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Nordstrom Local

Nordstrom Local expands its innovative, inventory-free retail hubs

Go where the customer is: Nordstrom brings its revolutionary Local service emporiums to more Los Angeles neighborhoods and soon, New York City.

Nordstrom Local expands its innovative, inventory-free retail hubs
[Photo: courtesy of Nordstrom]

What if your favorite fashion destination was also your local tailor, manicurist, bartender, juicer, cobbler, stylist—and even your WeWork?

That’s the essential idea behind Nordstrom Local, the innovative “service hub” the retail giant launched last October in Los Angeles. The 3,000-square-foot atelier-like space alongside millennial catnip boutiques like Glossier and Marc Jacobs on West Hollywood’s bustling Melrose Avenue combines a medley of Nordstrom’s popular amenities under one chic roof.

“We aim to bring the convenience and accessibility of our some of the most popular or highly demanded services right to the neighborhoods where our customers live and work,” Shea Jensen, Nordstrom senior vice president of customer experience, tells Fast Company. “We’ve heard loud and clear from our customers that drivability is a factor.”

The only thing missing is inventory—but that’s by design.  In lieu of stocked shelves, clients begin this revolutionary shopping experience well ahead–either at home or on their mobile phone. Customers come here to pick up their online orders.

So far, customers have responded positively, so much so that today, Nordstrom Local is announcing two more locations in Los Angeles: A 1,200-square-foot space in Brentwood, and a 2,200-square-foot store in Downtown. And there are plans to expand to New York City. Each location’s decor and services will be personalized to neighborhood needs and tastes.

Los Angeles is Nordstrom’s largest market with 16 full-line stores and 4 million customers, and with its mass inventory, an ideal expansion ground, says Ken Worzel, Nordstrom’s chief digital officer and president of

“We’ve got a young customer base that’s very engaged with our brand,” says Worzel. “One of the clear messages we’ve gotten is people love our brand when we’re able to bring the combination of highly relevant great product—with a layer of our people and services—to help make [the shopping experience] compelling . . . and super easy for them.”

This hyperlocal concept is the latest investment in its hallmark customer service. Bolstered by the growing number of discount Nordstrom Racks, the company reached record sales of $15.1 billion last year in an otherwise dismal retail market. Nordstrom has also experienced customer growth of 4%, to 33 million nationwide.


Nordstrom Local looks and feels nothing like its traditional stores. The airy and sunny ivy-fronted West Hollywood location has service pockets at each corner of the showroom: The Trunk Club desk helps men order a new wardrobe or size a tux; a seamstress sits in front an artistic mural of various threads ready to make adjustments; and in the back, customers enjoy a mani or pedi alongside a stocked kitchen of expensive juices, beer, and wine.

The luxurious, large fitting rooms–with their thick, floor-length curtains and mid-century pastel furniture– are reminiscent of a bridal boutique (minus the frenzied wedding parties).

Some come in and enjoy a full day at Nordstrom Local, parking themselves at a large marble communal table to either work–or perhaps peruse You’ll spot busy Angelenos in leisurewear dropping off online returns or broken, scuffed handbags and shoes awaiting mending in their respective bins. Some simply drive up to the back for curbside pickup.

During the holidays, pop-up services like gift wrapping or gift stations attempt to make the season a bit more tolerable.

It’s the store of your overscheduled dreams.

[Photo: courtesy of Nordstrom]

Many are there specifically for trying and picking up merchandise personally picked for them by Nordstrom stylists via Style Board, the company’s latest curation service. Style Board offers a team of online personal stylists who will handpick items–clothing, accessories, jewelry–based on a questionnaire that helps them better understand your personal style.Within less than a day, the stylist emails you a “board” of curated designs, which will then wait for you in a dressing room at Nordstrom Local. (It’s the ideal styling situation for those of us who are too lazy–or grouchy–to deal with a real, live stylist.)

Should you want further expertise, a stylist will assist you in Nordstrom Local. Ideally, you build a relationship with your stylist, who is on standby whenever you need an outfit or alteration.

“This gives [customers] a unique opportunity to get the best of both worlds,” notes fashion and retail expert Bahar Takhtehchian. “They get this ability to buy things quickly online, and then they’re able to go in there to get more details and hands-on help.”

Style Board, in many ways, is the culmination of Nordstrom’s strengths: inventory, customer service, digital prowess, and convenience. Those same markers led the company to acquire Trunk Club, the online personal styling service, in 2014.

“Our local market strategy is reflective of that more often today, customers don’t see Nordstrom as a website or a store or a salesperson. They see Nordstrom as a combination of all three of those,” says Jensen. “Our ambition is to serve customers in the local markets where they live and work, really agnostic of channel store–digital or physical.”

