All in with online, can J.C. Penney get up to digital speed?

I had a few occasions chatting with the IT people of the company in the past few years. They were reluctant to adapt to the on-line trend of the retail market. One year, they wanted to expand their on-line catalog business; the next year, they closed the on-line catalog business and moves the majority of their IT people overseas in the following years. This time, it appears that the new SVP, Mike Amend, hired from Home Depot, is ready to face the on-line retail business challenges.

This article highlights a lot of positive actions for the company to transition itself from a traditional retail business to an on-line one.

  • Recognizing its market strength: Research from comScore tells Penney that its customers have household incomes of $60,000 to $90,000, and they tend to be hardworking, two-income families living both in rural and urban settings. They don’t have the discretionary income to commit to membership fees.
  • Last month, Penney added the ability to ship from all its stores, which immediately made about $1 billion of store inventory available to online customers and cut the distance between customer and delivery.
  • About 80 percent of a store’s existing inventory is eligible for free same-day pickup.
    Last week, it offered free shipping to stores with no minimum purchase. Large items like refrigerators and trampolines are excluded.
  • JCPenney.com now stocks four times the assortment found in its largest store by partnering with other brands and manufacturers.
  • More than 50 percent of its online assortment is drop-shipped by suppliers and doesn’t go through Penney’s distribution. Categories added range from bathroom and kitchen hardware to sporting goods, pets and toys
  • JCPenney.com now has one Web experience regardless of the screen: phone, tablet or desktop.
  • Its new mobile app and wallet include Penney’s new upgraded Rewards program. Customers can book salon appointments on it. The in-store mode has a price-check scanner.
  • Penney set out to “democratize access to the data,” so that not only the technical staff could understand it, now dashboards and heat maps allow the artful side of the business — the merchants — to measure such things as sales to in-stock levels or pricing to customer behavior.

Reference: All in with online, can J.C. Penney get up to digital speed?

Amazon’s and Walmart’s latest moves confirm the death of the middle class as we know it

Amazon, whose Prime service claims more than 70% of upper-income households in the US — those earning more than $112,000 a year — is suddenly going after customers on government assistance who earn less than $15,444 a year for a one-person household.

The retailer on Tuesday announced it would slash the cost of its monthly Prime membership nearly in half, to $5.99 a month, for customers who have an electronic benefit transfer card, which is used for government assistance like the Supplemental Nutrition Assistance Program, better known as food stamps.

Reference: Amazon’s and Walmart’s latest moves confirm the death of the middle class as we know it

Gartner positions Microsoft as a leader in the Magic Quadrant for Operational Database Management Systems

This is the new Gartner magic quadrant for operational (transnational, OLTP) DBMS (Oct., 2015). It appears that Microsoft’s hard work and licensing structure pay off to beat Oracle. I was hoping to see the rankings of big data vendors, such as MapR, Cloudera, Hortonworks, and others, to be a lot higher but they are not. Maybe, big data applications are still limited to a few big name companies such as Google, Amazon, or Netflix, but not the majority of businesses. And, those big data businesses are more related to streaming and internet searches, less about point-of-sales and logistics operations. Or, maybe, traditional DBMS is already sufficient to meet most business needs with reasonable cost.

Reference: Gartner positions Microsoft as a leader in the Magic Quadrant for Operational Database Management Systems

An Amazon ‘pick-up’ store may be coming to a college near you

9/14/15 Mailroom by Mei Buzzell Students mail waiting

It makes perfect sense for Amazon to set up physical stores, or join existing Barnes and Noble stores in college campus, due to its shipping convenience and popularity in colleges. This would eliminate the need for those colleges to set up distribution centers in their campus, which is an completely unnecessary infrastructure cost to them.

Some people even suggested Amazon to buy out Postal Services. This is another interesting idea but does not actually solve the package problems to those colleges, because they simply do not have the space and labor to handle those increasing packages.

References:

How Are Organizations Using Amazon’s Cloud? Some Interesting Statistics

With Amazon finally lifting the kimono and admitting to the world that its Amazon Web Services (AWS) division is a massive (and fast growing) part of the business, it is interesting to look into what all of that $6 billion worth of revenue is being spent on.

One thing is for sure, and that is, regardless of posturing by other vendors, AWS is the largest pure-cloud vendor. That is; AWS sells more infrastructure as a service (IaaS) products than its competitors Microsoft, Google GOOGL -0.34%, IBM, and Rackspace.

Reference: How Are Organizations Using Amazon’s Cloud? Some Interesting Statistics

Roundup Of Free Cloud Computing Courses, 2015: Amazon Offering A New Online Course On Big Data

Amazon Web Services is now offering a free online course on Big Data , and is also offering an instructor-led course on Big Data on AWS. The AWS Training site has also includes sections on getting started with AWS, including AWS Essentials and self-paced labs.

