E-commerce Industry News
UPDATES ON THE ECOMMERCE INDUSTRY
August 8, 2017
A Nagging Question Is Answered: “How Much Should I Spend on a Wedding Gift?”
The Knot’s survey found the average guest spends $118 on a wedding gift!
If you struggle with basic questions concerning wedding gift etiquette, do not despair; you are not alone. According to results of a recent survey conducted by the Knot - a popular website that enables couples to create their very own wedding websites – almost half (47 percent) of Americans report needing help.
The Knot’s latest annual Wedding Guest Study surveyed over one thousand people who attended a wedding in the past 3 years, to find out how much people spend on gifts. Results showed that the average guest spent $118 on the wedding gift, and members of the wedding party (attendants) spent half again as much ($177 on average). Of course, one should factor in his or her own financial situation and whether spending on travel and accommodations will be required, as well as personal closeness to the bride and groom.
If you will be attending an engagement party and shower in addition to the wedding itself, a reasonable rule of thumb is to allocate your targeted total gift budget this way: 20% towards each the engagement present and the shower gift, and 60% towards the wedding gift itself.
The Knot’s survey revealed other interesting insights. Surprisingly, whereas the average spend was $118, almost half (46%) of the items listed on the typical couple’s registry cost under $50. Four out of five couples (83%) now use wedding websites as the means by which they share their gift registries with guests, and more than one in three guests (37%) purchases his or her gift directly from the registry. About two-fifths of guests present monetary gifts in one form or another - cash, checks or gift cards.
Younger couples tend to prefer to receive money; they can put it towards helping pay for a honeymoon, paying off school loans, a down payment on a house or simply making ends meet. Those living in apartments or starter homes typically appreciate gifts every couple welcomes to round out their home or apartment, and their kitchen, in particular.
Kathleen Grodsky, VP of Marketing and Operations at the online store Butcher Block Co., says she is not surprised at all by the Knot’s survey findings. “We sell a wide range of kitchen necessities that are perfect for newlyweds – especially John Boos wood cutting boards, Chroma Type 301 stainless steel kitchen knives and Artelegno magnetic knife blocks,” explained Grodsky. “These are the types and brands of kitchen accessories that every household aspires to own,” she continued.
Grodsky estimated that as much as twenty percent of the company’s total sales trace to gifting – purchases related to birthdays, Mother’s Day, Father’s Day, Christmas, Hanukkah and of course, weddings. “Gift cards are our best sellers,” she says. “The gift-giver does the legwork, finding a website like ours that sells only the absolute best kitchen furniture and accessories, easing the burden on the ultimate buyer – the soon-to-be-wed couple.”
July 11, 2017
Research Firm GfK Confirms and Quantifies World’s Addiction to Technology
One-Third of Internet Users Find It Difficult to Take a Break from Tech
One of the world’s largest market research firms, GfK (Gesellschaft für Konsumforschung; translation: Society for Consumer Research) recently surveyed internet users from around the world about their use of connected devices. GfK’s key finding was that despite the best of intentions, one out of every three internet users reports having a hard time walking away from electronic devices, despite knowing better.
In response to the question, “Do you find it difficult to take a break from technology,” 34% of respondents agreed – twice as many as the percentage who disagreed (16%). Not surprisingly, GfK researchers observed considerable variation in survey responses depending on the age of the respondent. Whereas 44% of the youngest cohort – age 15 to 19 – agreed with the above statement, only 15% of those 60 or older reported finding it difficult to disconnect from time to time.
Age forty seems to be some sort of an inflection point for technology resistance, according to the detailed findings. Affirmative response rates for the three youngest age groups – collectively, those under 40 – were clustered in a tight range of 38% to 44%. But there was a 9-point drop-off in the affirmative response rate between those in their thirties (38%) and those in their forties (29%).
