Holt Renfrew Proves that Image is Everything in Retail

RVP = Selection + Experience + Convenience / Price. This is a seemingly simple formula. However, regardless of the simplicity of the formula itself, many firms tend to neglect one or more of the variables required in order to achieve a positive RVP. Moreover, while some retailers focus on all of the variables, they have a misconstrued view of how each variable actually adds value to the consumer’s in-store experience.
Thus, I raise the question, what if a company believes that it offers its consumers a strong RVP through its distinct in-store experience, yet it is completely wrong about how consumers perceive this experience?

Holt Renfrew (HR) was oblivious to the fact that its exclusive persona was hindering its brand’s ability to grow sales. HR only discovered this when researchers were hired to assess the customer’s in-store experience. While customers were happy overall, the snobby attitude of the salespeople made them feel uncomfortable. These salespeople failed to approach customers that did not appear to be the typical HR clientele (based on what they were wearing). As a result, Caryn Lerner, CEO, decided to change the customer experience at HR from uncomfortable to enjoyable.

Salespeople were taught how to properly greet customers in a warm and sincere manner. As customers walked into different departments, they were greeted by different sales personnel who conversed with them regardless of their appearance. The training did stress however, that while salespeople should be helpful they should not be too aggressive with clients. Going from one extreme to the other would not solve HR’s issue. The positive effects from the shift in the store’s atmosphere were evident in the company’s bottom line. Sales showed a healthy increase, sales per employee improved and customers expressed that they had a better in-store experience.

This article has many implications for the retail industry. It suggests that although brands tend to be associated with a specific identity (high class, exclusivity), it is important that the identity is valued by the consumer as part of the RVP. If a brand is attempting to achieve a certain level of sophistication, it is crucial that the primary consumer is included in this exclusionary attitude, otherwise the retailer ends up excluding everyone! While HR merely attempted to establish itself as the retailer of premium brands, its sales personnel alienated its consumers by making them feel like outsiders. Therefore the persona it was attempting to achieve was hurting its overall image.

Although HR did revamp its image and customer experience, it is important to note that while helpful salespeople are important in the high-end garment industry, there is a fine line between being helpful and being bothersome. The training at HR emphasized this. While consumers want helpful sales staff, a company should avoid setting quotas for the number of times that a salesperson must greet a customer, as this can cause consumers to be alienated in a different way. Thus the key to a strong RVP is the balance between making a consumer comfortable, while avoiding being intrusive.


Source:
The Globe and Mail http://www.theglobeandmail.com/servlet/story/LAC.20060911.RHOLT08/TPStory/Business

Fueling up on gas, and then some...

A lesson learned early in our course was how valuable real estate is and how a retail store gains a strong competitive edge based on their location. In light of this concept, I began to think about the prime real estate that gas stations occupy, by being located at practically every major intersection in large urban centres.

Fuel can be defined as a necessity, as demonstrated by the recent fuel shortages associated with Imperial Oil’s production and distribution difficulties. There are approximately 18.5 million vehicles in Canada, which creates a large thirsty consumer for the 65 billion litres of gas and diesel that are sold each year to Canadian drivers. With society’s unremitting reliance on fuel, gas stations have successfully utilized this demand to profit on products which are secondary and essentially unrelated to fueling our engines.

For drivers and passengers, service stations provide an array of incidental and impulse products and services that enable us to fuel ourselves in addition to our vehicles. We can have our thirsts’ quenched, our appetites nourished and even our sniffles remedied. Our confidence is boosted, with the numerous accessories to make our car sparkle on the outside and smell minty fresh on the inside. All of these offerings are contained in the ever expanding service stores attached to many gas stations. Originally, the enclosed space served to solely process fuel-related transactions. However, with “pay at the pump” technologies and the marginal profits earned on fuel alone, these stores are increasing in size, offering a larger assortment of merchandise and becoming more inviting to attract drivers and their snacking impulses.

