Adobe has released its predictions for the 2020 holiday season, between November 1 thru December 31, and online retailers are set to score big.
Adobe is predicting record-breaking online sales, totaling some $189 billion. This represents a 33% year-over-year increase. According to the company, this is the equivalent of two years’ worth of growth packed into those two months.
Should the government approve another round of stimulus, spending would be driven up further, likely passing the $200 billion mark. If this happens, it would be a 47% increase.
“As retailers adapt to consumers’ new behaviors in this pandemic, we expect earlier discounts, more shipping and pick-up options and uncertainty around in-store purchases to drive this year’s online holiday sales to record highs,” said John Copeland, head of Marketing and Customer Insights at Adobe. “This year is unlike any in the past, and for the first time we are no longer referring to peak holiday sales as Cyber Week – it’s now Cyber Month.”
While large e-commerce entities may seem to be the biggest beneficiaries at first glance, in reality it is small retailers that will benefit most. Accord to the report, small retailers will see their revenue increase 107%, vs 84% for their bigger rivals.
Curbside pickup will also grow in popularity, with BOPIS (buy online, pick up in store) expected to account for more than 50% of orders at retailers offering the service.
Although the pandemic may be forcing holiday shoppers online in record numbers, shoppers may develop a taste for the low-hassle benefits of online shopping and BOPIS. If so, it’s a safe bet that many shoppers’ behavior may be permanently altered over the next two months.
A survey about online shopping habits indicates that the massive shift to online shopping during COVID will continue after COVID. The increases in online shopping because of closures and fear are expected to be permanent.
A new study from the secure payment solution provider PCI Pal shows that millions of Americans have become online shoppers during COVID and that this behavioral shift will last long beyond the COVID-19 era. With over 70% of respondents reporting plans to continue shopping online for some or most of their shopping even after the COVID-19 pandemic is over.
“Retailers face an unpredictable and unexpectedly challenging year due to the COVID-19 pandemic,” said Geoff Forsyth, CISO, PCI Pal. “What they can control, however, is delivering a seamless, secure shopping experience in-store and across digital shopping channels to offer customers much-needed peace of mind this holiday season.”
A few other trends for retailers to pay attention to:
New year, same habits. Despite 2020 bringing many changes and unexpected turns, one thing remains constant: consumers’ loyalty. 86% of respondents reported they still plan to shop with their same favorite retailers this holiday season, with 54% planning to do so online and 32% in-store.
Sincerely Securely, Santa: It’s no surprise that data security is a top concern for consumers going into this holiday season, with 60% of those surveyed reporting they feel more concerned about their data security as a result of COVID-19. However, one slip-up from a business could have more dire consequences than ever before: 70% of respondents reported they would stop shopping with a brand for a few months or even permanently if it suffered a data breach ahead of the holidays.
Safety supersedes security: While 70% of consumers plan to continue shopping online after COVID-19, some still feel uneasy about how it could impact their personal data security. Nearly 20% of consumers perceive online shopping as the least secure method for making purchases, while in-store shopping is still seen as the most secure by 57% of respondents. If online shopping is the future, then businesses must take steps to ensure their customers feel as secure shopping on their website as they do in-store.
The social shopping dilemma: Given new features on Facebook and Instagram, consumers are increasingly turning to social media for their shopping. According to research from Salesforce, purchases from a social channel referral saw big increases in Q2 2020, growing 104% across the entire industry. Yet, just like online shopping, consumers feel insecure shopping on these platforms: 46% of respondents reported they find social media to be the least trusted shopping channel. It seems that when it comes to their sensitive financial information, consumers are not yet ready to divulge their credit card information on social media.
Customer experience should be on Santa’s “Nice” list: Just as shopping has shifted online, so, too, has the demand for excellent customer service. With a majority of respondents reporting a preference for email (about 36%) or phone (33%) for their customer service needs, retailers will need to ensure that both of these channels are set up to offer a smooth customer journey.
Alibaba today announced it will invest $3.6 billion in Sun Art Retail Group, a huge hypermarket and supermarket operator in China. Sun Art is the largest retailer in China and competes head to head with Walmart. The transaction will give Alibaba a 72% controlling interest in the China-based brick and mortar retailer. Alibaba says that this purchase furthers its ‘New Retail’ strategy of integrating online and offline retail in China.
“Alibaba’s strategic investment in Sun Art in 2017 was an important step in our New Retail strategy,” says Alibaba CEO Daniel Zhang. “The alliance we formed with Auchan Retail and Ruentex was instrumental in building a robust infrastructure to create opportunities and value in China’s retail sector. Led by Chief Executive Officer Peter Huang, Sun Art has achieved impressive results in its digitalization and pursued promising synergies with businesses across the Alibaba digital economy. As the COVID-19 pandemic is accelerating the digitalization of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience.”
In 2017 Alibaba entered into a strategic alliance to digitalize and introduce New Retail solutions at Sun Art stores. The company says that since then “Sun Art has made significant progress in the digital transformation under a fast-changing market environment by leveraging resources and technology from the Alibaba ecosystem, to capitalize on the growth opportunities in China’s hypermarket and supermarket space.”
This acquisition reflects a growing retail trend in China. Euromonitor International said in a report earlier this year that merger and acquisition activities are expected to continue in the forecast period. As China’s retailing industry modernizes it is undergoing a drastic digital transformation. The forecasting firm also said that sun Art held a 14.1% share of the country’s hypermarket sales last year. That compares to Walmart’s 10.3% market share in that category.
