand structure. We at Ox enable that transition to happen. We support some of the biggest enterprises in the world and we can provide up to 2600% ROI in two weeks which offers a 1.4 week payback period. We're super proud of our business results that we can generate through optimized fulfillment. And with that, I’ll pass it over to Paul Wyatt.
Paul Wyatt
Thank you very much and welcome everybody. I have a heavy background with Macys and spent the last 20 years working on the click and brick side of it, seeing how that’s evolved. In particular, a heavy focus on consumer buying habit changes, the use of inventory, placement of inventory, and better use of physical location.
We're excited today to cover a number of the cases with you and some of the experiences that we are seeing. And with that, I’ll turn it over to Rich.
Rich Van Patten
Great, thanks Paul, thanks Charu.
I grew up in the retail space, so what you’ll here from all of us and especially from me, will be around the retail sector. I grew up in grocery for 23 years. The most recent job I had there was about 20 years ago. I was Director of workforce management and I had done that for 10 years prior to leaving. I’ve been consulting for about 21 years, six years with the Stores Consulting Group that focuses primarily on groceries and big box and small box retail so all verticals of retail. We'll talk a little bit more later on about what we do, but we do work a lot with eCommerce space and all of the functions and activities within the four walls of a retail environment. That’s a little bit about me and I think we'll get started now with that with our presentation.
As I mentioned in an e-commerce space over the past year, we've seen some magnificent growth in this with growth that was on the books for 5-10 years down the road - certainly not within a matter of months or weeks in some cases. We've seen some increased growth - will talk a little bit about that. We’ve seen that the customer needs to be front and center on everything that we do for an e-commerce standpoint.
Safety and satisfaction is something that all retailers need to focus on and to move things forward to increase the amount of return business that we see from those customers. We’re also going to discuss what we’re seeing and hearing about the retailer’s dominance over the past year and what we anticipate will happen over the next several years as we continue to move forward and continue to mature in the space.
We’re most excited for the change in the customer behavior especially with the fact that we anticipated it was coming, but those that anticipated it little bit ahead of the curve we're in a little bit better shape. But there were a lot of other opportunities that folks could grab onto to really move the commerce face forward.
Customers are demanding improved experiences. Paul is going to talk a little bit about what it looked like in March versus what it looks like today in addition to the retailer’s side of things. And then we look forward to the opportunity to help retailers continue this great e-commerce growth while improving profitability.
We’ve thrown a lot of things at the e-commerce solution but what we done is we're starting to take a step back and realizing that may not of been the most profitable way of doing things. A lot of what we talk about is what retailers are starting to think about, what they’re starting to look at for applications and tools out there and available for people to use to help them to become more productive.
We are excited to be able to bring to you not only some of the some of the spots are also some of the retailers are having, but also the technology that’s out there today and really starting to make it much more profitable and productive as well as enjoyable for our customers to be able to to to experience good customer engagement and better customer service.
There are certain things customers are looking for when they take a look at an online pick up in store processes within the e-commerce space. There have been growing pains of course throughout this accelerated growth - you’ve probably lived through it. Paul will talk a little bit about that from personal standpoint. But it is getting better as we continue to grow and as we continue to get more familiar with customer shopping patterns customer traffic patterns and we get better and better at the solutions.
The winners always put the customer front and center. I’ve seen some retailers who are looking at a true white gloves operation - even the store manager is bringing the product out to the store and ensuring that the customers are extremely ecstatic about the service that they received. So it goes from one end to the other.
Retailers are stretched, but have continued to grow and really focussed on the top 70% of customers who don’t want to wait for the item to ship.
From 2019 to 2020 we saw huge growth - about 44% increase in sales which is expected to continue over the next several years. It's going to slow, we believe, over the next year or two and then continue to start picking up again as we get much better at these processes and customers become familiar and trust retailers to get them the right items.
Online grocery shifted from convenience to necessary infrastructure overnight. You can see the big jump in March, which started to decline a little bit as things started to open up again and then as things start to close down again. We're still on the uptick from where we were even a year ago and we anticipate that will continue to grow.