Percent Agreeing It’s Difficult to Take a Break from Technology, by Age Group
Age 15-19: 44%
Age 20-29: 41%
Age 30-39: 38%
Age 40-49: 29%
Age 50-59: 23%
Age 60+: 15%
June 21, 2017
Amazon Launches Prime Wardrobe to Further Challenge Department Stores
New Service Allows Customers to Try On Clothes Before Buying
As if anyone needs yet another indication of Amazon’s huge ambitions after last week’s announcement of their intent to purchase Whole Foods for $13.8 billion, on Tuesday the internet behemoth launched a service they’re calling Prime Wardrobe that lets their Amazon Prime customers try on clothing at home before buying it.
Prime Wardrobe is modelled after the personal shopping services StitchFix and TrunkClub. The latter, founded in 2009, was acquired by Nordstrom in 2014. Customers of such so-called “box” services work with specialists who choose clothing for their personal boxes, which are shipped to homes. Customers have the option of purchasing or returning individual items included in each box.
Amazon’s service differs in that it is not subscription-based (i.e., customers can order boxes as often as they wish) and customers will choose for themselves what to include in their boxes. They will have seven days to decide which items to keep. Shipping is free both ways, plus Amazon will offer discounts as incentives to buy more items – 10% for the purchase of two or three items and 20% for four or more items. Over one million items of clothing will be eligible for the service.
Prime Wardrobe is only the latest in a string of initiatives aimed at earning Amazon a larger share of apparel sales. It’s estimated that Amazon accounts for roughly six and a half percent of total U.S. apparel sales, but the diversified services firm Cowen & Co. expects Amazon’s sales of clothing and accessories will grow nearly 30% in 2018 to $28 billion. That would put it ahead of today’s market leader, Macy’s, whose sales are expected to drop 4% to $22 billion. Macy’s, along with other department store chains such as Nordstrom and JC Penney, have been hurt by falling shopper counts at malls across the country.
June 14, 2017
Internet Ad Spending Is Projected to Surpass TV Ad Spending in 2017
Analyst/Investor Mary Meeker Reveals This Insight and Others in Her 2017 Internet Trends Report
Mary Meeker built a strong reputation as a Morgan Stanley stock analyst and an investor with the Silicon Valley venture capital firm of Kleiner Perkins Caufield and Byers. Each year Ms. Meeker publishes an eagerly awaited annual internet trends report loaded with data and insights concerning the technology and media industries. This year’s report is no exception. Here are some of her most important observations.
The Rise of Mobile
In 2016, on average Americans spent 5.6 hours on the internet each and every day. That was half again as much as they spent online in 2011 (3.7 hours). The increase traced to rapid expansion and adoption of smartphones (devices combining the functions of cell phones and computers). Mobile device usage quadrupled from 2011 to 2016, jumping from 0.8 to 3.1 hours daily. Over that same time period, use of desktop and laptop computers fell 15%, declining from 2.6 to 2.2 hours daily. So in 2016, Americans relied on mobile devices to access the internet over half the time (3.1 out of 5.6 hours, or 55%).
Mobile’s Share of Ad Spending Skyrocketed
Total U.S. online advertising more than doubled between 2011 and 2016, increasing from $32B to $73B. Once again, mobile was responsible for the dramatic growth. Advertising delivered via mobile devices exploded from less than $2 billion in 2011 to $37 billion in 2016. Consequently, mobile ad spending accounted for slightly more than half of total online ad spending in 2016.
Internet Ad Spending Will Top TV Spending in 2017
In 2011, global television ad spending totaled $160 billion – more than double internet ad spending at the time ($75 billion.) Since then, online has steadily increased its share of total ad spending from 32% in 2011 to 49% in 2016. Meeker expects internet ad spending to surpass TV ad spending for the first time ever in 2017 – roughly $200 billion compared to $195 billion.
Facebook Continues to Gain Ground on Google
In 2016, Google experienced 20% year-over-year growth in U.S. ad sales – from just under $30 billion to a bit over $35 billion. Meanwhile, albeit on a much smaller base, Facebook grew ad sales much faster - by 62%; from $8.5 to $14 billion. Facebook ad sales amounted to 29 percent of Google’s ad sales in 2015, but 39% of Google’s ad sales in 2016. Advertising sales recorded by all other internet media grew only 9%, in comparison.
