Consortium For Operational Excellence In Retailing (COER) @Wharton – Day 1 Quick Recap

Posted on Leave a commentPosted in ecommerce, General, Innovation, insights, Leadership, Logistics, Marketing, Mobile, Predictions, Pricing, Retail, Science, Trends
About Consortium For Operational Excellence In Retailing (COER)

Consortium for Operational Excellence in Retailing (COER) is focused on advancing retail operations from a combined academic and business perspective. We hold an annual conference in May, alternating between Harvard Business School and The Wharton School, where we present cutting edge academic research for participants to exchange ideas, thoughts, and challenges. COER attracts companies and academics from various parts of the world.

COER began as the Harvard/Wharton Merchandising Effectiveness Project in 1996, started by Marshall Fisher of The Wharton School and Ananth Raman of Harvard Business School. The academics in COER have published dozens of papers in leading journals and many case studies that are taught at top business school. The work produced by COER was summarized recently by Fisher and Raman in the book “The New Science of Retailing,” Harvard Business School Press. COER has facilitated the work of numerous doctoral students, many of whom currently are on the faculties of leading business schools.

COER grew out of the understanding that while the retail industry now has the analytical tools to make merchandising more effective, there are still many areas where academia can help to push the retail industry forward from an operational perspective.

Consortium For Operational Excellence In Retailing (COER) – Day 1 Quick Recap
Session One: Kicking the Growth Addiction
Presentation by Marshall Fisher, Vishal Gaur of Cornell University, and Herb Kleinberger of NYU
Key takeaways:
  • Growth (Open more stores!)
  • Denial (Should we open more stores?)
    • Stop opening stores when they stop providing a return.
  • Mature (We need to get more from existing stores.)
    • Drive out non-productive work.
    • Grow revenues faster than expenses. In business of scale, even a 1% or 2% increase can have significant bottom line impact if expenses are kept in check.
    • Focus on projects that return significant capital returns.


Presentation by Donald Ngwe of Harvard Business School and Paulo Campos of Zalora
Key takeaways:
  • Selectively inducing search friction on a retail website can increase margins by as much as 20%, without negatively affecting conversion. Cost neutral chance in selling strategy that promises significant potential returns.
  • Caveats: Increased search friction on a website may drive consumers to the competitors site Long-term performance may be harmed as consumers form expectations about an on-line store.
Presentation by Santiago Gallino of Tuck School of Business and Antonio Moreno of Kellogg School of Management
Key takeaway:
  • Retailers need to optimize on
    • 1) Price competition,
    • 2) Information & ratings,
    • 3) Fulfillment speed,
    • 4) Return policy, and
    • 5) Retailer brand promise.
Presentation by Chloe Kim, Marshall Fisher, and Xuanming Su, all of The Wharton School
Key takeaway:
  • A variant fulfillment model where the delivery trucks are positioned (parked) at optimal locations for customers to self pick-up. This study took at look deeper at what daily repositioning can do to sales. Using a random forest machine learning algorithm the team determined that the firm could realize a 25.6% increase in sales.
Session Five: Managing Customer Compatibility
Presentation by Ryan Buell of Harvard Business School
Key takeaways:
  • Customer satisfaction and loyalty are tightly aligned.
  • Greatest influence on customer satisfaction:
    • 1) The Customer – 94%. That’s right, it’s mostly out of your control.
    • 2) Employee – 2%
    • 3) Locations – 2%
    • 4) Processes – 1%
    • 5) Markets – 1%
  • If you are really good at 1 dimension which is most aligned with your brand promise, customer will typically apply positive attribution to your business’ other dimensions.
Presentation by Amitabh Sinha of Michigan Ross School of Business
Key takeaways:
  • Dynamic warehousing is the acquisition of warehousing space and services on-demand, in small increments, from a large pool of geographically spread warehouses, on a pay-as-you-go basis (OPEX).
  • However,  self-owned/operated networks may be cheaper depending on a number of variables. Lack of cost certainty. Systems integration.
  • There may be a optimal model that leverage both dynamic and self-owned/operated networks.
Session Seven: Data Driven Pricing
Presentation by Kris Ferreira of Harvard Business School
Key takeaways:
  • How can you combine predictive analytics to predict demand with prescriptive analytics to make tactical decisions?
  • There was a ~10% increase in revenue when models where applied.
Session Eight: The Effect of Social Influence on Demand
Presentation by Vishal Gaur of Cornell University
Key takeaways:
  • Two dimensions: Popularity “Share” rankings and Quality rankings.
  • Low quality (low reviews), should push Popularity “Share” rankings with customers.
  • High quality (high reviews), should push Quality rankings with customers.
Session Nine: Case Study—Coca Cola Vietnam
Presentation by Ananth Raman
Key takeaways:
  • Company’s can die from a thousand little cuts, not just one big wound.
  • Drive employee satisfaction
  • Drive lasting relationships with your customers.
  • Deliver what you say you are going to deliver.
Session Ten: A Conversation on Cyber Security
Ananth Raman in conversation with Kent Burnett of Dillard’s, Inc.
Key takeaways:
  • Security is a multi layered effort
  • Employees need to be trained and tested on security policy and procedures
  • It is an industry issue, which takes industry collaboration. Collaboration through organizations such as Retail Cyber Intelligence Sharing Center (R-CISC) –

(I will post a day 2 recap in the coming week.)

