Tag Archives: retail

Anti-Gifting and Reverse Logistics


Call it what you may, but ’tis the season following the gift-giving season, which means only one thing, it’s returns season. Did you receive a gorgeous pair of shoes in the wrong size? Return. Did you get yet another hideous tie or shirt in the wrong color? Return. Yet more lotion that makes you break out in an orange rash? Return? Video game in the wrong format or book that you already digested last year? Return. Toaster that doesn’t match your kitchen decor? Return.

And, the numbers of returns are quite staggering. According to Optoro — a research firm that helps major retailers process and resell returns — consumers return nearly $70 billion worth of purchases during the holiday season. That’s more than the entire GDP of countries like Luxembourg or Sri Lanka.

So, with returns being such a huge industry how does the process work? Importantly, a returned gift is highly unlikely to end up back on the original shelf from where it was purchased. Rather, the gift is often transported by an inverse supply-chain — known as reverse logistics — from the consumer back to the retailer, sometimes back to a wholesaler, and then back to a liquidator. Importantly, up to 40 percent of returns don’t even make it back to a liquidator since it’s sometimes more economical for the retailer to discard the item.

From Wired:

For most retailers, the weeks leading up to Christmas are a frenzied crescendo of activity. But for Michael Ringelsten, the excitement starts after the holidays.

Ringelsten runs Shorewood Liquidators, which collects all those post-holiday returns—from unwanted gadgets and exercise equipment to office furniture and popcorn machines—and finds them a new home. Wait, what? A new home? Yep. Rejected gifts and returned goods don’t go back on the shelves from which they came. They follow an entirely different logistical path, a weird mirror image of the supply chain that brings the goods we actually want to our doors.

This parallel process exists because the cost of restocking and reselling returned items often exceeds the value of those items. To cut their losses, online retailers often turn to folks like Ringelsten.

I discovered Shorewood Liquidators through a rather low rent-looking online ad touting returned items from The Home Depot, Amazon, Sears, Wal-Mart, and other big retailers. I was surprised to find the items weren’t bad. Some were an out-and-out deal, like this comfy Arcadia recliner (perfect for my next Shark Tank marathon). Bidding starts at 99 cents for knickknacks or $5 for nicer stuff. The descriptions state whether there are scuffs, scratches, or missing parts.

“This recliner? It will definitely sell,” Ringelsten says. Shorewood employs 91 people who work out of a 100,000-square-foot warehouse in Illinois—a space that, after the holidays, is a Through the Looking Glass version of Amazon, selling unwanted gifts at rock-bottom prices. And as Americans buy more and more holiday gifts online, they’re also returning more, creating new opportunities for businesses prepared to handle what others don’t want. Call it “re-commerce.”

The Hidden World of Returns

UPS says last week it saw the highest volume of returns it expects to see all year, with people sending back more than 5 million gifts and impulse purchases. On the busiest day of that week, the shipper said, people sent back twice as many packages—1 million in all—than the same day a year ago.

But those returns often don’t return from whence they came. Instead, they’re shipped to returns facilities—some operated by retailers, others that serve as hubs for many sellers. Once there, the goods are collected, processed, and often resold by third-party contractors, including wholesalers and liquidators like Shorewood. These contractors often use software that determines the most profitable path, be it selling them to consumers online, selling them in lots to wholesale buyers, or simply recycling them. If none of these options is profitable, the item may well end up in a landfill, making the business of returns an environmental issue, as well.

Read the entire story here.

Image courtesy of Google Search.

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Robotic Stock Keeping


Meet Tally and it may soon be coming to a store near you. Tally is an autonomous robot that patrols store aisles and scans shelves to ensure items are correctly stocked. While the robot doesn’t do the restocking itself — beware stock clerk, this is probably only a matter of time — it audits shelves for out-of-stock items, low stock items, misplaced items, and pricing errors. The robot was developed by start-up Simbe Robotics.