[Photo: courtesy of Nordstrom]


The 117-year-old, Seattle-based retailer has been evolving the retail experience since its inception—sometimes to excess. At one point in the 1950s, the company featured caged monkeys in the children’s shoe department.

In 1998, it was one of the first fashion retailers to embrace e-commerce. In 2012, it invested and partnered with men’s clothing e-site Bonobos. In 2018, it acquired private flash sale site HauteLook.

Most recently, Nordstrom partnered with Anthropologie for in-store home collections and expanded its Reserve Online & Try In Storeservice across the country. The popular Nordstrom Rewards program, which covers all Nordstrom Local services, grew last year by 35% to 10.5 million, according to the company’s recent investor report. Sales from Nordstrom Rewards customers represented 51% of sales, an increase from 44% in 2016.

[Photo: courtesy of Nordstrom]

Nordstrom operates 373 stores in 40 states, including 122 full-line stores in the U.S., Canada, and Puerto Rico, as well as 239 Nordstrom Racks. While plenty of competitors attempt to address slumping sales with in-store experiences or revamped stores, Nordstrom’s multi-pronged approach looks to open new avenues of revenue.“Part of our DNA is always trying to find a way to create a better experience,” reflects Jamie Nordstrom, president of Nordstrom stores. For him, the appeal of the Local concept in his no. 1 customer market made sense: “Having lived in L.A. for a couple of years, you know it’s damn hard to get around that town.”

“We’re trying to improve our effectiveness of being a great retailer in every major market we do business in: Nordstrom Local is one component of that,” says Nordstrom.

Though still in its infancy, Nordstrom Local Melrose offers some insight as to what resonates with clients. Buy online/curbside pickup, tailoring, and drop-off returns are the most popular services. The latter is especially helpful for Nordstrom to quickly reinsert merchandise back into its e-commerce inventory. Beauty services, meanwhile, saw a threefold pickup following the introduction of pedicure stations.

“When we find ways to engage with customers, their engagement with us tends to go up across the board,” says Worzel. “Customers are interacting with us more. They’re spending more with us digitally through online experiences, but they’re also continuing to shop in our existing stores and they’re just adding Local as another point of experience with us.”

[Photo: courtesy of Nordstrom]


Nordstrom Local seems to specifically appeal to clients who might not otherwise frequent a mall: millennials, the super busy, people who live in West Hollywood. Perhaps folks who potentially prefer browsing outfits while half-watching the news, then swinging by Local on their way home from work to pick up an online order. Or maybe it’s a busy mom who wants her nails done while imbibing her daily green juice as a salesperson demonstrates what would suit her best at an upcoming wedding.

According to a recent Forrester consumer research report, 66% of customers think that valuing their time is the most important element in delivering good customer service. “Time is a precious commodity for everybody,” says Worzel. “And so, when we make it easier for [customers] to discover product, engage with great product they’re looking for, but also with our people and our services on those terms, that’s a win for customers.”

[Photo: courtesy of Nordstrom]

And it’s working:  Nordstrom was named the U.S.’s favorite premium fashion retailer for the sixth year in Market Force Information’s annual study. Over 10,000 shoppers picked it over Lane Bryant, Dillard’s, Forever 21, and Kohl’s.

“You’re going to see us continue to just try stuff with customers, and some of it’s going to work, and some of it’s not going to work,” says Worzel, “but we think it’s super important to continue to innovate and not get stuck in an old model.”


Plant Based Foods

Plant-Based Product Claims See Dramatic Rise

Plant-Based Product Claims See 62% Rise Innova Market Insights Research
Infographic from Innova Market Insights

Burgeoning consumer interest in health, sustainability and ethics is spurring the popularity of plant-based ingredients and products, according to a report from Innova Market Insights. In fact, Innova, a Dutch knowledge solutions provider for the food and beverage industries, found that plant-based product claims skyrocketed at a compound annual growth rate of 62 percent worldwide from 2013 through 2017, with increases occurring in such areas as plant proteins, active botanicals, sweeteners, herbs and seasonings, and food coloring.

“The dairy alternatives market has been a particular beneficiary of this trend, with the growing availability and promotion of plant-based options to traditional dairy lines, specifically milk beverages, and cultured products such as yogurt, frozen desserts and ice cream,” noted Lu Ann Williams, director of innovation at Arnhem, Netherlands-based Innova.

In keeping with the knowledge that beverages largely spearheaded the dairy alternative category and still dominate it, global sales of dairy alternative drinks are set to reach U.S. $16.3 billion in 2018 and accounted for more than 8 percent of global dairy launches recorded by Innova Market Insights in 2017, up from 7 percent from 2016. Actual global launches have more than doubled over a five-year span.

