Distribution February 2019
Retail Sales Delayed
The report on retail sales for December and the full year was delayed by the government shutdown. Retail sales edged up 0.2% in November after jumping 0.8% in October. Sales were up 5.3% year to date. Core retail sales, which exclude autos, gasoline, building materials and food sales, rose 0.9% in November after rising an upwardly revised 0.7% in October. However, non-store sales, which are primarily internet and catalog sales, rose 2.3% after rising 0.8% in October and were up 12.1% year over year. Building materials and garden supply stores fell 0.3% but were up 3.5% annually. Many economists are unsure about how the trade wars, plunging stock market and new tariffs will impact retail sales going forward.
Buy online, pickup in-store spending increased 47% from November 1 to December 19 in 2018 compared to the same time period in 2017, according to data from Adobe Analytics, making it the biggest holiday on record for online pickups. Analysts say the concept appeals to shoppers who want to grab their stuff and go without waiting in line or interacting with employees on the floor. Picking up an order can also be much faster than waiting for home delivery. Allowing customers to pick up orders in stores requires increased security, tight inventory control, procedures that prevent fraud and additional staffing. Walmart reportedly has 25,000 trained personal shoppers to select produce and meat at stores to fulfill online orders.
It was the biggest holiday season ever for online shopping, according to Adobe Digital Insights. American consumers spent $126 billion for online retail purchases from November 1 through December 31. That’s a daily average of $2 billion, a new record. There were 26 days that saw at least $2 billion in online retail spending, compared with 15 days in 2017. Amazon dominated retail ecommerce, with $252 billion in sales, or 48% of the US market, followed by eBay, with $37.8 billion, 7.2% of market. Walmart’s $20.9 billion in sales accounted for 4%. As expected, the slowest day for online purchases was Christmas Eve, with just $880 million in sales.
CEO Marvin Ellison plans to hire 65,000 seasonal and permanent employees this year, including the first 500 of a planned 2,000 IT employees. Lowes plans to cut some jobs as they eliminate services such as project specialists for interior home jobs. The hiring includes 50,000 seasonal jobs for spring, the busiest time for Lowe’s and other home improvement retailers. Lowe’s will also hire 10,000 people for permanent jobs in their 2,240 stores to create a merchandising service team that will manage store inventory and carry out resets of merchandise in stores. Another 6,000 full-time assistant store managers and department supervisors will be added. Ellison says they are investing in key leadership positions to enhance customer service while also creating jobs that will improve the availability of their most popular products, transform the technology infrastructure and provide more access for customers to the home improvement expertise of store associates.
Walmart ended their cashier-less stores test in April of last year. CTO Jeremy King told attendees at the National Retail Federation’s annual Big Show conference in mid-January that they decided to end the program shortly after expanding the test to 125 stores because it was error-prone and proved difficult to scale. It was difficult to police how people were scanning their products, and things like multiple quantities of a product presented problems. King said that computer vision and other leading technologies on the horizon may solve those problems by using cameras and sensors to “see” and understand like a human. Walmart’s tech division is currently looking for a “Principal Data Scientist/Computer Vision” engineer according to recent job posts.
Walmart plans to add 2,000 tech jobs this year to help expand their online business and better compete with Amazon, according to CTO Jeremy King. They plan to hire data scientists, software engineers, designers and other experts to work in nine offices in the US and abroad. The additional jobs will expand Walmart’s technology group by more than 25%. King currently oversees about 7,500 employees in the tech division, which added 1,700 people last year. The tech team will support Walmart’s in-store tech efforts, including robots that clean floors and scan shelves. New technologies include a store map that allows staff to pick online orders faster by using an optimal route and enabling curbside grocery pickup, currently available in about 2,100 stores.