From Technology Review:

When customers can’t find a product on a shelf it’s an inconvenience. But by some estimates, it adds up to billions of dollars of lost revenue each year for retailers around the world.

A new shelf-scanning robot called Tally could help ensure that customers never leave a store empty-handed. It roams the aisles and automatically records which shelves need to be restocked.

The robot, developed by a startup called Simbe Robotics, is the latest effort to automate some of the more routine work done in millions of warehouses and retail stores. It is also an example of the way robots and AI will increasingly take over parts of people’s jobs rather than replacing them.

Restocking shelves is simple but hugely important for retailers. Billions of dollars may be lost each year because products are missing, misplaced, or poorly arranged, according to a report from the analyst firm IHL Services. In a large store it can take hundreds of hours to inspect shelves manually each week.

Brad Bogolea, CEO and cofounder of Simbe Robotics, says his company’s robot can scan the shelves of a small store, like a modest CVS or Walgreens, in about an hour. A very large retailer might need several robots to patrol its premises. He says the robot will be offered on a subscription basis but did not provide the pricing. Bogolea adds that one large retailer is already testing the machine.

Tally automatically roams a store, checking whether a shelf needs restocking; whether a product has been misplaced or poorly arranged; and whether the prices shown on shelves are correct. The robot consists of a wheeled platform with four cameras that scan the shelves on either side from the floor up to a height of eight feet.

Read the entire article here.

Image: Tally. Courtesy of Simbe Robotics.

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Dinosaurs of Retail


Shopping malls in the United States were in their prime in the 1970s and ’80s. Many had positioned themselves a a bright, clean, utopian alternative to inner-city blight and decay. A quarter of a century on, while the mega-malls may be thriving, the numerous smaller suburban brethren are seeing lower sales. As internet shopping and retailing pervades all reaches of our society many midsize malls are decaying or shutting down completely.  Documentary photographer Seth Lawless captures this fascinating transition in a new book: Black Friday: the Collapse of the American Shopping Mall.

From the Guardian:

It is hard to believe there has ever been any life in this place. Shattered glass crunches under Seph Lawless’s feet as he strides through its dreary corridors. Overhead lights attached to ripped-out electrical wires hang suspended in the stale air and fading wallpaper peels off the walls like dead skin.

Lawless sidesteps debris as he passes from plot to plot in this retail graveyard called Rolling Acres Mall in Akron, Ohio. The shopping centre closed in 2008, and its largest retailers, which had tried to make it as standalone stores, emptied out by the end of last year. When Lawless stops to overlook a two-storey opening near the mall’s once-bustling core, only an occasional drop of water, dribbling through missing ceiling tiles, breaks the silence.

“You came, you shopped, you dressed nice – you went to the mall. That’s what people did,” says Lawless, a pseudonymous photographer who grew up in a suburb of nearby Cleveland. “It was very consumer-driven and kind of had an ugly side, but there was something beautiful about it. There was something there.”

Gazing down at the motionless escalators, dead plants and empty benches below, he adds: “It’s still beautiful, though. It’s almost like ancient ruins.”

Dying shopping malls are speckled across the United States, often in middle-class suburbs wrestling with socioeconomic shifts. Some, like Rolling Acres, have already succumbed. Estimates on the share that might close or be repurposed in coming decades range from 15 to 50%. Americans are returning downtown; online shopping is taking a 6% bite out of brick-and-mortar sales; and to many iPhone-clutching, city-dwelling and frequently jobless young people, the culture that spawned satire like Mallrats seems increasingly dated, even cartoonish.

According to longtime retail consultant Howard Davidowitz, numerous midmarket malls, many of them born during the country’s suburban explosion after the second world war, could very well share Rolling Acres’ fate. “They’re going, going, gone,” Davidowitz says. “They’re trying to change; they’re trying to get different kinds of anchors, discount stores … [But] what’s going on is the customers don’t have the fucking money. That’s it. This isn’t rocket science.”