Spoonable nondairy yogurt has also experienced soaring levels of interest, albeit from a smaller base, with a 48 percent compound annual growth rate for the 2013-17 period taking its share of dairy launches from under 0.5 percent in 2012 to 1.5 percent last year. Innova’s consumer research found that one in three U.S. consumers increased her consumption of plant-based milk/yogurt in the two years preceding the close of 2017.

“In the move to offer something new, we are starting to see an increasing variety of nonsoy plant-based ingredients, including cereals such as rice, oats and barley,” said Williams. “We also noticed an increase in nuts, such as almonds, hazelnuts, cashews, walnuts and macadamias, as well as coconut and more unusual options such as lupin, hemp and flaxseed.”

Interest in plant-based eating has also shaped the meat substitute market, where global sales are poised to grow to U.S. $4.2 billion by 2022. The range of ingredients used for meat substitutes encompasses vegetables and grains, as well as traditional sources like soy and specialty manufactured brands such as Quorn (mycoprotein) and Valess (milk).

A shift toward plant-based diets in general, along with interest in vegan, vegetarian and flexitarian lifestyles and concerns regarding animal welfare, have combined to boost interest in such products, and as a result, new product development has seen an 11 percent compound annual growth rate in 2013-17 period. Innova’s research further showed that four in 10 U.S. consumers upped their consumption of meat substitutes/alternatives in 2017.

Innova will present new data on key consumer trends influencing the industry at the upcoming IFT Food Expo in Chicago on July 16-18.

For more about plant-based products, read the recent blog post about items spotted on the Summer Fancy Food Show floor.

Retail Innovation

Retail Innovation Summit 2018—

The Three As of New Retail

Knowledge. Know-how. Networks.

Retail Innovation Summit 2nd


  • The Coresight Research team attended the Retail Innovation Summit organized by the Hong Kong Retail Technology Industry Association (RTIA) on July 5 in Hong Kong. The Chairman of the RTIA Ricky Chu believes real-time analytics, service automation and artificial intelligence (AI) are key to retail innovation.
  • Microsoft has introduced its “virtual agent” to seamlessly integrate the human 
  • element and AI. When its virtual agent cannot provide the answers, customers’ 
  • queries will be directed to human agents.
  • With the goal of developing Hong Kong into a smart city, the government and 
  • retail industry leaders should focus more attention on encouraging innovation
  •  in the retail sector.



The Coresight Research team attended the Retail Innovation Summit organized by the

Hong Kong Retail Technology Industry Association (RTIA) on July 5 in Hong Kong.

The Chairman of the RTIA Ricky Chu kicked off the event with opening remarks

depicting his vision of the three As of new retail:

  • Real-time Analytics
  • Hyper-personalized service Automation
  • Artificial Intelligence

There are plenty of use cases of these technologies in retail. For example, real-time

analytics can be applied to enable dynamic pricing with competitors and to analyze

consumers’ behavior to determine the right product in the right quantity to sell.

Hyper-personalized service automation allows recognition of customers to provide

them with personalized products quickly. 

Chu also shared his vision of how a smart city can be achieved through big data.

Smart devices, sensors and cameras are important sources of data necessary to

create a smart city. Market research firm IHS Markit estimates there will be over 75

billion smart devices by 2025. Chu noted that there are currently over 200 million

cameras set up in China, fostering the development of smart cities in the country.

The Hong Kong government can speed up the pathway to Hong Kong becoming a

smart city by providing more open government data sources to the public with the

necessary application programming interface (API) for computer programing. 


Edmond Chang, Technical Solution Specialist, Business Applications at Microsoft,

introduced Microsoft’s solution to blend human and AI as a retail solution to improve

customer service for retailers. Although chatbots have become popular, the level of

satisfaction they bring to customers is low, giving answers that do not necessarily

correspond to customers’ queries. Microsoft introduced its “virtual agent” to seamlessly

integrate human and AI. When its virtual agent cannot provide the right answer,

customers’ queries will be directed to human agents. Over time, the virtual agent

will gradually learn to handle more customer queries. In fact, Microsoft has achieved

some success in its early applications. 

One multinational IT company that utilizes Microsoft’s virtual agent for its customer

service is Hewlett-Packard. It handles 70% of customers’ requests and achieving an

85% accuracy rate in interpreting these queries. 

The virtual agent can generate customer profiles automatically through conversations

with customers. For example, a customer says he wants to choose a gift for his wife.

The virtual agent will interpret that information and, similar to human intelligence, will i

nfer that the customer is a married man, probably aged over 25 and record this information in its customer profile database. The virtual agent can then promote related products to similar customers in future. 


Business leaders also shared their views on what Hong Kong needs to do to become a

smart city. According to Chang, the Hong Kong government is not focusing enough

attention on innovation in the retail sector. In a recent government-released paper,

Hong Kong Smart City Blueprint, “retail” received only two mentions in the entire report.

