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Container lines this week succeeded in imposing rate increases across most routes covered by the composite Shanghai Containerised Freight Index (SCFI), which recorded a jump of 9.4%.
Spot rates to South America, the Middle East and South Africa surged by 35%, 31% and 30% respectively, week-on-week, transpacific rates leapt by some 15%, while Asia-Europe rates held firm.
Rates from Shanghai to the US west coast were up $191, to $1,479 per 40ft, while to the east coast rates edged down slightly, by $60 to $2,565 per 40ft.
Annual contract negotiations for the transpacific trades are now in full swing and carriers will be relieved to see rates for the US west coast bounce back after several weeks of losses.
Concerns have been raised in the past few weeks about the impact on rates that the non-alliance carriers – Hyundai Merchant Marine, Zim and SM Line – would have on the route from next month.
In its review of South Korean SM Line’s entry into the market in a few days’ time, Alphaliner predicted it would “heavily discount its freight rates in order to secure sufficient cargo to fill its ships”.
Meanwhile, Asia-Europe carriers have announced new FAK rates for North Europe and the Mediterranean to coincide with the alliance reshuffle which launches tomorrow.
Spot rates recorded by the SCFI ticked up marginally for both trades this week: for North Europe there was a 2.8% increase to $838 per teu, while for Mediterranean ports there was a 4.9% improvement to $837 per teu.
Westbound Shipping, based at London Gateway – which will shortly welcome its first Asia liner service from THE Alliance – believes market rates from Asia will increase to around $2,000 per 40ft from 1 April as a consequence of the new FAK increases.
It predicted they would “no doubt soften week by week, or at least towards the end of April, before the next sharp increase comes into effect”.
As the new alliance structure prepares to get underway tomorrow, with the Ocean and THE alliances launching services, shippers and forwarders are preparing for the possibility of severe supply chain disruption.
The drawing up of contingency plans was in part due to a growing sense of unease that shipping lines did not appear to be “on top of” managing the roll-out of the new groupings.
“The transition of the alliances has been hugely frustrating, in a very predictable way. We recently concluded annual contracts for our Asia-Europe business, which begins next month, and the number of carriers quoting Ocean Three and G6 services when bidding for shipments after 1 April was ridiculous… although not unexpected,” he added.
UK freight forwarder Westbound Shipping Services described the “mind-boggling transition” for carriers of their fleets and equipment into their new alliance homes.
It said: “Many schedules still published are incorrect, as many vessels have been taken out of service. This upholds the demand for space and in turn the recent rate stabilisation.”
Another effect of the rescheduling is a capacity crunch on North European exports to Asia, which is having a serious impact on shippers’ businesses.
Understandably shippers and forwarders in North Europe are angry.
One major UK importer said his logistics team was looking at using the overland rail route from China to Europe should chaos prevail, as some have predicted.
“We have been testing the rail services – loading 15-20 containers over the last six months or so, and as a product it has gone very smoothly. The lead times were as promised – 19-20 days from China into Germany, principally either Hamburg or Duisburg,” he told The Loadstar.
However, he did admit there had been challenges, particularly with the onward leg from Germany to the UK.
“There is an issue with the restitution of rail boxes back to the railway companies in Germany. The rail companies want those boxes back in Germany, so you have to consider what sort of backhaul cargo you could attract on the rail to go to Duisburg from the UK once you have finished devanning the box.
“The other option is to decant the container in Gernamny and then truck it to the UK. Overall, you are looking at 22-23 days from China to the UK stores, so there is a good speed differential, while the freight cost is clearly closer to sea-air products, or even air, than it is to the ocean freight equivalent.
“What we are trying to work out is whether the speed advantage is worth the extra cost, and so far we have been pleasantly surprised by the results.
“The China-Europe rail service are our contingency plan if there are problems with the roll-out of the three new services – admittedly, that’s quite an expansive contingency plan, but most of contingency plans are.
“In any case, I’m certainly comfortable enough with the service levels that I would throw much larger number so containers at it,” he said.