Look at the headlines out there- you hear it every day - stores hiring 10,000 employees over the last year to grow their capacity for their aisles online program. Sprout sees digital sales soar almost 300% in Q4 of 2020. Best Buy expects to drive 40% total sales through their digital channels and reducing browsing space. So that big box Best Buy store you’re used to looking around at things is going to be reduced by half. The other half of the store will be dedicated to getting digital orders out the door in an expedited manner. Best Buy online sales nearly tripled last quarter 0 what they’re doing and putting in place is working for them.
The announcement this week about them laying off 5,00 employees and closing 20 big box stores - they’re planning to move those to more consolidated stores. So in Minneapolis the four stores that are in the Minneapolis area around headquarters, they’ve made them 50-50 split in the stores and they start to move people into those locations. Traditional brick and mortar is definitely changing, but not going away - people still want to come in the store. I know what we saw at the beginning of the pandemic was that those venturing out and using the online ordering service were also going into the store for the things that I didn't trust the shoppers because they weren't sure they were gonna get the best produce the best meat selections. They may have bought the staples not online and then went to pick it up. but while they were there, they ran inside and got perishables. It's becoming much better and they're starting to trust a lot more - you can see it in those numbers.
Right now in 2020, we’re expecting just shy of $1 trillion in e-commerce sales in the retail space. I’ve seen estimates reach 1.5 trillion annually by 2025. So just four years from now, we’ll have half again where we are today - about 1.5 trillion. In July 2020 it was estimated the US would need an addition billion square feet of warehouse space to meet that demand of $1.5 trillion.
Even as the pandemic comes into our rearview mirror, over 3% of retailers are looking to expand their investment in the e-commerce space. That’s expanded it, or start it. We’ve started working with some small retailers who have not had it in the past or have had it and relied on shopper track or different organizations to do the shopping for them rather. And now they're starting to look at how to pick that to maximize the value of the space and the investment.
Now we’re going to listen to Paul - he's going to tell us a little bit about his personal experiences and then quite a bit about how Macy's has grown eCommerce throughout the last couple of years. Paul?
Paul Wyatt
We have a couple of topics here around the increase in online purchases and what’s happened with curbside and speedy delivery as well as the concerns about profitability of eCommerce and the importance of market share. The behavioral changes is really one of the triggers that’s the enabler for much of this. If you go back a year ago, I was at FMI and I was talking to a number of companies. Their reference point for online orders was generally less than 10% and there was a consideration for modest growth but no excelerator. Well, come March all of a sudden the orders just for toilet paper shifted the entire marketplace. Commodities as a whole really took off and started a trend of adoption. It accelerated my estimation and others’ a five year advancement on the adoption on what are considered difficult transactions in eCommerce.
If you want to buy a sweater or a pair of shoes and you know the size and color you want - placing an order is no big deal. You’re getting one or two items and that's. But doing a grocery store order of 25 to 30 items where freshness of produce is a concern, trust is critically important. I'm fortunate in that my wife was an early adopter last year - she got the toilet paper order in early and I was very appreciative of it. But it was also interesting watching as we went through the year with companies likes Instacart and the early learning curve that she was going through and the pani of whether the stuff was going to show up, whether it was fresh, whether the items would be right, whether the substitutions were right. All the way through to today - I don’t think there’s any way shoppers like her are going to go back to the old way. It's a free hour thy get back in their week - they can do it while they're riding in a car or at a movie theater or can even start their order with Alexa or siri. I expect the demand and expectations will be even higher as we come out of this. Simple things like substitutions will be far more descript - where the user will have an end choice before the shipment is sent. We’ll continue to see what is considered “difficult transactions” to continue to get simpler and simpler.
If somebody had told you ten years ago, “hey you can order a king size mattress and have it delivered to your house without having to come into contact with you and you’ll trust it, and you’ll like the sleeping experience” you wouldn’t have believed it. But when you look at Purple or Casper or even the bigger purchases that are going on like Tesla - the simplification of the transaction and ability to fulfill it quicker and get it to the customer faster is going to continue.
The key is going to be around these key milestones and onsite and offsite experiences. Customers are going to want it where they want it and using platforms like Glympse to know where their stuff is going to continue to be important.
