8 Trends in the New American Economy and One Sector to Watch
Bruce E. Welty
Chairman & CEO of Quiet Logistics
The way people buy products is changing. eCommerce and mobile commerce are growing rapidly – far faster than traditional store-based retail. In this New American Economy, the rules are different. No one can predict what is going to happen from here, but the rise of the New American Economy is introducing existential risk to some of the largest retailers and huge new opportunities for branded manufacturers throughout the world.
Here are eight trends that promise still more change and challenge to the existing business models:
- The ubiquity of orders. Orders can be placed online for any product, at any store, by anyone, from anywhere, at any time. This strains even the most advanced supply chains. It costs 30-40x more per unit to move a single item to a consumer than a pallet/case of items to a storefront. An order to replace a torn David Ortiz Boston Red Sox jersey Size S can be placed from the sidelines during the game and will be at your doorstep tomorrow.
- Customers expect next day delivery. Sellers compete on accuracy, quality, assortment, and timeliness. Simply, if a company cannot deliver an accurate order, competitively priced, to the customer within one day, they will lose that order to a company that can.
- A store is no longer a store. When a customer buys (yes, buys) something in a store, there is no guarantee that the store made the sale. If a consumer can find the product for a lower cost via their smartphone they will buy it elsewhere. Storefronts are showrooms and fitting rooms as much as they are stores.
- Brands matter more now than ever. If all retailers are selling the same items (Tommy Hilfiger, Michael Kors, Diane von Furstenberg, Calvin Klein, Donna Karan) then the real winners are the brands themselves. The retailer will be forced to compete on price with other retailers... an unfortunate outcome considering that premium-branded products are their most profitable. The brands do not want price competition on their products, anyway. Recently Adidas pulled its products from Amazon/eBay to maintain better control of their pricing.
- Social Commerce has created a "Real-Time Feedback Loop." If a consumer wants to hear about the latest customer experience around a brand, retailer or product, a simple search of Twitter and YouTube will yield pages and pages of customers' experiences, in real time, both good AND bad AND awful. For example, conduct a search on Google for "United Breaks Guitars" and read the story!
- Shipping costs only make sense with a large enough basket. Adding shipping and handling costs to an order requires that the profit (a.k.a. gross margin) on that order be sufficient to cover these costs. Any company that sells items that cost $1.95 on average better be able to efficiently package many items in the same box. The world learned this lesson in 1999, with WebVan.com and Pets.com. "Those who fail to learn history are doomed to repeat it." Not every product category is good business for mobile and/or Internet.
- Robots are driving productivity improvements. With specialized robots from companies such as iRobot, Kiva Systems, Heartland, and Symbotic, productivity is rising. While improving working conditions, robots also provide three huge advantages: lower cost, better accuracy, and higher throughput.
- Amazon and Apple continue to lead. With purchases of a robot company (Kiva Systems) and 76 new Internet domains, plus an increased focus on fashion and the in-store Price Check App, Amazon continues to lead the economy with a unique and powerful vision to create the go-to shopping destination for everything. Apple continues to deliver profoundly disruptive products and generate revenue growth and profits that are unprecedented. With $1B in free cash flow each week, Apple defies the norms of valuation metrics and explores a range of possible markets to conquer.
During the California Gold Rush, there were many fortunes made and lost, but one of the more enduring successes was Levi-Strauss, a clothier to all miners. Levi's never had to worry about which miners were going to discover gold. In the New American Economy, these trends all converge around advanced fulfillment capabilities. Amazon has invested in its fulfillment capability for just that reason. The "Levi-Strauss-like" opportunity of today is in Fulfillment or, more specifically, Robotic Fulfillment.
About Quiet Logistics
Quiet Logistics is the eCommerce fulfillment provider of choice for premium fashion and apparel brands and e-tailers. Quiet combines best-in-class technology with a deep understanding of brand care to deliver an exceptional and highly personalized customer experience for its clients. www.quietlogistics.com