Is Omnichannel Even Possible?

Posted on Posted in ecommerce, Economy, Innovation, insights, Leadership, Predictions, Retail, Trends

I believe that 97.5 percent of today’s traditional retailers will NOT survive the earthshaking transformation that is currently occurring in their industry. Changes in the customer shopping behavior and preferences, rise of on-line shopping, local and state government push to increase minimum wage, and uncertainty in the global economy have placed quite a few obstacles in front of retailers.

In 2016, a significant number of store closings and bankruptcies are an indication of both shifting consumer preferences, and an unsteady economy. U.S. retail is an approximately $5 trillion dollar industry, and approximately 16 million people are employed in the U.S. retail industry according to the U.S. Bureau of Labor Statistics. An estimated two-thirds of the U.S. gross domestic product (GDP) comes from retail consumption. Therefore, store closings and openings are used an indicator of how well the U.S. economy is doing overall. However, total annual U.S. retail sales have increased an average of 4.5 percent between 1993 and 2015, with 2015 being effectively flat with ~3 percent growth; according to the U.S. Census Bureau.

Roughly 30 percent of the annual sales of the largest U.S. retail chains and almost 20 percent of the U.S. retail industry’s annual sales come from the Christmas holiday shopping season. This past holiday season, 2015, saw for the first time more shoppers choosing to shop on-line than in-store with 103m choosing on-line, vs 102m in-store; over the holiday shopping “opening” Black Friday weekend. Internet sales rose about 23 percent in 2015. Amazon continues to dominate U.S. retail. Amazon represented 51 percent of every growth dollar in on-line sales, and 26 percent for retail as a whole, up from 22 percent last year. Also, Amazon is far and away the most dominant mobile shopping app out there, boasting installation on 36 percent of all U.S. Android devices and ranking first in shopping app searches on Google Play during the critical holiday and Super Bowl selling seasons (October 2015-February 2016. If this rapid transfer of business from store sales to the Internet continues, and it seems it will, traditional brick and mortar retailers must look closely at their current business structure and decide where to cut/add administrative staff, which stores to close and where to open, in order to survive.

Labor represents approximately 30 percent of a retailers operational expenses. After years of national debate about the need to raise pay so families can earn a living wage, there is a push across the country to increase minimum wage rates. In July 2015, New York Gov. Andrew Cuomo announced a plan to raise the minimum wage for fast food-chain employees statewide to $15 an hour over the next few years. Over the past year, several other states have raised minimum wages, but all fall below $10 an hour, according to the National Conference of State Legislators. The city of Seattle is phasing in a plan to raise its minimum wage to $15 per hour, as has California. Going to $15 an hour represents a 50% rise from California’s current minimum pay of $10, and a 67% jump for New York. This certainly is a double edge sword for retailers, whereas on one end they should see an increase in consumption in these communities; they will also have to accommodate an increased cost component to operating their business.

Uncertainty and pessimism have dominated the economic and business news in recent months. While at face value the mood seems justified as many negative factors (China’s financial gyrations, volatility in oil prices, and the further weakening of the US economy) are colluding, the recent developments by themselves do not yet signal an imminent global economic recession. In the U.S., Solid domestic demand will help overall GDP growth at 2.0 percent in 2016, which is slightly lower than 2015 growth rate. In Europe, despite increased political risks, the short-term economic environment has actually improved faster than expected. As is the case in the U.S. economy, the European domestic demand continues to drive the current moderate recovery. In Asian, the growth rates of China, India and Southeast Asia are unlikely to see significant improvement in 2016 compared to last year. Chinese growth in 2016 is expected to stay the same as that of 2015 at 3.7 percent. In Latin America, rapid declines in oil and commodity prices negatively impacted Latin American economies, and exacerbated the ongoing troubles in the biggest economy in the region, Brazil. Africa is looking positive but uncertain. The prolonged decline in commodity prices, as well as weak growth in Nigeria and South Africa, will cause overall growth for the region in 2016 to come in at 3.7 percent – which is, though still an improvement from 2015, well below the average growth of the last few years. When it comes to international expansion, retailers need to maintain a sharp focus on those regions that will afford the greatest top-line growth for their core business.

