Tag Archives: Retail

Supply Chain

The International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) have failed to agree upon and sign a new contract for the last six months.  Since last month, demand planning and forecasting has been difficult, and I’ve had to raise prices to mitigate stock outs since many of our POs haven’t landed.  The ports of Los Angeles and Long Beach are congested and there are chassis shortages because the union refuses to work.  Some of my containers have been rerouted to Oakland, but ILWU workers walked off for three shifts there too, causing further delays.

I received an email just now saying that ocean carriers announced a $1,000 congestion surcharge per 40-foot container.  I have dozens of containers sitting in the ports right now, and many of my SKUs are going to stock out if this inventory doesn’t land in the next week.  I’ve already increased my prices to slow sales volume, but I can only do so much.  One of the SKUs that is going to stock out in the next couple of days is a Key SKU, meaning that this SKU alone drives about 10% of the revenue streams of my business.   Not to mention that Q4 is hands down the busiest time of the year in retail – The seemingly small scale disruption caused by the longshoremen’s attempt to apply pressure on management could potentially have a large negative impact on the economy and suppress sales during the holiday season.

In spite of how irritating this situation is, and the additional costs of time and money it is imposing on me and Overstock, I’m quite fascinated with these dynamics.  It’s kind of interesting how big of a ripple effect labor slowdowns and contract negotiations between unions and employers can have.  I can understand why businesses dislike labor unions, but I also see how important it is for labor unions to stand strong to negotiate better terms and conditions.  If it weren’t for unions, we wouldn’t have the standard 8-hour work days, or 40-hour work weeks.  We wouldn’t have family or medical leave, employer-based health coverage, or even weekends off.  Labor unions have accomplished a lot of things that many of us take for granted.

Supply chain is much more interesting than I thought. 🙂 There are many different levers I can pull to keep my business running smoothly, but this union’s tactics are making it quite the challenge.  I probably look like the biggest weirdo because I’m excited and jazzed up about something that is not necessarily a good thing for my business, haha but it’s really cool to see all these moving parts in action.  I probably won’t be pissed off about this whole thing until I’m impacted more directly. 😛 Nonetheless,  I hope that the ILWU and PMA are able to reach a compromise soon that benefits both parties.

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Retail Business Models

I’ve been in love with my job at Overstock since day one.  The more I learn about the business, the more I become fascinated with the industry and how Overstock fits within it.  It’s so funny because I never would have expected to see myself working in retail, let alone data analytics, but I absolutely love both worlds.

I sometimes feel that Overstock operates a lot like a start-up in that its strategy isn’t very complete or well-defined.  From my perspective, the company seems to have goals that are all over the place, and it’s easy to get lost in all the noise because we’re not just a retailer, we’re also in the tech industry.  It’s difficult to understand who exactly our competitors are, because we have so many product lines and there are competitors springing up from every direction, channel and industry.  We don’t really compete directly with Amazon, because we use a differentiation strategy when it comes to our furniture department.  But we also don’t really compete head to head with exclusively furniture e-retailers like Wayfair because we sell more product beyond just furniture.  Then, there’s also retailers who were formerly brick-and-mortar stores moving into the e-commerce scene, like Wal-Mart and Sears.  Are they competitors too?

I think that having a clear, well-defined strategy, and sticking to it is the key to running a successful business.  Rather than trying to have a hand in everything, I think it’s important to build a core competency and own that competitive advantage.

One of my favorite entrepreneurs of all time is Tory Burch.  The story of her road to success is so inspiring, and I feel that she built her company with a distinct strategy in mind from the onset.  She didn’t aim to compete head on with top-tier designers, but instead brought her own classic-boho look into the high fashion scene at more affordable prices.  There are very few designers whose style identically matches her product line.  And while she introduced a broad range of items from swimwear, apparel, sunglasses and handbags, she built her competitive advantage around her Reva ballet flats and her classic tunics, new styles for which are introduced each year and likely support a majority of her revenue streams.  Similar to Hermes scarves and Diane von Furstenburg’s wrap dress, Tory Burch built a competitive advantage around one signature item for which her brand could be built around.  Within a decade, Tory became a multi-billionaire and represented a threat to already-established mid-level brands like Michael Kors, Coach and Kate Spade  (See guys, I’m not just obsessed with her product – I’m in love with her story!).

Another favorite retailer of mine is Zara.  Zara is known as a fashion-forward retailer, but it’s funny to me because their strategy does not involve their designers bringing new and fresh designs to life.  In fact, it’s the exact opposite – Zara buyers closely monitor the attributes of products that are depleted from Nordstrom and Saks’ shelves the fastest.  As soon as they buyers identify styles that are “trending”, these designs can be seen on Zara’s racks within two weeks.  And, they intentionally hold low quantities of each style so that they sell out fast.  Thus, Zara does not risk incurring additional costs of releasing designs that don’t sell, and by limiting the quantities they have available they mitigate the cost of holding weak economic inventory.  I love this strategy because they avoid the uncertainty associated with being an “early adopter” of new and innovative styles, but are able to maximize the benefit of profitability while the style is at its peak and before it reaches its life cycle.

Even though Overstock is not primarily a fashion or apparel retailer like Tory Burch or Zara, I feel that Overstock can learn a thing or two from their strategies.  By differentiating itself, Tory Burch was able to make herself stand out among other mid-level brands.  Had Tory Burch tried to compete head on with designers of all tiers, or had the company invested additional time in developing other signature items beyond their tunics and ballet flats, it probably may not have been as successful as its competitors.  And Zara, deciding not to be the trend-setter, but instead a damn close follower of already-popular styles, probably would not have as robust of a business model if it decided to be a trend-setter as well.  Overstock should considering companies like Amazon, Alibaba,and Rakuten as competitors.  We don’t have as wide of a selection as they do in many of our stores, because the basis of our competitive advantage is in furniture.  And Overstock should not try to predict the next big fad and stock up on new and fresh inventory in anticipation – it should continue what it does best and generate revenue off of styles and attributes that have already proven themselves successful and coveted by the market.

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