I have over 20 years of experience watching the clicks take over the bricks. I’ve seen commodities and categories that were in that single digit range that now account for more than half - with some of the categories more than 70% of all purchases as the customer trust and the acceptance of it, particularly some of the return activities. But I've never seen a category revert back. So if it went from 5 to 10 or 10 to 20 or 20 to 30, I never saw it go back. With produce being an example, once the trust is built in that I’m goin to get fresh vegetables and fruit from a retailer, the trust is there. If there’s disappointment, there’s ramifications for it. But most likely it’s a continued trend higher. The value of the real estate for the walk-in customer will continue to get re-purposed.
The events that happen out of this about how flexible it is, how freeing it is - it’s not time-bound. If you think about going to a store to do your shopping, your time-bound to an hour and a half, versus you’re doing it on your phone over the course of 3-4 days, 2-3 minutes at a time. You build your basket, you don't have to forget about it, and you don't have to worry about I forgot to get something while I was in the store and now I have to make a trip all the way back.
So a lot of benefits lead me to believe the trend will continue to accelerate. There might be a plateau for, let’s say, Fall of 2021 into Spring of 2022 because of the advancement of all of these things has moved to quickly with the pandemic.
We’ve talked a lot about improvements and how to get the cost out and reinvest. So you’ll come to ask yourself, “how do I pick better”. I regularly hear 30 to 60 per hour or 180 to 220 depending on how effective the set up is. The efficiency of handling cold versus room temp needs, placement can make an impact, but things like dark stores - what's the back half doing - is it a market store? Do you have a slow store that has extra space they can service the full market? If you have to take market share out of the entire market, it’s not about shifting to eCommerce, it’s about holding on to the total market share and expanding it. Use of space is critical and less dependant on exact locations. We talk about ghost stores, but you’ll hear about ghost kitchens, ghost grocery stores, ghost fulfillment centers that might be doing fulfillment for multiple companies. So there might be a produce center fulfilling all produce orders for a marketplace that maybe dealing with 6-7 different labels of companies.
Processing costs are all going to have to get offset.There's got to be a decrease in mistakes and returns and labor costs, particularly with the wage conversations going on now. All of this is going to require us to give better service for a customer so that they repeat purchases with us. In many cases, that’s going to require automation, whether it’s more advanced self checkout methodologies with the customer using their own device or traditional go through a line and scan everything. There's gonna have to be offsets to these costs unless somebody knows it’s okay to increase your gross margin in a competitive environment. I think you’re going to see some unique partnerships - something like On My Way - where you can make five stops on your way home and a multitude of people retail companies to say, “will you deliver these items?” Delivering a light switch from the hardware store is not that much different than delivering groceries.
Rich Van Patten
Can I add a couple things there Paul? As we continue to get more productive, one of the things you'll hear from Ox is that increasing the orders per run - we’re seeing a lot of single orders. As we try to think outside the box. How do we get 4, 6, 8 orders at the same time and how do we make sure and ensure that it’s an easy pick? How do I enable our associates to pick and drop into multiple bins and know where they're going. So I think Charu talk a little bit more about that - and then the other piece is enough to Paul's points around looking outside of just e-commerce there are a lot of activities that we continue to do today in stores because we did them last week, last year, last quarter, last 10 years, last decade. Ad there's no reason for some of those things, especially in today's day and age they were other ways to do it - there are process improvements and looking outside of just that area. The communication side of things both with the customer through things like Glympse, Flyby and other applications that alert us when the customer is coming so that we're ready for them and wait times to know the ability to be able to communicate to the customer doesn't want somebody to bring it out they wanna go to a customer pick up location to be able to scan their ID and then up pops - through robotic technology - all in one bin or pending at how much they ordered able to have control. So it's all about options as well.
Then one other piece in regards to that in that communications - it's not just with a customer but it's also internally. How do we look at orchestrating the workforce so that we're communicating well with them and we're understanding what tasks they need to be accomplishing to be able to be more productive - so that whole automation of tasks, task management is also very critical as we move forward and talk about the ways that we can reduce become more productive. So thanks for letting me interject their Paul.
Paul Wyatt
There have been a lot of the challenges around the cost of entry, hiring employees, out-of-stock replacement, inventory placement - but there have been some successes. Increased sales, white glove experience - we do expect a continued need for that cross merchandising across selling opportunity to check out. Now I’m going to turn it over to Charu.