During Hapag-Lloyd’s results press conference in Hamburg on Monday, an irate German forwarder said shippers were calling him, “angry because Hapag-Lloyd said there was no opportunity [space] until the middle of May for China and Indonesia”.
Hapag-Lloyd chief executive Rolf Habben Jensen responded by saying that the eastbound demand had “been surprisingly high”. He said: “It might take some time until the situation recovers again, we are trying to take additional measures to alleviate the situation, but this cannot be done from one week to the next.”
Mr Habben Jensen said that one of the measures under consideration was to transport less empty equipment back to Asia to make room for extra loaded boxes.
However, there is some evidence that the solutions will come too late to prevent Asian customers sourcing their product from elsewhere in the world.
One major UK wastepaper shipper told The Loadstar this week that Chinese mills had already significantly cut back on their orders, due not only to the supply issue, but also because of the massive hike in freight rates over the past six months.
Li & Fung needs to upgrade to supply chain service provider for omnichannel and e-commerce sellers.
UPDATE 1-Li & Fung profit falls 47 pct in tough global retail market
(Recasts, adds comments and details)By Donny Kwok HONG KONG, March 29 Li & Fung Ltd, which supplies clothing and other products to retailers around the world, on Wednesday reported a 47 percent fall in 2016 net profit and said tough conditions in the global retail industry would put pressure on its business.
Li & Fung, which made its name by making clothing and toys for Western retailers, is battling a difficult economic climate as well as competition from online rivals.
The company said in a statement a highly promotional environment was likely to continue in all markets, and retail destocking would persist.
"I expect an unprecedented number of bankruptcies and store closures in the years to come," chief executive officer Spencer Fung told a news conference, referring to the global retail industry. "I remain cautious as (the) operating environment is deteriorating."
The group said it aimed to achieve low double digit growth in revenue and core operating profit by 2019.
Li & Fung said an immediate first step to improve its performance was to reorganise the company into two parts, one focused on services and the other on products.
CEO Fung said the company had no plans to spin off any part of its business at present but would continue to simplify its structure.
Li & Fung said its net profit for 2016 fell to $223 million, from $421 million a year earlier, missing expectations.
Analysts were expecting a profit of $246 million, according to Thomson Reuters SmartEstimate data.
Revenue fell 11 percent to $16.8 billion from a year earlier, while core operating profit dropped 19.6 percent to $412 million.
Li & Fung has refocused on its core supply chain business following the sale of its loss-making brand-licensing and distribution business in 2014, which helped to increase its cash flow and control operating costs.
Li & Fung's shares closed 0.5 percent lower ahead of the earnings announcement, lagging a 0.2 percent rise in the benchmark Hang Seng Index.
Hong Kong's stock index compiler in February said it would remove Li & Fung as a constituent of the Hang Seng Index, replacing it with Geely Automobile Holdings Ltd, sending Li & Fung's shares to a 14 year low. (Reporting by Donny Kwok; Editing by Randy Fabi and Jane Merriman)
Wal-Mart Stores Inc. is rapidly buying up hip, small online retailers that appeal to wealthier shoppers in hopes of finally taking on Amazon.com Inc.
Last week Wal-Mart acquired hipster clothing website ModCloth. In February it bought outdoor specialty retailer Moosejaw and the month before, online shoe seller ShoeBuy.
The small deals give Wal-Mart access to new groups of shoppers and brands that have shied away from the retail giant, which has struggled with mostly sluggish online sales growth the past two years.
Wal-Mart plans to let the retailers run as separate entities, the first time it has attempted to build new e-commerce brands in the U.S. However, some of the deals shed light on the extent of Wal-Mart's wider image challenges and the balancing act faced by small e-commerce startups looking for a payday.
After news of the ModCloth deal surfaced last week, shoppers took to Facebook and Twitter to critique Wal-Mart's image as out of line with ModCloth's feminist, socially liberal and plus-size inclusive branding.
"Wal-Mart has such a terrible track record. They are so adamantly antiunion," said Aimee Ledwell, a 41-year-old teacher who lives in Maynard, Mass., and owns about 15 dresses purchased on the site. After news of the deal, she said she erased the ModCloth app from her phone.