As of June 30, 2020, Sun Art operates 481 hypermarkets and 3 mid-size supermarkets in China, with a focus on strengthening its position through small and offline community stores.
Here is the official joint announcement of the acquisition.
“We really doubled down on digital,” says Bed Bath & Beyond CEO Mark Tritton. “We weren’t easy and we weren’t convenient. Life’s tough at the moment and you really want to make it simple, easy, and frictionless for customers. The introduction of BOPIS (buy online, pick up in-store), curbside, and now same-day to really facilitate ease and frictionless shopping starting with digital or in-store, wherever the customer wants to go.”
Mark Tritton, CEO of Bed Bath & Beyond, after releasing their earnings report discusses how the company is driving success by leveraging digital with frictionless brick and mortar stores:
Doubling Down On Digital
Our (6 million) new customers coming on board are about six years younger which is great news for us as we expand our customer profile. The key to that is our omni-always strategy. We talk about understanding our customer, how they shop today, and this was pre-COVID. Even more important, we know that 80% of our customers pre-shop online and either purchase there or go to store.
We had a really broken paradigm. We had a fantastic digital business that was very large. We did about $1.8 billion last year. We already beat that by this time this year. We’re large, but we are growing. We really doubled down on that digital aspect. But we weren’t easy and we weren’t convenient. Life’s tough at the moment and you really want to make it simple, easy, and frictionless for our customers.
Stores Are Key To Profitability
So we looked at our website and our integration with our stores which is an ability to leverage our store asset and connect those strongly to an omni environment. It’s really worked out. The introduction of BOPIS (buy online, pick up in-store), curbside, and now same-day to really facilitate ease and frictionless shopping starting with digital or in-store, wherever the customer wants to go.
We know that if we have a digital side that is BOPIS, curbside, or same-day, our margin is actually equivalent to a store. We are driving behaviour, driving engagement, and driving those three assets. That’s helping to leverage out our gross margin. As we rapidly expand our digital business the stores are a key to this profitability.
Amazon has announced a new initiative, Climate Pledge Friendly, to help customers shop for sustainable products.
Amazon has increasingly been under fire from its own employees for a perceived lack of effort toward addressing climate change. This included a “climate strike” in 2019, when hundreds of employees walked out. The efforts appear to have made an impact, as Jeff Bezos pledged $10 billion to fight climate change in early 2020, and now Amazon has unveiled its new initiative.
Climate Pledge Friendly labels will appear on some 25,000 different products across a host of categories, including grocery, household, personal electronics, fashion and beauty, to name just a few. In order to receive the label, a product will need to have at least one of 19 sustainability certifications. A number of brands have gotten onboard, including Seventh Generation, Burt’s Bees Baby, Mrs. Meyer’s and HP.
“Climate Pledge Friendly is a simple way for customers to discover more sustainable products that help preserve the natural world,” said Jeff Bezos, Amazon founder and CEO. “With 18 external certification programs and our own Compact by Design certification, we’re incentivizing selling partners to create sustainable products that help protect the planet for future generations.”
“We want to make sure that 70 to 80 percent of the volume for pizzerias is digital., says Slice CEO Ilir Sela. “This is very comparable to Domino’s and Papa John’s and other big chains. We’ve got to lead the digital transformation of these small businesses. We bring technology and marketing and we enable the existing operation of the pizzeria. We make them more efficient and we make these Pizzerias really powerful and valuable.”
Ilir Sela, CEO of Slice, discusses how the Slice app is driving the digital transformation of small pizzerias so that they can compete effectively with the national pizza chains:
Leading Digital Transformation Of Pizzerias
We take a merchant friendly approach because we really believe in the power of small business and the American dream. I am third generation in the pizza industry. My family consists of a ton of entrepreneurs who mostly opened up small business pizzerias. The goal for us was to make sure that as digital becomes an important component of their business that it doesn’t cannibalize the physical location.
So we take a digital-first approach in a way that means we want to make sure that 70 to 80 percent of the volume for these pizzerias is digital. This is very comparable to Domino’s and Papa John’s and other big chains. In order to do that you have to take a long-term view and you’ve got to take a merchant friendly view around loyalty and online ordering. Obviously, in order to do that we’ve got to run the playbook. We’ve got to lead the digital transformation of these small businesses.
All Pizzerias Need To Digitize Their Platforms
We are actually an all-in-one platform where we partner with a small business in order to digitize their operation. We are not a logistics company ourselves. We empower small businesses to have what we call first-party delivery. In a way, that’s been done forever. Small business pizzerias have delivered across the entire country for decades and they’ve made it work incredibly well.
The reality is that in the world of COVID and as we go further into the 2020s, all these pizzerias really need to digitize their platforms in order to become more efficient. What we do is we bring technology and marketing and we enable the existing operation of the pizzeria. We make it more efficient and we make it really powerful and valuable.
Slice CEO Ilir Sela Leading Digital Transformation Of Pizzerias
“There’s a real recognition that digitization and transformation are not doing what you used to do in the physical world,” says Publicis Sapient CEO Nigel Vaz. “Digitizing that and translating that is essentially the journey of going from being a caterpillar to a butterfly. Real transformation. How do you reimagine yourself in the context of a world that now is entirely digital? Customers are thinking very actively about how they actually create products and services that essentially create value for customers entirely digitally.”
