How Amazon, Walmart and Home Depot are tackling some of the stickiest issues in retail today.
Editor’s note: The following is a guest post from Christopher Walton, an independent consultant and former vice president, Target Store of the Future.
This past week, I did something I have never done before — I attended Home Delivery World 2018 in Atlanta, an expo and conference about retail logistics. I made the conscious decision to get outside the echo chamber of the normal trade show circuit, like NRF and Shoptalk, and frankly, I was not sure what to expect.
What I found surprised me. The conference — in an unadulterated and sexless (in a good way), much like my high school career — was like a game of Dungeons and Dragons squirreled away in a basement. You could tell upon arrival that this was where the “smart kids” went to congregate. These were the people closeted in the dark recesses of companies, writing algorithms to solve the complex logistical problems that will separate the haves from the have nots as the future of retail unfolds.
Case in point: One presenter even went so far as to mic drop “NASA” in his speech. Of course, he was from Amazon.
Here are my key lessons learned from Home Delivery World 2018:
- Leadership requires discipline
The most surprising revelation of the conference came from the aforementioned “NASA” name dropper, Amazon Vice President of Global Policy and Communications, Paul Misener. Paul went into specific detail on how Amazon undertakes innovation. While I had heard the buzzwords before – pizza teams, press releases, etc. – this time, they took on new meaning.
Hearing them described in framework-style detail from the very articulate Paul, gave me a new appreciation of what makes Amazon so damn successful: it’s discipline.
Paul gave six recommendations that led me to this conclusion.
- Leverage pizza teams (do not put more than eight to 12 people on a project — the amount of people that can be fed by two extra-large pizzas)
- Work backwards via press releases and FAQ preparation (Amazon writes the press release first, then creates a product to meet this discription)
- Write six-page business narratives and conduct regimented one-hour business reviews
- Be customer obsessed, not competitor obsessed
- Be willing to fail and to reverse your decisions fast
- Deliver results by actually doing what you said and decided, so you can ultimately send out that press release!
The above recommendations are pure brilliance. While the list seems simple to replicate, it takes an ungodly amount of discipline to do well. The point that cemented my newfound understanding was bullet point No. 3 – write six-page business narratives and conduct regimented one-hour reviews.
Instead of using power points to present ideas, Amazon demands that its leaders write business narratives to make their cases. Then Amazon leadership reviews these narratives in a didactic one-hour meeting where roles are clearly outlined and understood by all.
In the first half hour of the meeting, everyone reads. Yes, reads. That’s it. No talking. Just heads down to digest what each narrative contains. While reading, leaders are expected to make a list of questions to ask only in the allotted second half hour of the meeting. By the time the second half hour rolls around, everyone is engaged, thoroughly informed on the narrative and decisions are made on whether or not to move forward with an idea.
Contrast this with the far lazier and de rigueur approach of most American business — a PowerPoint presentation where one slide in, an uniformed leader derails the whole presentation by asking an ungodly amount of unnecessary and possibly even harsh questions.
Amazon’s approach sounds better and it is. Discipline is their secret sauce. The above list is hard to follow. Really f-ing hard.
- Sh*t is getting heavy
On a more amusing note, Americans are now buying heavier stuff online than ever before. Not only is e-commerce growing rapidly, but the products American consumers are buying are bigger too. Chalk it up, especially, to the growth of the home furnishings industry online.
Brian Bourke, vice president of marketing for SEKO Logistics, described how the increase in “cube” (i.e. the average box size of an item) is having a dramatic impact on the amount of goods that delivery providers can pack into their trucks. Where delivery companies used to be able to pack 18,000 pounds into a truck, the large cube size is now bringing the average truck weight down to about 12,000 pounds – which means the economic efficiency of truck shipping is changing drastically.
Ergo, truckers are getting squeezed, more trucks are needed and the cost of business is going up.
A looming rise in shipping costs is not being talked about much right now, but Matthew Boyle of Bloomberg News takes a great look at the issue in his article Walmart Relaxes Deadlines for Some Deliveries Amid Driver Crunch. Boyle’s article is a great read for more information on the potential issues at stake and how retailers, even the big guys like Walmart, plan to ameliorate them.
- We don’t talk about Home Depot enough
Home Depot runs one hell of a business with little fanfare. While much of the news each week is about Amazon, Walmart, and others, Home Depot keeps kicking ass and taking names. My favorite statistic at the show is this: Home Depot runs out 1,000 flatbed trucks per day for deliveries.
Put that in your everything store pipe and smoke it, Amazon.
Home Depot has a foothold in some difficult businesses to replicate in the digital sphere. Shipping drywall and lumber is no easy feat. Home Depot’s stated plan to become the fastest, most efficient deliverer of home improvement products makes a ton of sense and leaves me wondering where else they could still scale their capabilities, especially since Home Depot also this week announced plans to add 1,000 new tech jobs.
While Home Depot already acquired Home Decorators Collection back in 2006, a Wayfair acquisition could be insanely interesting. Adjacent real estate in strip malls will likely get cheaper by the minute in the coming years, and Home Depot already has strength in the new construction and remodel markets. Why not close the loop with home furnishings too?
Opening Wayfair by Home Depot stores right next door, in the same strip locations as Home Depot’s current stores, could make people’s live much easier, and it therefore seems like a great logical next step to consider. Such a partnership would make Home Depot the most accessible end-to-end home solutions store in the country.
- George is about to get his Jetson on all over grocery
As noted in my piece on Ocado last month at Shoptalk, the grocery business is going online in a big way. Jason Lepes, vice president and head of merchandising at FreshDirect drove the point home even further at this show with some telling statistics.
FreshDirect is an online grocer that prepares groceries and meals for direct delivery. The company has a strong position in the New York City market. I did not know much about them before the conference and I came away impressed.
Jason framed grocery delivery an entirely new way – he made it about freshness. “Supermarkets cater to people, not products,” he said. And the mere fact that produce goes into grocery stores at all means that “precious days of freshness end up getting lost.” Intuitively, this argument makes sense.
Now contrast that with his additional points that “shouldn’t we trust experts to pick produce better than we can pick produce ourselves?” and that “68% of American consumers don’t think about what they want to eat until the same day,” and one starts to believe that this direct grocery delivery thing is about to happen fast.
The argument, “Yeah, but I want to pick my own avocados” will start to lose steam. Just like I don’t want to perform my own hernia surgery either. I will leave that to the experts.
- The last-mile delivery space is crowded
Finally, last-mile delivery is hot. Nearly every booth at the show was laying some claim about being a last-mile solutions provider. Truth be told, it was difficult for the casual observer to differentiate one company from the next. All the company names sounded “techy,” like something out of the movie “Office Space.”
All of which tells me that the last-mile space is going to continue to thrive in the years ahead. Not only is the space essential to continuing to meet the needs of the omnichannel consumer, but no one has divvied up the financial pie yet.
In the next few years, expect last-mile companies to get better at branding and for true market leaders within the space to emerge. It is time for all of us to start boning up on our last-mile education.