Neiman Marcus Has Quarter Loses Due to Distribution Challenges

When a luxury retail department store leader like Neiman Marcus makes tech adjustments in its' distribution system, it is clear that traditional warehousing is not what will succeed any longer. Distribution has moved to a more sophisticated approach to managing inventory and shipping, especially when faced with robust Amazon. The e-retail giant has mastered distribution and used Same-Day Delivery to revolutionize how we ship.

Yet, Neiman Marcus recent announcement shows that the retailer has some improvements to be made. Internet Retailer discussed in an article how thre retailers has had first fiscal quarter losses for 2017 due to the distribution problems that it is facing. Neiman Marcus had challenges implementing a new cross-channel merchandising system, which costs Neiman Marcus up to $35 million during its fiscal first quarter. This impacts sales revenue from the holiday season. Neiman Marcus reported online sales accounted for 29.2% of overall sales in the first quarter, which ended October 29th, at $315.1 million. This number is slightly down from $315.7 million from the previous year.

Neiman Marcus stated, “These issues primarily related to the processing of inventory receipts at our distribution centers, the transfers of inventories to our stores and the presentation of inventories on our websites. These issues prevented us from fulfilling certain customer demand in both our stores and websites that we estimate resulted in approximately $30 to $35 million of unrealized revenue.” Efficient distribution matters not only for physical stores, but also with online business. Without having the product in stores, it can effect sales, and without correct inventory to fulfill online orders, it effects on-time shipping. This then creates the inability to keep up with demand on both fronts.

In a filing with the U.S. Securities and Exchange Commission, Neiman Marcus revealed problems that related to the implementation of NMG One, its new cross-channel merchandising and distribution system. It resulted in a negative impact on online and offline sales. More specific numbers mentioned in the report were Neiman Marcus' earnings, which included:

• A year-over-year total comparable sales decline of 8.0%, compared to a 5.6% decline last year.
• Net revenue of $1.079 billion, down 7.4% from $1.165 billion.
• A net loss of $23.5 million, compared to a net loss of $10.5 million.

One way to improve omnichannels to facilitate online and offline sales is same-day delivery, which is what companies like Best Buy, PetSmart, Toys-R-Us, and others are doing. One prime example is Macy's, which uses its' physical store locations as close proximity warehousing and get product to shoppers fast. Macy's offers same-day delivery in San Francisco, Los Angeles, Seattle, Houston, Chicago, New Jersey, Washington DC, and more. With over 880 store locations, Macy's can fulfill online orders on a national scale, alleviating some of the pressure on its' distribution centers.

Neiman Marcus can do likewise, partnering with a Same-Day Courier like A-1 Express to develop a same-day solution to move inventory between stores, as well as fulfill online orders to customers. The Orlando Courier also has a nationwide footprint and can handle the volume Neiman Marcus needs. Like Macy's and Amazon, Neiman Marcus can generate sales growth with same-day delivery, turning more inventory and order fulfillment to their stores.

Reference: 12.15.16, www.internetretailer, Matt Lindern, Distribution problems cost Neiman Marcus during its first quarter

No More Upfront Fee For Amazon Fresh Same-Day Delivery

There are a number of retailers that would like to be ahead of Amazon. Yet, when the e-retailer shows it's moving on from not only expanding Same-Day Delivery with online products to same-day groceries AmazonFresh also, it's clear that the momentum of Amazon is dominating and just too hard to slow down.

The latest move from Amazon to expand AmazonFresh is not to the service itself, but the pricing model. Recode.com recently reported how Amazon is eliminating AmazonFresh upfront costs for members in an effort to attract shoppers to using it. The service use to be $299 per year, yet now will be $14.99 per month for existing Prime members only. This equates to $179 annually, which is a $120 difference from the $299 AmazonFresh yearly subscription. When a Prime members add in their $99 annual fee, their overall annual cost is only $279 annually with both services, instead of the $299 for just AmazonFresh. This is an impressive selling point for loyal Prime members that felt the upfront costs made AmazonFresh a little steep.

Subscription programs are being piloted by other big name retailers to compete with Amazon, in addition to a way to build customer loyalty online. Wal-Mart is rolled out testing for its' new ShippingPass service in July, offering free shipping with two-day delivery with a low annual $49 fee. This low-cost fee significantly lower than Amazon's, being half the cost and appears to be designed to attract shoppers with market entry pricing for the new program. Customers can go to WalMart.com and get a variety of products, including clothing, electronics, health products, and more. The online items with the ShippingPass logo next to them are eligible for the service.

Keith Anderson, vice president of e-commerce analytics startup company Profitero, commented on the upfront fee change. He stated, “This positions Fresh much more favorably. An incremental, annual $199, paid up front, was unprecedented and a huge hurdle for mainstream households to commit to, even if Prime members skew to affluence.” Having an upfront fee to get groceries just may not be sustainable for Prime members and regular shoppers, which has an adverse effect on the purpose of a subscription program. Valued-added services, coupled with low cost and convenience is what not only attracts online customers, but keeps them.

Anderson also commented on what the new fee structure means for Amazon. "[T]he change in fee structure could be a sign that Fresh is stabilizing and poised for more aggressive expansion. This is supported by how prominently the new fee is being promoted on Amazon's homepage in markets where Fresh is available.” When a huge cut in fees is implemented like Amazon has done, it affirms that there will be a strong customer base and volume for growth, especially with free same-day delivery already in place in major cities nationwide. It's only a matter of time that AmazonFresh will be close behind.

As the holiday season approaches, other grocery chains are taking their same-day grocery service to another level, namely Whole Foods partnering with Google to expand. Any retailer seeking to grow online with same-day delivery, needs to have a optimal and fast order fulfillment system in place to get deliveries done on time. A Same-Day Courier like A-1 Express can develop a sound same-day delivery system within major US cities, bridging store and online products. The Orlando Courier is a partner with the type of courier expertise retailers like Wal-Mart could utilize to pick up and delivery groceries from local stores nationwide.

Reference: 10.7.16, www.recode.net, Jason Del Rey, Amazon finally just proved it’s very serious about grocery delivery