Online Retail Sales Continue Strong Double-Digit Growth
U.S. e-commerce sales nearly doubled between 2011 and 2016, expanding from $200 billion to just under $400 billion. Sales have increased 15% on average over the past three years and show no sign of slowing. Package shippers have also benefited. Year-over-year growth in parcel volume was a bit under 4% in 2011; more than 4% in 2012 and 2013; then 6%, 8% and 9%, respectively since then.
This ecommerce news summary is presented by Butcher Block Co., an online-only retailer of kitchen furniture, countertops and accessories, principally made of butcher block.
May 26, 2017
Mcommerce (Mobile) Sales Projected to Reach 37% of Ecommerce Total in 2017
Still, mobile’s gains have fallen short of some pundits’ predictions, as most consumers prefer laptops or desktops for online shopping, especially for big-ticket purchases.
The digital data and research firm eMarketer.com estimates that one out of every three dollars spent on ecommerce purchases in 2016 traced to a mobile device (phones and tablets), as compared to only 19% just two years earlier. They expect that figure to climb to 43% by 2020, when mcommerce sales will approach $295 billion. Much of the gain traces to consumers’ embrace of smartphones boasting 5-inch screens and larger.
Even though Mobile’s share of ecommerce sales has been growing steadily, some industry analysts have been on trend, but off target. They expected rapid adoption of mobile devices would revolutionize ecommerce. As it turns out, while mobile traffic has been growing about 7 percent annually over the past few years, sales triggered over mobile devices have been growing only 2.7 percent per year, according to data aggregators Statcounter and Comscore.
ComScore reports that during the first quarter of 2017, mobile’s share of all digital commerce was 22% - (notably, far off eMarketer’s 37 percent estimate for the whole of 2017), whereas mobile devices accounted for about for 47% of online traffic. The generally accepted theory is that consumers like small screens for researching purchases they are contemplating and for browsing product offerings, but when it comes time to click the Complete Purchase button, they resort to larger-size screens. Surveys suggest this is due to the constraints which small screens impose and perhaps online merchants historically giving their mobile sites short shrift (although this is rapidly changing).
There are, however, many categories of products where mobile sales exceed sales racked up on desktops. For instance, Comscore reports that during first quarter, 60% of online sales of video games, consoles and accessories traced to phones and tablets; as did 57% of toy and hobby sales and 55% of jewelry and watch sales. In sharp contrast, mobile devices landed only 9% of computer/peripheral/PDA sales and 11% of consumer electronic purchases.
Another meaningful measure is mobile’s share of transactions, as opposed to share of dollar sales. Global ecommerce trend tracker Criteo reports that mobile devices now account for two-thirds of all online transactions. In a company release, Criteo posited that consumers are more comfortable using their phones to buy smaller, less expensive items where there is little need for product information and the risk of making a bad purchase decision is rather low.
It remains to be seen whether larger screens and further improvement in display resolution will ever be enough to convince consumers to complete big-ticket purchases on mobile devices or whether desktops and tablets will continue to dominate.
This ecommerce industry news is presented by Butcher Block Co., a leading online seller of kitchen furniture, countertops and kitchen accessories.
May 10, 2017
Harmon Kardon Announces Details of Device to Compete with Amazon’s Echo
Harmon’s new Invoke audio device will work with Microsoft’s Cortana personal assistant.
The runaway success of Amazon’s Alexa - the digital personal assistant bundled with the Amazon Echo smart speaker – demonstrates that consumers are rapidly becoming accustomed to talking to devices to automate their lives and run their homes. Since Amazon allows third parties to integrate Alexa into the products they manufacture – everything from appliances to automobiles - consumers are using Alexa to manage home lighting, thermostats, locks, security alarms and more. Ford, for example, is building the digital assistant into its new cars so that Alexa will be able to answer such questions as “How much fuel remains?” or “Where the heck did I park the car?”
Certainly, Amazon’s success is not lost on its high-tech competitors, each of whom seeks points of difference and superiority. Google Home, for instance, incorporates Google Assistant, which leverages the company’s industry-leading internet search capability plus other Google services, including Google Calendar, Google Contacts and Gmail.
