Just another manic monday?

As online retail traffic continues its upward trend with every holiday season, new business terms keep getting defined to explain the phenomenon. The latest addition to the list is "Cyber Monday". Created by the National Retail Foundation it represents the first monday after the Thanksgiving weekend when consumers return to work and spend time shopping online to make purchases for the holiday season. I came across a very interesting article on how cyber monday sales can be boosted by not just online ads but by complementing them with non online ads. The article says - "One limitation in the search space is volume. There are only as many searches as there are people multiplied by the queries they do." The publisher of the article found that - "20% of all search volume can be correlated to TV GRP volume. So, while we've always known that TV creates an interest that search can fulfill, this gives us sufficient evidence that it creates a volume of interest which can substantially move the impression needle, and therefore increase CTR and potentially CVR for your campaigns". So in a time where ad spends are progressively shifting to online media, looks like there is still some steam that can be driven off of traditional media to drive traffic to online sites.

Get it to your doorstep for free

As holiday season is getting closer and closer, and consumers are shifting more and more to buying online, a host of retailers are offering free shipping. A recent report by CNBC interviewing Shop.org president, Scott Silverman talks about how nearly 50% of the US population will make online purchases this holiday season. An interesting part is that free shipping is become very common. A random check on the websites of top retailers (Macy's, Targer, Neiman Marcus, JC Penny's) shows free shipping offers of some kind. In most cases they are conditional upon the total purchase. The shipping option is however restricted to only standard shipping. Any kind of expedited shipping will be charged. Also if the boxes are to be shipped to multiple addresses, only the delivery to one shipping address is for free. In some cases, the option of free shipping is available only if you choose to put the items in minimum possible boxes which is very intuitive since most parcel carriers charge by the box, unless you exceed their 100 wt requirements. So it seems like free shipping is no longer a promotion, its become a cost for doing business. This entails, the retailers to rethink their contracts with standard parcel carriers. Another aspect of free shipping is service level - how soon is the customer going to receive the package. Standard UPS Ground shipping can take anywhere between 5 - 7 business days. So is the customer going to buy something that he needs to gift and choose a free shipping option? One way to support a high service level and still provide free shipping is by doing what is referred to in the small package industry as zone-skipping. The idea is to identify regional parcel hubs and sort your packages by those hubs and line haul (fill a truck) it to the regional hub. Basically, you are avoiding your packages going through multiple sortation points in your parcel carrier's network. At the same time this strategy can help the retailers negotiate better rates as they are effectively doing a lot of the sortation work that the parcel carrier would have to do. Of course with more retailer joining the free shipping bandwagon, the rate negotiation advantage might tilt towards the parcel carriers.

Introducing Retail 101

As part of my effort to cover diverse areas of retail, I am planning to include a post once a week which will describe some key concept in retail using published articles or information gathered from academia. The idea behind it is that it will help better understand some of the terms which are often taken for granted in standard industry white papers and news briefs. So starting this week with the concept of Demand Forecasts . In retail there are 2 key things customer satisfaction and lesser inventory. Now if you always had full stock of every item that you had to offer, there will never be any stock outs and thereby a customer will never go back not being able to buy what he wants to. But there is a cost to it - till the time that someone buys the item, your money is locked into that item. That money could have been invested somewhere or kept in your savings account and would have earned some intrest. So what am I getting to? If you could read the minds of all your customers in terms of what they want (kind of like Mel Gibson in What Women Want) then there wouldnt be a problem. You could place orders accordingly and satisfy your customers and keep your inventory low. Sadly, very few people (or maybe no one) has that kind of clairvoyance. Thats where forecast comes into picture. So like in every relationship, as time goes by you begin to understand the other person/party better, as time goes by you gather an idea of what your customers buy, how much they buy and at what time they buy. And using this information you start predicting what they would want in the near future. That is in some way a forecast. Ofcourse its easier said than done. Several forecasting models have been created and its as much an art as a science to select the correct forecasting model. There are other factors like promotions etc. which can change your forecast. I came across a very good article in Supply and Demand Chain Executive by Atul Mandal who is a project manager with Plan4Demand a boutique consulting firm. Mr Mandal is ofcourse more experienced in forecasting and explains very well some of the underlying concepts behind choosing a forecasting model. Thats our Retail 101 for this week...stay tuned for another one next week.