Sears’ CEO Eddie Lampert won a bankruptcy auction in mid-January. Sears advisers accepted Lampert's bid, worth more than $5.2 billion, after two days of tense negotiations. Bankruptcy court still has to approve the deal. Meanwhile, a group of creditors is seeking approval to sue, accusing Lampert of years of mismanagement and deliberately dismantling Sears for his own gain. If accepted, the deal will keep about 400 Sears stores open and save about 45,000 jobs. Sears filed for voluntary Chapter 11 in mid-October.
Ace Hardware Corporation was named one of the Best and Brightest Companies to Work for in the Nation by the National Association of Business Resources. The Best and Brightest Program recognized 512 national winning organizations from across the country out of 2,400 nominations. Ace Hardware was named one of the top 100 highest-scoring companies in the country. Ace Hardware was also recognized as one of Chicago’s Best and Brightest Companies to Work for in 2018 by the National Association of Business Resources. For the second consecutive year, Ace Hardware also ranked among the top 10 employers for the Chicagoland area in The Chicago Tribune’s 2018 Top Workplace list.
True Value is moving forward with an investment of $100 million for supply chain advancements that will alleviate congestion in distribution centers and ensure that True Value provides the highest fill rates. Last March, True Value announced plans to sell 70% ownership of the organization to private investment firm ACON Investments. That decision transitioned True Value away from its long-time identity as a co-op. In April, more than 80% of True Value members approved the deal. President John Hartmann covered nearly 30,000 miles visiting stores across the country, including hosting 15 town hall meetings in the US over a four-week period in late March and early April. Hartmann said the appeal of their new structure is the ability for members to access first-class retail services without the usual buy-in, thus freeing up capital.
Q4 revenues rose 20% to $72.4 billion. North American sales rose 18% to $20.8 billion. Amazon Web Services (AWS) sales rose 45% to $7.4 billion and subscription services, which include Amazon Prime and Amazon Music, rose 25% to $3.9 billion. The largest percentage increase was in Amazon’s “Other” category, which is primarily advertising. Revenue rose 95% to $3.4 billion. Amazon’s forecast for the first quarter was slightly below expectations.
Amazon’s national TV media spending jumped 60% last year to $679.1 million and has nearly doubled since 2015, according to estimates from Kantar Media. Amazon was one of the top 15 national TV spenders last year, spending more than Toyota or McDonald’s.
Amazon has a program that quietly sends customers samples of free products Amazon thinks the customer might like. The program uses machine learning and predictive analytics to send samples of goods like Folgers coffee, Bear Naked granola and dog food. The program is known as Amazon Product Sampling, and is supported by the brands being sampled. It’s another part of Amazon’s growing advertising business, which is expected to more than quadruple by 2023.
Amazon has partnered with Chamberlain Group, a leading manufacturer of garage door openers, in order to allow Amazon Prime members to receive in-garage delivery of packages. Chamberlain Group is providing its myQ-connected garage door opening technology to Key by Amazon, a service that allows select Prime members to receive deliveries in their home, car and now garage. The service will be available in the second quarter to Prime members in 37 cities. In addition to the delivery service, any person with a myQ-connected garage door opener will be able to monitor and control their garage door from anywhere via Amazon’s Key app.
Amazon will sponsor a Las Vegas convention that will be open to the public on robotics, space and artificial intelligence. It will also cover future applications of emerging technologies. The conference, titled re:MARS (Machine Learning, Automation, Robotics and Space) will bring together experts and visionaries from diverse areas to share learning and spark ideas for future innovations. Attendees will also meet Amazon technology engineers and see the Blue Origin rocket capsule developed by the private space firm owned by Amazon CEO Jeff Bezos. Speakers will include researchers from MIT, the University of California, NASA’s Jet Propulsion Laboratory and the Harvard Berkman Center.
Amazon spent a record $14.2 million on lobbying the US government in 2018, according to regulatory fillings. Issues of interest to Amazon included privacy, immigration, new tariffs, healthcare plans, drug prices and food safety. Amazon spent $13 million lobbying in 2017.
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