Although the U.S. retail industry is slowly expanding, not recessing, the lingering effects of the Great Recession of 2008 can be seen in the dramatic shift in consumer buying habits and preferences. The post-recessionary retail industry is all about the empowered consumer. Traditional retailers are aggressively trying to meet the needs of today’s shoppers by implementing a number of service capabilities under the umbrella of Omnichannel, working to make broad based system changes to integrate various departments, leveraging Unified Commerce platforms, and reimagine the store at a reduced sq. ft. “experience center.” The most successful U.S. retail chains will need to be able to deliver what consumers expect or die.

I’m a student of retail history and disruptive innovation theory, and neither are favoring retail incumbents. In 1960, 316 traditional department stores existed. This included the likes of Macys, Dayton-Hudson, etc. Well, in 1962 discounters started to dominate the market (e.g. Zayres, Arlans, Gibson’s, Masters, Two Guys, Korvette). Of the original 316 traditional retailers, only 8 survived the insurrection of the discounter (2.5 percent). Many traditional retailers also tried to operate both a traditional model and discount model; all but one failed to make this transition. The only one of the 316 traditional retailers that successfully transitioned into a discounter, was Dayton-Hudson, which created the separate business unit named “Target.”

What many of the traditional retailers tried to do was effectively disrupt themselves; rule #1 of disruptive innovation theory is “an organization cannot disrupt itself.” The reason why an organization cannot disrupt itself is because at its core, a disruptive innovation must be separated from the core business, it cannot happen within the existing organization’s Resources, Processes, and Profit-formula (RPP) – RPP determines what a company can and cannot do:

  • Resources: Usually people or things – they can be hired and fired, bought and sold, depreciated or built, includes cash.
  • Processes: Include the ways that products are developed and made and the methods by which procurement, market research, budgeting, employee development and compensation, and resource allocation are accomplished. Your company’s culture is process manifested.
  • Profit-formula: The profit formula is how organizations internally determine which projects to select. Often consists of specific ratios targets, i.e. X% gross margin, IRR of Y, etc.

There are three main types of innovation:

  • Sustaining Innovation: Offering ever better products, to sell at ever better margins, to your very best customers; Incumbents fight new entrants; Innovation aligns with existing business model.
  • Low-end Disruptive Innovation: Offers “good enough” but not much more; targets “over-served” customers; figured out a fundamental different business model.
  • New-market Disruptive Innovation: Targets “non-consumption.” people who did not have ability or access to incumbent product; Make profit for lower price-per-unit sold than incumbent tech. Think dollar vs percentages; Product provides lower performance for the existing market but higher performance for non-consumers.

An innovation is not inherently disruptive, it gains the disruptive designation based on its deployment. In the case of ecommerce to traditional retail, ecommerce has elements of both a low-end and new-market disruptive innovation to traditional retail. In that it serves an over-served consumer with an option that allows for the purchase of goods and services at a lower than average price, with good enough service with respects to delivery service’s SLAs; while also making retail goods and services accessible to non-consuming customers due to the ubiquity of Internet access and through leveraging existing delivery services (USPS, FedEx, UPS).


Traditional vs. eCommerce
  • Fixed
  • Variable
  • Supply-Driven
  • Demand-Driven
  • High Margin
  • Low Margin


In the mid to late 90’s to early 2000’s, when retailers initially launched their fledgling ecommerce initiatives they established the new channel as a separate business unit. At the time, the idea was that it was such a foreign and high-risk initiative that it made more sense to keep it separate, and thus easier to dissolve without impacting the core business being brick and mortar. Now retailers have adopted an ideal that integrating ecommerce into their core business will help them in servicing the customer. There is a lot that is true with this ideal. If you have a single view of your customer, products, and inventory then theoretical you should be able to orchestrate a consistent experience indifferent of the consumer interaction medium (stores, on-line, mobile, social, games, devices, or call-center). In the early days of an ecommerce initiative taking place within a traditional retailer, where it receives secondary focus and contributes sub-par revenue, this can work. It will still have inefficiency, but scale has a way of masking waste. However, as customers engage more with a retailer’s ecommerce business, causing leadership to encourage more internal attention be paid to it, yet it still does not compare to traditional sales profitability, the impact of the diverging resource needs, processes, and profit-formula start to weigh heavy.

Leaders in traditional retail organizations need to rethink their corporate structures, allowing for their traditional and digital businesses to be separate business units. This will allow the ecommerce business to develop the resources, processes, and profit formula needed to win! If a disruptive innovation is moved into the “old” business, the existing business will implement the innovation in a way that serves the existing company, making it a sustaining innovation, or ruin the innovation that was built/acquired.