Shopping culture follows housing culture. Sprawling malls were therefore a natural product of the postwar era, as Americans with cars and fat wallets sprawled to the suburbs. They were thrown up at a furious pace as shoppers fled cities, peaking at a few hundred per year at one point in the 1980s, according to Paco Underhill, an environmental psychologist and author of Call of the Mall: The Geography of Shopping. Though construction has since tapered off, developers left a mall overstock in their wake.

Currently, the US contains around 1,500 of the expansive “malls” of suburban consumer lore. Most share a handful of bland features. Brick exoskeletons usually contain two storeys of inward-facing stores separated by tile walkways. Food courts serve mediocre pizza. Parking lots are big enough to easily misplace a car. And to anchor them economically, malls typically depend on department stores: huge vendors offering a variety of products across interconnected sections.

For mid-century Americans, these gleaming marketplaces provided an almost utopian alternative to the urban commercial district, an artificial downtown with less crime and fewer vermin. As Joan Didion wrote in 1979, malls became “cities in which no one lives but everyone consumes”. Peppered throughout disconnected suburbs, they were a place to see and be seen, something shoppers have craved since the days of the Greek agora. And they quickly matured into a self-contained ecosystem, with their own species – mall rats, mall cops, mall walkers – and an annual feeding frenzy known as Black Friday.

“Local governments had never dealt with this sort of development and were basically bamboozled [by developers],” Underhill says of the mall planning process. “In contrast to Europe, where shopping malls are much more a product of public-private negotiation and funding, here in the US most were built under what I call ‘cowboy conditions’.”

Shopping centres in Europe might contain grocery stores or childcare centres, while those in Japan are often built around mass transit. But the suburban American variety is hard to get to and sells “apparel and gifts and damn little else”, Underhill says.

Nearly 700 shopping centres are “super-regional” megamalls, retail leviathans usually of at least 1 million square feet and upward of 80 stores. Megamalls typically outperform their 800 slightly smaller, “regional” counterparts, though size and financial health don’t overlap entirely. It’s clearer, however, that luxury malls in affluent areas are increasingly forcing the others to fight for scraps. Strip malls – up to a few dozen tenants conveniently lined along a major traffic artery – are retail’s bottom feeders and so well-suited to the new environment. But midmarket shopping centres have begun dying off alongside the middle class that once supported them. Regional malls have suffered at least three straight years of declining profit per square foot, according to the International Council of Shopping Centres (ICSC).

Read the entire story here.

Image: Mall of America. Courtesy of Wikipedia.

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The Filter Bubble Eats the Book World

Last week Amazon purchased Goodreads the online book review site. Since 2007 Goodreads has grown to become home to over 16 million members who share a passion for discovering and sharing great literature. Now, with Amazon’s acquisition many are concerned that this represents another step towards a monolithic and monopolistic enterprise that controls vast swathes of the market. While Amazon’s innovation has upended the bricks-and-mortar worlds of publishing and retailing, its increasingly dominant market power raises serious concerns over access, distribution and choice. This is another worrying example of the so-called filter bubble — where increasingly edited selections and personalized recommendations act to limit and dumb-down content.

From the Guardian:

“Truly devastating” for some authors but “like finding out my mom is marrying that cool dude next door that I’ve been palling around with” for another, Amazon’s announcement late last week that it was buying the hugely popular reader review site Goodreads has sent shockwaves through the book industry.

The acquisition, terms of which Amazon.com did not reveal, will close in the second quarter of this year. Goodreads, founded in 2007, has more than 16m members, who have added more than four books per second to their “want to read” shelves over the past 90 days, according to Amazon. The internet retailer’s vice president of Kindle content, Russ Grandinetti, said the two sites “share a passion for reinventing reading”.

