(708) 946-9792 Inquire

Retail Ecommerce Revolution Intensifies

Statistics released since last issue’s article about the ecommerce revolution depict more vividly how it is completely transforming the retail industry.

At the same time, consumer spending figures for 2015 reported by the government cast doubts about the strength of the economic recovery and may have helped feed the recent stock market selloff.

In the last issue of ACWI Advance we noted divergent early reports about consumer spending during the holiday season (AA 1-15- 16, P. 1). It now appears that some of those reports were far too rosy.

More recently the National Retail Federation said retail sales – excluding cars, gas stations and restaurants — decreased 0.2% seasonally adjusted from November, and rose 3.1% unadjusted from the same period in 2014.

Total holiday sales in 2015 increased 3% to a total of $626,140 billion. However, before the buying began NRF had forecast 3.7% growth, including online sales. Even the good weather had a negative impact.

“Make no mistake about it, this was a tough holiday season for the industry” admitted NRF President and CEO Matthew Shay. “Weather, inventory challenges, advances in consumer technology and the deep discounts that started earlier in the season and that have carried into January presented stiff headwinds as retailers competed with one another and their own bottom line.”

However, the organization’s top number cruncher remained optimistic. “While the timing is uncertain there are positive prospects for improvement, including recent job gains that will help lift income and earnings, and a healthy housing market that should provide some support for [retail] spending,” observed NRF Chief Economist Jack Kleinhenz.

The Commerce Department estimated retail trade sales were down 0.2% from November 2015, but up 1.6% from 2014.

Total retail sales – including food services – were up 2.1% for all of 2015 from 2014. Total sales for the October- through-December 2015 period were up 1.8% from the same period in 2014, the government reported.

The bright spots were sporting goods, hobby, book and music stores, which were up 7.6% from December 2014, and nonstore retailers, who were up 7.1% from the previous year.

Of course, timely delivery is crucial to ecommerce growth. According to Dr. Jim Tompkins, CEO of Tompkins International, the major package delivery carriers performed just well enough this holiday season to support the trend away from bricks-and-mortar stores.

“FedEx performance held up well, UPS suffered a drop in on-time deliveries, as they continue to manage their costs, while increasing capacity for the seasonal peak,” he pointed out. “Luckily, there has not yet been a repeat of 2013,” which saw widespread service failures during the holidays.

The facts seem to bear him out:

  • More than 1.3 billion packages were delivered in the month of December 2015.
  • The Big 3 in December were the U.S. Postal Service at 42%, UPS at 32% and FedEx at 17%.
  • Other delivery companies took a record share of 9% of that business.
  • Overall delivery volume went up 9% compared to December 2014
  • On-time delivery performance for secure ecommerce purchases was measured at 95% for FedEx and 91% for UPS.
  • When it came to overnight and two-day deliveries, FedEx experienced 99% on-time performance and UPS was at 96%.

“The challenges have resulted not in the volume of dollars being shipped by companies but rather by the impact of smart phone orders,” Tompkins said.

Smartphones have for the first time registered a significant volume of orders with customers placing more but smaller orders more often, he noted.

“As one-click mobile checkout becomes more prevalent the order size will continue to shrink and thus more deliveries per dollar of sales will take place,” Tompkins added.

Although ecommerce purchases made from smartphone remain a small chunk of the overall ecommerce sales, they leapt from 14% of orders during the 2014 holiday season up to almost 20% in November and December of 2015.

Some small retailers bridle at consumers who bring their phone into stores to compare prices (a practice called showrooming). However, many of their larger competitors are embracing the practice, which may save bricks-and-mortar retailing.

A consumer survey by retail ecommerce software provider SOTI Inc. revealed that 73% said the availability of in-store mobile technology signals better customer service and loyalty, an increase of 26% over last year. Also, 66% said they’re more likely to shop at retailers offering a mobile technology shopping experience, an increase of 52% year over year, and 93% said they would like to see more stores using in-store mobile solutions.

CP Asks DOJ Probe Of Rival Railroads

Canadian Pacific has asked the Justice Department to open an antitrust investigation of other North American Class I railroads, asserting that they conspired to derail its acquisition of Norfolk Southern.

The NS board of directors has rejected three offers from CP to acquire and merge with NS. CP’s merger efforts also have drawn criticism from major American lawmakers and shippers.

A letter from the Surface Transportation Board to members of Congress appears to show that CP would have a tougher go of obtaining approval for the merger arrangement than it has publicly asserted (AA, 1-15-16, P. 5).

CP believes conversations between executives from Union Pacific, BNSF and CSX railroads may have violated antitrust law. “We are deeply concerned that these actions are being taken for the primary purpose of restraining trade” in violation of U.S. antitrust laws, an attorney for CP told the Justice Department in his Jan. 19 letter.

“According to statements reported in the press, some of these railroads are concerned about the damage that increased competition from a CP-NS combination would have on ‘shareholder value’ and on their own profitability,” he added.

The attorneys also said CP “ultimately concluded the unprecedented action of major competitors organizing to block a new entrant from enhancing competition to the U.S. merited the attention of the antitrust authorities.”

Seeking to counteract some of the opposition to the merger with NS, CP also released a White Paper study to support its assertions that combining the two railroads would lead to alleviating congestion at the Chicago rail hub. CP claims the merger would accomplish this by allowing rail shipments to bypass Chicago over the new CP-NS network.

CA Expands Labor Commissioner Reach

As of Jan. 1, California employers now have to deal with a Labor Commissioner who enjoys enhanced authority to enforce judgments for unpaid wages under the state’s new Fair Day’s Pay Act.

“California employers and business owners face costly new liabilities for failing to comply with California’s many wage and hour laws,” says attorney Jamerson C. Allen of Jackson Lewis PC.

In addition to reviewing their wage and hour policies and practices, he advises employers to consider training managers and supervisors on the need to comply with California’s wage hour laws and the risk of individual civil and criminal liability if they fail to do so.

The new law imposes individual liability on owners, officers, directors, or managing agents of an employer in the same manner as the employer firm for violations of any wages or hour provisions.

The commissioner now can issue stop work orders against employers (and successor employers) who have judgments against them for nonpayment of wages. Levies can be issued against employers’ bank accounts and accounts receivable, and liens placed against real estate and personal property.

An employer who fails to satisfy a final judgment for nonpayment of wages 30 days after the time to appeal has expired (and where no appeal is pending) must cease operations, unless it obtains a bond for $50,000 to $150,000.

The commissioner can impose a $2,500 civil penalty for failure to comply against an employer and “any other person acting on behalf of an employer.” Failing to pay a penalty can subject employers to additional penalties of up to $100,000.

The commissioner may issue a stop work order to employers conducting business in violation of the bond requirements. Employees affected by any ordered work stoppage must be paid for up to 10 days’ lost time. An employer, owner, officer, director or managing agent who fails to comply with a stop work order is guilty of a misdemeanor punishable by imprisonment of 60 days or by a fine of up to $10,000.

Leave a Reply

Your email address will not be published. Required fields are marked *