The RVP of a service station store focuses heavily on Convenience, but also on Selection. The convenience factor relates to the accessibility of products, which allows any driver to quickly pick up a drink, without detouring off the main road. Selection is relevant in terms of the small yet varied product assortment, which is necessary for attracting the highly diverse consumer segments that venture into a station, as well as the differing preferences consumers experience throughout a 24-hour period.

Petro Canada is strongly focusing on the Experience component of the RVP equation with their new “Neighbors” service station concept. Neighbors plans to welcome customers with a greater selection of fresh food, prepared on site, to create a pleasant ambience and environment for customers to buy healthy food, in a more luxurious, restaurant-like setting. Additionally, their new Glide AutoWash, plans to take the car washing experience the next level in its infrastructural design, customer experience and satisfaction.

With great advancements for retailing opportunities available at gas service stations, oil companies have failed to properly address the layout of their valuable real estate. With high demands for fuel, consumer interest in stations’ additional product and services, and small corner properties, station designers have failed to offer a layout which appropriately directs customers through the station, without causing bottlenecks and customer frustration. As the population moves toward paying at the pump for convenience and safety purposes, parking your car in a designated spot becomes necessary if you wish to buy anything from the store. Unfortunately, at peak hours and when gas prices drop, the high volume of cars limits available spots, which is likely to prevent a driver from purchasing extra merchandise. Also, on a mild winter day, car-wash systems create winding line-ups which often block the “air-pump” and also create difficulty for drivers who must squeeze through narrows lanes to reach an available pump or parking spot. These chaotic situations are also experienced inside the service store, when there is often only one attendant available to service customers.

Gas stations have done a great job at creating a need in drivers for their extra products and services, yet these efforts could potentially lead to their own demise. If service station layouts fail to reflect the valuable asset of the convenience store, it is questionable whether drivers will remain willing to face a vehicle obstacle course, simply to grab a bag of Skittles.

Sources:

Discovery Channel- Daily Planet Mindbender
http://www.exn.ca/mindbender/default.asp?id=18

Fuel Focus, Natural Resources Canada
http://fuelfocus.nrcan.gc.ca/reports/2006-11-2/supply_demand_e.cfm

Petro Canada
http://www.petro-canada.ca

Service-station definition:
http://en.wikipedia.org/wiki/Service_station

The Romance Killer?

We have talked a bit in class about how the world of retailing has changed dramatically in the past decade, particularly the last five years, with the advent of the internet. Although there is no denying the fact that internet retailers are here to stay and day by day are stealing market share from traditional bricks and mortar outfits, there is still an argument to be made in favor of there always being a place in the retailing world for “real” stores where the consumer can touch and feel the product before purchasing. BlueNile.com just may be the online retailer that proves that the future of retailing is going to be 100% on the net.

If there is any product that a consumer wants to see, touch, and hear about from a sales person in the flesh before they purchase, it is a diamond ring. And that is exactly why most people thought BlueNile.com would never succeed. Mark Vadon, the entrepreneurial mind behind the company, saw the outrageous margins retailers like Tiffany’s and Birk’s were making off the diamond trade, and capitalized on it by selling the same product, carat for carat, in some cases for more than a 40% discount. As it turns out there is a demand for discounted diamonds; in just over 6 years the company is generating over $251 million in sales.