"Wal-Mart today is very different than some of the perceptions people still hold," said a company spokesman. "All the things that made customers love these brands in the first place are not going away, they'll only get stronger," he said.
The buying spree started after Wal-Mart bought Jet.com Inc. six months ago for $3.3 billion, installing the site's founder Marc Lore at the head of its U.S. online operations.
"Assortment is driving a lot of these acquisitions," Wal-Mart Chief Executive Doug McMillon told investors last week. "There are some suppliers that don't want to sell on Wal-Mart." Wal-Mart also wants the talent and product expertise the employees provide, executives say.
Moosejaw, known for its irreverent marketing and loyal Michigan following, gives Wal-Mart access to outdoor brands like Patagonia, Arc'teryx and North Face, even if they aren't sold through Wal-Mart directly. Its chief executive, Eoin Comerford, will take charge of the outdoor category on all Wal-Mart websites.
ModCloth, Moosejaw and ShoeBuy are part of a growing group of online retailers confronting the challenge of competing with the fast shipping and large assortment of Amazon or increasingly savvy suppliers selling directly to shoppers.
ModCloth's traffic and revenue has been weak in recent years, said people familiar with the financial statements. It had a large debt payment coming due, said one of these people. Wal-Mart bought the company for less than the roughly $75 million ModCloth raised in venture capital, plus its debt, said this person.
Last week the San Francisco-based firm's co-founders Eric Koger and Susan Gregg Koger sent an email to a small group of people who hold employee stock entitled "The death of ModCloth's common stock." Employees and the co-founders won't make any money from the sale, Mr. Kroger wrote in the email, which was reviewed by The Wall Street Journal. "It just is what it f -- ing is."
The couple didn't respond to requests for comment.
Wal-Mart's purchase price is "along the same lines" as other recent acquisitions, said a spokesman. Wal-Mart said it paid $51 million for Moosejaw and around $70 million for ShoeBuy.
The acquisition strategy is being driven largely by Mr. Lore, who wants to take on Amazon directly and grab market share faster. Asked at an industry event Monday if Wal-Mart would be happy as the second-largest U.S. online retailer after Amazon, Mr. Lore responded, "winning is winning." More acquisitions are coming, he said. In the three months ended Jan. 31, 2017, Wal-Mart's U.S. e-commerce sales grew at a healthy clip, up 29% from the year-earlier quarter.
Jet.com had explored a deal for Moosejaw, which operates 10 retail stores, before selling to Wal-Mart. The outdoor retailer's founder and family sold the company to private-equity investors in the mid-2000s. Since then the company continued to raise money and shift investors. Moosejaw's CEO didn't respond to a request for comment.
Moosejaw shoppers' reaction has been more muted than after the ModCloth purchase, but the news spurred debate. Owen McDonnell, a 31-year-old in Portsmouth, N.H., said he is wary of how Wal-Mart may change Moosejaw. He likes buying his ski and hiking gear at local shops that support outdoor enthusiasts, he said, and doesn't shop at Wal-Mart. "I still remember when the first one was built in my area and how it has changed the community and the stores that followed."
"There has been a lot of bad press historically about the values of" Wal-Mart but much of it is unwarranted, Mr. Lore said this week. When Jet.com executives told employees that Wal-Mart planned to buy the startup, "upfront people were definitely concerned," Mr. Lore said. But after getting a firsthand look inside, "people have turned the corner."
Laura Stevens and Khadeeja Safdar contributed to this article.
Augmented Reality or Virtual Reality will create more retail duality chaos. And add more to leaders and laggards. It will also accelerate Supply Chain transformation to deal with more orders, larger orders, and orders with more products.
Amazon’s Ambitions Unboxed: Stores for Furniture, Appliances and More
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Credit Giacomo Marchesi
SEATTLE — Last Sunday in Palm Springs, Calif., Jeffrey P. Bezos, the chief executive of Amazon, climbed into the cockpit of a 13-foot robot and began flailing his arms as though warming up for a workout, causing the robot’s enormous appendages to mimic his movements.