Nigel Vaz, CEO of Publicis Sapient, discusses how the current pandemic has forced organizations to reimagine their businesses digitally. Nigel works closely with clients such as McDonald’s, Nationwide, and Unilever to deliver transformative experiences and business models:
https://youtu.be/VOKcTLcxHXw
Businesses Being Reimagined In A World That Is Now Entirely Digital
Digitization Has Become Existential For Business
I think Digital has always been important for business. Now more than ever what’s becoming very clear is this has gone from being something that’s important to something that’s existential. How do you support customers to make orders entirely online when your stores are closed? How do you create mashups with other partners to be able to facilitate deliveries when your own deliveries don’t suffice? How do you try to create experiences online through self-service that minimize the impact of people calling your call centers?
All of these things are things clients are facing on a regular basis. Most CEOs I’m in conversation with are acknowledging the fact that this has now got to be a priority, that they have to be ready more so than they’ve ever thought before.
3 Key Things Happening With the Transformation
There are three things happening here in terms of transformation. The first is the change in human behavior where I think there’s a recognizable shift now. We’re seeing significant accounts of over-70s, for example, ordering from retail and ramping that up. We’re seeing a big shift in institutions like schools and educational institutions, which historically had not thought about transformation as particularly applicable to them.
We’re also seeing a shift in industries like leisure looking at creating virtual experiences since physical experiences are essentially restricted and people can’t use them. The human behavior shift is translating to big investments in technology and technology platforms that enable this.
Businesses Being Reimagined In A World That Is Now Entirely Digital
Then lastly, new business models. There’s a real recognition that digitization and transformation are not doing what you used to do in the physical world. Digitizing that and translating that is essentially the journey of going from being a caterpillar to a butterfly. Real transformation. How do you reimagine yourself in the context of a world that now is entirely digital?
Customers are thinking very actively about how they actually create products and services that essentially create value for customers entirely digitally. There are plenty of examples in this from telemedicine and from the educational space with new courses coming online which can scale faster than traditional courses limited by a classroom and a professor.
“What we’re really seeing here is the integration of bricks and clicks,” says Cohen retail analyst Oliver Chen. “Target really hit the bull’s eye on their numbers. What stood out really was 195 percent ecommerce growth and using stores as hubs or fulfillment centers, particularly drive-up curbside pickup and reinventing the purpose of the store to integrate the whole shopping journey. As retail continues to evolve this whole fulfillment and stores plus digital will continue to be a huge theme.”
What We’re Seeing Is the Integration of Bricks and Clicks
What we’re really seeing here is the integration of bricks and clicks. Target really hit the bull’s eye on their numbers. What stood out really was 195 percent ecommerce growth and using stores as hubs or fulfillment centers, particularly drive-up curbside pickup and reinventing the purpose of the store to integrate the whole shopping journey. What’s happening is that America really values convenience and Target’s done a great job being America’s easiest place to shop.
Thinking about physical, mix with digital and instant gratification, same-day fulfillment has been a big deal. Customers want it all. They want physical, they want digital, they want groceries and hard lines. We’re also seeing this at-home revolution with home electronics doing really well too. These are all key themes. As retail continues to evolve this whole fulfillment and stores plus digital will continue to be a huge theme.
Ecommerce Is No Longer a Bad Word
The key is that ecommerce is no longer a bad word. If you think back a couple of years ago if you mentioned ecommerce the idea was to short all retail. It took some of these retailers a while to understand the investments in technology that needed to be made. But they’ve done it using the stores as assets instead of liabilities.
Again, if you go back maybe five years ago the idea was if you had a store you’re in trouble. These companies through their technology investments have really proven that’s not the case. I do believe that investing in technology to drive your sales and your earnings is certainly the right thing to do for these companies.
What We’re Really Seeing Is the Integration of Bricks and Clicks
“In the most challenging operating environment I’ve ever seen for this team to deliver the strongest comps in our 50 year history is pretty incredible,” says Target CEO Brian Cornell. “This is in an environment where so many Americans are avoiding shopping in physical stores, our store comps were still up almost 11 percent. The investments we made in our team and in creating a safe shopping environment has built trust with the consumer. Certainly, our digital growth is industry leading at almost 200 percent.”
“Our second quarter comparable sales growth of 24.3 percent is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model,” said Cornell. “Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9 percent and stores enabling more than three-quarters of Target’s digital sales, which rose nearly 200 percent.”
“We also generated outstanding profitability in the quarter, even as we made significant investments in pay and benefits for our team,” noted Target’s CEO. “We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year.”
The Company had comparable stores sales growth of 10.9 percent and digital sales growth of 195 percent. Total revenue of $23.0 billion grew 24.7 percent compared with last year, reflecting sales growth of 24.8 percent and a 16.6 percent increase in other revenue. Operating income was $2.3 billion in second quarter 2020, up 73.8 percent from $1.3 billion in 2019.
Target Delivers Strongest Comps In 50 Year History
I’ve been with Target now going on seven years. Obviously, this is a special moment for the team. It is a beautiful morning here in Minnesota. I’ve got to start by really recognizing our team. In the most challenging operating environment I’ve ever seen for this team to deliver the strongest comps in our 50 year history is pretty incredible. Our EPS was also a record high up over 80 percent. So to the 350,000 team members in the U.S. and in offices around the world these results were all about you.
We continue to see strength across our entire portfolio. The strength that we saw in the second quarter, which we will break down in our earnings call later today, the fact that we saw really consistent strength from May into June and July. May was the strongest month with comps over 30 percent. But in both June and July we saw comps over 20 percent. That strength has continued in August and we are seeing low to mid-teen growth.
