Many brick and mortar stores are not taking full advantage of their physical locations to compete with e-tailers such as Amazon. Some chains such as Wal-mart and Bestbuy do provide ship to store for internet purchases. However, most other internet purchases are shipped from centralized warehouses. When shipping via UPS or FedEx, these parcels cross multiple zones and thus incur additional expenses. But what if the brick and mortar retailer utilized their existing locations to ship purchases to their internet customer? How would such a system operate?
Based on the premise retail locations carry the 20% of the products which account for 80% of their sales, the locale store will be able to fulfill 80% of the internet purchases. The other 20% will reside in a warehouse. Those purchases can be shipped to a local store utilizing the existing store merchandise replenishment system. In many cases the freight trucks having excess space available for the additional cargo.
Once the internet order arrives in the store, it can be injected into the UPS or FedEx system. At this point the retailer has assured the parcel will remain within one carrier shipping zone or cross at most one boundary. As most carriers compute their shipping charges based on the number of zones the parcel crosses, local shipping reduces the fee by reducing the number of carrier zones. In many cases the increased cost of the retailer shipping product to stores for local fulfillment is more than offset by the savings realized by reducing the carriers' zones. In some cases, that can be a 25% savings!
The actual details of how such a system would work will differ for each retailer based on how their store replenishment systems function. However, the basis premise is the same. Move the product as close to the consumer as possible utilizing existing company cargo systems before relinquishing control to a common carrier. Parcels can either be packaged and addressed at a centralized location or at the store. The key is minimizing the distance from the retailer to the consumer before the common carrier obtains the package. The shorter that distance, the lower the shipping fees paid to FedEx and UPS. Many retailers should experience savings of 10% or more!
Monday, July 15, 2013
Saturday, June 29, 2013
Decision Making by Howard Kier, MBA, ABI, CPP
Every so often I read a book which changes the way I look at things. "Blink" by Malcolm Gladwell is one such book. Through anecdotes the reader is brought through a series of decisions and shown how decisions are made. The basic premise of the book is there are two levels of decision processing human use. There is a conscious and unconscious decision. More attention is placed on the unconscious decision. Some people will commonly call the unconscious decision ESP, Luck or Intuition. In some cases the person using their intuition is picking up on some unnoticed fact to make a judgement or decision.
More importantly, the book also shows how wrong choices can be made by not fully understanding what is being tested or how people make a decision. One of the most famous examples discussed in the book is Classic Coke. Other examples of poor testing leading to bad decisions are also shown. These include new product launches, how a war game functions and how the recording industry decides what we hear on the radio.
Another chapter in the book discusses how a little bit of information can be used to predict various outcomes. Typically when a patient enters an ER with heart symptoms they are subjected to a complete series of tests. However, it turns out there are a very small select number of tests which can predict the need to admit the patient or refer them for later out patient follow up. In another example the book discusses how researchers determined how likely a person will be sued based on a simple observation.
How does all this relate to Management Consulting? The first is to make sure the proper questions are being studied. Just as Coke relied upon the wrong test, it is easy for a consultant to look at the wrong data to make a decision. Next, there are times when there is too much information. All the excess information has clouded the real issues and more importantly caused the client to subsidize a useless study. Finally, some questions can be answered with very little information. There is no need to complete additional investigation.
More importantly, the book also shows how wrong choices can be made by not fully understanding what is being tested or how people make a decision. One of the most famous examples discussed in the book is Classic Coke. Other examples of poor testing leading to bad decisions are also shown. These include new product launches, how a war game functions and how the recording industry decides what we hear on the radio.
Another chapter in the book discusses how a little bit of information can be used to predict various outcomes. Typically when a patient enters an ER with heart symptoms they are subjected to a complete series of tests. However, it turns out there are a very small select number of tests which can predict the need to admit the patient or refer them for later out patient follow up. In another example the book discusses how researchers determined how likely a person will be sued based on a simple observation.
How does all this relate to Management Consulting? The first is to make sure the proper questions are being studied. Just as Coke relied upon the wrong test, it is easy for a consultant to look at the wrong data to make a decision. Next, there are times when there is too much information. All the excess information has clouded the real issues and more importantly caused the client to subsidize a useless study. Finally, some questions can be answered with very little information. There is no need to complete additional investigation.
Saturday, May 25, 2013
Anticipated Effects of Interstate Sales Tax by Howard Kier, MBA, ABI, CPP
Sooner or later, states will be able to collect sales tax on interstate internet transactions. The time is ripe for such a law to pass. Major retailers are in trouble and states need more income. Income that is lost to internet sales. Inevitably, the law will pass. What will happen afterwards?
Brick and mortar stores will have gained a level playing field. But is it truly a level playing field? Internet retailers had the advantage of price and selection. Their storefront was the web. While not subject to real estate costs for a physical location, the Internet store does have to have a warehouse and distribution system to get product to the customer. Customers do not have the ability to hold the merchandise in their hands. Finally, except in a few special cases, Internet retailers are open for business 24/7 all year round. Something few brick and mortar retailers are capable of matching.