“Why do I feel so much like Sigourney Weaver?” Mr. Bezos said, referring to the actress who wore a mechanical suit in a climactic battle in the 1986 movie “Aliens.”
The intimate audience of entrepreneurs and academics, attending an Amazon conference on robotics and artificial intelligence, chuckled. Later, Mr. Bezos posted a photo on Twitter of himself in the suit with a more menacing air, the robot’s arms raised as if about to deliver a bone-crushing bear hug.
For years, retailers have been haunted by the thought of Amazon using its technological prowess to squeeze them into powder. That battle has mostly played out on Amazon’s home turf, the world of online shopping.
Now the fight is coming directly to retailers on actual streets around the globe, where Amazon is slowly building a fleet of physical stores. And while most of the attention has been focused on Amazon’s grocery store dreams, the company has a more ambitious collection of experiments underway.
If those experiments work — and there is no guarantee of that — they could have a profound influence on how other stores operate. Over time, they could also introduce new forms of automation, putting traditional retail jobs in jeopardy. At the same time, locating those stores close to customers’ homes could also help Amazon further its ambitions of delivering internet orders within hours.
The Amazon bookstore in Seattle.Credit Kyle Johnson for The New York Times
The company is exploring the idea of creating stores to sell furniture and home appliances, like refrigerators — the kinds of products that shoppers are reluctant to buy over the internet sight unseen, said one of several people with knowledge of the discussions who, in conversations with The New York Times, spoke on condition of anonymity because the plans were confidential. The stores would serve as showcases where people could view the items in person, with orders being delivered to their homes.
These would not be your average Home Depots: Amazon has considered using forms of augmented or virtual reality to allow people to see how couches, stoves and credenzas will look in their homes, the person briefed on the discussions said.
Amazon is also kicking around an electronics-store concept similar to Apple’s retail emporiums, according to two of the people familiar with the discussions. These shops would have a heavy emphasis on Amazon devices and services such as the company’s Echo smart home speaker and Prime Video streaming service.
And in groceries — a giant category in which Amazon has struggled — the company has opened a convenience store that does not need cashiers, and it is close to opening two stores where drivers can quickly pick up groceries without leaving their cars, all in Seattle. It has explored another grocery store concept that could serve walk-in customers and act as a hub for home deliveries.
Overseas, Amazon is quietly targeting India for new brick-and-mortar grocery stores. It is a vast market, and one still largely dominated by traditional street bazaars where shoppers must wander from stall to stall haggling over prices and deliberating over unrefrigerated meat sitting in the dusty open air. Amazon’s internal code name for its India grocery ambitions: Project Everest.
Last week, Amazon opened its fifth physical book store in Chicago, and it has five more announced locations under construction.
It is possible that some of the store ideas will never see the light of day. Groups within Amazon are often encouraged to come up with zany initiatives (this is the company that popularized the idea of drone deliveries). Many ideas are chucked after deeper scrutiny by executives. Amazon declined to talk about any stores it has not announced publicly.
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“We want to do something uniquely Amazon,” Jeffrey P. Bezos, the company’s chief executive, said in 2012. “If we can find that idea, and we haven’t found it yet, but if we can find that idea, we would love to open physical stores.”Credit Joshua Roberts/Reuters
“We are always thinking about new ways to serve customers, but thinking is different than planning,” said Drew Herdener, an Amazon spokesman.
Since the late ’90s, pundits have asked when Amazon — the company Mr. Bezos founded on the premise that people would rather shop from the comfort of their screens — would finally start building stores. But Amazon executives saw plenty of opportunities in online retail and new ways to reach people, from creating digital book-selling devices like Kindle to building up the Prime membership service for getting faster deliveries and other benefits.
In 2012, Mr. Bezos told the television interviewer Charlie Rose that shoppers were already well served by existing retailers and that Amazon had no interest in a me-too effort.
“We want to do something uniquely Amazon,” he said. “If we can find that idea, and we haven’t found it yet, but if we can find that idea, we would love to open physical stores.”