Chang believes the government needs to pay more attention to the retail sector in order

for Hong Kong to become a smart city. 

Andy Wong, Group Information Technology Director at leading Hong Kong apparel r

etailer G2000, pointed out that Hong Kong was once considered a “shopping paradise,”

but has since lost some of its shine from the growing challenges faced by e-commerce

and Chinese tourists going to Europe or the US to shop. The retail industry and the Hong

Kong government will need to make a concerted effort to encourage innovation in order

to keep Hong Kong’s retail climate vibrant. Introducing smart retail solutions and new

retail experiences to consumers will be vital. For its part, G2000 is testing a 3D body-

scanning machine that scans the customer’s body in 40 seconds to provide tailor-made

shirts. Wong believes innovations such as this are helpful to ensure Hong Kong’s retail

sector continues to thrive.


A combination of real-time analytics, service automation and AI are key to bring retail i

nnovation to consumers. While chatbots are not 100% ready to take over all aspects of

customer service, blending human and AI is a start to improving the customer service

experience. Retail plays a crucial role in a smart city, and the government and retail

industry leaders should focus more attention on encouraging innovation to ensure

Hong Kong’s retail sector continues to thrive.

Simple Ingredients

Making fancy food from simple ingredients
July 9, 2018

Simple ingredients, authentic recipes and transparency were major themes at the Summer Fancy Food Show in New York City last week. The Specialty Food Association’s annual event featured companies and brands of all sizes, from startups to big names, that stressed the beauty of simple ingredients from nature.

Clean ingredients and information about nutrition and ingredients are key qualities millennials seek out when shopping for specialty food, according to the research from the association and Mintel. Consumers also opt for restaurants that use local and regional ingredients and do well at describing the ingredients they use and where they come from.

Chefs Rick Bayless and Jean Marie Brownson co-founded Frontera Foods in 1996 with a passion for salsa and a commitment to producing sauces without artificial ingredients and additives.  Two decades later, the company which still makes the same five salsas along with a growing list of new products, sold itself to food conglomerate Conagra and Brownson became the giant company’s culinary director.

When thriving independent brands are acquired by large companies, the concern can be that the big company will make changes to the popular brands. In Frontera’s case, Conagra looked to it to take the lead on growing the brand authentically and it also enlisted Brownson’s help in bringing that authentic feel and clean ingredient strategy to products in some of its other lines, Brownson said.

“My boss said ‘I want you to change us, I don’t want us to change you.’”

The deal allowed the brand to expand into frozen meals. The meals, including four bowls and four skillets, started with Frontera’s sauces. The skillet meals come with the sauce in a pouch that melts in the skillet and flavors the frozen meats and veggies as they heat up.

“It’s important to me to make food families want to eat while sitting together at the table,” she said.

The brand also plans to create a single-serve frozen breakfast offering within the next year or so, said Brownson, a classically trained chef and food journalist. One of the big trends she sees along the lines of clean ingredients is the growing understanding of the diversity of flavor chilis can bring to the food.

“With the different chilis, you realize you can make food with flavor, without all the fat and calories,” she said.

Making a brand from a single ingredient

Lior Lewensztain is a doctor who found he didn’t like the way modern medicine treats disease instead of promoting health, so he decided to do something about it. He created That’s it. to get people to eat more fruit, and his first line of simple bars made of one or two ingredients won the brand a national placement in Whole Foods Market.

Today the brand has expanded to include a line of veggie bars and chocolate-covered fruit truffles.

Another brand, Date Lady, produces syrups and sugars made from only dates, with no additives or other ingredients. Founder Colleen Sundlie discovered the diverse flavors of different varieties of dates while living in the Middle East for three years and she launched her brand in 2012 to introduce them to the US.

There are more than 100 cultivars of dates, each with its own flavors and qualities, she said, and she aims to explore as many as possible.

Trendy flavors

The Ginger People began more than 30 years ago as an ingredient company, and supplying candied ginger and other ingredients to other manufacturers is still the lion’s share of the business. But today the company is also diversifying with new retail products including Rescue Ginger Shots, spicy daily shots in three flavors: Coconut, Lemon & Cayenne and Wild Turmeric.

The company has also launched a turmeric latte mix and Ginger Soother Tonics.

“Our retail side is expanding,” said founder Bruce Leeson. “There’s no real plan, we’re just seeing the opportunities as they come up.”

Some other trendy products at the show

German company Farmers Land Food has also focused on simplifying. The company’s products include frozen smoothie cubes that don’t require a blender. Instead, the cubes are mixed with hot water and shaken or stirred in a jar. The company also makes Iced Coffee Cubes and Frozen Smoothie Bowls made with fruit and cereal.