Meanwhile, the physical store which was once the show room for the internet (ie. Best Buy), will be able to compete on price. Brick and mortar stores will have an advantage based on customer service. However, the customer service will not be based on what we normally thought of as customer service. In the new environment, customer service will be a knowledgeable sales person capable of diagnosing the customers' needs and determining the best solution for the customer. They will also be available to educate the customer on their purchase and be there when a problem occurs.
These days consumers are smarter than ever. They have more information available to assist them with their purchases than ever before. With the pricing playing field leveled, the consumer will utilize other factors to determine where to make their purchases. The most obvious, value. Consumers will look for the best value. Value will include more than just the merchandise itself. It will include ease of purchase, ability to return, knowledge of the sales people and much more.
The brick and mortar stores have been given a level playing field. It is up to them to provide value and customer service to the consumer if they expect to survive in the competitive retail market place.
Brick and mortar stores will have gained a level playing field. But is it truly a level playing field? Internet retailers had the advantage of price and selection. Their storefront was the web. While not subject to real estate costs for a physical location, the Internet store does have to have a warehouse and distribution system to get product to the customer. Customers do not have the ability to hold the merchandise in their hands. Finally, except in a few special cases, Internet retailers are open for business 24/7 all year round. Something few brick and mortar retailers are capable of matching.
Meanwhile, the physical store which was once the show room for the internet (ie. Best Buy), will be able to compete on price. Brick and mortar stores will have an advantage based on customer service. However, the customer service will not be based on what we normally thought of as customer service. In the new environment, customer service will be a knowledgeable sales person capable of diagnosing the customers' needs and determining the best solution for the customer. They will also be available to educate the customer on their purchase and be there when a problem occurs.
These days consumers are smarter than ever. They have more information available to assist them with their purchases than ever before. With the pricing playing field leveled, the consumer will utilize other factors to determine where to make their purchases. The most obvious, value. Consumers will look for the best value. Value will include more than just the merchandise itself. It will include ease of purchase, ability to return, knowledge of the sales people and much more.
The brick and mortar stores have been given a level playing field. It is up to them to provide value and customer service to the consumer if they expect to survive in the competitive retail market place.
Wednesday, May 22, 2013
Shifts in Photography Industry Over the Years by Howard Kier, MBA, ABI, CPP
I opened my
photography studio over 10 years ago. I
look back and see how much has changed since that fateful day. At the time, I
had recently completed my transition from film to digital. The future looked
rosy. I joined various photography groups and mingled with some of the greats
and not so great in our industry. We were all sharing ideas of how to embrace
this new paradigm called digital photography.
I learned you had to be a business person first and a photographer
second. Actual photography accounted for
less than 10% of my time.
When I started photography was a niche business. Cameras were expensive and it took real skill and knowledge to take good photos. In order to get good, a photographer had to shoot lots of film and make lots of mistakes. From the time we clicked the shutter button until we saw the image, it could be a couple of weeks unless we had our own darkrooms. In that case it might be a day or so later. In any case, the feedback loop was much longer. Today, we see our images instantly on the back of the camera. We can see if we did it correctly or not.
Another big change was the cost of taking photos. In fact, on many of my vacations, one of my biggest expenses was the film and processing. Sometimes, it was more than my airfare! For wedding photographers we figured a cost per click which was typically around $3/click. This included the film, processing and proofing of the image. Today, we no longer account for that cost. The cost has moved from a direct physical cost to an indirect labor cost as we process our digital images. Many photographers no longer consider their time as something to include in the cost per click. Sadly, I think this devaluation of our labor has contributed to the changes in our industry. After all, there is no money coming out of our pockets.
What many of us didn't realize was the learning curve to use film and the cost to process photos created an entry barrier to the industry. There was no such thing as a "Mom with Camera." She simply didn't have the time to devote to learning the craft and it was easier to leave it to the experts. Newer cameras with more features, allowed anybody to take good enough photos. The technology curve has put cameras on the market at a price many people can afford. Many times, the camera takes a good enough photo without the photographer needing to provide additional brains. Not only that but, photographer can check the image to see if they got what they wanted. No more trusting. Now you can verify. Poor photography became good enough.
As the economy declined, more displaced workers started looking at their cameras and saw an opportunity. There was no barrier to entry so they said, "What the heck!" Suddenly our industry was faced with a multitude of people with cameras. Everybody was a photographer. Any economist can tell you what is going to happen when the supply exceeds the demand. The price is going to drop. And drop it did.
First we saw more being included in packages. Film photographers rarely gave away their negatives. Digital photographers soon had no option but to include the files. Clients were expecting it. Eventually, prices dropped. Today, it is common to see $500 photographers and we even hear of photographer giving it way to build a portfolio. This is a price practically unthought of when I first started. At that time the $1000 was considered cheap. In the film days, you had to pay for your film, processing and proofing. Who knows where it will end?