If you visit BlueNile’s site, you will see why they have been so successful in taking on the traditional diamond outlets. Although I will be the first to admit I have never gone shopping for a diamond, I have been in some of the Jewelry stores downtown, and in comparison BlueNile clearly has the same, if not higher level of selection. This is probably because retail space downtown Toronto is exponentially more expensive than retail space online. BlueNile can afford to market hundreds of diamonds at different price points on their webpage because they have virtually unlimited web space. All their products are held in some warehouse in the rural United States, not in a showcase on the corner of Bay and Bloor. The prices, as I mentioned before are significantly less than that of competitors because they don’t have nearly the same overhead (for a breakdown of the specific costs involved in selling a diamond, check out the Forbes article below). The experience of buying a diamond on BlueNile is clearly not the same as buying it at a retail store. There is no salesperson to educate the consumer about diamonds or give details about a specific product and maybe even more importantly, they can’t actually touch the product that they are about to spend thousands of dollars on. However Mark Vadon has really done an amazing job at making the process of buying a diamond online as similar as possible to buying one with his competitors. There is a great “education section” on the basics of buying a diamond ring, and each product has details that inform the consumer on what they are about to buy. One of the best features in my mind is that if for whatever reason you want to return the product, you have 30 days to do so. Finally, what could be more convenient than logging on and having an incredible selection of products with the click of your mouse?

Needless to say, BlueNile’s competitors are terrified of what Mark Vadon has managed to accomplish in only 6 years. They simply cannot compete with the massive discount he can afford to put on the same product. In my mind, the only saving grace for these bricks and mortar retailers is the unique customer experience of buying a diamond through a knowledgeable sales person at a store. However, the bottom line is, our generation, which is notoriously web-savvy, is getting older and starting to make the disposable income needed to buy these products. I think we are only seeing the tip of the online retailing iceberg that is going to inevitably change the future of how retailers do business for good.

*The title “the romance killer” was shamelessly taken from the following article in Forbes which was written by a Victoria Murphy… possibly a relative of Kyle’s?
http://www.forbes.com/forbes/2004/1129/097_print.html

Here is Blue Niles website for anyone that is planning on popping the question in the near future:
http://www.bluenile.com/

JOE FRESH STYLE: Will it Last?

It seems Canada has taken a cue from Europe in the value-clothing market. Martin’s recent post about Primark’s low-price strategy in the UK sounds all too familiar as Loblaw’s new private label clothing line, Joe Fresh Style, approaches its first anniversary in the Canadian market. While Primark has enjoyed considerable success in the UK, I wonder whether Joe Fresh has the right positioning in Canada to meet the lofty expectations of Loblaw executives.

In March of 2006, Loblaw Cos. Ltd. launched Joe Fresh as part of its “Making Loblaw the Best Again” strategy. The aggressive three-year strategy is intended to better position Loblaw stores against Wal-Mart. Joe Fresh has now expanded to 70 retail outlets across Canada and is expected to reach 300 stores by 2009 to become Canada’s largest clothing retailer[1]. The line is designed by Joe Mimran, former owner of Club Monaco.

Pre-launch research determined that the average ticket price in Joe Fresh could not exceed $13, and that customers would demand trendy, high quality items on par with competitors’ offerings[2]. Mimran promises to create value for his customers by providing trendy garments, made from high quality fabrics, at low prices. With an RVP focused solely on selection and price, Joe Fresh may not have stood a chance against beloved low-end, high-fashion retailers like H&M and Zara. However, Joe Fresh has the unique advantage of being able to tap into Loblaw’s extensive distribution network to add convenience into its RVP mix. In fact, most Joe Fresh stores are located within Loblaw grocery stores. With an emphasis on selection, price and convenience, the well-rounded Joe Fresh is a perfect fit for the needs of its target market – time-constrained mothers in their 30s who are looking for a quick fashion fix.

Although Loblaw has successfully carved a niche for the innovative clothing line in Canada’s retail market, just how much can Joe Fresh do for the struggling grocer?

I fear that first-year sales have relied too heavily on impulse purchases from consumers merely intrigued by the new brand. To truly impact the bottom line for Loblaw, Joe Fresh must generate significant revenue through repeat business.

From personal experience, Joe Fresh has done well in all areas of its promised RVP. I am concerned, however, about the slow turnover of its product selection, which seems to occur only seasonally. Unlike competitors, who are able to bring designs to market in just weeks, Mimran forecasts trends a year in advance to accommodate the lengthy manufacturing and distribution processes. With this in mind, I question Mimran’s ability to keep designs fresh enough to please the target market and generate sufficient repeat business.