Being Agile and Flexible Is Key To Our Success
The biggest adjustment is probably the consumer who is still waiting for a signal around back to school. As you might imagine uniforms, backpacks, and school supplies are a little slower than last year. But the overall momentum and growth in market share continues as we go into the third quarter. The key to our success when I think about the second quarter is one, we’ve been true to our strategy, but our team has really focused on being agile and flexible and adjusting to the current operating environment. We’ve been changing the playbook every week.
As we think about back to school as I’m sitting here today there are 56 million K-12 students that are waiting for direction. As of this week 66 percent of students will start remotely. They don’t know if they are going back into a classroom in September, October or if it’s going to happen in January. So we are going to have to extend the back to school season and make sure that we’ve got the items they need throughout the fall. We can adjust by market. We’ve got to be flexible and adaptable. That’s really been the key to our success so far this year in both the first and the second quarter.
Digital Growth Is Industry Leading – Up 200%
If you look at our results in the second quarter overall comps were up 24.3 percent. These are some of the strongest in retail. Our store performance is really for me a standout and probably one of the biggest surprises. This is in an environment where so many Americans are avoiding shopping in physical stores, our store comps were still up almost 11 percent. The investments we made in our team and in creating a safe shopping environment has built trust with the consumer. Certainly, our digital growth is industry leading at almost 200 percent.
We’ve been taking share on a broad based basis from both specialty and department stores but also some of our traditional competitors including club. Category by category we’re gaining share. In categories like food and beverage and household essentials we were up 20 percent during the quarter. As Americans have been working and learning from home we’ve seen categories like electronics grow by 70 percent in the quarter. We’ve picked up significant market share from our electronic competitors. Our business and home categories were up over 30 percent.
We Are Seeing Significant Market Share Gains
Categories like decor, categories like domestics, what we are seeing with kitchen ware, we are continuing to build momentum and market share. We also saw a big rebound in apparel which was down almost 20 percent in the first quarter. It grew in the low teens in the second quarter. We are seeing significant market share gains. Across our business we are picking up share from our competitors whether they are specialty players, department stores, or our traditional retail competitors.
The market share number of $5 billion is the most important number on the print. It just shows the relevance of our brand, the momentum, and the trust we are building with American consumers.
Target CEO Brian Cornell: Digital Growth Is Industry Leading – Up 200%
Walmart has partnered with Zipline to deliver health-related products directly to customers. “We are teaming up with Zipline to launch a first-of-its-kind drone delivery operation in the U.S.,” says Tom Ward, Senior Vice President of Customer Product at Walmart. “The new service will make on-demand deliveries of select health and wellness products with the potential to expand to general merchandise.”
Walmart will begin testing drone delivery early next year near their Arkansas headquarters. Zipline specializes in delivering medical supplies and other critical products for businesses via its unique drone technology. So far the company has made 58,436 commercial deliveries so far.
“Zipline will operate from a Walmart store and can service a 50-mile radius, which is about the size of the state of Connecticut,” said Ward. “And, not only does their launch and release system allow for quick on-demand delivery in under an hour, but it also eliminates carbon emissions, which lines up perfectly with our sustainability goals. The operation will likely begin early next year, and, if successful, we’ll look to expand.”
“As we continue to build upon the foundation of innovation laid for us by Mr. Sam, we’ll never stop looking into and learning about what the next best technology is and how we can use it to better serve our customers now and into the future.”
“Our digital business is up 127 percent,” says Kroger CEO Rodney McMullen. “When you look at what our customers tell us and one of the reasons why our digital business is so strong is things that are personalized. We continue to look at what the customer wants and needs and then how do we serve those. What we find are our store teams, our pickup associates, and delivery is very important.”
“Customers are at the center of everything we do and, as a result, we are growing market share,” noted McMullen in their earnings release. “Kroger’s strong digital business is a key contributor to this growth, as the investments made to expand our digital ecosystem are resonating with customers. Our results continue to show that Kroger is a trusted brand and our customers choose to shop with us because they value the product quality and freshness, convenience, and digital offerings that we provide.”
Rodney McMullen, CEO of Kroger, discusses how their digital business has been particularly key to powering their massive growth amid the COVID pandemic:
Digital Business Is Up 127 Percent
Customers are continuing to shop in our stores. When they shop in our stores, the count is down but the amount they spend per visit is up significantly. Also, our digital business is up 127 percent. Customers continue to engage in that. What we’re finding is that in markets where COVID is having a lower incident rate or where it is having a higher incident rate, it really doesn’t have that much of a difference. The thing that’s exciting is that people are finding they enjoy cooking and they enjoy eating as a family. It’s really all those things together that gave us the confidence to go out with the (earnings) guidance that we did.
We’re really looking at this for the long term, what’s right for the customer today and what’s right for the customer two or three years out. The increased volume has allowed us to leverage some costs. What we’re doing is taking some of that and sharing it with the customer by waiving our pickup fee. Also, we’ve continued to do promotions throughout the pandemic and we continue to share some of that with the customer. We really do fundamentally just believe the customers will reward us once we get out of the pandemic as well. It’s just the right thing to do and it’s the right thing to do to help a customer’s budget go a little further.
Digital Business Is Strong Because Of Personalization
For us, it’s the whole total experience. When you look at what our customers tell us and one of the reasons why our digital business is so strong is things that are personalized. We also do incredibly well on fresh. Customers tell us and they expect that our fresh is really good and good relative to our competition. It’s really all of those things together. We’ve had a membership program for a long time and you didn’t have to pay for it. It’s fuel rewards and we do loyal customer mailings and all those things.