Despite Amazon’s internet retailing success, over time it has become clear that there is a lot of shopping that people prefer to do in person. The most glaring example is groceries — the mother of all shopping categories, with about $770 billion for the supermarkets represented by the Food Marketing Institute, a nonprofit group that includes the majority of such stores in the United States.
After pouring resources into an online grocery service, AmazonFresh, for almost a decade, the company has made only modest progress. According to people familiar with the workings of the company’s grocery business, it has struggled to operate it profitably, leading to a slow rollout of the service in new locations.
One big desire many customers have is that they want to see fresh fruits, vegetables and meat in person before buying them. The relatively high cost of home delivery — Amazon charges $15 a month for its Fresh service, on top of a $99 annual Prime membership — is another barrier.
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The company is testing Amazon Go, a convenience-store concept stocked with beverages, sandwiches and prepared meals, which are put together by chefs in a kitchen that is visible from the street.Credit Kyle Johnson for The New York Times
Online grocery delivery accounts for only about 3 percent of the market in the United States, though it is closer to 10 percent in Britain, said Randy Burt, a partner in the food and beverage practice of A. T. Kearney, a strategy and management consulting firm. Mr. Burt said Amazon’s growing interest in stores mirrored the conclusion that other online merchants with physical stores — the apparel seller Bonobos and the eyewear seller Warby Parker — had come to.
“I think they are recognizing, for certain things you can’t digitize and replicate online all the experience one has in a store,” Mr. Burt said. “The ability to create experiences is going to be critical for them to continue to get share.”
Joe Thompson, a former general manager in Amazon’s retail business, sees physical retail as key to Mr. Bezos’s outsize ambitions for the company. "I can’t help but feel that, in Bezos’s mind, he wants to be the first trillion-dollar valuation company,” said Mr. Thompson, who is now an executive at BuildDirect, an online home improvement store. To do that, he said, Amazon would have to “crack” a couple of “completely underpenetrated markets online.”
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Amazon’s current market value is bobbing around $400 billion.
In the coming weeks, Amazon is expected to open its first two grocery pickup stores, in Seattle’s Ballard and SoDo neighborhoods, which will allow customers to order food online and schedule brief windows for picking them up in person. Recently, as cars ripped by, workers hung a sign on the exterior of one of the stores — to be called AmazonFresh Pickup, according to city permit documents obtained by GeekWire — before quickly covering it up.
A growing number of established grocery retailers are experimenting with this “click and collect” approach to shopping, including Walmart, Kroger and others. According to one person briefed on Amazon’s plans, the company has been developing technology for automatically detecting when a customer pulls into the parking lot so orders can be brought to them more quickly.
A few miles away from its other Seattle stores, on the ground floor of one of its many office towers in the city, the company is testing AmazonGo, a convenience store concept stocked with beverages, sandwiches and prepared meals, which are put together by chefs in a kitchen that is visible from the street.
The retail industry has been captivated by Amazon Go’s technology since the company unveiled the store late last year. The store uses a combination of sensors and artificial intelligence to automatically detect the food items shoppers remove from shelves, so they can leave the store without visiting a cashier — the way customers do when they bolt from an Uber.
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The Amazon bookstore in Seattle has a space for children to read and play.Credit Kyle Johnson for The New York Times
“Amazon is wonderful at frictionless commerce,” said Timothy Laseter, a professor at the University of Virginia’s Darden School of Business.
There have been glitches with the technology that Amazon engineers continue to work on, according to a person familiar with the operations. For now, only Amazon employees are allowed to use the store. Amazon previously said it would open Amazon Go to the public in early 2017.
Only Amazon employees are allowed to use the store, for now. The company has said it would open Amazon Go to the public early this year.Video by Amazon
If Amazon is successful at automating the checkout process, the long-term implications for employment could be far-reaching because other retailers would probably do everything possible to copy it. More than 3.4 million people are employed as cashiers in the United States, according to the Bureau of Labor Statistics.
Amazon Go technologies like artificial intelligence are “Latin for ‘fire cashiers,’” said Scott Galloway, a professor of marketing at New York University’s Leonard N. Stern School of Business.
“I’ve probably been in 30 boardrooms of retailers in the past year,” Mr. Galloway said. “I would say the No. 1 topic of conversation is Amazon.”
