Retail’s Emerging 3D Makeover

3D design

3D Object Being Printed

3D printing, or Additive Manufacturing (AM), is no secret having been developed in the early 1980s, but within the last 5+ years has it been capturing the imagination of a much wider audience than the early adopters who have pioneered the industry.  A big reason is that it’s becoming readily apparent it’s a technology that will likely change the face of not only manufacturing, but other industries as well given its ability to facilitate “mass customization.

As The Economist eloquently stated:

“THE industrial revolution of the late 18th century made possible the mass production of goods, thereby creating economies of scale which changed the economy—and society—in ways that nobody could have imagined at the time.  Now a new manufacturing technology has emerged which does the opposite.  Three-dimensional printing makes it as cheap to create single items as it is to produce thousands and thus undermines economies of scale.  It may have as profound an impact on the world as the coming of the factory did….

Just as nobody could have predicted the impact of the steam engine in 1750—or the printing press in 1450, or the transistor in 1950—it is impossible to foresee the long-term impact of 3D printing.  But the technology is coming, and it is likely to disrupt every field it touches.”

this is a game changing technology which is a big reason why it’s taking so long, 30+ years, to emerge.  Now that 3D printing has been briefly introduced, the remainder of this post will focus on the retail sector and developments there over the last several years.

The focus for retail is not about competing with the 3D printer manufacturers, but concentrating on 3D printing as a service and selling the printers and materials.  Leveraging printers from the existing technology providers like Stratasys, 3D Systems, etc., the aim is to be able to print unique and/or custom items that previously would have been too costly to produce a single item or in small batches.

Shapeways was one of, if not, the first companies to emerge to capitalize on this opportunity when it started offering printing as a service in 2008.  It is now the largest online marketplace for 3D printed goods.  However, things heated up in summer of 2013 when Amazon launched its 3D printing service.  Besides bringing its current 250+ million customers and 40+ million Prime members to bear, Amazon has also filed for patents on a system that would use 3D printers installed on trucks to produce an ordered product, bypassing the need for a fulfillment center, so a customers’ order could be delivered more quickly.  While several years away, its one more sign that Amazon has no intention of taking its foot off the gas pedal.

More traditional retailers like Home Depot, Micro Center, Sam’s Club, Staples, UPS Store, etc. are now starting to sell 3D printers and/or offer 3D printing as a service.  While its early, this helps build momentum for what’s surely going to be a substantial opportunity.  And to highlight some of the emerging applications, companies like Flow with its portable Focus 3D printer and Electroloom are generating attention.  Given its mobile 3D printing patent, it would be surprising if Amazon wasn’t already familiar with Flow.  And Electroloom’s efforts to print clothing could redefine the apparel industry if successful.

While just starting to emerge, 3D printing is preparing to have a significant impact on the retail sector.  Much like when the Internet “burst” upon the scene in the mid 90s, the 3D printing has been under wraps for decades now, but that’s soon about to change and so will retail.

Amazon Widens Its Moat (Again)

Amazon separates from its competitors

Amazon Grows Its Moat

Last Tuesday, March 31, Amazon offered a glimpse into its next big thing, Amazon Dash.  While in some circles it was mistakenly thought to just be an April Fool’s Day joke, that’s clearly not the case although I am certain many retailers wish it were.  Here are two reviews, one pro and one con so will let readers decide for themselves.  That being said, Dash clearly borrows from the Internet of Things (IoT) which once more details Amazon’s relentless drive to shape the future and serve hundreds of millions, if not billions, of people.

And adding fuel to the fire, Millward Brown Digital recently validated in a survey of 2+ million online consumers that Amazon Prime is keeping members loyal to Amazon at the expense of Target, Walmart and other mass merchandise retailers.  And with close to 40 million members in the US,  Amazon doesn’t publish the numbers, that’s a formidable advantage that’s hard to envision any retailer approaching let alone overcoming.  As a result, its hard to see any traditional brick & mortar retailer seriously eroding that edge although new competitors such as Alibaba, JD.com and others are certainly trying.  Maybe all of them will be able to take some wind out of Amazon’s sails, but that currently isn’t the case and Prime is a primary reason.