Meanwhile, it’s reported that Apple is working on its own voice-based, smart home device that will leverage its wildly popular AI personal assistant, Siri, and allow users to stream Apple Music content, among other things. According to Bloomberg, Apple will attempt to one-up Amazon’s Echo by using advanced microphones and speakers, but based on the Invoke’s specifications released by Harmon on Monday, that could prove to be a tall order.
While the Invoke device closely resembles the Amazon Echo in appearance, Harmon will leverage its expertise in advanced acoustics. Each Invoke will feature six individual speakers - three woofers (designed to reproduce sounds of low frequency) and three tweeters (for high-frequency sounds) – to deliver 360-degree sound. Moreover, each Invoke will use a seven-microphone array plus noise-cancellation technology in order to provide superior recognition of the voice commands sent to it.
Microsoft’s contribution to the partnership will be its Cortana software, which can be used to manage a user’s calendar, for instance, or to conduct internet searches via Microsoft’s Bing search engine. Bing is already used by almost 150 million users of PCs and mobile devices.
This internet technology news summary is provided by Butcher Block Co. BBC is an online-only store whose focus is furniture, equipment and accessories for residential and commercial kitchens. The company’s specialty is wood countertops and kitchen carts, islands and tables.
April 20, 2017
Ecommerce Surge Impacts Profit Margins, Prompting Changes in Strategy & Tactics
Walmart offers discounts to entice customers to pick up in-store. UPS adds Saturday home delivery and tests drones.
Amazon and Walmart lead all e-commerce retailers, racking up annual online sales of $79.3 billion and $13.5 billion, respectively, according to the data and research firm eMarketer. But the more telling data point is this: online sales still account for only 2.8% of Walmart’s total sales. To address its online underdevelopment, last year Walmart announced it would acquire the e-commerce start-up Jet.com for an eye-popping $3.3 billion.
Another key strategy the world’s largest retailer will employ is to leverage their physical stores, which can serve as warehouses from which products can be shipped or picked up. This could represent a key advantage since small package shipments directly to homes is costly. Hoping to control shipping costs, which are certain to rise as e-commerce accounts for an increasing share of overall sales, earlier this month Walmart unveiled a new “Pickup Discount” program that will reward customers with 3 to 5 percent price discounts when they order select items online then pick them up at one of Walmart’s 4,700 brick-and-mortar stores. According to a company release, the price-break will be offered on more than one million items by the end of June.
With online sales growing far faster than overall retail sales, all major players in the e-commerce space are exploring ways to better manage “last-mile” delivery expense – the high cost of transporting goods over the last leg of delivery, into the home. UPS, for example, saw its profit margin contract during the latest fiscal quarter, as growth in home deliveries outpaced growth in deliveries to commercial addresses.
In response, UPS said it will increase capital spending by $1 million, or 33 percent, to keep up with consumers’ rapid shift to online shopping. In addition, the company just initiated Saturday home delivery, which both the U.S. Postal Service and FedEx already offer. UPS is also testing in rural areas home delivery via drones launched from truck roofs.
This e-commerce news summary is presented by Butcher Block Co. BBC is an online seller of kitchen countertops, furniture and accessories, including kitchen knives, knife blocks and exquisite serveware. Butcher Block Co. keeps close track of emerging trends in the retail sector.
April 9, 2017
Retail Sector on Pace to a Record-Number of Store Closings in 2017
Experts say it may take five years to bring the over-stored U.S. in line with true demand.
U.S. retailers, impacted by the growing popularity of online shopping, are taking serious action by shuttering stores at a record pace. According to Credit Suisse, so far this year retailers have announced plans to close almost 2900 stores – that’s two and a half times as many closings as had been announced by the same point in time one year ago: 1153. If the trend continues, 2017 will be a record-setting year for the sector; but not in a good way.