Brooklyn, N.Y.-based Organic Gemini is introducing consumers to the Tiger Nut, a small root vegetable the size of a chickpea that has prebiotic properties. The company sells several products made from the root including granola, TigerNut clusters and a cold-pressed beverage called horchata.

Mother-and-daughter team Marilyn and Sara Polon created Soupergirl to sell the kind of scratch-made soups from seasonal ingredients that they craved. The vegan soup company sells two flavors year round and another six or seven that change with the seasons.

Competing Against Amazon

How To Compete With Amazon? Create An In-Store Customer Experience That Rivals Theirs

July 08, 2018

rivalsAmazon is the company retailers love to hate. Amazon’s arms continue to weave and curl around your customers.

And while shoppers shop at both Amazon and local businesses or department stores, the fact is any trip saved by shopping online is a trip not made to a brick and mortar retailer.

While it is easy to feel the danger Amazon poses, the way to deal with that fear is to analyze what it is that makes them so easy to do business with.

Amazon is a technology company rather than a retailer. They began as a discount book seller, but it has progressed where it isn’t the cheapest option on the web… but don’t let that fool you, they command 49% of online search.

Their understanding of data and innovation makes them easily adaptable to go after any product category.

Instead of moaning and groaning, try fashioning your business by stealing from Amazon’s stranglehold on customer loyalty.

Here are 7 Ways To Create An In-Store Experience That Rivals Amazon’s:

Convenience. Between Amazon’s delivery service to your car’s trunk, which keeps your packages safe from front-porch thieves, to their Amazon Key program, which hand-delivers your packages to the inside your home, Amazon is all about making their customers’ lives easier. Walmart is testing delivery services inside your home too, and they will actually stock your refrigerator with groceries you purchased online.

OK, most retailers can’t offer those services, but what could you do to make shopping with you more convenient? One of the most obvious, most talked services you could offer from a shopper’s point-of-view would be to expand your hours of operation.

Quite simply, people who have jobs don’t have the luxury of strolling down to Main Street to buy something between 10 am and 5 pm Monday-Friday.

You could also make it a point to grab a customer’s bags at the counter and walk with them out your door, then offer to continue to their car. On a rainy day, you could grab an umbrella and meet them in the parking lot or escort them out of the store so they didn’t get wet.  You get the idea but it all revolves around convenience.

Free shipping. Amazon offers Prime for $119 a year, but most of their customers see it as free shipping. That’s good because Barilliance states the average online shopping cart abandonment (where shoppers don’t complete a purchase) was 78% in 2017 due to unexpectedly high shipping costs.

If you’re going to have an online store – and I think you must – keep shipping costs upfront. Even if you offer free shipping on orders over $50, the place for your shopper to learn that is on your store’s home page, not after they add it to their cart.

In store, even saying free local delivery within 10 miles would be a big step to showing you want to deliver as friction-free an experience as you can.

Selling used. One thing the Big A learned early-on was that there was a segment of their shoppers who were looking to save money by buying used. Most any product you select shows both used and new prices.

If you sell used electronics, appliances, or even kitchen products, bring that message to your online page. If you offer those products in-store, make sure your crew understands how to sell them when a customer absolutely balks at paying full price for new merchandise.

Also make sure you merchandise like the item deserves respect and not like it is a refugee from the aisle of misfits. Remember, Millennials especially are looking for lower prices most everywhere and will often buy used.

No questions asked returns. This is a close cousin of convenience. On the order page, Amazon tells you how long you have to return an item. Truth be told, if you miss that deadline and write them a note, most likely they will give you a full refund – even if worn or tags are missing.

How many brick and mortar retailers still have those signs from the 80’s NO REFUNDS, exchange only for store credit. The joke of this is per the retailer’s merchant agreement, they have to give refunds on the card used. And if the retailer won’t, the cardmember knows they can just initiate a chargeback against the merchant.

Since you’ll most likely lose anyway, why not take the high way and make your return policy more generous?

Add-on. Scroll just a bit down the page from an item you find on Amazon, and you’re sure to see Customers who bought this item also bought. Once you put that item in your cart, another message that says, Recommended for you based on (the item’s name.) That’s because Amazon knows the key to making more profit is to sell more items based on what the customer was interested in.

Most retailers understand the concept of adding on but most simply don’t train it. Why? Because it might seem pushy. Their employees might feel it is making those customers buy something they don’t need.

See also, How To Add-On To Any Sale

I don’t care what the excuse is, the profit is in the second item.

A smart retail sales training program hammers this point with regular role-playing on various items in your store. And you know what? The shopper who buys the additional item is glad you mentioned it because it helps them get more value out of their original purchase. It also removes the opportunity for the shopper to need to go online for something else.

Payment options. Amazon Go, their new convenience store, allows shoppers to login with their Amazon Prime account at the entrance and walkout with their products without standing in any checkout line; it automatically scans items while they walk around.