Reference: Roundup Of Free Cloud Computing Courses, 2015: Amazon Offering A New Online Course On Big Data

Is E-Technology A Good Idea for Publishers?

With increasing popularity of e-books and e-book readers, book stores and on-line book retailers are promoting readers their e-book readers and e-books, whereas book publishers and, especially, magazine and newspaper publishers are slow to adopt this technical trend. So, why is there a big gap between the sellers and publishers? Why publishers are reluctant to adopt the e-technology concept?

This article shows you that e-book is actually a good business from the view point of economics, because it changes the landscape of book, magazine, and newspaper sales.

The following figure shows you an example of a book sale. The example assumes a fix cost of $2,000, covering all of the cost to make a book ready for publication, a variable cost of $10 per book, and a sales price of $20 per book. The example does not consider volume discount and marketing related cost, assuming marketing campaign is independent with and is needed for both media types, i.e., paper or electronic format.

ebook1If we look at sales volume from 0 to 300 books, the red line in the figure shows you the fix cost line over the sales volume, which is independent from the volume. The green line shows the total cost by adding the fix cost to the variable cost, based on the sales volume and the variable cost of $10 per book. The purple line shows the total revenue over the sales volume based on the unit price of $20 per book. Note that the green line intercepts the purple line at the sales volume of 200 books. This is the break-even point for paper book sales, where the total cost equals to the total revenue. If the sales volume is greater than 200, the publisher makes a profit; if the sales volume is less than 200, the publisher has a lost.

If the publisher sells e-books on its own web site instead of paper books, it essentially eliminates the variable cost. (If e-books are sold on a third party web site such as Amazon, the variable cost is not zero but is still a lot smaller, compared to the variable cost of paper books.) That is, the resulting e-books are just a set of computer files in common e-book formats and are ready to be distributed to e-readers and computers over computer networks or personal storage devices. If we consider only fix cost in the figure, the purple line intercepts the red line at the volume of 100 books and reduce the break-even point from 200 books to 100 books. It greatly increases the chance of making a profit for the publisher. As the sales volume increases in the figure, the profit of e-books sales is far greater than the sales of paper books.

In the following figure, the red line shows you the profit line of e-books and the green line shows you the profit line of the paper books. As a result, the blue line shows you the difference between the e-book profit and the paper book profit and it is an increasing line in linear trend.

ebook2When volume discount is considered and is assumed to increase as sales volume increases, it creates diminishing return (also profit) for larger sales volume. The volume discount will have impact to both the e-book and paper book profit lines. Although e-books will have more profit margin for discount due to their higher profit than paper books, the resulting profit difference curve would become a concave curve due to the diminishing return as a result of the discount.

Note that the example does not consider selling e-books with packaged storage devices, because it is not the way e-books are sold today, and will not be in the future; otherwise, the additional sales of storage devices with the e-books essentially incur variable cost again and brings the sales to be no better or worse than the sales of paper books.

Therefore, the sales of e-books changes the landscape of book sales by eliminating the variable cost from the sales model, reduces the break-even point, and gives publishers greater power to make more profit than selling paper books. So, it is a good idea for publishers to adopt e-technology.

Beyond the scope of this article, publishers have the following reasons not to embrace the e-technology completely today. I list them below with my comments. Overall, I do not suggest to ignore them. I agree that they need to be properly addressed to protect the intellectual property of both publishers and authors. But, they should not stop or delay the publishers to use e-technology.

  • Piracy: e-books are easy to be copied and shared for free. I think price plays a very important role in piracy. When price is too high, people cannot afford and this leads to piracy. A good example is the movie and music sales over CDs, DVDs, and Blue-Rays. Because of their high price, piracy of movie and music is high, although those studios try all kinds of methods to prevent piracy without success, such as delaying the release of new movies or hiring lawyers to pursue legal actions on distributors and consumers. For book, music, and movie lovers, they always like to keep a private copy of the item they like legitimately, when the price is right. This has been shown with the book market and recent price-reduced sales of music over iTune and Amazon. When the price is reasonable, you see increasing sales, which shows more people are spending money to buy instead of copying them.
  • Lack of affordable color display: all e-ink readers are black-and-white; only computers and computer tablets support color displays but they are expensive or not portable enough. For books and articles, I think content and comfort are more important than color display. This is why people are still buying e-readers, because they are affordable, convenient, light weight, and easy to eyes. I do agree that some newspaper and magazine articles do need the support of color display but people can still live with black-and-white display until color e-ink or other better color display technology becomes available, affordable, and comfortable.