Blog postsJune 14, 2019
FLEXE Hub: Tariffs, tech, and Target
A roundup of the latest news on logistics, retail, and industry trends
Keeping up with the latest store closures, emerging tech, and what Amazon is doing could easily be a full-time job. Luckily for you, it’s ours.
Like you, we also can’t believe it’s the middle of June. In the news this week, we look at:
- Rising inventories
- Outdoor Voices’ new in-store tech
- Target’s revamped beauty aisle
Let’s talk logistics
Inventory levels are on the rise
According to the Bureau of Economic Analysis, private business inventories grew $123.7 billion in Q1. The culprit? Tariffs. Companies have been stockpiling goods ahead of tariff increases between the U.S. and China to avoid paying additional fees.
The challenge then becomes finding space for all that extra inventory. Thanks to eCommerce, the market for logistics real-estate is already incredibly tight and this is only adding to the problem. Retailers and brands have begun seeking out new solutions like on-demand warehousing to store excess inventory and avoid tariffs. FLEXE Co-Founder and CEO, Karl Siebrecht, said when the trade wars began, “we didn't immediately observe a drastic shift in demand, even in top import markets. But after three to six months, we started to see companies reacting.” It’s unclear how long the current situation will last, but retailers, brands, and manufacturers alike are facing the challenge.
The trouble with tariffs
Even Walmart is being affected by the tariffs. To deal, they’ve added new options to their Cost Change Scenario tool, which now allows vendors to “submit price increases needed to offset the recent rounds of China tariffs.” Reasons for price increases can include “tariffs, labor, transportation, and raw materials.” According to Walmart CFO, Brett Briggs, price increases will almost certainly have to happen due to the tariffs, and with this new tool, they have a system in which to implement them.
Outdoor Voices is betting on tech to enhance its in-store experience. They’ve recently added RFID (radio frequency identification) technology to all of their products—making it incredibly easy and efficient to find and manage inventory (even the inventory that’s accidentally fallen behind the displays). Store associates simply need to wave the scanner over their products to get inventory counts, or point it around the store to track down lost inventory. This both saves time and increases their inventory accuracy—they’ve gone from 70%-80% accuracy to 99%.
This helps them in two ways: More product can be found and sold to customers in the store, and they get valuable data around product sales and movement that leadership can use to inform future product development decisions.
Sephora better watch its back
Target’s coming for beauty retailers. Sephora and Ulta are in for some stiff competition with Target’s latest plan to revamp its beauty section. Target’s no stranger to the beauty industry, selling “$18 billion worth of beauty products and household essentials last year, more than Ulta and Sephora combined.” However, much of those sales consists of generic staples like soap or shampoo. Where they’re looking to expand is in the specialty beauty market.
Target is taking a two-pronged approach to meet this goal: Distribution deals with trendy direct-to-consumer brands like Flamingo razors and influencers like hair guru Kristin Ess, as well as a newly designed beauty aisle that feels a lot more like a Glossier and a lot less like a drugstore. Together, these tactics are putting the retailer in a position to steal some serious market share. Target’s strategy of “straddling the line between big-box and specialty retailer” has served it well in its clothing and home lines and could prove to be just as successful in the beauty realm.
What’s Amazon up to?
Breaking up with FedEx
Or more accurately, getting broken up with. Last Friday, FedEx announced that it would not be renewing its U.S. Express contract with the eCommerce giant, which is set to expire on June 30th. According to FedEx, the reason for this decision is so they can “focus on serving the broader eCommerce market.”
Don’t expect Amazon to take this too hard, though. Amazon has been building out its own delivery operations (Amazon Air, freight, and employee-owned delivery companies, just to name a few) and was already relying on UPS and USPS far more than it was FedEx.
FedEx is only losing about 1.3% of its total revenue by cutting ties with Amazon, which is a small price to pay for no longer having a partner that poses a threat to its business. What remains to be seen is if USPS and UPS will eventually come to the same conclusion—how long will they feel comfortable having a customer that’s also a competitor?
FLEXE news & events
The right delivery promise: How many locations do you need?
All of this talk about same- and next-day shipping got us thinking: Does everyone need to be in the race for the fastest delivery promise? And, does it really require the infrastructure that Amazon, Target, and Walmart have? Find out in the latest blog.
Move fast and don’t break things
Our co-founder and CEO, Karl Siebrecht, was interviewed on the Leaders in Supply Chain podcast about how on-demand warehousing is the AWS of logistics, the challenges and rewards of creating a new category, and what greatness means at FLEXE. Check it out here.