Rethinking Retail Scale
Through a special arrangement, presented here for discussion is a summary of a current article from the newmarketbuilders blog. The article first appeared on the Licensing Industry Merchandisers’ Association (LIMA) blog.
Not that long ago, retailers ran their online and offline operations in silos. In many cases, they actually competed against themselves in different channels. These days, retailers from mass to class see all channels — including mobile — as synergistic and seamless touchpoints and, along the way, scale has been redefined.
Retailers’ new criteria for scale are no longer thousands of stores, but they aren’t millions of online impressions or mobile transactions either. It’s all of these combined. That’s why retailers are paying attention to their online presence once again. But now their focus has evolved from building virtual shopping carts to connecting their sites to their stores. It’s why in-store kiosks and strategically placed signs beckon shoppers to order online and then pick up in-store, as demonstrated by a growing number of new retail formats, including Walmart’s Express concept.
Although the Express stores have been portrayed by the media and other observers primarily as a small-format move, building site-to-store scale is a huge part of the Express story that is largely being overlooked. All of those small stores will not only service new customers in neighborhoods that used to only have dollar stores, but they will also serve as pick-up locations for the over 40,000 unique items that Walmart offers online.
Walmart’s site-to-store capabilities have the potential to be its killer advantage over dollar stores, which have built massive scale through store proliferation while largely ignoring online opportunities. Dollar General recently changed that with its September e-commerce launch, however, the site went live with direct shipment rather than with site-to-store capabilities.
Target’s decision to bring its online operation in-house came quite close to its announcement that it too will enter the small-format fray with its City Target concept. Coincidence? I think not. Once Target gets its site-to-store integration up to par, every tiny Target store will have the potential to realize exponential sales that belie the inventory held in the back room.
The granddaddy of all e-tailers, Amazon, seems to be on the verge of coming out of the clouds to form an alliance with a large-scale retailer on terra firma. According to a smattering of online reports, a 7-11 store location in Seattle holds a stack of lockers that, although unbranded for now, actually belong to Amazon. The lockers are part of a beta in which Amazon customers will receive an email notification when their purchases are delivered to a local 7-11. After scanning a bar code on their smartphones, a PIN will appear that opens the locker and releases the goods. If successful, this clandestine beta is rumored to be ready for rollout to 7-11 stores by next summer.
The major retail players have redefined scale. Will others as well?
Discussion Questions: What do you think of the recent efforts of the major retailers — Walmart, Target and Amazon — to meld offline and online channels? What’s the likelihood that in-store pickup options will become a major competitive advantage for larger retailers? How should other retailers respond?