Our revenue streams changed too. Photographers used to count on the couple, parents' albums and reprint orders. Today, we're lucky to get a couple's album. The parents and everybody else have their own cameras and no longer need the professional photographer to capture memories for them. While we lost our revenue streams, those people were suffering from a tight economy. Once again, causing the supply to far out weigh the demand.
While many continue to deny it, the photography industry has changed. It is no longer a niche specialty. Photography has become a commodity. Photographers are a dime a dozen offering pretty much the same thing. Sure you may claim your style differs from everybody else. However, from the customer's eyes, there is not much difference from one to another.
A while ago, I started my sabbatical. It has given me a chance to step away from the day to day details of photography to take a big picture look. The margins are no longer available in wedding photography. The commodity nature of wedding photography has made it very difficult to convince couples to spend $3000 for a photography package. They can easily get a $500 photographer who will meet their needs. Reprints? Forget it. People are running around weddings with their own cameras.
Recently in the news, we've seen CPI file for bankruptcy protection. In store, photo studios are suffering too. All across the industry, the news is the same. Here in Chicago, some of the big studios have closed locations. All of this points to an industry undergoing a major change. Where will it end? I don't know for sure. But I can tell you it has reached a point, where I can make more money in a standard career working fewer hours than by continuing to be a wedding photographer. If/when the economy recovers, perhaps things will get better. But wedding photography will never recover back to the level of profitability we saw in the film days. Photography has changed from a niche to a commodity.
When I started photography was a niche business. Cameras were expensive and it took real skill and knowledge to take good photos. In order to get good, a photographer had to shoot lots of film and make lots of mistakes. From the time we clicked the shutter button until we saw the image, it could be a couple of weeks unless we had our own darkrooms. In that case it might be a day or so later. In any case, the feedback loop was much longer. Today, we see our images instantly on the back of the camera. We can see if we did it correctly or not.
Another big change was the cost of taking photos. In fact, on many of my vacations, one of my biggest expenses was the film and processing. Sometimes, it was more than my airfare! For wedding photographers we figured a cost per click which was typically around $3/click. This included the film, processing and proofing of the image. Today, we no longer account for that cost. The cost has moved from a direct physical cost to an indirect labor cost as we process our digital images. Many photographers no longer consider their time as something to include in the cost per click. Sadly, I think this devaluation of our labor has contributed to the changes in our industry. After all, there is no money coming out of our pockets.
What many of us didn't realize was the learning curve to use film and the cost to process photos created an entry barrier to the industry. There was no such thing as a "Mom with Camera." She simply didn't have the time to devote to learning the craft and it was easier to leave it to the experts. Newer cameras with more features, allowed anybody to take good enough photos. The technology curve has put cameras on the market at a price many people can afford. Many times, the camera takes a good enough photo without the photographer needing to provide additional brains. Not only that but, photographer can check the image to see if they got what they wanted. No more trusting. Now you can verify. Poor photography became good enough.
As the economy declined, more displaced workers started looking at their cameras and saw an opportunity. There was no barrier to entry so they said, "What the heck!" Suddenly our industry was faced with a multitude of people with cameras. Everybody was a photographer. Any economist can tell you what is going to happen when the supply exceeds the demand. The price is going to drop. And drop it did.
First we saw more being included in packages. Film photographers rarely gave away their negatives. Digital photographers soon had no option but to include the files. Clients were expecting it. Eventually, prices dropped. Today, it is common to see $500 photographers and we even hear of photographer giving it way to build a portfolio. This is a price practically unthought of when I first started. At that time the $1000 was considered cheap. In the film days, you had to pay for your film, processing and proofing. Who knows where it will end?
Our revenue streams changed too. Photographers used to count on the couple, parents' albums and reprint orders. Today, we're lucky to get a couple's album. The parents and everybody else have their own cameras and no longer need the professional photographer to capture memories for them. While we lost our revenue streams, those people were suffering from a tight economy. Once again, causing the supply to far out weigh the demand.
While many continue to deny it, the photography industry has changed. It is no longer a niche specialty. Photography has become a commodity. Photographers are a dime a dozen offering pretty much the same thing. Sure you may claim your style differs from everybody else. However, from the customer's eyes, there is not much difference from one to another.
A while ago, I started my sabbatical. It has given me a chance to step away from the day to day details of photography to take a big picture look. The margins are no longer available in wedding photography. The commodity nature of wedding photography has made it very difficult to convince couples to spend $3000 for a photography package. They can easily get a $500 photographer who will meet their needs. Reprints? Forget it. People are running around weddings with their own cameras.
Recently in the news, we've seen CPI file for bankruptcy protection. In store, photo studios are suffering too. All across the industry, the news is the same. Here in Chicago, some of the big studios have closed locations. All of this points to an industry undergoing a major change. Where will it end? I don't know for sure. But I can tell you it has reached a point, where I can make more money in a standard career working fewer hours than by continuing to be a wedding photographer. If/when the economy recovers, perhaps things will get better. But wedding photography will never recover back to the level of profitability we saw in the film days. Photography has changed from a niche to a commodity.
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