Monday, January 16, 2012

When All Around You Fails – Sometimes Common Sense Is Hidden In Plain Sight

Amazon has recently been called a lot of things, including The Death Star.

The retail world has changed forever but retailers haven’t yet changed enough to deal with “The Death Star”.

Most retail executives (including Walmart’s) have been blindsided by the spectacular rise and impenetrable marketing power of Amazon while they watched in shock, copying this, trying that, but still losing ground, putting their companies and their careers at high risk.
Chart 1 below shows a classic example of the effect of The Death Star”  in action against an otherwise great company, who has tried every conventional thing to compete – to no avail.
A Simple Common Sense Solution can reverse this tough situation, rendering Amazon’s quick rise into a disastrous fall with excessive and expensive distribution centers that will no longer be required. (Chart 2)  Incredible But True when retailers see the obvious solution and start the journey back with a competitive advantage Amazon cannot match.

Let’s review what we already know, but maybe are overlooking:  Amazon’s Achilles’ heel.

Follow along with us for a moment.  Let’s explore an unconventional solution that you might never normally consider, but now, against “The Death Star”, it might all of a sudden make sense.

Nobody likes to wait – particularly in a retail line-up.  Everyone knows this – it’s simple common sense.

Chart 3 below shows the results of the steadily compounding growth of e-commerce – which is absolutely predictable based on past and current government statics – but which nobody wants to believe.  (We didn’t have the nerve to show the greatly reduced local retail store sales in 2030.)
Given total consumer retail spending growth is a constant long term average of 3%, then e-commerce sales (17% average growth) are inevitably growing at the expense of your local stores – making them irrelevant.
Given your local stores currently represent 90%± of your sales (and assets), and because you have sales both in-store and e-commerce, it is also probable that you have mixed emotions about this future outlook.
Chart 4  shows (in light blue) what online sales are readily available from your local stores at no extra cost.  The red indicates sales that remain outside the local sales arena.
Consumers have clearly shown their constantly growing preference for e-commerce because of convenience, price & product choice. (see Chart 1)  And that’s not going to stop.
But consumers don’t like to wait.
They prefer next day e-commerce deliveries (or sooner) to next-week deliveries (or later)Amazon, Walmart & Google all realize this and are quickly moving in the consumer’s preferred direction.  Common Sense.
However, Amazon, being the true radical innovator in the crowd, is now offering Same-Day e-commerce delivery.  Again, a lot of common sense.  Unfortunately it’s from “The Retail Death Star”. Please notice their current position in Chart 6.
So how in the world do you get your business back from Amazon (and Walmart and Google) ?
Common Sense rules the day.
Would you wait 3 days to get something you want, when you can easily get it in 30 to 60 minutes at a lower cost?  Of course not.  Nobody would. Even Same-day is way too slow for today’s busy consumer.  That is simple common sense. (see Chart 5)  And don’t kid yourself, it doesn’t matter what it is , a TV set or a house or a cheeseburger – you still want it now, if you can get it now at the same price.
But, you might reply:  it can’t be done; or, it will be too expensive; and anyway, it’s too complicated; and people don’t need it;  and “Retail Is Different”; and, and, and.  This is where common sense just left the room.  30 to 45 minute delivery has been with us most of our lives: pizza, Chinese food, etc – common practice, efficiently done for years (or it wouldn’t still be here). 
Many others, like Webvan, Publix and McDonald’s, tried to offer rapid delivery but failed only because they had the wrong business model.  Wrong vehicles, wrong drivers, wrong product, wrong technology, wrong delivery timing, etc, etc.  But in many other countries like India and the UK, it’s common practice and has been done right for years, same as pizza delivery here.
Here’s where common sense becomes revolutionary.
A pizza is delivered to your home in 30 to 45 minutes, reasonably hot, and costs roughly $20/$30 including the pizza.  Tom Monaghan, founder of Domino’s pizza is one of our founders.  We took his 40 years experience in pizza and combined it with our 30 years in retail and groceries and simply put them together during several years of field trials, which are now completed. 
Rapid (30 to 60 minutes) Online Order Fulfillment (ROOF) is actually easy, low cost and highly efficient (more so than same-day or next-day or 3 to 10 days) when you know how, creating a new marketing, sales & distribution channel, thereby saving many retail stores and the jobs of roughly 7 million retail employees nationally.   Truly A Revolutionary Event.
Here’s where a revolution becomes innovative.
Chart 4  shows (in light blue) the size, scope & effect of what can be the future of your retail stores – with simple retail common sense and a little imagination.  Rapid Online Order Fulfillment (ROOF) in the U.S. is a huge new channel. Challenging today’s e-commerce.  Some will see it as scary, a dreamer’s dream, when in fact it is simple common sense.  To an innovator it is taking on an exciting industry-changing program that in-turn will also transform companies who need revitalized sales & profits and who are battling the currently invincible Retail Death Star.
If your company is in Chart 6, particularly in the red section, common sense says you should seriously consider a new marketing shift to safer more productive waters as shown in Charts 2 & 4 and described in detail after Chart 6.
In the cold light of day, you have 3 choices, (1) ignore the obvious and do nothing; (2) wait until someone beats you to it and steals your market; or, (3) call us  (or e-mail us) –and  become your industry’s innovative leader very possibly saving your company and its employees.
Let’s innovate together starting right now!  Or at least send this to those in your company who are aggressive and in a position to innovate.

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