Distribution October 2017
Retail Sales fall 0.2%
Retail sales fell 0.2% in August after rising 0.6% in July. It was the biggest decline in retail sales in six months. Hurricane Harvey weighed on sales in August, data for July was revised down to a 0.3% gain from the 0.6% first reported and the damage inflicted by Hurricane Irma has not yet been factored in. Core retail sales, which exclude auto sales, gas and building materials, and factor into GDP, fell 0.2% in August after rising 0.5% in July. Auto sales took a big hit in August, falling 1.6% after being flat in July. The big decline trimmed 0.3% off total retail sales. Sales at gas stations jumped 2.5%, due both to stocking up in areas affected by the hurricanes and a surge in gasoline prices due to constricted supplies after the storms. Nonstore retail sales, which include internet and catalog sales, dropped 1.1% in August after jumping in July but were up 8% from August 2016. Amazon’s Prime Day sales factored into the increase in July. Building materials and garden equipment sales fell 0.5% in August after rising 1.2% in July but were up 8.2% from August 2016. Sales in this category will probably jump in September due to extensive preparations for Hurricane Irma in Florida. Retail sales account for one-third of all consumer spending, with services making up the other two-thirds.
The top ten retailers on this year’s list of the nation’s top 100 (based on retail sales) from the National Retail Federation include Walmart (1), The Home Depot (4), Amazon (8) and Lowe’s (10).
Retailers Prepared for Hurricanes
THD and Lowe’s were both busy before Hurricanes Harvey and Irma. THD shipped more than 100 truckloads of plywood into South Florida every day before Hurricane Irma struck. THD has two bulk distribution centers in the state, one on the east coast in Pompano Beach and one on the west coast in Tampa. In addition to factoring in how much they need to get into the area, they factor in the safety of their associates and drivers and make sure they can get out. Before Hurricane Harvey hit Texas, THD activated their disaster response plan, asking managers to freeze prices in stores around the region and move storm related merchandise to the front of the store. Lowe’s had sent 400 truckloads of hurricane prep materials by September 6, including flashlights, batteries and weather radios.
Holiday Hiring Jumps
Major retailers are putting on more temporary help for the coming holiday season as they work at improving customer service on their sales floors and better handling the rapidly growing use of stores to fulfill online orders. Some retail analysts noted that the push to compete with Amazon and other online retailers may have caused some retailers to pay less attention to their stores. Jobs site Indeed.com reported a 34% increase in seasonal job postings compared to last year from retailers such as Amazon, Target, Best Buy and Macy’s. ChargeItSpot, which provides cell phone charging stations at retailers such as Nordstrom, Neiman Marcus and Under Armour, found in a survey that 63% of consumers thought store associates were “extremely important” when they shop and not being able to find help when you wanted it was a huge problem. Speeding up check out and minimizing the time spent waiting in line in the store to pick up online orders was also very important to respondents.
Target Raises the Bar for Minimum Wage
Target will increase the minimum hourly wage paid by a dollar to $11 before the busy holiday season, and vowed to raise it to $15 an hour, the so-called “living wage” labor advocates across the U.S. are campaigning for, by 2020. The movement, dubbed the “Fight for Fifteen,” has been gaining traction and attention across the country. Target’s decision comes less than three months after the Minneapolis City Council approved a measure requiring large companies to pay workers at least $15 an hour by 2022. Walmart, the nation’s largest retailer and private sector employer, last raised their minimum wage for store employees to $10 in 2016.
The Home Depot
THD will join Google Express this fall, adding the ability for THD’s customers to shop through the voice assistant on Google Home or the Google Express website or app.
Michael West joined Lowe’s as senior vice president of supply chain field operations on September 25. He was most recently the head of distribution, transportation and fulfillment for all Neiman Marcus brands. At Lowe’s, West will lead operations for the company’s regional and flatbed distribution centers, millwork facilities and bulk distribution centers. His professional experience also includes 12 years at Target where his roles included vice president of global logistics. He’ll report to Chief Supply Chain Officer Brent Kirby.
Lowe’s is rolling out two new iPhone apps, Measured by Lowe’s and Envisioned by The Mine. Both apps are part of Lowe’s efforts to create augmented, virtual and mixed-reality platforms. Both will be available for iPhone users with the 6S or newer models. Measured uses the iPhone’s camera to allow shoppers to instantly measure a range of items and save the measurements. Envisioned by The Mine will launch in early October. It will let consumers use scale images of furnishings available on The Mine’s online product catalog to envision them in their home or commercial space. Lowe’s owns The Mine, which is an online-only retailer of luxury home furnishings. Gihad Jawhar, Lowe’s vice president of digital development, said that they intend to harness technology to solve everyday problems.
Walmart plans to replace their aging headquarters campus in Bentonville, Arkansas with a brand new home office on 350 acres a few blocks away. Walmart made the announcement a week after Amazon announced, with great fanfare, that they plan to build a second headquarters in whichever city offers them the best perks. Walmart says that the new campus will house up to 17,000 employees and be “more suited to a digitally native workforce.” Construction will take place over the next five to seven years. A company spokesperson said they never considered moving out of Bentonville.
Walmart is restructuring their U.S. business in order to continue to improve the efficiency of operations. Walmart is trimming the number of regions from 44 to 36 and the number of divisions from six to four. A source said the reorganization is expected to be completed in October. Walmart realigned their ecommerce and technology leadership teams in January and laid off about 1,000 workers across multiple divisions before the fiscal year ended January 31. They streamlined buying operations in February, enabling one buyer from the store buying team to purchase products for both in-store and online. They restructured their food and merchandising leadership teams in July.
