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Supply Chain by the Numbers

- Oct. 29, 2020

  Supply Chain by the Numbers for Oct. 29, 2020

Q3 GDP Sees Record Rise; Amazon Giant Holiday Season Hiring Spree; Loblaw want Vendor to Pay for Its Rising Costs and Investments; Free Shipping may not Really Pay Off, Study Finds



That was the rise in Q3 US GDP, according to the first of what will be several estimates from the Commerce Dept. That follows a record drop in Q2 GDP of 31.4%. The gain was easily a new record, doubling the 16.7% increase seen in the first quarter of 1950. Q3 growth came amid a resurgence in consumer activity, which accounts for 68% of GDP. Personal consumption increased 40.7%, while gross private domestic investment surged 83% amid a 59.3% increase on the residential side. However, while the rise exceeded consensus forecasts by more than a percentage point, it doesn't place overall output back at its pre-pandemic highs. Third-quarter growth would have needed to reach roughly 46% to balance out the record downturn. Economists have said a full recovery may take years, as fourth-quarter growth is expected to land well below Thursday's blockbuster reading.




That was the net loss for a European retailer's ecommerce business during four-month stretches in which it offered consumers free shipping. That despite the fact that on-line sales revenue rose 11% during the period. What was going on? It turns out that, according to the study recently published by Scott Neslin of Dartmouth College's Tuck School of Business and others in the Journal of Marketing Research, rising return rates hammered the bottom line. While total sales grew, much of that growth came from increased purchases of items that historically have higher return rates, such as clothing or products from less recognized brands. The rise in returns caused profits to disappear. According to the Wall Street Journal, the research also found that consumers viewed free shipping as a counterweight to taking a risk on a product. What's more, a feelings of gratitude for having shipping costs eliminated made them happy and thus more willing to make a risky purchase. Neslin advises companies to really analyze whether their free-shipping promotions really are profitable.





That's how many fulfillment related temporary workers Amazon said this week it will attempt to hire for this year's peak season in the US and Canada. That makes it the fourth hiring spree Amazon has announced for the United States this year, as the virus pandemic drives already robust on-line purchases dramatically higher. Many of the jobs will be at the 100 or so new fulfillment centers and delivery station sites it is opening this month. Amazon has already announced 100,000 and 75,000 new fulfillment jobs in March and April, respectively, hoping to attract workers who were laid off by other businesses during the early weeks of the COVID-19 outbreak. Just last month, the company said it would hire 100,000 additional permanent jobs for its FCs and other facilities. The company will have more than 700,000 employees in the US once those positions are filled. Amazon says it now pays its fulfillment workers at least $15 an hour.



That is a new fee, as a percent of invoice, that Loblaw, Canada's largest grocery chain, is planning on levying on many of its largest suppliers. That according to an article this week in the Canadian publication the Financial Post. Apparently, there were actually several versions of a letter sent to suppliers, depending on their size and other attributes. "We're asking for your help," reads one version of the letter, obtained by the Financial Post. Why does Loblaw need financial help from its vendors? The letters asked vendors to "keep in mind" that it is investing $6 billion over the next five years to upgrade its stores and e-commerce operations. What's more, "It's never been more expensive to sell groceries," Loblaw spokesperson Catherine Thomas said after the news hit. Needless to say vendors are not happy with the move. "It's just absolutely ridiculous," said Michael Graydon, CEO of the industry association Food, Health & Consumer Products of Canada. It turns out Walmart Canada actually started the trend. In July, the retailer imposed the fees of 1.25% on the cost of goods sold to the retailers, plus an extra 5% on ecommerce sales, as a way to offset the cost of a $3.5-billion investment to modernize its stores and distribution network.

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