For months, reports have circulated that Amazon was considering a concept for a larger grocery store that would combine shopping formats like traditional walk-in purchases, click-and-collect and home delivery. One of those articles, a February piece by The New York Post, described a futuristic Amazon grocery store staffed by robots, requiring only three human workers.
That was too much, apparently, for Mr. Bezos, who became uncharacteristically feisty on Twitter, attacking the article by saying The Post’s sources had “mixed up their meds.”
But a group within Amazon has explored another larger grocery store format, according to both a person familiar with the concept and to internal Amazon documents reviewed by The New York Times. The store could stock fresh produce, meats and other items in a public area of the store, while keeping frozen foods, cereals and other items traditionally found in the center of a grocery store behind a wall, in what would be a kind of small Amazon warehouse. Workers behind the wall, not robots, could quickly package orders for customers.
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The exterior of the Amazon Go grocery store is seen during the location’s beta opening in Seattle last December.Credit David Ryder for The New York Times
The idea resembles a concept laid out in a paper, “A Beautiful Way to Save Woolworths,” written by the retail industry consultant Brittain Ladd, who was later hired by Amazon. The status of that project at Amazon is unclear: One person said it never advanced far and was effectively dead, and another disputed that characterization.
While Mr. Bezos was known for coining the motto “Get Big Fast” in the early days of Amazon, the company’s plans in physical retail could be better described as “Get Big Slow.” Some reports have said Amazon has discussed building up to 2,000 grocery stores. But that figure was floated mainly as a hypothetical to consider the impact on Amazon’s supply chain, not as a goal that was under serious consideration, a person familiar with the discussions said.
In addition to the two soon to open in Seattle, as many as five more AmazonFresh Pickup locations could open by next year, and the company hopes to expand Amazon Go to Britain and several cities in the United States in the same time frame, this person said.
India could represent another big market for Amazon in physical retail. The company, which has vowed to spend billions of dollars on its efforts in the world’s second-most populous country, recently sought approval from the Indian government to open online and physical food stores in the country, The Economic Times reported in February.
According to a person familiar with Amazon’s India grocery efforts, the company hopes to open its first Indian grocery store in Bangalore. In a statement, Amazon said the company was excited by the Indian government’s efforts to encourage foreign investment in a “stronger food supply chain.”
“We have sought an approval to invest and partner with the government in achieving this vision,” Amazon said.
For Mr. Galloway at N.Y.U., the slow pace of Amazon’s rollout of stores is a sign that it has not figured out physical retail yet, and that has surprised him. Five years ago, he believed Amazon would have hundreds of stores by this time.
“What appears to be clear is they haven’t yet zeroed in on a format they’re willing to massively scale,” he said. “This is a company that the moment it figures out something that works, it puts nuclear energy behind it.”
Kavita Kumar, Star TribuneTarget CEO Brian Cornell talked about the retailer's prototype store at the Shoptalk conference in Las Vegas.
LAS VEGAS – As they took turns on a stage addressing thousands of industry leaders last week, top executives from Wal-Mart and Target Corp. offered different road maps of how to survive — and thrive — in the fast-changing retail landscape.
Target Chief Executive Brian Cornell told the audience he is doubling down on stores, envisioning them as “shoppable distribution centers” where people can come in and browse core products such as apparel and accessories or grab an online order and some food to go.
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About 20 minutes later, Marc Lore, Wal-Mart’s e-commerce chief, described a company making big investments in online as it looks to take on Amazon.com directly.
As Target is pulling back on some big-thinking Silicon Valley projects — a much-buzzed-about topic of conversation at the conference — Wal-Mart announced it is opening an incubator there for start-ups looking to disrupt the future of retail.
Time will tell which strategy will pay off. But the stakes are high.
Last week, household names such as Sears and Payless ShoeSource joined the growing list of retailers on a death watch as many in the old guard continue to struggle to keep up with online shopping and other changes in consumer behavior. News of their impending struggles hung over the Shoptalk digital retail conference with Silicon Valley-funded start-ups touting artificial intelligence and augmented reality as other solutions to help revitalize and modernize the industry.