From 2000 through 2007, U.S. retailers closed about 2500 stores each year. That number doubled to about 5000 during the depths of the Great Recession (2008 – 2010) and peaked at 6200 in 2008. Industry experts say we could see as many as 8000 or more store closings this year.
Some retailers are opting to reorganize under bankruptcy protection, shuttering poorly performing stores in order to improve financial results. High-profile casualties include Payless ShoeSource, which recently filed for Chapter 11 bankruptcy and announced plans to close 400 (9%) of its stores worldwide. Electronics retailer RadioShack, in its second bankruptcy filing in two years, announced it will close another 187 (9%) of its stores. Outdoor goods retailer Gander Mountain, who operates in 11 states, has announced it will close 32 of its 162 stores.
Other retailers will shut down operations altogether. In January, Ohio-based women's clothing company, The Limited, filed for Chapter 11 protection after shuttering roughly 250 stores across 42 states. The Indianapolis-based electronics chain HHGregg Inc. announced it will close all of its 220 stores in 19 states. Gordmans Stores Inc., based in Omaha and operating 106 department stores in 22 midwestern states, will likewise close all its doors.
Many companies are electing to pare down their physical-store footprint in the absence of any bankruptcy proceedings, including Sears Holdings Corp., Macy’s Inc. and J.C. Penney. Others, such as American fashion house Kenneth Cole and the women’s apparel chain Bebe Stores Inc., are reportedly hoping to remake themselves into e-commerce-focused enterprises.
Data generated by the commercial real estate information provider CoStar Group suggests that because of overbuilding and Ecommerce gains, the U.S. remains over-stored and that another ten percent of retail space still must go. While upscale malls continue to perform well, C and D-class shopping centers (30% of the U.S. total) will bear the brunt of store closures in the years ahead.
This retail-store news summary is presented by Butcher Block Co. BBC is an online-only retailer specializing in kitchen furnishings and accessories, including wood countertops, kitchen islands, carts and tables. BBC closely monitors retail trends impacting markets and consumers.
March 22, 2017
Amazon’s Growing Prominence in Apparel Pressures Department and Mall Stores
Historically, the generally accepted belief was that online retailers posed little risk to brick-and-mortar apparel stores whose fitting rooms and promise of instant gratification represented distinct advantages; or so it was thought. But millennials – those coming of age early in the new century – seem quite willing to delay gratification and to cope with the hassle of returning unwanted merchandise. This valuable demographic group – 18 to 34-year-olds – accounted for 35% of all online apparel purchases in 2016 according to Slice Intelligence, a research firm focused on online commerce.
Slice reports that Amazon, who leads all other apparel retailers in capturing this attractive demographic segment, garnered a 16.6% share of millennial’s 2016 online apparel purchases. That’s more than twice Nordstrom’s 8.1% share; more than three times Old Navy at 5.1%; almost four times that of J.Crew (4.2%); and four and a half times Macy’s 3.6% share. Demonstrating a serious commitment to the apparel sector, Amazon launched seven private-label clothing brands last year alone. Plus, it’s reported that the company will soon launch Amazon-branded bras and has an active-wear line in development.
Even worse for department stores and mall-based apparel retailers, Amazon continues to gain momentum in clothing categories. Cowen & Company, a diversified financial services company, projects that Amazon’s clothing and accessory sales will jump 30% in 2017, while Macy’s sales, for example, will likely decline 4%. This partly explains Macy’s decision to close 68 of its 728 stores in 2017. Barring some game-changing development, it’s likely that online apparel sales will continue to strengthen and Amazon, in particular, will increase its share-of-mind and sales among this next generation of shoppers who exhibit a strong “digital-first” preference.
Even online-only competitors such as eBay have seen fit to modify policies and practices in attempts to thwart Amazon’s growing prowess, fueled in part by its popular Prime membership program. Amazon Prime promises free two-day shipping on many purchases and unlimited streaming of movies and TV shows. This week eBay announced plans to guarantee delivery of twenty million items within three days, many for free. In comparison, Amazon’s Prime membership offers free, 2-day shipping on more than fifty million items.
