Mickey Drexler And The De-Schlepping Of Retail



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The boxes are placed on a cart when customer orders are assembled at the Jet.com Inc. order processing center in Kansas City, Kansas, USA. Photographer: Daniel Acker / Bloomberg

Millard "Mickey" Drexler, the former CEO of J. Crew Group and Gap, is a lot of things. Shy and withdrawing is not among them. Admittedly, Drexler had his ups and downs, his victories and defeats. But he is always interesting. During my only conversation with him (over the phone when I was in charge of strategy and multichannel marketing within the Neiman Marcus group), he had the attention of a gnat on an Energy 5 bender. Hour. Between barking his assistant, he dictated a litany of things that we were doing badly at Neiman and that I had to address to STAT (wait, am I working for you?). I left the teleconference with a long list of & nbsp; items to discuss with my superior, more than ready for nap. Good time.

Drexler has& nbsp; most of the time, she has escaped the radar since leaving J. Crew, but has reappeared in a typical style last week. Annual Retail Forum / Retail Trade Radicals& nbsp; event organized by Columbia Business School & & nbsp;The Robin report. Among his & nbsp;a lot of provocative comments& nbsp; the one that caught my attention is what he called "unsubscribing from the retail business". "Why supermarket schlep paper towels? Why Schlep dog food? Why schlep a lot?" He asked. And he's right. Of course, bringing home heavy and bulky items from a store has always been a daunting task, especially if you take public transport or live in an apartment. The most powerful change is the number of companies that have emerged to solve this problem, including & nbsp; Boxed, Jet and Amazon.

Me (and others) made the distinction between shopping and shoppinghighlighting the fact that e-commerce is rapidly gaining market share in the former, where products are more commodity-oriented and where price and convenience are paramount. Purchases, on the other hand, are more experimental and tactile and, as a result, pure online shopping has not gained so much appeal. As Drexler describes it, the disembedding responds to a very particular subset of customer needs, bringing clear and obvious value. From my own experience, once I discovered the ease of buying bulky and heavy items online, I did not turn around. Although the purchases are not very large, I have spent almost all of the expenses in some categories of traditional groceries to Amazon and others. & Nbsp; It is clear from the data that I am far from isolated.

At one level, this dynamic is pretty obvious. Basically, this simply explains some of the fundamental reasons why online shopping now accounts for 10% of all retail sales and continues to grow much faster than retail. What is relatively different from the de-bottling phenomenon, however, lies in both the customer value and the underlying economy for the retailer.

There are many categories of retailers where the customer can be largely indifferent whether he buys at a store or online.or where they regularly allocate their expenses between the chains, according to their episodic need for sales assistance, the desire to touch and feel the product or a pure impulse. This is not true when we are motivated primarily by our desire to remove. Once we know what we want and we have a supplier we trust, there is really no reason not to buy online because a physical store experience adds little or no perceptible value.

Yet from the retailer's point of view, it's often quite different. Since brick and mortar are largely fixed-cost activities, the marginal profitability of a large bag of dog food or 48 packs of toilet paper or a cash register is a problem. Sparkling water S. Pellegrino (my favorite) is generally good, even at very advantageous prices. Conversely, for online players, the economic situation is generally catastrophic because of the nature of the variable costs of direct sales to consumers. The specific reasons why customers love the de-schlpping of the retail business are the reason why e-commerce vendors generally hate it. If it's big, bulky and heavy, storage, handling and shipping are expensive. Logistics costs in relation to the gross margin generated in dollars generally render these orders unprofitable. What's great for consumers is ugly for online retailers.

The question is not, therefore, whether the defogging of the retail trade is good for consumers. The question is whether this can be economically supported as it evolves. The nature of the Amazon Prime Program means that a decent percentage of the e-commerce giant's orders are not profitable. The prevalence of free delivery and significant discounts to acquire new customers means that some online-only players perform many transactions that generate negative cash flows. Ultimately, this refers to the interaction between the unit economy and the value of the customer's life. Most customers are smart enough to go where they will get the best deal. They will "abuse" retailers (online or offline) who consistently offer their customers too good value to be true (see also Uber, Lyft and WeWork). In the case of Amazon, & nbsp; & nbsp; offers the advantage of a relatively low customer acquisition cost, efficient supply chain and offers a range of products and services so vast that the vast majority of customers have a good value over the entire lifetime, even if it has transactions that are losers.

For brands that offer great customer value, but suffer from economic problems related to delivery and high acquisition costs (Boxed, Wayfair, among others), the way forward is much less secure. Of course, it is impressive to generate consistently strong revenue growth. Still, it turns out that it's not really surprising that the service offering and pricing are becoming too good to be true. & Nbsp; For consumers, it's great when investors are willing to subsidize a new business model that offers real customer utility. That this business model is economically sustainable in the end is another problem. Time will tell us. In the meantime, as long as some brands agree to set their prices so as to avoid the hassle of going home with the largest and most bulky items I regularly buy, I will continue to buy. I will let them ask themselves if they can sell at a loss and make up for lost time.