We continue to look at what the customer wants and needs and then how do we serve those. What we find are our store teams, our pickup associates, and delivery is very important. We are making sure we have that total balance of the experience both from a people standpoint, a price standpoint promotion, and then kind of sealing the deal with fresh products as well.
Digital Business Is Up 127 Percent Says Kroger CEO Rodney McMullen
“It’s a remarkable time in that we’re witnessing the beginning of a seismic shift in terms of consumer preference in how they want to buy their food,” says FreshDirect CEO David McInerney. “What we’ve seen is within the cities that we operate, New York, Philadelphia, DC, we’ve seen the urban dwellers migrate out to the suburbs. As they migrate out they are taking FreshDirect with them.”
David McInerney, CEO, and co-founder of FreshDirect, discusses how the pandemic has caused a boom in how people want to buy their food:
Witnessing Seismic Shift In How Consumers Want To Buy Food
Overall, the growth continues to be tremendous both in the cities and in the suburbs. It’s a remarkable time in that we’re witnessing the beginning of a seismic shift in terms of consumer preference in how they want to buy their food. What we’ve seen is within the cities that we operate, New York, Philadelphia, DC, we’ve seen the urban dwellers migrate out to the suburbs. As they migrate out they are taking FreshDirect with them.
When you combine that with this iconic truck that we have that everybody knows and then new customers in the suburbs see it and word of mouth goes on. Then all of a sudden we are seeing really explosive growth there as well. Frankly, it’s something that we like a lot. We like the suburban customer because they have really big pantries. They really value fresh food. We’ve had a good time with it thus.
Customers Moved To Suburbs But They Are Coming Back Soon
We’re sort of on the sidelines watching (when people will go back to urban areas again). We are talking to a lot of our customers. The truth is we are hearing from some that they plan on staying wherever they are, whether that’s in a suburb in our trading area or somewhere else in the country. But I think there are a fair amount that are coming back and we’re planning as such. We’re planning to see a significant migration back in September for all three cities.
While the ramp-up will probably not be as strong as we’ve seen in earlier years we’re still expecting growth. There’s also a big chunk of our business which is in the offices. We do a corporate office business as well and that has been pretty much non-existent. We think that will take more time to ramp up but we see that coming back to some extent in September as well.
FreshDirect CEO David McInerney: Seismic Shift In How People Want To Buy Food
“We had to learn to work in different ways to become more digital and to put data to work in different ways,” says Walmart CEO Doug McMillon as he reflected on the release of their blowout financial results. “Basically, to create a seamless experience for customers. We don’t want them to sense any difference as it relates to our brand whether they are shopping inside a store, picking it up, or having it delivered. All of those differences and channels that we might have thought about in the past need to be erased and taken away.”
Doug McMillon, CEO of Walmart, discusses how the company has changed to become more digital over the last couple of quarters in response to the pandemic:
Ecommerce Was Very Strong
I would like to say thank you to all of our associates around the world and here in the US. They did a great job. You can imagine how challenging it is in this environment to go to work everyday and serve customers and keep the supply chain moving. Whether it’s in our stores, our Sam’s Club’s, or our distribution centers they have done a great job.
Customers have been responding in waves as we’ve gone through the first and second quarters. Not surprisingly, they got really focused on things they needed to stock up to be at home for a long time at first. Over time, as we got through the second quarter and stimulus checks came in to play and people were at home, we certainly saw them buy things like laptops and tablets and fishing equipment and bicycles. Things that were related to home decor as they were at home thinking about their environment inside and outside the house we certainly saw them respond with what they were buying. Ecommerce, in particular, was very strong.
Technology Phenomena Happening Around the World
I’ve been in retail for almost 30 years and it’s really exciting when so many things can be done using technology. We can save customers time and expose them to so much more choice than we could previously. Our ecommerce assortments are broader as retailers and that’s certainly true at Walmart. We sell first-party owned inventory as well as through our marketplace. Now they can pick up their phone or be at home and open up their laptop and shop in so many different ways and have access to so many different things. It’s a lot of fun to be able to try and serve them in that way. That phenomena is happening around the world.
You can use your app to do pickup and our stores. You can use your app to have the product brought straight to your house. Obviously, you can come in the store and we are learning how to use technology inside the stores in different ways to save you time. It boils down to access to assortment and an ease of shopping here in the US and around the world that people haven’t experienced before. That’s happening in Mexico, Canada, China, India, and all over the world.
We Had To Become More Digital
There have been a lot of changes inside the company. We had to learn to work in different ways to become more digital and to put data to work in different ways. Basically, to create a seamless experience for customers. We don’t want them to sense any difference as it relates to our brand whether they are shopping inside a store, picking it up, or having it delivered. All of those differences and channels that we might have thought about in the past need to be erased and taken away. Our teams have been doing a great job doing that.
The outcome of that is this ease of shopping that’s unique and different. In our case, we’ve got so many stores so close to customers around the country it gives us a big advantage especially in being able to deliver quickly. We’ve got an express delivery system here in the United States that commits to delivering orders from our stores in less than two hours. That’s now in more than 2,000 stores and coming to stores all over the country. We are actually delivering a lot faster than two hours so far. That’s a great experience.
We believe that this is something that we can build on along with having great stores where you want to come in from time to time, stock up, and experience what’s new. Really, we think that this omni world of retail is what will end up being the winning strategy over time.