We’re a long way off for that for most retailers but your own online store should have an option where you store the credit card of the customer provided they register it. If you haven’t turned that on yet, do. If you have, make sure you mention the benefit to registering with one-click checkout from then on.

In your brick and mortar store, more and more affluent customers as well as digital natives are using Apple Pay, Google Wallet, and even PayPal where offered. Why? Because it is as simple as tap and pay. Having mobile payment options isn’t just a benefit to the customer, it also allows you to move more shoppers through your system which adds to profit.

Complete experience. While Amazon can add various angle pictures of products and videos to give a more complete picture of an item, brick and mortar stores can offer the real experience.  Looking for in store experience examples? Take the Adidas store on 5th Avenue in New York which has a miniature track set up on the floor where shoppers can get their stride analyzed or just take a run. They also have an on-site print shop where shoppers can customize clothing. Allbirds, also in NYC, has a human-sized hamster wheel where shoppers can try out their shoes.

OK, so maybe you can’t do all of that, but you can look at those two experiences. How can you bring more to the fitting process than just trying a garment on?

Personalization is becoming big business.How can you custom print or customize your products quickly? I wrote about the Xerox printer here, but this is something online retailers can only hope to create – a virtual reality experience when you offer real reality.

While Amazon did command almost half of online searches there is hope, in 2017 it slipped from 2016’s 55%.

And even more noteworthy for 2018, 46% of shoppers now start off with search engines rather than Amazon when they don’t have anything particular in mind. Just 39% start at Amazon, and 15% start at their favorite non-Amazon retail site.

See also, What Top Brick and Mortar Retailers Are Doing To Combat Amazon

In Sum

While Amazon and Walmart battle it out for who will most dominate online retail, one thing is for certain, you have to evolve your retailing skills.

Those skills will be a bigger part of your retail sales strategy in co-opting any of the competitive advantages Jeff Bezos’ sprawling empire does better than you do to create amazing retail experiences with your own shoppers.

Semantics of Supply Chain

The Semantics of Supply Chain

I cover supply chain management, technology, and global trade Opinions expressed by Forbes Contributors are their own.
My 80-year-old Prussian father-in-law loves to hear stories about how supply chain impacts economics, society and the environment. As a former Morgan Stanley investment banker, he knows something about business and appreciates the complexity and power of the end-to-end supply chain.
His one complaint is the name. “Supply chain”, he says, sounds boring.
Terminology Matters
“Supply chain” is a label with baggage. In some circles it is still seen as a low-tech, non-creative servant function hardly worthy of a Harvard MBA. I once had a candid conversation with a McKinsey partner who told me that they explicitly prefer the term “operations” because of this baggage.
In response, champions of supply chain (myself most certainly included) have worked to lionize the profession by showing how it works to drive profits, deliver innovation and improve lives. Undeniable proof, including the massive shareholder value created by supply-chain-intensive businesses like Walmart, Apple and Amazon, or the sustainability leadership of supply chain organizations like Unilever, Nike and Schneider Electric, has been a big help.
The good news is that this rebranding is working. Among the young, perceptions of “supply chain” are dramatically more favorable than among the old. In fact, according to consumer survey data collected by my colleague Matt Davis, the typical 20-year-old is 35 times more likely to have a positive than a negative reaction to the term “supply chain”. His or her grandparents are much less friendly to us.
Source: SCM World Survey % of respondents, n=282
Youth Appeal
Reactions to the term ‘supply chain’
Supply chain is an increasingly popular major or concentration in universities. Having coalesced out of programs dedicated to logistics, purchasing, production operations and decision sciences, it is now common to find fully fledged departments of supply chain management offering masters degrees. The University of Tennessee is the latest to have formalized this naming convention.
It is also the case that recent years have seen at least a dozen CEOs or Presidents elevated from supply chain roles, including stars like Tim Cook at Apple and Mary Barra at General Motors. Supply chain is starting to look like a credible path to the top.
Reality Bites
And yet supply chain still struggles with semantics. Experimentation with new terminology such as “value chain”, “demand chain” and “supply network operations” often confuses business colleagues who typically work with clear functional boundaries and stable, objective metrics. After all, if it is supposed to be end to end, what doesn’t supply chain own?
In practice, the answer comes down to organizational design and the judicious use of informal influence alongside hardline direct control. Many of the most consistently successful supply chain organizations are built with shared responsibilities. Such an approach uses dotted-line reporting to serve two masters for functions that bridge supply and demand, such as customer service and logistics, or that bleed into product development, such as production engineering.
Adapted from Gartner Supply Chain Top 25
Supply Chain in relation to other business functions
The moment of truth for supply chain organizations like these comes in cross-functional meetings such as S&OP or stage-gate reviews. This is where cost, quality and speed are all discussed in the perpetual balancing act of business.
The paradox of supply chain management is that excellence requires end-to-end thinking, but in the real world that’s simply too broad a mandate. I have known plenty of smart, ambitious supply chain people who’ve bitten off more than they could chew.
Trying to own it all is like Icarus flying too close to the sun. You’ll fall.
What Gets Measured Gets Managed
The long-term scope of supply chain management will settle when its traditional accountability for cost is counterbalanced both by the last generation’s quest for quality and the 21st century need for speed. These three foundational metrics, working in constant tension to make the most of customer demand, product innovation and investment capital, will define the future of supply chain.
As to semantics, the name “supply chain” is only as boring or as exciting as the work you do. Marketing stokes customer desire or demand. R&D invents things to satisfy that demand. Supply chain is about making it happen profitably, reliably and as fast as possible.
Take primary accountability for cost, quality and speed and you’ll forever own the job of making dreams come true at scale.
There’s nothing boring about that.