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The boxes are placed on a cart when customer orders are assembled at the Jet.com Inc. order processing center in Kansas City, Kansas, USA. Photographer: Daniel Acker / Bloomberg

Millard "Mickey" Drexler, former CEO of J. Crew Group and Gap, represents a lot of things. Shy and withdrawing is not among them. Admittedly, Drexler had his ups and downs, his victories and defeats. But he is always interesting. During my only conversation with him (over the phone when I was in charge of strategy and multichannel marketing within the Neiman Marcus group), he had the attention of a gnat on an Energy 5 bender. Hour. Between barking at his assistant, he dictated a lot of things that we were doing badly at Neiman and that I had to address to STAT (wait, am I working for you?). I left the teleconference with a long list of topics to discuss with my boss, more than ready for a nap. Good time.

Drexler has Since J. Crew's departure, he has largely left the radar, but he has re-emerged in a typical style at the annual Retail Forum / Retail Radicals event organized by the Columbia Business School and The Robin Report. Among his many provocative comments, the one that caught my attention is what he called the retail detachment. "Why supermarket schlep paper towels? Why Schlep dog food? Why Schlep many things?" He asked. And he's right. Of course, bringing home heavy and bulky items from a store has always been a daunting task, especially if you take public transport or live in an apartment. The most powerful change is the number of companies that have emerged to solve this problem, including Boxed, Jet and Amazon.

I have (as well as others) made the distinction between shopping and shopping, highlighting the fact that e-commerce is rapidly gaining ground in the former, where products are more commodity-oriented and where price and convenience are paramount. Purchases, on the other hand, are more experimental and tactile and, as a result, pure online shopping has not gained so much appeal. As Drexler describes it, the disembedding responds to a very particular subset of customer needs, bringing clear and obvious value. From my own experience, once I discovered the ease of buying bulky and heavy items online, I did not turn around. Although the purchases are not very important, I have almost completely abandoned the traditional grocery shopping in certain categories instead of going through Amazon, among others. It is clear from the data that I am far from isolated.

At one level, this dynamic is pretty obvious. Basically, this simply explains some of the fundamental reasons why online shopping now accounts for 10% of all retail sales and continues to grow much faster than retail. What is relatively different from the de-bottling phenomenon, however, lies in both the customer value and the underlying economy for the retailer.

There are many categories of retailers where the customer can be largely indifferent whether he buys at a store or online.or where they regularly allocate their expenses between the chains, according to their episodic need for sales assistance, the desire to touch and feel the product or a pure impulse. This is not true when we are motivated primarily by our desire to remove. Once we know what we want and we have a supplier we trust, there is really no reason not to buy online because a physical store experience adds little or no perceptible value.

Yet from the retailer's point of view, it's often quite different. Since brick and mortar are largely fixed-cost activities, the marginal profitability of a large bag of dog food or 48 packs of toilet paper or a cash register is a problem. Sparkling water S. Pellegrino (my favorite) is generally good, even at very advantageous prices. . Conversely, for online players, the economic situation is generally catastrophic because of the nature of the variable costs of direct sales to consumers. The specific reasons why customers love the de-schlpping of the retail business are the reason why e-commerce vendors generally hate it. If it's big, bulky and heavy, storage, handling and shipping are expensive. Logistics costs in relation to the gross margin generated in dollars generally render these orders unprofitable. What's great for consumers is ugly for online retailers.

The question is not, therefore, whether the defogging of the retail trade is good for consumers. The question is whether this can be economically supported as it evolves. The nature of the Amazon Prime Program means that a decent percentage of the e-commerce giant's orders are not profitable. The prevalence of free delivery and significant discounts to acquire new customers means that some online-only players perform many transactions that generate negative cash flows. Ultimately, this refers to the interaction between the unit economy and the value of the customer's life. Most customers are smart enough to go where they will get the best deal. They "abuse" retailers (online or offline) that consistently offer a customer value too good to be true (see also Uber, Lyft and WeWork). In the case of Amazon, it offers the advantage of its relatively low customer acquisition cost, the efficiency of its supply chain and the diversity of its products and services, so that the vast majority of its customers have good value over their lifetime, even if it does some losing trades. .

For brands that offer great customer value, but suffer from economic problems related to delivery and high acquisition costs (Boxed, Wayfair, among others), the way forward is much less secure. Of course, it is impressive to generate consistently strong revenue growth. Yet, it is not really surprising that the service offer and pricing are too good to be true. For consumers, it's great when investors are willing to subsidize a new business model that offers real customer utility. That this business model is economically sustainable in the end is another problem. Time will tell us. In the meantime, as long as some brands agree to set their prices so as to avoid the hassle of going home with the largest and most bulky items I regularly buy, I will continue to buy. I will let them ask themselves if they can sell at a loss and make up for lost time.