Sunday, March 26, 2017

The Stay at Home Economy and Its Supply Chain Impacts - Part 1: Definition

I have noticed a bit about my own behavior and started looking to see if it was just me or was it a "trend" (I am not usually "trendy").  The behavior is simple:  I just stay at home more and I have made my home a bit of a "Disneyland".  Rather than go out for entertainment, I have it brought to me. Instead of going out to buy things, I had them brought to me.  To listen to music, for example,  I merely plug into an amp and headphones and through the power of Amazon, Spotify or Pandora I have just about every song ever recorded at my fingertips.  This is The Stay at Home Economy.

The Stay at Home Economy (SAHE for now on) is something that has huge impact on how our supply chains work.  First, lets explore why this is growing:

  1. Technology: I have written a lot about how technology miniaturized or digitized just about everything and it continues at a rapid pace.  My music, my video and my books are all digitized so I get them on demand and in digital devices.  No need to shop or go to a central place to watch or listen.  In fact, my home theater and home audio equipment rivals that of professional locations.
  2. Customization: Because virtually everything is available with the touch of a button, I essentially customize my experience to an audience of one - me.  Before, I would have to compromise and listen, watch or do some activity that perhaps was not exactly what I wanted to do.  Now, I do exactly what I want to do. 
  3. Control of the Temporal Aspect of Activity: I do what I want (see #2 above) when I want. I no longer have to worry about "start" times or what day of week I am doing something.  I do what I want and when I want to do it. 
  4. Food Delivery: This is the last bastion of home delivery e-commerce and it is coming. It is far more complex but with companies building "Meals ready to eat" (No, not the MRE's from the Army days but companies such as Blueapron) and with your local supermarket delivering, the last "big" reason to go out is starting to go away.  
  5. Security: This is an unfortunate part of life these days but it is a fact - the more the aggregation of people occur at events, the more risk there is.  Why take that risk?  When I am at home I feel far more secure. 
All of these reasons lead to the idea of "Mass Customization" which has been a dream for a long time.  No longer do you have to produce a product, service or experience for the "masses" but rather you can offer a large amount of individual items and let the customer aggregate these things into the experience they want - when they want it.  

This is the SAHE and you can already imagine the impacts of this on your supply chain.  If you are not letting people customize experiences or products or you are not building a really compelling reason why someone should leave their home to go to your location, you are going to lose.  

This is also the much bigger reason why Amazon is winning - they have built out an experience, a catalog and customization capabilities for the SAHE.  One might even say they are the store for the SAHE.  It is not just a fancy website and big warehouses.  They are actually building out an ecosystem which supports the SAHE. 

Jim Cramer reported on this on his Mad Money Show and said (from Seeking Alpha):
"When Domino's Pizza (NYSE:DPZ) crushed earnings and Target (NYSE:TGT) got hammered, Cramer is convinced that the stay-at-home economy is getting strong. 
The comparisons between these two stocks are perfect metaphors for the current environment. Stocks such as Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Domino's allow people to stay at home and save money as well. Domino's delivers pizzas to you at home while Target requires you to leave the house. 
The bricks and mortars are losing in a world where consumers see stay-at-home as an advantage. This also means that companies like Home Depot (NYSE:HD) and TJX Companies (NYSE:TJX) are rallying as they make the home better. 
Netflix, Amazon and the likes have made entertainment reach home, when you want, how you want it. Gaming companies create engaging video games which people play at home. With social media, consumers are aware what's going on and do not need to leave the house. It's just that things are different now compared to how they were 10 years ago. The stay-at-home economy is touching every aspect of people's lives and it's not going to change soon."
I think it is clear the SAHE is here to stay and it is dramatically changing how people behave and shop.  My next entry will be on the implications of your supply chain - Hint:  If you are not working to support the SAHE you are quickly becoming obsolete.

  Note:  I am not making any value judgment pro or con on the SAHE - that is for social scientists and psychologists to develop.  I am merely reporting what is clearly happening and the impact on supply chains.  

No comments:

Post a Comment