Shoppers use smartphones to locate brick & mortar stores

Americans have put down their turkey drumsticks and picked up their smartphones, which means the 2015 holiday shopping season has begun in earnest. But a new survey shows that only four in ten shoppers use their phones to actually make purchases.

To be sure, the smartphone is an indispensable commercial tool, with 78 percent of American consumers planning to use their phones while doing their holiday shopping, up from 72 percent in 2014, according to Deloitte’s 2015 Holiday Survey.

But only 41 percent of survey respondents said they used these powerful pocket computers to make a purchase online.

By far the most popular way that survey respondents used their smartphones while holiday shopping was simply getting store locations (60 percent) to help them visit brick-and-mortar shops.

The next most common uses included: compare prices (55 percent), browse online (50 percent), read reviews (46 percent), get product information (45 percent), get/use coupons (45 percent), check product availability (43 percent), access social networks (39 percent), and scan barcodes to get information (27 percent).

No one can dispute that e-commerce is a fast-growing trend with big implications for fulfillment strategies and distribution center operations, but the results show that brick and mortar retailing is here to stay.

The poll of 4,009 consumers was commissioned by Deloitte and conducted online by an independent research company between September 11–22, 2015. To see the complete survey, visit http://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-2015-holiday-survey-results.pdf. 

“Shark Tank” startup safeguards home deliveries

Americans have eagerly leapt into the 2015 holiday shopping binge, with millions of e-commerce purchases already speeding to home addresses around the nation.

Distribution centers are humming with activity to meet the demand, but despite the sheer volume of Christmas and Hanukkah gifts being delivered to doorsteps, one link in the e-commerce chain is still rusty—security.

Shoppers frequently face two frustrations as they try to take possession of their purchases. First, timing the arrival of a valuable item is difficult, since most couriers can provide only a rough estimate of their schedule for delivering a specific parcel at a certain address.

The second persistent challenge in the e-commerce ecosystem is theft. As carriers drop cardboard boxes and pouches at empty homes during working hours, lurking thieves sometimes pluck the deliveries right off the building’s front steps. When the buyer arrives home hours later, he or she assumes the item was never delivered and calls the retailer to complain.

Now a company has sprung up to fix this leak in the flow of e-commerce. myDoorman Inc. is a San Francisco-based startup that got some of its initial startup capital in January 2015 on the TV reality show “Shark Tank.” An additional $1.5 million quickly followed, when a group of venture capital firms stepped up in June 2015.

Promising to bridge the gap between a FedEx or UPS courier delivering a package and the time the consumer actually arrives home, Doorman allows customers to schedule their own deliveries as late as midnight, seven days a week.

For a fee, subscribers simply substitute the nearest Doorman location for their home address, and their online purchases will be delivered to a secure location. Doorman then sends a notification to the buyer’s smartphone app, and the user can schedule a time between 6pm and midnight to have the package delivered to their own home.

In a world where felonious Grinches resort to holiday burglary, it’s good to know there is still a place where Santa can safely deliver a holiday package.

A step closer to better roads

As an industry that relies on our nation’s roads to move goods from place to place, it is refreshing to see Congress finally acting on behalf of infrastructure improvements.

Last week, the House of Representatives approved a six-year, $325 billion bill to fund our nation’s surface roads. The Senate approved a similar plan in July. The legislation is now before House and Senate conferees to reconcile the two bills. Both chambers will then have to approve the conference version. Hopefully, it will soon be in front of President Obama for his signature.

One of the significant measures in the House bill is a National Highway Freight Network that will provide funds and structure for connections to ports and intermodal facilities. This is an important piece considering that these connections are vital to logistics operations.

Another key provision is the requirement that the Department of Transportation set up a program to investigate granting modified commercial driving licenses to what it terms “novice licensed drivers.” These would be drivers between 19 years, 6 months and 21 years of age. Currently commercial licenses are available only for drivers over 21. This potentially opens the doors to a pool of drivers before they begin other careers and should help to fill the ranks where shortages have been persistent for years. Personally, I feel this should extend to drivers 18 and up, but this is a step in the right direction.

Unfortunately, the House also killed a provision that would have raised the weight limit for trucks from the current 80,000 pounds to 91,000 pounds. This is despite evidence that shows such a raise would better utilize existing capacity without compromising safety. It would reduce miles driven, energy consumed, and the total number of vehicles on our highways. Hopefully such a measure will be considered again in the future.

On the whole, it was a good week for transportation advocates.

The Echo chamber

 

Doug Waggoner chuckled as he answered the question the only way he legally could. The chairman and CEO of Chicago-based freight broker Echo Global Logistics Inc. was asked at an Armstrong & Associates Inc. 3PL conference last month, in the wake of UPS Inc.’s $1.8 billion acquisition of hometown rival Coyote Logistics LLC, had Echo been approached by a possible buyer that wanted the same type of skills that UPS had identified in Coyote, namely the ability to fill UPS’ underutilized trucks and reduce its network variability?

As the head of a publicly traded company, Waggoner said he couldn’t answer that question under any circumstances. But Waggoner did applaud UPS and Coyote for agreeing to a deal he said makes perfect sense for both.

These days, Waggoner can afford to be jovial and magnanimous. His company is in excellent shape, with solid positions in truckload, less-than-truckload, and intermodal brokerage to accompany Echo’s footprint in managed transportation. From its start in 2005 as an LTL broker, Echo has penetrated the exponentially larger truckload market with much success. And it closed June 1 on its $420 million purchase of rival Command Transportation, a broker that focuses exclusively on the non-contract, or spot, market and is strong in the East Coast and Southeast, balancing Echo’s well-entrenched positions in the upper Midwest and West Coast.

Like other brokerage executives, Waggoner has preached the mantras of geographic coverage and shipment density. Echo’s third-quarter numbers bear out that strategy. Its third-quarter gross revenue increased 40 percent year-over-year to $450 million. Net revenue increased by 50 percent to $87 million from the third quarter of 2014, numbers that included 8 percent organic growth. Net transport margins rose to 19.4 percent, up year-over-year and sequentially. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 46 percent. Truckload volume increased by 134 percent over the third quarter of 2014, results that were boosted by Command’s contribution. The tailwind from Command notwithstanding, these were very good numbers in an otherwise subpar macro environment.

While Command’s volume growth was stunted by a spot market that’s been weak virtually all year, its value will show through if and when capacity tightens again. Meanwhile, Echo’s organic truckload growth in the quarter surged 24 percent. That’s the beauty of the model: It is a designed to work in all market conditions. It can also be effectively cross-sold by Echo’s sales force. These positive traits should significantly boost the top line, if estimates are accurate. Investment firm BB&T Capital forecast $2.09 billion in gross revenue next year and $2.73 billion in 2017, up from a 2015 estimate of $1.53 billion.

Despite all this, the market value of Echo equity was cut by more than half from peak to through, dropping from $34.35 in late June to $16.56 a share in late October; it has since climbed to $24.31 a share in the wake of the strong third-quarter numbers. 

As of the Nov. 7 close, Echo’s market cap sits at a little more than $752 million. Its enterprise value, which is often referred to as a business’ “takeover” price because it includes the amount of debt and cash an acquirer would assume, is $842 million.

That begs the question: If UPS can take out Coyote for $1 billion or so more than Echo’s market cap and enterprise value—to be sure, Coyote went for a healthy premium, but with a market cap of $94 billion, what UPS shelled out was a rounding error—what’s to stop FedEx Corp., a large truckload carrier, or anyone with similar deep pockets, from pursuing a strong business like Echo?