Notably, two-thirds of eBay’s orders already ship free and more than three in five arrive within three days. Nevertheless, eBay felt the need to beef up its delivery promises, motivated by research indicating that online shoppers rank having a guaranteed delivery date the number-two decision-making criterion, second only to free shipping. Ebay will even offer free returns on items that arrive outside the promised delivery window.
This Ecommerce news summary is provided by Butcher Block Co. – an online store specializing in kitchen countertops, furniture, equipment and accessories. BBC strives to keep consumers abreast of key trends in online retailing.
March 19, 2017
John Boos & Co. Marks 130th Anniversary of Iconic American Brand
Boos Blocks Have Been Continuously Made in America Since 1887.
Conrad Boos and his son John began harvesting sycamore trees in 1887 in Central Illinois. They processed the trees at a family-owned sawmill, sawing them into thick wood slabs that blacksmiths used as heavy-duty worktops. Such tops could withstand the heaving pounding smithies were famous for back in the day.
Boos sycamore blocks were being used for wide ranging applications in textile mills and manufacturing shops when John Boos came up with the idea of mounting the wood slabs on legs and expanding the company’s market into butchers’ shops. The innovation was so profound it gave rise to an all-new product category and name - the butcher’s block - for which John Boos is world famous.
One hundred and thirty years later, the “Boos Block” brand name can be found on all types of kitchen furniture, including islands, carts and tables, as well as cutting boards, chopping blocks and countertops. Boos has also become a major player in commercial kitchen equipment, including stainless steel work tables and enclosed base cabinets, as well as stainless steel sinks and accessories.
Here’s how Ted Gravenhorst, Jr., VP of Sales & Marketing at Boos & Co., explains the company’s long-term success. “Consumers expect the very best from John Boos; they always have. The only way to meet their expectations is by continuously improving the design, functionality and workmanship of Boos products.”
Butcher Block Co., a leading Boos online dealer, is celebrating Boos’ 130th anniversary by staging a consumer giveaway. The grand prize is a thousand-dollar Boos butcher block countertop. Kathleen Grodsky, V.P. of Marketing at BBC, explained, “BBC is eager for homeowners, builders, contractors and designers to discover the beauty and durability of butcher block and how easy it is to design and price Boos countertops on the BBC website. The winner of the sweepstakes will be entitled to design his or her own custom countertop made of maple, walnut, cherry or oak and constructed in edge-grain, end-grain or blended style”, Grodsky continued. Consumers can enter the sweepstakes by visiting the company’s Facebook page before March 31, 2017.
BBC carries the full John Boos line, which ranges from counter and island tops to kitchen islands, carts and tables with butcher block tops, plus wood cutting boards and stainless steel commercial kitchen equipment. In addition to John Boos, BBC carries products made by eight other manufacturers who supply similar and other types of kitchen furniture, plus such accessories as kitchen knives, knife blocks and wooden serving bowls.
March 6, 2017
Americans Rate Internet Retail Top Channel in Customer Satisfaction Survey
Amazon and Trader Joe’s Score 86; Publix 84; and Costco 83.
Each year the American Customer Satisfaction Index (ACSI) interviews roughly 70,000 U.S. consumers to assess their satisfaction with a wide variety of industries, companies, products and services. Last week ACSI released their 2016 findings, revealing that for the second year in a row, respondents rated Internet Retail superior to other channels. Also known as “E-commerce,” this distribution channel earned a score of 83 (out of 100) in 2016 – up 3 points compared to 2015.
With an overall score of 80, Specialty Retail Stores ranked number-two for the second year in a row, also improving 3 points year over year. Three channels earned a rating of 78, resulting in a three-way tie for third place: Department & Discount Stores (up 4 points); Health & Personal Care Stores (up 5 points); and Supermarkets (also up 5 points). The other channel measured, Gasoline Stations, managed a one-point year-over-year improvement and a score of 76.