“Goodreads has helped change how we discover and discuss books and, with Kindle, Amazon has helped expand reading around the world. In addition, both Amazon and Goodreads have helped thousands of authors reach a wider audience and make a better living at their craft. Together we intend to build many new ways to delight readers and authors alike,” said Grandinetti, announcing the buy. Goodreads co-founder Otis Chandler said the deal with Amazon meant “we’re now going to be able to move faster in bringing the Goodreads experience to millions of readers around the world”, adding on his blog that “we have no plans to change the Goodreads experience and Goodreads will continue to be the wonderful community we all cherish”.

But despite Chandler’s reassurances, many readers and authors reacted negatively to the news. American writers’ organisation the Authors’ Guild called the acquisition a “truly devastating act of vertical integration” which meant that “Amazon’s control of online bookselling approaches the insurmountable”. Bestselling legal thriller author Scott Turow, president of the Guild, said it was “a textbook example of how modern internet monopolies can be built”.

“The key is to eliminate or absorb competitors before they pose a serious threat,” said Turow. “With its 16 million subscribers, Goodreads could easily have become a competing online bookseller, or played a role in directing buyers to a site other than Amazon. Instead, Amazon has scuttled that potential and also squelched what was fast becoming the go-to venue for online reviews, attracting far more attention than Amazon for those seeking independent assessment and discussion of books. As those in advertising have long known, the key to driving sales is controlling information.”

Turow was joined in his concerns by members of Goodreads, many of whom expressed their fears about what the deal would mean on Chandler’s blog. “I have to admit I’m not entirely thrilled by this development,” wrote one of the more level-headed commenters. “As a general rule I like Amazon, but unless they take an entirely 100% hands-off attitude toward Goodreads I find it hard to believe this will be in the best interest for the readers. There are simply too many ways they can interfere with the neutral Goodreads experience and/or try to profit from the strictly volunteer efforts of Goodreads users.”

But not all authors were against the move. Hugh Howey, author of the smash hit dystopian thriller Wool – which took off after he self-published it via Amazon – said it was “like finding out my mom is marrying that cool dude next door that I’ve been palling around with”. While Howey predicted “a lot of hand-wringing over the acquisition”, he said there were “so many ways this can be good for all involved. I’m still trying to think of a way it could suck.”

Read the entire article following the jump.

Image: Amazon.com screen. Courtesy of New York Times.

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Irrational Exuberance and Holiday Shopping

‘Tis the season to buy, give, receive and “re-gift” mostly useless and unwanted “stuff”. That’s how many economists would characterize these days of retail madness. Matthew Yglesias over a Slate ponders a more efficient way to re-distribute wealth.

From Slate:

Christmas is not the most wonderful time of the year for economists. The holiday spirit is puzzlingly difficult to model: It plays havoc with the notion of rational utility-maximization. There’s so much waste! Price-insensitive travelers pack airports beyond capacity on Dec. 24 only to leave planes empty on Christmas Day. Even worse are the gifts, which represent an abandonment of our efficient system of monetary exchange in favor of a semi-barbaric form of bartering.

Still, even the most rational and Scroogey of economists must concede that gift-giving is clearly here to stay. What’s needed is a bit of advice: What can economics tell us about efficient gifting so that your loved ones get the most bang for your buck?

We need to start with the basic problem of gift-giving and barter in general: preference heterogeneity. Different people, in other words, want different stuff and they value it differently.

In a system of monetary exchange, everything has more or less one price. In that sense, we can say that a Lexus or a pile of coconuts is “worth” a certain amount: its market price. But I, personally, would have little use for a Lexus. I live in an apartment building near a Metro station and above a supermarket; I walk to work; and driving up to New York to visit my family is much less practical than taking a bus or a train. So while of course I won’t complain if you buy me a Lexus, its value to me will be low relative to its market price. Similarly, I don’t like coconuts and I’m not on the verge of starvation. If you dump a pile of coconuts in my living room, all you’re doing is creating a hassle for me. The market price of coconuts is low, but the utility I would derive from a gift of coconuts is actually negative.

In the case of the Lexus, the sensible thing for me to do would be to sell the car. But this would be a bit of a hassle and would doubtless leave me with less money in my pocket than you spent.