Trojan Horse: Instacart

The Trojan Horse: Will Instacart Become A Competitor Of The Grocery Retailers It Serves?

 Opinions expressed by Forbes Contributors are their own.

InstaCart employees fulfill orders for delivery to customers. Photographer: Patrick T. Fallon/Bloomberg

True story: Sam Walton, the founder of Walmart, is famous for using the phrase “steal shamelessly” when it came to keeping a close eye on competitors and applying the lessons learned to make Walmart a better company. Sam even wrote openly about stealing ideas in his 1993 autobiography Sam Walton: Made in America.

When Walmart was founded in 1962, its biggest competitor was Kmart. Being naturally curious and competitive, Sam made the decision that he was going to learn everything possible about how Kmart operated. Sam’s chosen method for learning? Go inside as many Kmart stores as possible to look around, and establish a relationship with executives from Kmart.

Sam Walton understood the importance of data to a retailer better than anyone. Data as it related to store operations, pricing, supply chain, technology, organizational structure, supplier relations, product assortment, promotions, consumer behavior and especially customer experience.

Walking into as many Kmart stores as he wanted and openly discussing retail with Kmart executives provided Sam with exactly the data he desired. Having unlimited access to Kmart allowed Sam to learn the two most important lessons about the company—its strengths and weaknesses.

And what did Sam do with the knowledge he gained? He modified Walmart’s business model to create a company that outperformed Kmart at every level, resulting in Kmart losing all relevance. Specific details on how Walmart grew can be found in the book Walmart: Key Insights and Practical Lessons from the World’s Largest Retail.

Sam Walton — the founder of Walmart and arguably the most influential and capable executive in the history of the retail industry.  (1985)(AP Photo)

The Trojan Horse 

Fast forward to 2018 and once again we are experiencing a repeat of the process utilized by Sam Walton to decimate Kmart. This time the company so deftly gaining access to retailer is Instacart, which recently announced it is expanding into another city.

Instacart requires a grocery retailer to provide them with certain data and access so Instacart can set up the grocery retailer within its core systems. Retailers invite Instacart inside their four walls and voluntarily provide them with data whereas Sam Walton had to often use his wits and charm to get the information he wanted. Kmart wasn’t concerned about Walton as it didn’t view him or Walmart as a threat.

Grocery retailers have embraced Instacart as few grocery executives believe Instacart will ever become a competitor. Kmart was wrong about Sam. Are grocery retailers wrong about Instacart? If so, Instacart is operating in a fashion like the famous Trojan Horse in Greek mythology as grocery retailers are enthusiastically inviting in an entity with the potential to become a major competitor.

I strongly advise the grocery industry to crush all assumptions that Instacart will look and operate the same way three to five years from now. In fact, the mantra I live by is Crush All Assumptions about business in general. Case in point: How many grocery executives thought Amazon would acquire Whole Foods? What prevents Instacart from changing its business model? Nothing.

Instacart will have no choice but to expand its business model to survive. Amazon is accelerating the expansion of Prime Now for grocery delivery and Target has accelerated the expansion of Shipt to deliver groceries and general merchandise.

Sooner rather than later, the grocery delivery and online order fulfillment services provided by Instacart will become a commodity business as more third-party delivery companies enter the market, and established third-party delivery companies expand.

Instacart attempting to add more services to current customers and signing up small regional grocery retailers to add scale is not a strategy that will insulate Instacart from disruption.

Kroger’s partnership with Ocado will allow Kroger to end or greatly scale back their relationship with Instacart and other third parties for grocery delivery. I anticipate that many grocery retailers will copy what Kroger is doing and this will impact Instacart.

