Last December, during a 60 Minutes interview, Jeff Bezos announced his plans for Amazon Prime Air, a service that would deliver packages to consumer’s homes using a fleet of drones. Since then the retail industry has gone absolutely bonkers exploring new ways of delivering packages ordered online to consumer’s homes. Amazon has announced it is testing delivery via taxicabs and bicycle couriers. DHL and Walmart are experimenting with crowdsourcing delivery to random people. eBay and startups like WunWun offer concierge services that will deliver just about anything to your home in less than an hour. Cardrops in the UK will store packages in your car’s trunk while you are away. Soon you will be able to order a present on Christmas morning to be delivered in less than one-hour, fully wrapped, just in time for you to put under the tree.
Tomorrow is the biggest shopping day of the year in the US – Black Friday. However, a more appropriate description of the day might be “Dark Friday” or “Red Friday” given the wave of violence that has emerged in recent years. In fact, the first references to “Black Friday” were not very positive. In 1966 the Philadelphia Police Department used the term Black Friday to describe the massive traffic jams and overcrowded sidewalks throughout the downtown shopping district. Nearly 100 years earlier in 1869 Black Friday was used to describe a financial crisis. Sometime in the early 1980s the merchant community changed the meaning of Black Friday to reflect the day at which retailers turned profitable for the year. Instead of operating in the red they were now operating in the black.
There has been a frenzy of media coverage over Groupon lately after it reportedly turned down a $6 Billion acquisition offer from Google. Groupon is one of a rare group of companies that has achieved overnight success with an innovative and disruptive approach to the market. No other startup has gone from launch to $1 Billion in valuation more quickly other than YouTube. During one span, Groupon increased its valuation by 4X in just 3 months. And on Friday it was reported that last week Groupon raised nearly $1B in venture capital from large institutional investors including Fidelity, T. Rowe Price and Morgan Stanley. Rumors that the company is on a fast-track for a potential $15B IPO are circulating as well. Unlike many of its peers in the social commerce arena, Groupon actually has a business model that generates revenue. In fact, various reporters have estimated Groupon’s 2010 annual revenues to be approximately $500M.
The New York Times reported that last week Groupon raised nearly $1B in venture capital from large institutional investors including Fidelity, T. Rowe Price and Morgan Stanley. Rumors that the company is on a fast-track for a potential $15B IPO are circulating as well. There has been a frenzy of media coverage over Groupon lately after it reportedly turned down a $6 Billion acquisition offer from Google. Someday I aspire to be confident enough in a growing business to turn away a multi-billion dollar buyout proposition from the likes of a Google. But in the meantime, I can only imagine what I would do if I were in the shoes of the Groupon management team. One of the first areas I would explore is expanding the scope of merchandise being sold and the limited geographic reach of the offers.
The summer of 2010 was a unique period in our history when consumer euphoria about a revolutionary wave of mobile devices overwhelmed the supply chain, security professionals and wireless networks. The summer witnessed the introduction of a series of amazing and revolutionary devices including the EVO 4G, Blackberry Torch, Droid X, iPhone 4. Consumer euphoria about the new devices led to a surge in demand that managed to overcome a seemingly unrecoverable period of recession. However, the handset manufacturers and wireless carriers which introduced the products had hoped for even greater success. A series of security blunders, supply chain snafus and regulatory entanglements, battered brands and constrained what might have otherwise been even higher sales results.
The Fast Moving Consumer Goods (FMCG) segment spends a considerable amount of its marketing budget on trade promotions. It is not uncommon for FMCG brands to spend 15% of sales on promotions with retailers. Trade promotions are designed to generate uplift in sales for the brand owner. There are hundreds of different types of promotions. Many involve a discount to the end consumer. Examples include price discounts; manufacturer coupons; value packs; bonus packs and special events. Manufacturers also offer financial incentives to retailers to perform specialized in-store advertising and product placement on an end-cap or near a checkout. However, retailers and wholesalers of FMCG products also use the promotions as a strategy to maximize profits.
Billions of dollars of waste and inefficiency are created annually from the inability to comply with retailer guidelines for carrier routing, shipment labeling, product packaging, item ticketing and EDI transmissions. With significant margin pressure on both retailers and manufacturers due to the recession you may be wondering why the industry has not been able to significantly reduce these “preventable deductions.” The answer is that enforcing compliance is a like a complex game of Battleship for suppliers, which requires them to keep pace with an average 50-150 business rules for each of their 75 to 100 retail customers. Retailers do track compliance towards similar types of performance criteria such as on-time delivery, accurate documentation and carrier routing. However, there is very little consistency between retailers on the actual metrics being tracked. Continue reading