This gap between what something is worth to me and what it actually costs is “deadweight loss.” The deadweight loss can be thought of in monetary terms, or you might think of it as the hassle involved in returning something for store credit. It’s the gap in usefulness between a $20 gift certificate to the Olive Garden and a $20 bill that could, among other things, be used to buy $20 worth of food at Olive Garden. Research suggests that there’s quite a lot of deadweight loss during the holiday season. Joel Waldfogel’s classic paper (later expanded into a short book) suggests that gift exchange carries with it an average deadweight loss of 10 percent to a third of the value of the gifts. The National Retail Federation is projecting total holiday spending of more than $460 billion, implying $46-$152 billion worth of holiday wastage, potentially equivalent to an entire year’s worth of output from Iowa.

Partially rescuing Christmas is the reality that a lot of gift-giving isn’t exchange at all. Rather, it’s a kind of Robin Hood transfer in which we take resources from (relatively) rich parents and grandparents and give them to kids with little or no income. This is welfare enhancing for the same reason that redistributive taxation is welfare enhancing: People with less money need the stuff more.

Read the entire article here.

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The Ascent of Scent

Scents are deeply evokative. A faint whiff of a distinct and rare scent can bring back a long forgotten memory and make it vivid, and do so like no other sense. Smells can make our stomachs churn and make us swoon.

The scent-making industry has been with us for thousands of years. In 2005, archeologists discovered the remains of a perfume factory on the island of Cyprus dating back over 4,000 years. So, it’s no surprise that makers of fragrances, from artificial aromas for foods to complex nasal “notes” for perfumes and deodorants, now comprise a multi-billion dollar global industry. Krystal D’Costa over at Anthropology in Practice takes us on a fine aromatic tour, and concludes her article with a view to which most can surely relate:

My perfume definitely makes me feel better. It wraps me in a protective cocoon that prepares me to face just about any situation. Hopefully, when others encounter a trace of it, they think of me in my most confident and warmest form.

A related article in the Independent describes how an increasing number of retailers are experimenting with scents to entice shoppers to linger and spend more time and money in their stores. We learn that

. . . a study run by Nike showed that adding scents to their stores increased intent to purchase by 80 per cent, while in another experiment at a petrol station with a mini-mart attached to it, pumping around the smell of coffee saw purchases of the drink increase by 300 per cent.

More from Anthropology in Practice:

At seventeen I discovered the perfume that would become my signature scent. It’s a warm, rich, inviting fragrance that reminds me (and hopefully others) of a rose garden in full bloom. Despite this fullness, it’s light enough to wear all day and it’s been in the background of many of my life experiences. It announces me: the trace that lingers in my wake leaves a subtle reminder of my presence. And I can’t deny that it makes me feel a certain way: as though I could conquer the world. (Perhaps one day, when I do conquer the world, that will be the quirk my biographers note: that I had a bottle of X in my bag at all times.)

Our world is awash in smells—everything has an odor. Some are pleasant, like flowers or baked goods, and some are unpleasant, like exhaust fumes or sweaty socks—and they’re all a subjective experience: The odors that one person finds intoxicating may not have the same effect on another. (Hermione Granger’s fondness for toothpaste is fantastic example of the personal relationship we can have with the smells that permeate our world.)  Nonetheless, they constitute a very important part of our experiences. We use them to make judgments about our environments (and each other), they can trigger memories, and even influence behaviors.

No odors seem to concern us more than our own, however. But you don’t have to take my word for it—the numbers speak for themselves: In 2010, people around the world spent the equivalent of $2.2 billion USD on fragrances, making the sale of essential oils and aroma chemicals a booming business. The history of aromatics sketches our attempts to control and manipulate scents— socially and chemically—illustrating how we’ve carefully constructed the smells in our lives.

More from theSource here.

Image: The Perfume Maker by Ernst, Rodolphe, courtesy of Wikipedia / Creative Commons.

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