Finally, its worth noting that Amazon appears to be growing its marketplace merchant base at the expense of eBay.  While the article clearly highlights that eBay has a much larger merchant base, ~25 million as compared to Amazon’s 2+ million and Amazon’s fees are higher along with the threat of competition Amazon poses, eBay’s base has stayed flat the last 2 years while Amazon’s grew nearly 100% from 2013 to 2014.  Whether this is a trend or one year blip we don’t know yet, but worth keeping an eye on as eBay spins out PayPal in 2H15.

One emerging company frequently mentioned as being able to possibly challenge Amazon’s supremacy is Jet. Jet aims to reinvent the shopping club, think BJ’s, Costco and Sam’s Club, where a membership is payed and the goods are significantly discounted.  For those not familiar with Jet, the founder, Mark Lore, along with his Quidsi co-founder, Vinit Bharara, were the ones who sold Quidsi to Amazon in late 2010 for $545 million.  Mark and Vinit stayed on at Amazon for 2+ years so both have some familiarity Amazon’s inner workings, Vinit is just an investor in Jet, but Mark clearly thinks there’s room to improve Amazon’s business model.  To date Jet has raised $220 million, but has yet to launch to the general public.

Clearly a great deal of competition, from traditional retailers, eTailers, membership shopping clubs and upstarts, is lining up against Amazon.  While this hasn’t impacted Amazon to date, revenues were up 20% in 2014 to $89B, the next several years should be interesting, especially if Alibaba locates its US headquarters in Seattle as rumored.

 

eCommerce 20 Years Later (The China Anniversary)

China as a gift

20th Anniversary

In fall of 1994, the eCommerce revolution was kicked off and while the incident was acknowledged, I think its safe to say few if any people could have predicted that on its 20th anniversary it would have the momentum it appears to.  Now that 2014 eCommerce sales have been totaled, I thought it would be useful to look back at the last 20+ years.

eCommerce retail sales in the US in 2014 totaled almost $304B.  And if you look at the growth over the last 10 years, save for the financial crisis of 2008, double digit growth has been the norm (and even at the height of the crash eCommerce was still growing).  And excluding autos and fuel which generally aren’t sold online eCommerce accounted for 8.3% of all US retail sales in 2014.  And while that’s impressive, B2B eCommerce sales were expected to cross the $1 trillion, T-R-I-L-L-I-O-N, mark in 2014 which dwarfs B2C.

Clearly the genie is out of the bottle and this causing  all sorts of angst for traditional retailers, distributors and manufacturers which in turn is spurring significant growth in the eCommerce technology market.  Not too shabby for a market that didn’t materially exist 20 years ago.  And while brick & mortar retail/distribution is not going to disappear, its clearly reeling and trying to figure out how to improve its relevancy.

Times are clearly changing and and much is at stake.  As someone who’s been around eCommerce since the mid 90s, the pure plays have the edge online, but I also still believe that effective omni channel retailers will more than hold their own.  While eCommerce has become more of a threat than most retailers ever imagined, its also an opportunity for the bold who insist on shaping their future.

As eCommerce has now reached critical mass imo, I think the next 5/6 years are critical ones for traditional retailers to adapt to this new paradigm or risk being marginalized, and retail’s issues with point of sale (PoS) breaches since late 2013 isn’t helping their cause.  While many retailers are slowing their growth of physical stores, and many are closing existing stores, this is a necessary right sizing to accommodate the growth of eCommerce.

The big unknown here is the impact of mCommerce.  While the 2014 forecasts were bold, its not clear that promise was achieved so we’ll just have to wait and see how this plays out.  One more technology initiative for retailers to embrace and historically this hasn’t been a strength.

Are Analytics the Answer?

Magnifying Glass

The Future of Analytics

Was catching up on some reading this week and read several articles on the power of analytics and the role it is and will continue to play in shaping the future of business.  For retailers as well as distributors and manufacturers, its time to take notice of this trend and prioritize it within their business.

The reason I mention this is because the power of analytics is based on having relatively clean data that can be relied upon and for many companies this just isn’t the case today.  As a result, companies really need to start refining their data input processes because as the old saying goes, “Garbage in, garbage out“.