To be sure, both Minneapolis-based Target and Wal-Mart have devoted considerable resources to both their stores and online operations.
Wal-Mart has been spiffing up its stores and investing in increased wages and training academies for its front-line workers. Target has hired hundreds of engineers in the last couple of years to stabilize and upgrade its website and has seen significant online growth, helping to make up for falling foot traffic. A spokeswoman said the retailer continues to focus on improving the mix and appeal of the website.
“Both are following a similar trajectory in understanding that omnichannel (a mixture of stores and digital) is the way forward,” said Michelle Grant, head of retailing for Euromonitor. “But Wal-Mart is making a bigger bet on dominating the e-commerce market” while Target is focused on integrating stores into its digital strategy.
Lore said at an industry event during the conference that his mandate is “to crush the U.S.” When asked if that meant being No. 2 [to Amazon], Lore, a former Amazonian, didn’t blink: “Win means win.”
Wal-Mart brought Lore in about six months ago to run its e-commerce operations in the United States after also buying his online retail start-up, Jet.com, for $3 billion. Since then, Lore has been integrating his Jet.com staff with that of Walmart.com so there’s one category manager in charge of both websites.
“It’s incredibly challenging for a company to sort of hand over the keys to a start-up,” he said from the Shoptalk stage. Wal-Mart CEO Doug McMillon “and the board made a big move in empowering me and the team to basically run all of Wal-Mart’s e-commerce business. That really got us fired up. We sort of carried that on with the acquisitions we’ve done.”
Under his leadership, Wal-Mart has snapped up three hip online retail companies in the last several months — outdoors retailer Moosejaw, footwear company Shoebuy, and most recently apparel retailer ModCloth. The CEOs of those companies are now being charged with not only running their own businesses but, for example, the entire shoe category for Walmart.com and Jet.com.
Lore acknowledged it can be challenging for a publicly traded company to invest beyond the next couple years out. But with Store No. 8, the just-announced incubator, he’s hoping to do just that by bringing in top entrepreneurs and giving them a budget to build start-ups looking out five to 10 years down the road.
“So there’s not a focus on just today,” he said. “They can actually think bigger.”
What’s happening at Target
That’s in contrast to Target, whose sales have been on the slide and recently began reining in some of its further-looking innovation projects such as an internal start-up called Goldfish and a store-of-the-future concept that was killed weeks before it was set to open in Silicon Valley.
“There are some great new things we’ll continue to evaluate,” Cornell said at Shoptalk. “We’ll look around corners. But I want to make sure the innovation investments we’re making are going to impact our business over the next two or three years.”
For now, as Target looks to return to positive sales, a big part of the next two or three years will be focused on improving its supply chain, launching a dozen new brands and remodeling and opening new stores.
The majority of shopping will continue to be done in stores for the foreseeable future, Cornell said. And Target sees stores as a key to digital growth since they already fill about 55 percent of online orders through in-store pickup or ship-from-store capabilities.
By leveraging its network of 1,800 stores, Target can get items to customers faster and spend less in shipping costs, he said. And when people come by the store to pick up their orders, it brings them to the store where they might buy other items.
“In this new era of retail, stores need to be multidimensional showrooms — they have to be destinations for services, and more and more we’re positioning ours to function as guest-facing hubs in a smart network,” he said. “Think of a Target store of the future as being a hyper local, shoppable distribution center.”
That’s why Target plans to remodel about 600, or about a third, of its stores in the next three years. The idea is to turn its stores into places of inspiration.
He didn’t name any names, but said the retailers that deferred investments in their stores are those that are struggling today.
Target’s new store prototype has two separate entrances, Cornell said, one meant to inspire with home and apparel displays while the other aimed at convenience with groceries and beverages moved to the front and an online order pickup area nearby.
“Our guests like to shop,” he said. “Our guests love that sense of discovery. They expect an elevated experience. So we need to create an environment that is worthy of their time.”
Blockchain for supply chain management should be a blend of centralized and decentralized to integrate the 3 supply chains—product, finance, and information.