Charu Thomas
Thank you Paul so much for that and in fact when you guys were speaking there were a lot of things that were just popping up so I think I'll just summarize a lot of the points that you guys already referenced.
I think there's a lot of really interesting opportunities that come through this experience. The retailers that will truly win will be the ones that will be able to enable that fantastic customer journey from the ending process. By far the first opportunity is to update the ability to streamline and optimize BOPIS and curbside delivery through profitability availability and cost effectiveness. In order to actually make that happen, we need to continue to innovate across that operational network and truly transform every single store into a distribution point. You can accomplish this through automation technology that we've already heard about today - whether that be MFC, dark stores etc. as well as our existing brick and mortar storefronts.
If you're using a third-party services like Instacart, it's really important to consider those ramifications for the customer experience. It's a really scary prospect to give Instacart your customer data. When you get personal identification information (PII) two times, you are exponentially improving the chance that the customer is going to buy from you again. With Instacart owning that entire channel, you're essentially putting that responsibility in the hands of a third-party and it really decreases your ability to gain that channel back in the future.
So obviously that means that we have to think about the operational efficiency post Instacart - what does that world look like. That relates primarily to the efficiencies of staffing and capacity or: how can we get as many orders at the door as possible?
Rich already talked about how you need to be able to match the order so you can fulfill more, and retailers who might not be batching orders in the 30 to 60 range like Paul said, but we can really enable them to reach those 150 type pick rates with those basic process improvements through batching and better staffing.
We also reference to some of the gig economy or additional workforce optimization and task management solutions and we also need to build. Those are both related to in-store staff able to support all that capacity that you have currently and also have a giga economy workforce that's also able to kind of handle those extra jumps in demand. I think that that's truly the combination that work effectively for the long-term - you have a stable almost almost like a stable stock in the QR inventory policy, but with workforce instead.
And the last piece of it is the customer experience. I know Pail mentioned some of those challenges that he had as a customer on the other end of it and I've actually heard a lot of challenges from retailers themselves have had problems with the customer communication and that mobile experience. So you really need to be considering all aspects of the customer journey because if you can't offer that strong customer experience as measured through a strong net promoter score, you will lose a customer over time. People really do remember experiences but they remember bad experiences a lot more unfortunately. And on the other side of it, if you're able to offer that incredibly strong customer experience you're able to build those brand evangelists that we’ve already talked about today and those people will be able to continue to support your brand and what you represent over time.
At Ox, what we really do is we build that end-to-end fulfillment technology that's focused on making those retail stores into micro distribution centers and we're really proud of the business outcomes that we can support. For one of our customers we could offer 2600% ROI over two years which is a 1.4 week payback period. Ox supports enterprise level customer orders across the entire fulfillment stack, whether it’s optimization of order across their entire supply chain network whether that’s stores, microfilfillment centers, MFCs, etc, worf stores distribution centers and I see etc. associate facing technology, workforce management and automation there as well. Again this is for that core need of supporting your BOPIS MFC strategy and we’re really excited about the opportunity to share a little bit more about this thank you.
Rich Van Patten
I think we're ready at this point for any questions, so I will ask Arianna who's been kind of taking those questions in the chat if you can tell us what those are - between Paul, Charu, and myself we will answer your questions.
Arianna Thayer
One of the questions that came through was “what's the biggest challenge for retailers today from your vantage point”
Paul Wyatt
The pivot, which I’ll say is in process, it’s not fully there yet, is pretty significant. If you look at just very fundamental things like use of space - packing stations, pick up areas, inventory placement, etc - setting up all the logistical pieces is significant. It means change for the team, which is always hard. Sometimes it’s simple things, like whether you should merchandise all the Cheerios. Do you put them all on the shelf knowing that 24 out of 36 are going to get shipped out. How do you handle that differently so you get the most out of your labor and get shipments ready faster?
We’re partway there but not even close to being fully optimized. I look at a grocery store me where I can drive by on a Friday afternoon at 4:30 and see 30 or 40 cars queued for curbside pick up. Until we are better organized than that, I would say we’re still pivoting.