Imagine doing your grocery shopping online and coming home to discover that your groceries have been delivered and all your refrigerated and frozen items have been safely put away. Walmart is partnering with August Home, a provider of smart locks and smart home accessories, to test an online grocery shopping and delivery service. A handful of August Home customers in Silicon Valley have opted in to participate in the test. The homeowner will be in control of the entire experience. They’ll be notified that the delivery is in progress and be able to watch the delivery in real time on their smartphone. A driver delivers the order; if no one answers, the driver is given a one-time passcode to the smart lock so they can leave the items wherever the customer would like, even in the frig.
Sears is considering expanding their partnership with Amazon. They partnered with Amazon over the summer to sell Alexa-enabled Kenmore air conditioning units. Now they will use Southern California as the first market to test the expansion of the line to other large appliances, including washers, dryers and refrigerators. They plan a nationwide expansion in early 2018.
Menards stores held a three-day Local Contractor Connection event in mid-September at several stores in Michigan. Local contractors were available to consult with customers on projects.
True Value’s Fall Reunion took place in Chicago during the last week of September. True Value recently added 15 new stores in hurricane-impacted Texas, Florida and Puerto Rico. Chairman Brent Burger told attendees how the co-op distributed 20,000 5-gallon gas cans and 30,000 cases of bottled water. More than 3,000 generators moved out of the company’s Corsicana and Atlanta DCs, and the transportation team made more than 300 emergency deliveries.
Senior VP of marketing David Elliott described a big change in the marketing arena and a shift to a more digital and more local approach. Elliott said that after reviewing customer profiles, the co-op intends to broaden their marketing efforts to target not only millennials, but all generations, an announcement that drew lots of applause from the audience of dealers. True Value is also ending its National Promo Fee, about 1.4% of each retailer’s wholesale purchases that supported national advertising. Elliot says their 2018 marketing plan, “Tools for Transformation” will be locally focused and digitally driven, and will include broadsheets, paid search, social media, email, online advertising, point-of-purchase displays, direct mail and mobile push. Elliott is a New Zealander who worked with True Value CEO John Hartmann at Kiwi hardware co-op Mitre 10.
Amazon is scouting North American cities looking for the ideal spot for a second company headquarters, where it plans to hire as many as 50,000 full-time workers. Amazon plans to invest $5 billion in construction and operation of the location, which it is calling Amazon HQ2. Amazon CEO Jeff Bezos says they expect it to be fully equal to their Seattle headquarters. Amazon is seeking proposals from local, state and provincial government leaders, and says they are focused on metropolitan areas with more than 1 million people. They are also looking for areas that can attract and retain technical workers and offer a stable and business-friendly environment. They’re not necessarily looking for an urban or downtown location. They’ve stated they will go with the city that offers them the best perks and incentives. Among the reported contenders are Atlanta, Detroit, Dallas, Phoenix, Chicago, Boston, Philadelphia, Washington, New Jersey, Denver, Miami and Cincinnati as well Ottawa and Toronto in Canada. City applications are due October 19.
Amazon’s two-day shipping promise met its match during Hurricane Irma. Many Floridians who ordered hurricane supplies through Amazon’s Prime program received cancellation notices from Amazon, with no word on when delivery would be possible. Analysts noted one lesson was that there was still definitely a need for local stores.
Amazon Web Services (AWS) recently released Macie, its machine-learning security platform. Macie will deploy machine learning to assist in the prevention of data loss. The software will discover, classify and protect sensitive data within AWS. Amazon Macie automates labor-intensive processes that used to require customers to develop and frequently update data classifications, which were limited to accounting for known risks.
Amazon Web Services (AWS) has introduced per-second billing for some of its services, which AWS says will make them more cost-effective than ever. Amazon says there will be a minimum charge of one minute, with prices listed on a one-hour basis but charged down to the second.
Amazon Business Now currently has more than one million business customers. Business Now was launched in April of 2015, and offers business-only pricing on millions of products and access to more than 85,000 business sellers. Amazon Business serves businesses of all sizes and in many different industries. The Director of IT Procurement for Siemens Corporation said that depending on the type of business, their teams might need tools delivered in hours, large amounts of office supplies or big pieces of machinery for factories. Amazon Business allows them to automate a lot of orders and get delivery in a very short amount of time. Membership is free, but businesses must be approved. Among the benefits are free two-day shipping on orders over $49. Multiple users can use the same account and purchase order numbers and integration with popular enterprise purchasing systems is also offered. There are also systems that streamline reordering and offer special business pricing, bulk quantity discounts and other perks.
Kohl’s is partnering with Amazon to create Amazon Smart Home Experiences in 10 Kohl’s stores in the Los Angeles and Chicago areas beginning in October. The smart home spaces will allow customers to buy Amazon devices, accessories and smart home devices and services directly from Amazon. The Smart Home Experience centers will be about 1,000 square feet and offer Amazon Echo, Echo Dot, Amazon Fire TV, Fire tablets and more. The staff managing the space will be Amazon associates. Customers will be able to schedule an Amazon expert to come to their home, evaluate their needs and install smart home products for a fee.
Kohl’s will start accepting Amazon returns at 82 stores in Los Angeles and Chicago beginning in October. There will also be designated parking spots near store entrances for people doing an Amazon return.
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