The first article was “The algorithmic CEO” as an excerpt from Ram Charan’s soon to be released book, “The Attacker’s Advantage: Turning Uncertainty into Breakthrough Opportunities”.  The focus of the article is the growing use of algorithms to make decisions and how they will reshape the business landscape.  If reading this article doesn’t convince you of of the need to rethink how your business is being run, best of luck to you in the future.

The next article was an interview with salesforce CEO Marc Benioff.  Known for having a crystal ball, there’s a good reason why salesforce has emerged as a force in technology with $5B+ in revenues and a $38B+ market cap, he views artificial intelligence (AI)/data science as the most important trend in technology today.  Nuff said.

The third one is this business intelligence forecast from Gartner.  If even 50% of what Gartner predicts comes into being, the business world is going to look a lot different in 5 years.

My final contribution is Rich Karlgaard’s recent column titled “Data Wimps“.  This one caught my attention because of his use of Bill Simmons to make the point about “how data and analytics in sports should be a writer’s gift” (I am a huge Boston sports fan , especially hockey, and he’s one of the best writers in the business today).

Rich’s point about making timid decisions because data might show a decision to be in error is well thought out.  While data plays a critical role in making better decisions, its also worth remembering that data is just a tool and while a powerful one, it also has limits.  Necessary to keep in mind as we move towards an analytics and data driven future.

In the context of this post, I would like to bid a belated adieu to RadioShack.  Perhaps better analytics sooner could have saved it the chain from its current fate, but that’s history now.  And it will be interesting to see if Amazon picks up some of the stores to kick start its brick & mortar presence.  Definitely the end of an era and let’s hope that Sears can avoid the same fate, but based on recent events its hard to be optimistic on this front.

2/15/15 update – and here’s one more article, “Guinea Pig Economy“, I would have included in my original post, but just finished reading it.  Based on the concept of Captology, and this has nothing to do with the “science” of salary caps in professional sports, its an illuminating read on the influence the connected world now has in our daily lives.

Dead Malls

Dead mall

Dixie Square Mall is a prime example of a dead mall

Came across a LinkedIn post this morning to this New York Times article, The Economics (and Nostalgia) of Dead Malls and thought it merited the first post of 2015.  This evidence of the challenges facing shopping malls and brick & mortar retail are attributed to three factors:

  1.  Growth of income inequality dating back to the 1970s
  2.  Excess of commercial retail space due to over development
  3.  Growth of eCommerce in the US

Clearly there are some major challenges that have been developing for quite some time and while the article underestimates the impact of eCommerce saying its only accounting for < 10% of sales, the actual revenue should exceed $300B for 2014 which is significant.  Throw in the decline of Sears which often anchored many malls and it’s not surprising that of the US’ roughly 1200 malls, only 80%, approximately 960, are considered healthy which is defined as reporting vacancy rates <= 10%.

And am certain the retail store closings in 2014 and closings forecast for 2015 are contributing to this issue.  Its gotten to the point there is now a website called DeadMalls.com dedicated to tracking shopping mall closings and it has 400+ listings.  With all of these retailers shuttering stores, one question that emerges is how does this excess retail real estate get re-purposed?

One shining example is The Legaspi Company which rebuilds failing malls into Hispanic cultural centers.  Here are some other examples and have to assume Real Estate Investment Trusts (REITs) like Kimco Realty are also working on this, but don’t have any specific examples.  And the good folks at DeadMalls.com are also willing to help out.  That being said, this is a major issue and one that demands attention sooner rather than later as shopping malls and brick & mortar retail endure a challenging transition to eCommerce, mCommerce and omni channel retailing.

1/5/15 update – came across this article on the impact eCommerce is having on shopping malls this morning so thought I would include it.  While I think the 30%+ number for 2014 is way high, sorry St. Louis Fed, this article does reinforce that online shopping is having a significant impact on brick & mortar retail.