Rich Van Patten
And I agree with that and then I just add you know we've had a lot of food deserts, a lot of retail desert out there that need to be supplied. And people are traveling long-distance is to pick up - how do we get to pick up closer to the need? So as we look at the overall orders where they're coming from, we can then start to make different decisions. So we set up a customer pick up system service within a bank’s parking lot and build a small building that's relatively quick and easy to put up and fully robotic that we can just bring the orders in rolling in and that everything is taken care of and customers can pick up. So really look at that and also the MFC side of things in the dark stores. To Paul’s point earlier - how can I support more stores out of space?
Arianna Thayer
We got another question for you, “how soon will robotics and automation take over the eCommerce process”
Rich Van Patten
Great question - I'll start with this one and then pass it on. There’s a lot testing going on, there's a lot of people that are moving forward. Think about all the places you are starting to see lockers. OK the lockers there - I get a code on my phone I go up and it tells me what locker my my product is in. And that’s kind of baby steps as we move to the ability for the robots to be able to pick the orders in an MFC. Look at Ocado who has the ability to fully automate that process - they go up until the last mile. Now they have an agreement with Miramax to be able to say “OK now we’ve gotten this far, let’s use your robots to go the rest of the way.” From pick to delivery of a customer order it’s fully robotic.
We’ll be seeing that locally more and more. We’re already starting to see it in many areas with Ocado distribution centers and MFCs. All retailers will continue to move forward in that light.
Charu Thomas
I completely agree with that, Rich and it was actually really insightful to hear your thoughts on that too.
I think MFC is a really really interesting technology and I think it honestly makes a lot of sense for the most retailers to really think about where they are in their automation strategy. So at some level you have that the volume to justify that level of automation and so it's really important to think about where that automation makes the most sense - in the highest volume stores, in the places you need the highest capacity, and really build that hub and spoke network for all your brick and mortar stores, especially for at the enterprise level. St the SMB and mid market level, I think the MFC strategy makes more sense if you don’t have the capital outlaid. Like Paul was mentioning about cloud stores it would make a lot of sense. But to my knowledge I don't think there has been a business model in that realm - unless auto store does something like that - but you guys can correct me on that.
Rich Van Patten
Paul, anything to add there?
Paul Wyatt
As fast as possible. Speaking on the business operations side: Please as fast as possible.
Rich Van Patten
And I think it has to be the full MFC - you know it could be parts of the system that become automated. Enable the people to be more proficient as they walk through the store to be able to pick, sort, and prepare the order - so might be just parts and pieces of the of the process that get automated.
Arianna Thayer
“What are the main advantages of fulfill from store?”
Paul Wyatt
I'll start with that. I think there's a couple considerations. If the some sales in the marketplace have held whole but the sales that are physically taking place in the store have been reduced by half, in essence there’s a portion of the square footage that can still be serviced by the marketplace that doesn’t have the be evident to the customer walking around - that’s the idea behind dark stores. Managing the marketplace from a store-side fulfillment can allow a couple things. Direct ship from manufacturer, bypassing distribution centers and take a stuff out and not having to do any of the merchandising are really two early ones. Second is to have choices on where to send that merchandise you may decide it's lower cost or or lower cost labor. It gives you a couple of different options that the traditional customer facing retail space doesn't.
All of them need to be taken into consideration as you’re thinking through your economic model.
Rich Van Patten
Paul hit on “options”. Customers like options. So Best Buy as I mentioned earlier sees that and says, “people still want to touch it feel it and understand it before they order it,” but not everybody. I may know that I want an iPhone 12 and I want this color and I'm ready and willing and able to order it online but there are others that need the option to be able to go touch it, feel it, see it, before they buy it.
Charu Thomas
Yeah I completely agree with that that. In fact, the way I’d describe that is almost like “load balancing of the network” where you can essentially reoptimize how are routing those orders to effectively address that customer demand. One statistic that pops in my head is that it’s 90% cheaper to fulfill from store than even eCommerce fulfillment centers - because of that last mile component. I think it’s a a required strategy of retailers moving forward.
Rich Van Patten
And it's a more efficient use of the product they have - not everything sells all at once. It's there, it’s available, but to Paul’s point earlier - what are some efficiencies we can put into the system to also help the profitability as well.