CommonSense Robotics will become the go-to company for retailers looking for an automated solution to fulfill online grocery orders as well as meet demand for groceries in rural and urban areas. CommonSense Robotics can even build and operate sites capable of performing a dual role – fulfilling online grocery orders and building pallets to replenish groceries to retail stores.

Grocery retailers that want to replace Instacart can turn to Delivery Solutions, a Texas-based technology company that can help enable an intelligent, orchestrated mix of in-house and third-party delivery capabilities. Many grocery retailers have come to realize that owning the last mile and maintaining a direct relationship with its customers is more strategic than outsourcing last-mile deliveries. Delivery Solutions gives command and control of the customer experience back to the grocery retailer.

Instacart is under pressure due to the myriad of changes taking place in the grocery industry that are directly affecting the retailers served by Instacart. Instacart must adapt. Below are options Instacart could consider:

1. Get acquired. Google, Facebook, Microsoft, Walmart or Cerberus Capital Management, among others, could acquire Instacart and create a re-imagined experience for groceries. Cerberus owns the grocery retailer Albertsons and is in the process of attempting to acquire Rite Aid. If given the choice of acquiring Rite Aid or Instacart, Albertsons should acquire Instacart. I believe Instacart, Boxed Wholesale and Sprouts are vastly more strategic to Albertsons than Rite Aid.

2. Instacart can sign a strategic partnership with or acquire Boxed Wholesale or any number of grocery distribution and product manufacturing companies. If Instacart and Boxed team up, the combined companies could expand deeper into grocery retailing, B2B and B2C bulk sales and distribution, private label grocery and CPG manufacturing, wholesale grocery distribution, etc. (Full disclosure: I recommended to Kroger in 2017 to acquire Boxed Wholesale with final instructions to be prepared to bid as high as $600 million to acquire Boxed. With an estimated value of $470 million, Boxed turned down Kroger’s offer of $400 million.)

3. Instacart can sign a strategic agreement with or acquire CommonSense Robotics. A combined CommonSense Robotics and Instacart offers very interesting possibilities for the grocery industry.

4. If able to raise the required capital, which Instacart has proven it can do, Instacart could acquire the online retailer Peapod from Ahold Delhaize. Peapod has exceptional opportunities for innovation and growth whether owned by Instacart or Ahold Delhaize.

5. Leading CPG companies would be wise to consider acquiring Instacart and copying the Walmart model. Walmart acquired Jet.Com to gain access to technology and a team of executives under the leadership of Marc Lore, who could breathe new life into Walmart’s stagnant e-commerce business. It worked. Instacart’s executive team is like the one at Jet.Com—visionary, smart and capable—and they would add tremendous value to a CPG company looking for ways to ignite innovation and growth.

I believe Instacart has every intention of exploiting its technology and business prowess to the fullest to grow and remain relevant. It is entirely plausible that Instacart, under the right circumstances, could open innovative Instacart-branded stores—especially if Albertsons acquires Instacart.

I’m not attempting to predict what Instacart will do, I am merely pointing out the fact that Instacart has options they can pursue to change and expand its business model.

The Ghost of Sam Walton

Aldi, Sam’s Club, Costco, Kroger, Whole Foods, Ahold Delhaize, Publix, Supervalu, Wegmans and Albertsons are all customers of Instacart. The retailers I listed just happen to be the leading grocery retailers in the United States and in the case of Aldi and Ahold Delhaize, global grocery leaders. Instacart serves over 200 grocery partners in the U.S. and Canada. Should the executives at these retailers consider the possibility that Instacart could become a competitor? Yes, they should and here’s why:

  • Instacart is analyzing and learning how the retailers it serves operate across every aspect of grocery retailing. Or, stated another way, grocery retailers are teaching Instacart their business models.
  • Instacart is learning everything possible about the consumer behavior of the customers at each grocery retailer that has a contract with Instacart.
  • Instacart is thoroughly identifying the strengths and weaknesses of each grocery retailer they serve.
  • Instacart is the leveraging data it has collected to perform long-term strategic planning and “What If?” analysis to identify the optimal future state grocery-store format, technology, operating model, pricing, assortment and supply chain to delight customers across the grocery industry.
  • Instacart’s highly-skilled executive team isn’t satisfied with the status quo and the team will modify the business model to position Instacart for growth and relevance—this means applying the lessons they’ve learned from the grocery companies they serve to their advantage.

My advice to grocery executives who don’t believe Instacart may one day become a competitor is to learn from the past. Kmart executives used to sit and drink coffee with Sam Walton, someone they viewed as nothing more than a folksy CEO of a small company named Walmart who wanted to learn everything possible about how Kmart operated as a company. Walmart went on to become Kmart’s most formidable competitor by applying the lessons Sam learned from Kmart and other retailers. The ghost of Sam Walton lives on.

Brittain Ladd is a globally recognized thought leader on strategy, M&A, and the digital supply chain.