Scale Can Sometimes Be A Disadvantage
Scale can sometimes be an advantage and sometimes it’s a disadvantage. Speed also matters a lot. Creativity matters a lot. What I’m proud of is how our team is responding to create new solutions for customers. Ultimately, whether Walmart grows or not is all up to them. We are serving families, moms and dads, and customers that have a lot of different choices. Even during the pandemic period with ecommerce and all the chains that were open there was still a lot of choice.
We’ve got to compete to earn their business everyday and that’s the approach we take. Our team has really stepped up during this period and even before the pandemic to drive change and to create more solutions for customers.
Walmart CEO Doug McMillon: We Had To Become More Digital
“It was a strong quarter for us certainly across almost every metric,” says PayPal CEO Dan Schulman. “What’s happened is the world has accelerated from physical to digital across almost every industry. If you look at health care it’s all about telemedicine right now. If you look at education it’s about remote learning. If you look at the retail industry it is now about online almost over offline or physical locations in store. If you look at the restaurant business you really can’t be in business.”
Schulman says that it is imperative for businesses to move toward a digital-first strategy. “If all you’re doing is trying to serve customers at your location given social distancing and the number of people coming out (you won’t survive),” he said. “You have to be about takeout and delivery. Across every industry, we’re seeing this surge towards a digital-first strategy. All of the tools and products and services that we offer are probably more relevant and important across multiple industries than they’ve ever been before.”
PayPal CEO: Across Every Industry, We’re Seeing a Surge Towards a Digital-First Strategy
“We’ve partnered with the National Restaurant Association for a restaurant safety app called VirusSAFE Pro,” says Restaurant Impossible host Robert Irvine. “When you say you’ve done something, say you’re cleaning the refrigerator, and you’re actually outside smoking a cigarette, I know because of geotagging that you didn’t clean that when you said you did. It’s really about accountability of duty of care. What we’re trying to do is put back the consumer of customer confidence through transparency.”
Robert Irvine, celebrity chef and host of Restaurant Impossible, discusses the launch of his new app VirusSAFE Pro which helps restaurants and consumers monitor the implementation of safety protocols. Irvine says the key is restoring “consumer confidence” in restaurant dining:
VirusSAFE Pro App Helps Restaurants Stay Healthy
We’ve actually partnered with the National Restaurant Association for a (restaurant safety app) called VirusSAFE Pro. It enables checklist reminders on your phone so that COVID-19 safety protocols are done in a timely manner and all the protocols are completed. You think about standing operating procedures for restaurants especially in the COVID-19 times where we’re looking at masks and gloves and everything that’s clean.
We’ve all been to airports and restaurants where people say that things have been done and they actually haven’t. VirusSAFE Pro is an app for phones that also has a desktop which helps with mitigation. When you say you’ve done something, say you’re cleaning the refrigerator, and you’re actually outside smoking a cigarette, I know because of geotagging that you didn’t clean that when you said you did. It’s really about accountability of duty of care. What we’re trying to do is put back the consumer of customer confidence through transparency. That’s the biggest part. It’s simple. It’s easy to use. It provides verification of stuff done in real-time.
Right Now The Problem Is Consumer Confidence
It’s 99 percent fail-safe as opposed to a pen and a piece of paper. I can actually tell you where you are and what you are doing. This is the only consumer-facing app that when you’re verified and you’re using that system you can put a check and verified sticker in your window. A consumer can then take their smartphone use it on the QR code and find out exactly what’s been done for the last 24 hours or 48 hours of your protocols. That allows a guest who has two kids that are below three years old or an 89-year-old grandmother to feel safe to go back into your restaurant. Right now the problem is consumer confidence.
It’s tracking everything that we’ve done for two years or more. You know what it’s like right now, everybody’s saying I got sick in your restaurant. Now I’ve got this mitigation tool to say we have done our best practices and protocols and our duty of care to make sure you are your safest. There is no system that’s 100 percent clear but this is 99 percent that we can follow what you’ve done, how you’ve done it, and make you want to get back to a restaurant. If you don’t do this and this is a big don’t, we already are at 30 to 40 percent of failure with the restaurants that will not be able to come past this pandemic. That is a huge amount when we’ve got 11 million folks out of work.
Restaurant Impossible Reopen
I’ve just reopened six restaurants in three weeks in four states following COVID-19 closures putting in new practices and protocols to make sure that consumers are safe. You will hear more from me regarding this on my TV show Restaurant Impossible Reopen which you’ll see very soon. It’s really important that we take these protocols seriously.
Robert Irvine: New App Makes It Possible For Restaurants To Reopen Safely
“The fact is that COVID has already accelerated everything that was taking place in the marketplace,” says the former co-CEO of Whole Foods, Walter Robb. “Some people say that between 30 and 50 percent of small businesses are going to go out of business. We are going to see disruptions as the COVID turns left or turns right. It’s throwing curveballs at businesses. It’s very difficult to operate in this environment.
Walter Robb, former co-CEO of Whole Foods, discusses how COVID related business closures and restrictions by urban governors and mayors has accelerated the existing trend of retailers closing due to competition with big rivals that have a sophisticated and expansive presence online such as Amazon and Walmart:
COVID Accelerates Retail Closures
The fact is that COVID has already accelerated everything that was taking place in the marketplace. So I think you will see some more (retail bankruptcies). I saw some numbers from the Yelp folks that suggested there would be 150,000 businesses fold. Some people say that between 30 and 50 percent of small businesses are going to go out. We are going to see disruptions as the COVID turns left or turns right. It’s throwing curveballs at businesses. It’s very difficult to operate in this environment.