Consumers gave E-Commerce its highest mark (88) for “ease of checkout and payment process.” On three additional attributes the channel scored 85: “ease of navigation,” “usefulness of product images” and “variety and selection of merchandise.” Amazon outpaced all other online retailers monitored, and the Internet Retail sector as a whole, improving its rating 3 points to 86. Four other online retailers scored big gains vs. 2015. Tech-focused Newegg improved 4 points to 83; Ebay and Overstock both gained 6 points to score 81 and 79, respectively; and Netflix picked up 3 points to tally 79.
The Specialty Retail Store channel earned its highest marks (83) on the attributes of “courtesy and helpfulness of staff” and “layout and cleanliness of stores.” Nine chains scored 80 points or more, with Costco leading the pack at 83. Three chains were rated at 81: Barnes & Noble, L Brands’ Victoria’s Secret and Bath & Body Works and Sam’s Club; and five scored 80: AutoZone, GameStop, Home Depot, Staples and TJX.
Dillard’s (83) and JC Penny (82) led Department & Discount stores – a sector whose key strength is “convenient store locations and hours.” Health & Personal Care stores also count convenient locations and hours as their most appealing attribute (86), plus “quality pharmacy services” and “store layout and cleanliness” (84). This sector’s leading scorers – Kmart (84) and Albertsons (83) – markedly improved compared to year-ago.
Most appealing for Supermarkets is the location, hours, layout and cleanliness of stores, plus the helpfulness of store staff. A differentiating attribute for this channel is the “freshness and quality of meat and produce.” Six chains beat the 80-point threshold: Trader Joe’s (86); Aldi, HEB, Wegmans (83); and Whole Foods (+8 points to 81).
Americans expressed highest satisfaction with television and video players (87), followed by soft drinks (84). In contrast, they expressed much less satisfaction with internet service providers (64), subscription television service (65) and municipal utilities (68).
This summary is provided by Butcher Block Co. – an online store specializing in kitchen countertops, furniture, equipment and accessories.
February 1, 2017
Wal-Mart’s Latest Foray Aimed at Amazon: Free Two-Day Shipping
Retail Giant Improves Its ShippingPass Program to Better Compete with E-commerce Leader
Pressured to accelerate growth in online sales, Wal-Mart announced it is abandoning its fee-based ShippingPass subscription-based program, which promised free delivery of over 2 million different items within three to five days when shoppers spent at least $50 with the brick-and-mortar juggernaut. Instead, the company now promises delivery within two days and has lowered the minimum purchase requirement to $35. The company began testing ShippingPass in May of 2015.
The move marks Wal-mart’s latest salvo aimed at the wildly successful Amazon Prime program. Prime members pay an annual $99 fee to enjoy free two-day shipping on eligible purchases, plus such wide-ranging benefits as unlimited streaming of movies and TV shows with Prime Video. Such perks make it difficult for competitors to wrestle loyal customers away from Amazon. Apparently, Wal-Mart deemed it necessary to raise the stakes in order to siphon users away from Amazon.
Explaining the change in a company news release, Marc Lore, President and CEO of Walmart U.S. eCommerce, explained, "In this day and age, two-day shipping is really just table stakes. We don't think it's necessary to charge a membership [fee] for it." While it remains to be seen whether the shift in strategy will prove successful, the move is understandable. Amazon Prime’s U.S. membership exceeds 50 million, according to Cowen and Co. And Kantar Retail estimates that about one-third of Wal-Mart shoppers are Prime members, so top prospects for conversion.
Kantar reports that free two-day shipping is the leading reason Prime members renew their subscriptions. Now that Wal-Mart will provide similar two-day delivery for free, on orders of $35 or more, Wal-Mart might finally be poised to gain ground on Amazon. The narrow breadth of Wal-Mart’s product array might represent a major drawback, however. Whereas Wal-Mart will offer free-shipping on 2 million products, Amazon boasts that over 40 million items are Prime-eligible.
Even if Wal-Mart is successful in luring online shoppers away from Amazon, it’s not clear that the firm’s profit margin will necessarily grow as a result. Accelerating online sales at some retailers have caused profit margins to contract. Lore suggested the minimum purchase requirement, which encourages shoppers to build bigger baskets (i.e., buy more items), should help guard against margin erosion. This was the concept behind Jet.com – the company Lore founded that relied on a pricing algorithm that incentivized shoppers to add to their baskets. In August, 2016 Wal-Mart announced it agreed to acquire Jet.com for approximately $3 billion in cash plus $300 million in Walmart shares.
