Distribution April 2019
Retail Sales Fall 0.2%
Retail sales fell 0.2% in February after rising a sharply upwardly revised 0.7% in January. Economists had expected sales to rise 0.4%. Sales were up 2.7% from February 2018. Core retail sales, which exclude food services, car dealers, building-materials stores and gasoline, fell 0.2% in February after rising 1.1% in January. February sales were weaker than expected; analysts speculated that colder weather and more precipitation may have taken a bite out of sales. In addition, the IRS has been slow issuing refund checks due to the five-week government shutdown. Refund checks usually help drive sales in the early months of the year. In February, online and mail-order retail sales rose 0.9% after rising 2.6% in January. Sales at building material stores dropped 4.4% in February after rising 3.3% in January. The biggest drop since April 2012 was most likely due to extremely cold weather in much of the country.
Costco Tops Satisfaction Survey
Costco took over the top spot on the annual American Customer Satisfaction Index, scoring 83 to Amazon’s 82 and nudging Amazon out of the number one ranking they’ve enjoyed since 2010. Amazon scored 86 last year; this is the first time the survey has included Costco, which is a latecomer to ecommerce. The survey attributed Costco’s ascent to a same-day delivery partnership with Instacart and a new online grocery delivery service. Grocery is one large online category that has been tough for Amazon to penetrate.
Walmart US CEO Greg Foran told the UBS Global Consumer and Retail Conference that there was a time when Walmart was David and Sears and Kmart were Goliath; he said it was fun being David, because no one likes Goliath. But sometime in 2000 they realized they had become Goliath, and now there were a lot of David’s taking aim at them, from drug stores, traditional supermarkets and other discounters to Amazon. Foran told the audience Walmart was considering some key questions while formulating a strategy to deal with Amazon, including the benefits of having hundreds of millions of SKUS vs. the benefits of having a more curated assortment. They are also considering what opportunities there might be with data and what other marketplaces, such as health and wellness, they might want to participate in.
Walmart is planning to hire 900 new truck drivers this year, and is also offering a one-cent-per-mile pay increase to their 8,000 truck drivers. The increase will push their average annual salary to just under $90,000. Like many companies, Walmart is dealing with a shortage of truck drivers and rising transportation costs.
Walmart plans to bring their digital ad business in-house, and is winding down their relationship with Triad, the unit of WPP PLC that sells ad space on retail websites and other digital properties. WM also plans to bring their store and digital ad teams closer together, using Walmart’s vast amounts of shopper data to sell marketing opportunities to companies. Digital advertising is currently dominated by Alphabet’s Google and Facebook. Amazon has also made significant inroads. WM sees building a bigger advertising business for suppliers as way to ramp up advertising revenues and keep Amazon at bay. Walmart has gone after in-store marketing dollars, but in recent years has encouraged brands to lower prices to gain an advantage rather than paying to market products in the aisles. Walmart will need to build a team of media and marketing execs who can sell ad space and help suppliers create ads for their products and services.
Executive VP of Merchandising John Surane addressed attendees at the co-op’s Spring Convention in Orlando and told them that independent hardware stores need to be famous for four categories: BBQ& Backyard, Power Tools, Paint and Home Preservation.
According to CMO Kim Lefko, the sales environment is changing. The average order in a store is $27; the average order online is $79 and the average delivery order is $272. Ace has several initiatives designed to get the word out about Ace in a fast-changing media environment.
Lefko says 40% of people using delivery are Ace Rewards members who have not shopped with them in two years, so the numbers indicate a big opportunity.
Ace is piloting a digital marketing tool that will let dealers build their own key-word marketing campaigns and will be launching an Ace app by the end of the year. She said that purchases made inside an app have grown 70% in the past year, and people who purchase in an app spend three times more than online shoppers and five times more than in-store shoppers.
In Power Tools, Ace pointed to their strength of brands, including Craftsman, Milwaukee, DeWalt, Stihl, Toro and what they described as the fast-growing Ego battery-powered brand of tools.
Surane noted that what he referred to as home preservation, or home maintenance and repairs, is the core business and guts of a great hardware store. It is crucial that Ace is seen as the place to fix, repair and maintain the home.
True Value will invest more than $150 million to accelerate and modernize their supply chain. Modernization includes what they describe as an “unprecedented” new distribution facility in Hanover, Pennsylvania that is expected to open this fall. The 1.3 million square-foot center will be the first ground-up distribution center they’ve built in more than 30 years.
True Value and their vendors donated more than $400,000 worth of merchandise to the Dallas Area Habitat for Humanity after their semi-annual Reunion trade show that was held at the convention center in February. More than three dozen volunteers collected, sorted and packed 16 semi-truckloads of donated products that were showcased at the show. The donations came from more than 200 vendors. True Value has been a staunch supporter of Habitat for Humanity for several decades, and in the past three years has donated more than $2.6 million.
2018 annual sales rose 8% to $11.2 billion. Sales in the US rose 8%. On a daily basis, sales increased 7%, driven entirely by volume. Fourth quarter sales rose 5% to $2.8 billion and were up 6% ex-currency and 4% on a daily basis. Grainger expects sale to rise 4% to 8.5% this year.
Amazon will close more than 80 of their small kiosk pop-up stores where they’ve been letting customers try out and buy devices offline. But that does not mean Amazon is abandoning the physical store concept. They are expanding their relationship with Kohl’s and also with Whole Foods, and there may soon be Amazon devices available on store shelves. In addition, they plan to increase the number of Amazon bookstores and Amazon Four-Star stores.
Amazon has quietly altered their agreement with third-party sellers on Amazon marketplace, dropping a controversial clause in their contract that required sellers to price their products on Amazon lower than they were priced anywhere else. The practice was stopped in Europe and Germany after investigations were launched looking into discriminatory practices. The latest move is considered a response to requests from Congress for an investigation into Amazon’s anti-competitive practices, and threats from Senator Elizabeth Warren that she would consider legislation that broke up big tech companies because they have an unfair competitive advantage.
Amazon is offering a series of Selling Partner Summits. The series of six conferences is designed to help small and medium-sized businesses build their business in Amazon’s stores. The initial series sold out in six weeks. More than 1,800 businesses are signed up to attend the nationwide events between March and October. More than half of the units sold in Amazon’s stores are from small and medium-sized businesses.
Amazon has stopped selling their physical Dash Buttons, the gadgets that allowed users to automatically re-order household items. Dash Buttons were first introduced in 2015. Amazon said that a shift towards virtual versions of the buttons is behind the decision, but they will continue to support the buttons currently in use. Customers are also increasingly using programs like Alexa Shopping and Subscribe and Save, which automatically delivers frequently ordered items at regular intervals.
Amazon will hire 3,000 remote workers in the US in 18 states, including Texas, Washington, Arkansas, Mississippi, New Mexico and Arizona. According to the job listings cited by CNBC, Amazon will pay $15 per hour for the seasonal work- from-home customer service jobs.
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