Thanks Amanda. You tried to tackle a hard question regarding the cost benefit of doing production overseas, versus the job creation benefit of housing those operations in the US. While you outlined the problems, I’d be curious to hear your recommendation on Fords elected location. You mentioned they should place more weight on the long-term strategy instead of short-term changes since these are capital intense projects that will weigh heavily on their operational decisions for years to come. Does this mean that you’re suggesting they should go overseas? What type of tax benefit would they require in order to reconsider locating the plant here, and are they working with the current administration to accomplish this?
Unfortunately I believe Ford’s decision to offshore has a bigger implication on the American perception of health than other companies – simply due to the brand equity it carries in the US. Yet basing decisions off of the current administration is risky given the lack of enforcement on tax promises thus far. I would recommend that Ford operate under the assumption that the current situation will not become less risky/more appealing in the short-term.
Thanks Charlie – I thought this was an interesting take on the impacts of Brexit. Frankly, I had not considered the implications Brexit has on the importation of commodity goods such as food, but after reading this I’m anxious to see the outcome.
You mentioned a bit about residents purchasing habits changing, but I’m curious if Tesco will be able to accommodate them. In the long-term, I wonder if it would be viewed as strategically sound for Tesco to start either acquiring or developing close relationships with its local suppliers, mom and pop grocery stores, and small restaurants. With increased importation costs and the rise of the internet, what is stopping locals from simply purchasing Unilever and P&G products through Amazon altogether and skipping Tesco? Amazon’s economies of scale and minimal taxes are the perfect loophole for UK consumers, and I view this as an opportunity prime for Amazon’s dominance.
If Tesco is no longer able to compete on price, they are going to have to shift their strategy to compete on something fundamentally different. For a grocery store, I would say that should be freshness of goods and variety – which they’d be able to obtain through local partnerships. In order to establish a strategy like this, they would need to dramatically increase their regulatory and control teams, sourcing, due diligence and partner relations. Ultimately this change could be viewed as a positive change for the local communities if the consumers are willing to support their decision.
I struggle with Reformation’s positioning, because I can’t get past the simple question: Can you call yourself a sustainable company when you are intentionally creating fast-fashion products?
While I think the transparency elements they’re introducing to their UX experience are helpful to make sustainability top of mind for the consumer, I’d argue they are not undertaking anything revolutionary in their supply chain to warrant the positioning of a “sustainable business”. In fact, I would argue that their entire angle is simply to try and offset their company positioning of consumable goods. These are not clothing items that are meant to be kept for a life-time. They are a slightly better version of Zara, but is that enough of a pedestal to stand on?
I struggle to see any altruistim in their sustainability claims, and they seem to have self-selected those that also benefit the business from a profitability perspective. Using materials such as Viscose are noticeably cheaper than the material alternative of silk, and carrying little inventory in stores is a profitability play, not a sustainable one.
I agree with you that they should be taking the sustainability angle one step further and offering services that will actually push the industry as a whole to approach it differently. When that is accomplished through things such as a recycling program, than I can say confidently that they’ve played their role to help identify and alter the direction of other companies.
Thank you for talking about sustainability and fashion – its a topic thats been top of mind for me recently, and I’m glad that other consumers are thinking about encouraging companies to bring more transparency.
I want to address in particular one question you posed – a philosophical one: Is the luxury retail industry inherently incompatible with sustainability? While I agree that the consumption of anything is by nature wasteful, we should be addressing sustainability in consumer goods as the minimum viable amount required to still produce a product. My argument would be that the mere nature of luxury products being high involvement purchases that consumers keep for a long-time, is actually positively contributing to the growing concern.
In the era of fast-fashion players such as Zara and H&M, consumers are using wasting considerably higher amounts leading to unsustainable practices. Not only are the clothes meant to be worn only a few times (with some reports mentioning the clothing has a forced obsolescence after a single wash), but the entire consumption throughout the supply chain is also multiplied by each article of clothing.
Given LVMH’s size, I think their stance on sustainability is more important from a pure visibility standpoint – paving the way for other retailers to start thinking about incorporating this into their supply chain with ethical standards. However I don’t believe even with their number of product lines, that their business is one that could benefit the most from these changes in the industry.
Thanks Aaron, It’s hard to argue that Amazon has optimized or is in the process of optimizing every element of their supply chain. They have been the industry leaders for efficiency, transparency, and cost for shipping – beating out longstanding government incumbents and ultimately delivering real beneficial value for their customers.
You asked if based on Amazon’s current supply chain advantages, do large brick and mortar players that have made progress online like Wal-Mart, Macy’s, Costco, etc. pose a real threat to Amazon’s e-commerce dominance in the US? Coming from this background, I would argue that its not their supply chain that poses a treat, but their assortment and curation. While Amazon wins out in many categories, they are lagging in the traditional retail categories of Apparel and Accessories, which are increasingly falling to ecommerce players.
Yet there is no arguing that Amazon’s power is leaving few scrapes for the others. As we’ve seen with Kiva, the DC automation company they acquired that you mentioned in your essay, existing retailers may need to start thinking of Amazon as a friend – not foe. The Kiva acquisition left a major technological gap, as many retailers were using the technology in their DC’s when it occurred. Amazon decided to take the technology in-house in April 2015, renamed it Amazon Robotics, and “encouraged prospective users of Kiva technology to let Amazon Robotics and Amazon Services provide fulfillment within Amazon warehouses using Amazon robots.” This is one example thats indicative of their ability to manipulate and control the entire industry by way of acquisition and bargaining power. From that perspective, I think they’re unstoppable in the US.
Thanks Nate for the article on HBC, as you know I worked there in the omnichannel strategy and innovation team for the last two years, so I’d love to connect in further depth on your comments. 🙂 For now, I’ll touch on a few of the items you mentioned.
Continue to aggressively invest in distribution centers automation: While I agree that all retailers should be looking for opportunities to optimize their supply chains to reduce costs in the long-term through automation, HBC is already leading the charge in this area, and I would challenge that this is the largest opportunity they have in the coming years. With the installation of the technology that you mentioned in your article, HBC actually will own the largest high-speed technology fully automated pick and pack DC system in North America. Certainly they should stay abreast of additional supply chain efficiencies, but I actually believe a much bigger long-term opportunity exists in the inbound strategies – obtaining revenues. If our focus was solely on optimizing the back of house, we would loose sight of the retail business model.
We hear “omnichannel” thrown around a lot, but its am imperative strategy for retailers, because it makes the customers so much more valuable. On average, a customer spends 5-6X more with a company if they are an omnichannel customer versus single; this was in line with what we saw at HBC as well. Kiosks will only serve the customers that are already in the store. We need to get them there.
The real benefit of being a house of many brands is that we’re able to actually recognize these synergies in back-of-house operations. Certainly HBC should always be looking for additional technology enhancements, but the real value is actually being created when we bring all these banners together: now we can operate on one website deploying features across all banners in a single update, reduce production costs by only shooting and setting up items once given the amount of product overlap, centralize our DCs, create more buying power with our vendors, and learn across all customer behaviors to continuously optimize the online experience.
In as bleak of an environment that we see in retail today, I believe the only way HBC will survive is to continue growing through acquisition. By creating a retail conglomerate these recognized synergies will only continue to multiply, and free up capital to actually invest in new technologies.