The information herein is presented by Butcher Block Co., an online merchant specializing in kitchen countertops, furniture, equipment and accessories.
January 31, 2017
UPS Results Disappoint. Company Plans $4 Billion Investment To Improve Margins.
Shipping Giant Is Impacted by Shift from Business-to-Business to Business-to-Consumer Shipments
UPS missed analysts’ revenue and earnings expectations for its latest fiscal quarter, and adjusted downward expectations for 2017. The company continues to experience a shift in composition of its delivery base from commercial to residential addresses that has hurt profit margins.
E-commerce sales are expanding at double-digit rates, according to the National Retail Federation. This drives steadily higher the total number of annual package shipments. But higher shipment volume does not necessarily translate into higher profit margins, since the total number of ship-to destinations increases in kind, driving up total delivery costs.
More deliveries to more addresses impacts shipping company productivity and ultimately, profit margins. By far, the “last mile delivery” cost component is the most expensive for all shippers. Plus, the increase in shipments to individual consumers is compounded by their rising demand for expedited and on-time delivery, further stressing shippers’ operations and margins.
For UPS, residential deliveries are less profitable than commercial deliveries, so company profit margins have been negatively impacted. Simply put, shipments from one business to another (Business to Business, or B2B) are typically larger, more efficient and so, more profitable. But, as a percentage of all UPS shipments, B2B sales are on the decline. For perspective, UPS classified 55% of its fourth quarter shipments as Business to Consumer (B2C) deliveries.
In contrast, FedEx, which has also experienced growth in total shipments, has managed to expand profit margins within its ground-shipping segment. Challenged to keep up, UPS plans to invest $4 billion in 2017 to increase overall capacity in its delivery network. Much of the invested capital will be spent on facility automation.
The information herein was compiled by Butcher Block Co., a leading E-commerce concern with a focus on kitchen furniture, equipment and accessories. The company sells branded and private label wood countertops, plus residential and commercial kitchen islands, tables, carts and cutting boards.
January 12, 2017
Brick and Mortar Stores Still Dominate, but E-Commerce Drives the Growth
Amazon Dwarfs E-commerce Competitors. Now Accounts for Nearly 40% of Online Sales.
The Pew Research Center recently reported that eight in ten Americans now shop online, but only 15% do so on a weekly basis. Consequently, the E-commerce channel accounts for less than 10% of total U.S. retail purchases, according to the U.S. Census Bureau. Two out of three Americans say they still prefer in-store shopping over the online experience, but the tide seems to be turning.
Online sales growth far outpaces growth recorded by physical stores, so E-commerce’s overall share is destined to steadily grow. Both Adobe Digital Insights and First Data report that 2016 online holiday sales beat year-ago by 11 to 12%, whereas Slice Intelligence pegged E-commerce growth at almost 20%. In sharp contrast, visits to retail stores during December 2016 declined 9.6% from prior year, according to analyst John Kernan of Cowen & Co. The first week of the new year wasn’t much brighter, as Shopper Trak reported a 5.8% drop in retail visits during the first seven days of 2017. The inevitable result will be more store closings across the country. Macy’s, for instance, has announced plans to shutter 68 stores in 2017.
Among E-commerce competitors, Amazon continues to dominate. It accounted for 38% of November-December 2016 online sales, per Slice Intelligence. That was nearly ten times the 3.9 market share achieved by Best Buy – the next closest competitor. Positions three through eight were held by name-brand retailers, each accounting for 2.3 to 2.7 percent of the E-comm market: Target, Walmart, Macy’s, Apple and Nordstrom, respectively. Kohl’s, Home Depot and J. Crew also made it into the Online Top Ten.
The information herein was compiled by Butcher Block Co., an online store specializing in kitchen furniture, equipment and accessories, including butcher block counters, islands, tables, carts and cutting boards.