BS in Electrical Engineering from Texas A&M University; MS in Systems Engineering from Southern Methodist University; 10 years at Electronic Data Systems; 21 years at IBM focused on the Retail Industry and Industry Solutions for most of those 30+ years
We actually ran a project last year in our Retail Practice to define a more modern set of sales metrics for brick and click retailers. Most of what we decided came down to moving from metrics like separate same store sales and digital sales to a consolidated view by selling square footage. So for instance sales/sq ft, capital expense/sq ft, operational expense/sq ft, gross margin/sq ft, net margin/sq ft. That fundamentally changes the equation as super large brick and click retailers like Kohl's keep the number of stores but repurpose '000 sq ft of store space by leasing to adjacent business like Aldi. Even that is not perfect as we start to move into new fulfillment mechanisms like micro distribution centers in urban areas. Maybe it makes more sense to look at a store as a direct to consumer fulfillment space and measure fulfillment square footage instead of selling square footage.
To me there is no doubt that this is a better way to execute retail. The apparel supply chain is abysmal in the way it is being run with billions in waste. We have spent so much time looking for the magic algorithm for demand forecasting so that we have the right product in the right place at the right time. No matter how good we get, we will never be right.
Traceability and transparency are much more effective in matching real-time demand to real-time supply in the stores, especially as more demand goes online. That can't be done when the inventory accuracy at a SKU/location level is 65%. It becomes even more imperative when you look at the variety of INCO terms that retailers and brands use. Depending on who pays what with respect to transportation dictating the visibility is not going to give you the transparency necessary to meet consumer demands for information. If trust was ubiquitous between merchants and brand sellers this would be done already on the existing technology.
Blockchain technology just happens to be a new way to exchange information instantaneously in a network model where I can trust that at least if the other party changes something along the line, I will be able to see it. Also I can do it in a way where only the party I want to see it will see it. It's like doing the NYTimes Crossword Puzzle in pen. Everything doesn't have to be perfect, but at least I know where mistakes were made and corrected. That is a different level of trust than exists with the way we do it today.
Dave, As I looked at DSCSA I saw some really big gaps, like it stops at the Pharma supplier vs taking it all the way back to the contract manufacturer that the big Pharma uses. If we are truly worried about the health of patients, don't we want to be able to trace the drug back to the original manufacturing plant? Sure they are manufactured under license with a recipe. Take Zantac for instance. Who decides what inert ingredients go into the pill and where that stuff came from? Is it Sanofi or a generic drug manufacturer in India? Maybe if some stiff fines start coming out they will start looking to push liability deeper into the supply chain and thereby create transparency.
Peter, no doubt looking back that is true. Do you think that they intentionally put in a policy that put safety at risk or was it an unintended consequence. The second part of my comment is that creating a human/patient centric culture could help preventing the implementation policy that had that consequence. That is different than just customer centric. I think it is the next evolution in business that takes into account the people that deliver that customer experience as well.
This is another example of how groupthink is in conflict with the best interest of both the corporation and the consumer. Of course an enterprise as extensive as Walgreens is putting in place policies that stretch human capacity. The mistake here is not that they pushed the limits beyond what the human could do but that they covered it up. Imagine the goodwill that would have been created if they had said to the world: "Wow, we had a problem. We pushed efficiency too hard and now we are going to change to make it better for our employees and our patients." That is a human-centric response that we know would be well received by the humans involved. Instead they totally missed the opportunity to be a human company that makes mistakes and fixes them and betrayed the trust they have been working to build with the public. Leadership needs to fall on their swords and put in place some new policies and leaders that deal with ethics in their operations to prevent a repeat.
Here's a thought. Rather than close the stores, maybe they are in a good spot do what Mansell did at Kohl's. Remodel and lease out square footage to adjacent businesses. Gets you to a smaller format, can increase foot traffic, and the new owners execute on something they have core skills in.
Even if as the name implies their target customer is a female 15 to 25, the reality is that size XS represents only about 5 percent of that target customer segment. Merchandising and operations need to fix the basics. As you say Cathy, they can have the most awesome styles but if they miss the right size and fit they will continue to fail.
Here is what I find most interesting regarding the private equity plays that have killed many iconic retail organizations over the last 10 years. The malls have a seriously vested interest in keeping the stores open. What I don't think most private equity companies get is that when you close a store in a market area not only do you lose the store revenue but you lose the associated e-commerce revenue in that market. There is a proven symbiotic relationship between stores and e-commerce that we are now beginning to understand more clearly. Just take a look at Sears' e-commerce business.
I agree with Nikki. It is not that employees should not have consensual relationships. It is about avoiding situations where there is potential for abuse of power. That is the very definition of sexual harassment. Does a person who works for you genuinely have the ability to consent? Do leaders need to be held to a higher standard? You can not stop two people who work together from forming a potentially romantic relationship. You can however, expect leaders to not put their direct employees in a compromising situation.
With great leadership and power comes great responsibility. It was not very responsible of Mr. Easterbrook to allow that to happen for a great many reasons. He could have made many other choices that would not have compromised him or the company.
Ignore customer expectations at your own peril. Table stakes for sure. Something essential for any retailer operating in these times. Of all the possible operational challenges for BOPIS, DG’s biggest in my opinion is inventory accuracy. If anything like most other retailers the customer backlash for not having in that store what the customer orders will be swift and vicious.
Most interesting comment is: "On the positive side, the majority of suppliers said drop shipping has led to improved sales, market share and profitability." Just goes to show you that the increased logistics cost for DTC is overshadowed by manufacturing operations cost. More sales means more profits for the suppliers.
The world has changed. The Millennials and Gen Z shoppers, arguably the most sought after segments for new customers by H&M, care about this. Good for them and I think transparency will become the next big disruption in this crazy wonderful industry.
Like almost everything in life, I think it important to note that one size does not fit all. Different categories require in many cases completely different approaches, even with AI. Long lifecycle products can combine historical sales peaks and valleys with causal factors that can be predicted with a high degree of accuracy. Short lifecycle products need a deeper look at outside information like weather, fashion trends and social buzz. This is especially true of using AI/Natural Language Understanding to look at outside factors that we have not looked at in the past. AI in all its different form factors is proven to improve forecasting by a factor of 10 over what we were able to achieve in the previous 10 years before AI. The longer we wait the further behind we will get from those that are doing it.
What I find especially interesting is the chasm of disconnect between the "leaders" in a retailer omnichannel organization and the "leaders" in a retailer supply chain organization. Let's take for instance department stores. Does anybody really believe other than Macy's who has made the investment in selling to the last item with RFID, that a department store actually has a better than 65 percent accuracy rate down to the color/size level in a store? Even though there have been many studies that prove the ROI they can't seam to get over their institutional inertia. When will they realize that they can no longer compete spending 1.5 percent of revenue on IT? #crisisofleadership