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Next Big Thing: Instant delivery

BY HBSDealer Staff

Amazon's same-day delivery option has arguably shifted the goal posts for modern-day retailers.

But is there a way to outdo the e-commerce giant?

Pottery Barn is attempting that. The retailer recently teamed up with PICKUP, which offers a trademarked Instant Delivery service, to offer a multi-day event at its Dallas location that was devoted to instant gratification.

During Pottery Barn's Instant Delivery Days event in June, customers were able to take advantage of on-demand delivery by off-duty firefighters, military members and veterans on in-stock home decor and furniture.

PICKUP was founded in 2014 and is currently based in Dallas, where they offer Instant Delivery services to consumers and retailers.

Their Good Guy drivers —  off-duty firemen, military and veterans — meet the age-old need for "a few strong men and a pickup truck," and they can be hired directly via a mobile app.

The app itself works a lot like Uber. Users request a pickup, receive an estimate, and then watch the map in real time as a Good Guy approaches their pickup location.

They serve everyone ranging from interior designers to warehouse and big box stores, though this appears to be the first time a retailer has offered their services as a promotion directly to customers.

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Dow Chemical enacts job cuts per the Dow Corning deal

BY HBSDealer Staff

Dow Chemical Co is laying off 2,500 employees — which is 4% of its total workforce — as part of its takeover of Dow Corning.

“We are moving quickly and effectively to integrate Dow Corning and deliver the synergies that will drive new levels of value creation for our customers and generate even greater returns for our shareholders,” said Andrew Liveris, Dow’s chairman and CEO. “With these difficult but necessary actions, we are bringing together the best of each company’s talent and technology, accelerating Dow’s strategy to go narrower and deeper into attractive, targeted market sectors, and setting the stage for the new Dow – the world’s leading material science company.”

Dow Corning was previously a joint venture between Dow Chemical Co and Corning Inc. In December, Dow Chemical announced its plans to assume full control of Dow Corning, as well as merge with DuPont.

In addition to the layoffs, the company is also shutting down silicones manufacturing facilities in Greensboro, North Carolina, and Yamakita, Japan, as well as certain administrative, corporate and manufacturing facilities.

These actions will help the company achieve its cost synergy target run rate of 70% with 12 months of the transaction closing, and 100% within 24 months.

The company said it was positioned to capture $500 million in run rate annual synergies owing to the restructured ownership, including $400 million in cost synergies and $100 million in growth synergies.

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The flip side of retail consolidation

BY Ken Clark

Since 2010, volatility in the retail industry has increased 250%, resulting in $200 billion more of retail sales being “traded” among competitors, according to Deloitte’s “Retail Volatility Index."

What's this mean for home improvement? That depends, according to one of the report's authors. But it could be good for the independent dealer.

Volatility – a measure of disruption in the industry – is now being driven by fragmentation of market share as small and mid-level players collectively steal share from traditional retailers – rather than the consolidation of the big getting bigger, which has driven the industry for the last 100 years.

The title of the Deloitte Retail Volatility Index study puts things in perspecitve: "How 100 years of conventional wisdom is being disrupted."

“Traditional retailers are being subjected to death by a thousand paper cuts where the competition is no longer the big box retailer across the street, but rather a myriad of new players – this represents a sea change for the industry,” said Kasey Lobaugh, principal, Deloitte Consulting LLP and chief retail innovation officer. “Conventional wisdom might also say the loss of share by traditional retailers is simply an online vs. bricks-and-mortar battle, with traditional retailers losing the e-commerce game – which our research also shows to be untrue.”

Out of the top-25 brick-and-mortar retailers, 16 have robust and growing e-commerce sales that have consistently outperformed the broader e-commerce retail market. Between 2010 and 2015, these brick-and-mortar retailers grew their e-commerce business by an average of 20.9%, compared with a 15% growth rate in the overall market – indicating these retailers are actually taking share from those others who operate in the e-commerce space.

"A bit of an eye-opener for us was the amount of market share being traded," Jacob Bruun-Jensen told HBSDealer. "That's what we call volatility. We're seeing some companies gaining, and some are losing, and we're seeing that at occur at an increased level."

Bruun-Jensen pointed to three groups who are picking up market share, and one is smaller retailers who, "to a large extent are being enabled by new technology."

Also gaining are regional players that are expanding nationally. And the third group is, not surprisingly, Amazon.com.

So, is this report good news or bad news for the independent home improvement dealer or lumberyard? "I think it depends," said Bruun-Jenson. "There is a need for retailer to really focus on what they are good at, and what they want to stand for in the market."

Essentially, differentiation comes in two forms: experience, and product assortment.

"Unless the independent can find ways to compete with the large guys through differentiation, I think they are going to have a hard time," he said. "Those independent retailers that have either differentiated experience, or differentiated products they actually thrived against the larger guys."

In the bigger picture of all retail, barriers to entry have fallen which has fueled fragmentation. Fragmentation in particular gives smaller retailers the upper hand in the market as they focus on niche products and experiences compared to the big retailers who cast wider nets.

“On the surface, the broader retail market appears tepid, but underneath that surface, there is a lot of commotion,” said Bruun-Jensen. “When measured at its full depth, the market has become highly volatile and increasingly fragmented. Rather than a give-and-take among the top 25 retailers, there are numerous forces at play, and share is no longer just changing hands and consolidating with the big retailers.”

Not all is lost for larger retailers though; looking deeply at the set of retailers studied, Deloitte found that while the top retailers who offer the most differentiated product and experience (versus those who compete more so on value and convenience) show the highest compound annual revenue growth rate and margins, substantially beating the broader market.

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