The main thing is can we keep the economy open in some safe manner? It isn’t whether it’s an essential business or a non-essential business. It’s whether we can keep it open for both the team members and for the customers. It’s going to really determine some of that. Some folks have already thrown in the towel and some folks are going through bankruptcy.
But there are a lot of folks working hard in retail to serve people. It will depend on whether we going to get some sort of support, both in terms of the main street lending facility amendment or in terms of keeping the economy open to let them continue to serve their customers.
Used car sales have defied the dire COVID related expectations, says Carvana CEO Ernest Garcia. “When it first hit there was no doubt that there was a huge hit to demand,” says Garcia. “We saw car sales drop 30, 40, 50, and even 60 percent very early on. They started to recover very quickly by late April and they have continued to recover. That was definitely not the baseline expectation heading in”
Ernest Garcia, CEO of automotive ecommerce retailer Carvana, discusses how COVID has surprisingly been a boon to the used car market over the last several months:
Used Car Sales Up Significantly Year Over Year
When COVID first hit there was no doubt that there was a huge hit to demand. We saw car sales drop 30, 40, 50, and even 60 percent very early on. They started to recover very quickly by late April and they have continued to recover. Many retailers including ourselves are actually up year over year, significantly in our case. It has definitely recovered very quickly and that was definitely not the baseline expectation heading in.
The biggest change has been with the decrease in gas prices. There has been a lot of demand for SUVs and a lot of demand for trucks. But there has been a lot of demand across the board. There has been a lot of demand for off-lease vehicles right now as new production starts to spin back up. There is also a lot of demand for older cars that are a little less expensive. I think across the board we are seeing a lot of demand in all of automotive retail.
There Is Both A Pull Toward Used And A Push Away From New
To some degree, it is pulling from new car sales because used cars are a little less expensive. To some extent, there is a push away from new car sales because production has slowed down and incentives are being pulled back as a result. That is likely to continue for the immediately foreseeable future. There is both a pull toward used and a push away from new as well.
Automotive retail is a very interesting market. On the used side there are 40 million transactions per year. On the new side there are 15 million give or take transactions per year. There are about 40,000 dealers out there. This has always been a market that is enormously competitive and enormously fragmented. Dealers have found a way to persevere and have pretty decent margins over the last 75 years.
We Represent A New Kind Of Business Model
What we represent is a new kind of business model. It’s an ecommerce-centric model where a customer goes to our website, they select a car, they go through the purchase process, and we deliver it to their door using first-party logistics. Then they get a seven-day return policy. That business model has a pretty different cost structure than the traditional automotive resale model. As a result of that, we have additional opportunities above and beyond most automotive retailers.
Used car prices have also been an incredibly interesting and volatile place to watch over the last three and a half months. In April, we’ve had the biggest decrease we’ve ever seen in the Manheim Used Vehicle Value Index, which is one of the measures of used car prices that are broadly used. In May and June, we saw sequentially probably one of the biggest increases we have ever seen in used car prices. They are now at the highest prices they have ever been.
Future Demand Is Very Difficult To Forecast
That market has spun around quite bit, just like the stock market and other gauges of economic activity. It has been very difficult to forecast and I would not want to forecast where it is going to go from here. On the new side, there are likely to be supply shortages. There is a lot of demand today. Trying to figure out what demand is going to look like over the next six months with increased unemployment (payments) potentially expiring and with less stimulus in the economy is very hard.
Used Car Sales Way Up – Defy Dire Expectations, Says Carvana CEO Ernest Garcia
Amazon released its first quarter results, beating analysts revenue estimates while falling short of their earnings-per-share estimates.
Amazon has been at the center of the coronavirus pandemic, as the e-commerce giant has become a lifeline for many consumers sheltering in place. At the same time, Amazon has struggled to keep up with demand, initially hiring 100,000 extra warehouse workers, only to announce they would hire another 75,000 after that. The company also cut back fulfillment on non-essential items in an effort to keep up.
“From online shopping to AWS to Prime Video and Fire TV, the current crisis is demonstrating the adaptability and durability of Amazon’s business as never “before, but it’s also the hardest time we’ve ever faced,” said Jeff Bezos, Amazon founder and CEO.
With their earnings report, the dichotomy of Amazon’s position was made clear. The company reported $75.5 billion in revenue, up from analysts’ expectations of $73.61 billion. However, earnings-per-share were only $5.01, instead of the $6.25 analysts expected.
Even more significantly, the company expects to spend all of the operating profit it will earn next quarter in an effort to deal with the challenges it’s facing as a result of the pandemic.
“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit,” Bezos continued. “But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe. This includes investments in personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own COVID-19 testing capabilities.”
Many tech companies have expressed concern about the next quarter, in spite of doing reasonably well this quarter, and it appears Amazon is no exception, despite how important it has become during these times.
They’ve become a familiar sight in shopping malls, but Microsoft has announced it is permanently closing its retail shops.
The company’s announcement reflects the changing retail landscape in the wake of COVID-19. Like most industries, the pandemic forced Microsoft’s retail employees to work remotely, where they focused on helping customers do the same. As a result, and thanks to the success of that initiative, the company will continue to focus on remote sales teams, providing assistance to customers all over the world.
“Our sales have grown online as our product portfolio has evolved to largely digital offerings, and our talented team has proven success serving customers beyond any physical location,” said Microsoft Corporate Vice President David Porter. “We are grateful to our Microsoft Store customers and we look forward to continuing to serve them online and with our retail sales team at Microsoft corporate locations.