Holiday 2014 in Retrospect

online shopping eCommerce

2014 Holiday Shopping Season

As the 2014 holiday shopping season draws to a close, worth doing a quick review to see where things landed.  Back in early October the National Retail Federation (NRF) announced its forecast for 2014 holiday  shopping season at a robust 4.1% increase excluding autos, gas and restaurant sales that was almost 33% greater than 2013’s 3.1% gain.  Personally I couldn’t see such a significant upside, especially with the 10 year average gain at ~2.9%, so my forecast came in at 3.5% – 3.7% which still would represent a gain of 13% to 19%.  Now comes the challenging part, determining what really happened.

The NRF has yet to release a statement detailing December shopping results so we’re looking for other sources until they do.  In the last few days I have come across a couple of articles, one optimistic and one not so, so here goes.  On the more pessimistic front, this article quotes Customer Growth Partners as saying holiday sales needed some help post Christmas to reach its 3.4% forecast.  The one upside in this estimate is that online shopping is surging with double digit gains.

Now on a more optimistic note, MasterCard Advisors SpendingPulse is saying retail sales rose a whopping 5.5% this holiday season which represents a 75%+ gain from 2013.  However, their numbers point to casual dining and lodging as the primary gain drivers:

Casual dining and lodging were among the strongest categories, posting double-digit and nearly double-digit year-on-year sales growth, respectively, from “Black Friday,” the day after Thanksgiving, through Dec. 24.

If we remove those along with autos and gas like the NRF does, then this estimate is probably more in line with the NRF’s 4.1%.  That being said, there’s no exact way to determine this (yet).  It seems like the growth still has a pretty big range between these two end points so we’ll just have to wait and see what additional news emerges.  Am expecting the NRF will have an announcement at the Big Show, so stay tuned as updates will be coming.

The one thing we can say with some certainty is that online shopping was the growth leader, again, this holiday season.  And it appears retailers and the shipping companies managed shipping expectations well enough such that there weren’t any major issues like last year.  Until more details emerge, not much more to offer.

Best wishes to everyone for a prosperous 2015.

Retail Leadership vs. Management

Leadership is an art

Leadership vs. Management

Earlier this week I read Paula Rosenblum’s article, “Why Is It So Hard To Find A Good Retail CEO?” and considered the article so thought-provoking that it was worth doing a blog post on.  I am inclined to agree with her premise as the majority of the news coming from the retail sector in the last 1+ years hasn’t been overly positive with revenue and profit numbers down, data security breaches, etc.

Back in late August I did a post on the The World’s Most Innovative Companies and of the 100, 17 were retailers, only 6 in the US and 3 of those are food and beverage retailers.  More recently, late October, Hahvad Business Review released its list of The Best-Performing CEOs in the World.  While Amazon’s Jeff Bezos topped the list, there were only 14 retail CEOs in total, excluding David Simon of Simon Property Group who was ranked 5th (not a retailer per se, but heavily influences retail) and 10 of the 14 CEOs run US-based retailers.  While not off the charts, also not a bad showing.

Based on these studies, it would appear US retailers are pretty well represented amongst the best-performing companies in the world and drop just a notch amongst the most innovative.  That being said, remove Amazon from each list, #6 and #1 respectively, and the US’ standing is lowered.  Remove food and beverage retailers like Chipotle, Keurig Green Mountain, Starbucks and Whole Foods Market along with Netflix and retail’s presence drops considerably.

Given this, at least from my perspective it seems the challenge focuses more around the depth of the bench here in the US and what I would refer to as the contrast between leadership vs. management.  Management is the norm in American business, it can be taught much more easily, whereas leadership is much more the exception to the rule.  While a handful of people become great leaders, far more can become good to very good managers.

Back to Paula’s article, I am going to take the liberty of suggesting that she’s looking for CEOs who not only are top managers, but are also leaders and this narrows the pool considerably.  And to quote her, “It’s not an impossible task, but it’s a really challenging one.  It will take as much creativity to find the right candidates as it will take for the new executives to improve on their companies’ sagging fortunes.  A good CEO is seriously hard to find.”  Agreed.

And for more details on one who is viewed as both a great leader and manager, here’s an interview with Jeff Bezos that’s worth taking the time to read/listen to.