This may be painful; there is a possible path to divert this existential issue. If retailers continue down the path of putting their ecommerce business under the same roof as their traditional business there is a high likely hood that it could cause both businesses to fail, or otherwise be negatively impacted. Retailers should take the initial step of taking a deliberate strategy of separating the two businesses, allowing them to operate independently with their own resources, processes, and profit-formula. Given the particular nature of the customer interaction, each business should focus on the customers’ “Job to be done.” A job-to-be-done is a circumstances-based description of understanding your customers’ desires, competitive set, anxieties, habits and time-line of purchase. This is key to aligning on the customer and being customer centered organizations. Provide your traditional and ecommerce business units with “Good money,” which is money that encourages a focus on driving growth and profits, respectively. The two businesses should have independent administrative functions, including finance and HR. However, they should share customer data, product information, marketing assets, inventory insights, and fulfillment services. All interorganizational shared services should be accessible via discreet web services. In addition, ecommerce should leverage the core business’ supply chain where appropriate; augmenting to meet its unique needs, up to and including leveraging services like Amazon’s Fulfillment by Amazon (FBA), in order to support scaling. On this last point, the amount of capital and complexity of Amazon’s supply chain/fulfilment services should not be underestimated, and retailers should take a serious look at how Amazon should best be leveraged for success.

In taking the Disruptive Innovation course through Harvard Business School, one of the first things that Prof. Christensen presented was that it’s surprising how many brilliant managers dismiss disruptions to their industry, or business, until it is too late. Omnichannel is possible; I believe that there will unfortunately be a large number of organizations who will not execute an effective deliberate strategy [top-down, thoughtful and organized initiatives], and will dismiss emergent opportunities [unplanned initiatives that bubble up from within]. If you want to see the real strategy of a company, don’t listen to what they say; watch what they do. It is the profit-formula (not leadership) that controls the resource allocation process. Leadership must understand that managing the resource allocation planning criteria is key as it will guide what you do; do not believe that as leadership what you say will just happen. Strategy is temporary. Never believe that the strategy that helped you to be successful, will always be the strategy that keeps you successful. Skate to where the puck is going.


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“The Internet Economy” via @cdixon #innovation #AI #Video #Voice

Posted on Posted in Artificial intelligence, Development, ecommerce, General, Innovation, insights, Leadership, Predictions, Retail, Robotics


“The Internet Economy” @cdixon

“We are living in an era of bundling. The big five consumer tech companies — Google, Apple, Facebook, Amazon, and Microsoft — have moved far beyond their original product lines into all sorts of hardware, software, and services that overlap and compete with one another…” “Amazon’s vision here is the most ambitious: to embed voice services in every possible device, thereby reducing the importance of the device, OS, and application layers (it’s no coincidence that those are also the layers in which Amazon is the weakest). But all the big tech companies are investing heavily in voice and AI….” “This would mean that AI interfaces — which in most cases will mean voice interfaces — could become the master routers of the internet economic loop, rendering many of the other layers interchangeable or irrelevant…”

Read the full article on Medium

The funny things happening on the way to singularity #AI #economy #whatiswork #singularity

Posted on Posted in Artificial intelligence, Development, Economy, Innovation, insights, Leadership, Robotics, Science, Trends

People often ask me about the impact of 3D printing on jobs. Will the technology be a job creator or destroyer? The short answer is, it will take more jobs than it makes — and 3D printing is…

Source: The funny things happening on the way to singularity | TechCrunch

Facebook’s Messenger Bot Store could be the most important launch since the App Store #retail #bot

Posted on Posted in Artificial intelligence, Development, ecommerce, Innovation, Marketing, Mobile, Retail, Trends

If Facebook announces the “Messenger Bot Store” at F8, as many predict, it would be arguably the most consequential event for the tech industry since Apple..

Source: Facebook’s Messenger Bot Store could be the most important launch since the App Store

We Are Coming for You, Tesla, And You, Too, Google, Says Hacker Hotz #AI #Engineering #Leadership

Posted on Posted in Artificial intelligence, Development, Innovation, IoT, Leadership, Science

Hacker George Hotz is mobbed after telling SXSW he's coming for Tesla, GM, and Google.

The legendary hacker George Hotz, known by his nom de guerre “geohot,” who first came to public attention by hacking Apple’s (AAPL) first iPhone, spoke this morning at the South by Southwest conference about taking on Tesla’s (TSLA) self-driving car initiatives with his own garage efforts, a talk titled “I built a better self-driving car than Tesla.”By the end of the talk, it was clear he had numerous targets, including Alphabet’s (GOOGL) self-driving car efforts, despite mighty respect for the search giant.Hotz’s achievement, rigging up home made parts to an Acura ILX to make it self-driving, first came to prominence with an article in mid-December by Bloomberg’s Ashlee Vance. Judging by the thunderous applause at the end of the session, and the gaggle of those crowding Hotz to ask questions, Hotz made some converts and fans.

Source: We Are Coming for You, Tesla, And You, Too, Google, Says Hacker Hotz – Tech Trader Daily –