“We deliberately built teams with unique backgrounds and skills that could serve customers from anywhere. The evolution of our workforce ensured we could continue to serve customers of all sizes when they needed us most, working remotely these last months,” continued Porter. “Speaking over 120 languages, their diversity reflects the many communities we serve. Our commitment to growing and developing careers from this talent pool is stronger than ever.”
This is a significant change in the company’s operations and it’s unlikely Microsoft will be the last company to reimagine its retail operations.
“Ecommerce exploded when everybody got their stimulus checks,” says marketing superstar Gary Vaynerchuk. “It reminded me how much of a materialistic capitalistic country we are. The numbers are through the roof on food and beverage and things of that nature. Obviously, apparel has been hit in certain ways also. But net-net this is a capitalistic materialistic country and people want to buy things so you’re seeing a ton of activity.”
Gary Vaynerchuk, CEO of VaynerMedia and host of his own “GaryVee” channel on YouTube with 2.6 million subscribers, discusses how ecommerce is booming in spite of the current pandemic:
Ecommerce Exploded With The Stimulus Checks
Ecommerce exploded when everybody got their stimulus checks. It reminded me how much of a materialistic capitalistic country we are. A lot of my businesses are in ecommerce and I was “micro happy.” But I was macro disappointed because I’m hoping that people learn how to save money during this time. With VaynerMedia, my marketing firm, we sit with a lot of Fortune 500 companies that have consumer brands and we’re very involved in a lot of their e-commerce businesses.
The numbers are through the roof on food and beverage and things of that nature. Obviously, apparel has been hit in certain ways also. But net-net this is a capitalistic materialistic country and people want to buy things so you’re seeing a ton of activity. Sports cards are a space I pay attention to. I can’t believe how well it’s doing.
People Still Think Another Stimulus Check Is Coming
I actually think the macro conversation is the way this is all playing out. It’s disguising some of the economic vulnerabilities because we’re still in this cocoon. People still think there may be another stimulus check coming for me. As soon as this is over I’m gonna get a job.
I think the most interesting part of this from a kind of thoughtful economic standpoint it’s kind of that first month to three months or four months after it gets back to normal-ish. I’m really eyeing February, March, and April of next year where I think that you could see a dip because people will say wait a minute we’re in something bad. Right now I think it’s fake to some people.
Ecommerce Exploded When Everybody Got Their Stimulus Checks
“Last year we sent about 50,000 pet portraits to our customers,” says Chew CEO Sumit Singh. “We’re an experience-driven company. This is not a cost. This is an engagement mechanism. We’ve partnered with about a thousand local artists across the country. We think of this as an experience building. We have 90 percent re-ups (of our subscriptions). Our customers love engaging with us.”
Sumit Singh, CEO of Chewy, discusses their IPO (launched today) and how customer engagement has driven their phenomenal growth in an interview on CNBC:
We Are An Experience-Driven Company
Last year we sent about 50,000 pet portraits to our customers. We’re an experience-driven company. This is not a cost. This is an engagement mechanism. We’ve partnered with about a thousand local artists across the country. They show up to your doorstep unannounced. It’s a total surprise. You can’t buy them. When they do (the paintings) they create memories. People talk about them. They drive dinner table conversations. They show up on social media. It’s just an emotive category.
We think of this as an experience building. We have this because we want it, not because we need it in some way. Once we get out there and once this shows up on your doorstep the engagement that it creates generates the loyalty, the repeat purchase rate. In fact, our cohorts just keep growing from $330 to $500, $600, and $700 as they go from year five, six, and into year seven. This is what does it. Pets is the only category where a consumer refers to themselves as a pet parent. The only other category where consumers do that is kids.
“Jackson loves his Chewy portrait!” notes Chewy customer Eri Anne
Our Customers Love Engaging With Us
Pet ownership is underrepresented in the growth of e-commerce. First of all today in the United States we’re only about 14 percent penetrated from an online point of view. Chewy, if you look at it, is a $70 billion dollar industry. We’re penetrated in about roughly 10 percent of the households. We have 11 million customers. We’re growing fast and we’re engaging them hard.
They stay with us. It’s the two flywheels, the engagement, and the acquisition. It just spins really well. Our investors love that. Our customers love that. We like it. We have 90 percent re-ups (of our subscriptions). Two-thirds of our revenue comes from Autoship and our subscription program. Our customers love engaging with us.
We Have An Incredible Amount of Data
Our shipping (cost) is built into our gross margins. What you’ve seen is as we’ve gotten big fast, we’ve also gotten fit fast. Our gross margin has expanded over 500 basis points over the last three years. We have a dense network. We have the predictability of Autoship. We can plan supply plan tighter and baseload build a lot tighter and get it to our customers fast and in a reliable manner. That’s how we make it work.
We have a ton of data. When you contact us you’re giving us (information). Pet profiles is an amazing way for us to engage with you. Customers are leaning in. We talked to you via customer service. At this point, we have 11 million customers but we manage over 27 million relationships between pets and pet parents. That is an incredible amount of data and facts to have on base.
Pets.com Was 20 Years Ago
The company (Pets.com) was 20 years ago. Look at the way the e-commerce has built out, the inputs are changing. Look at our stickiness. Look at the number of customers that we’re attracting. The fact that we’re servicing greater than 95 percent of US households in less than two days and the fact that customers keep coming back to us. Also, the necessity and desire to continue to engage and seek information via the high-touch high-class customer service that we provide. We just closed the loop better than anybody else out there.
We Are An Experience-Driven Company, Says Chewy CEO Sumit Singh