Because Joe Fresh is a private label brand, the integration of market research, product development, manufacturing and distribution is essential for meeting price and selection expectations of consumers. Although costly, an initiative aimed at shortening the time to market for new designs could be the key to success for Mimran and Loblaw executives.

Reference Articles:
[1]http://www.canadianbusiness.com/innovation/article.jsp?content=20061106_82323_ 82323

[2]http://www.theglobeandmail.com/servlet/story/LAC.20070222.RLOBLAW 22 /TPStory/Business

Websites:
www.joe.ca

Starbucks: all about the Convenience and Experience

Starbucks excels at Convenience and Experience in the Retail Value Proposition


Starbucks wants to be CONVENIENTLY accessible in locations all over the world, making the café a third home for consumers, wherever they may be. The new advertisements in North America feature the catch-phrase ‘life happen over coffee’. With recent expansion plans into Bangalore India, the catch-phrase might change to ‘life happens over tea’. “Coffee giant Starbucks is in talks to open its first outlet in India by as early as the year-end to tap the growing affluence of the middle class in a nation of tea drinkers.” In neighbouring China, another nation of tea drinkers, the chain opened its first outlet in the late 1990s and now has 190 coffee shops.
“Starbucks offers the same coffees everywhere, from Chicago to Shanghai," said Cuff. "We believe our customers should have the same experience at Starbucks anywhere in the world."
This statement was clear when I was visiting Paris, France in January. As I was strolling along Avenue des Champs-Elysees I was excited when I recognized a Starbucks. I walked through the doors and felt like I was back at home. The EXPERIENCE was identical to my daily routine in Canada. The baristas (although barely spoke English) were extremely helpful as I customized my java order (grande sugar-free vanilla non-fat latte). The atmosphere was friendly and inviting and consumers were enjoying life over their special coffees or teas.
With various expansion plans, Chairman Howard Shultz is guaranteeing that the Starbucks experience will continues to have “the soul of the past, and will reflect the warm feeling of a neighborhood store.”

http://news.yahoo.com/s/afp/20070225/ts_afp/indiacommoditiescoffeestarbucks_070225130604

http://www.starbucks.com/

A blog post on blogs

Little did I know, the landscape of the internet is littered with Web logs (blogs) about everything, from personal diaries to the best way to make spinach cheese dip. With 75,000 blogs being created daily, joining the already 35 million in existence, a marketer cannot ignore such a popular viral communication tool (See: Retail Blog Marketing)

We all know how it is to shop for something we know nothing about. We turn to our network of family and friends that may have input and ask them, “Who, what, when, where, why and how?” We then proceed, as 78% of internet shoppers do, to the search engines of the internet and “Google” it. So what does this mean for retailers? Blogs are proven to get your company to the top of the search engine’s results list (See: Retail Blog Marketing). Not only are blogs a great source of information, they strategically get your company’s internet advertising to the forefront. Blogs, a compilation of opinions on a topic, are a phenomenal way to improve the customer’s shopping experience, therefore, enhancing the retail value proposition. For example, in the LCBO case, vintages (fine wines) were mentioned as a product people are really interested in but don’t know a lot about. If the LCBO had a blog discussion on fine wines, think of the plethora of opinions one could obtain on the topic. One thing a retailer should keep in mind is that this is a product where people feel the need to express their opinion, which lends to the success of the blog. Nonetheless, once I read some of the positive and negative reviews, I’m much more likely to pay extra and purchase the wine. Proof that buyer’s opinions can lead to a more complete shopping experience is eBay’s business model.

Retailers who are currently using blogs to their advantage include EA Sports and Expedia.ca (See: Expedia & EA). EA’s blog has a discussion on tips and tricks of how to play games while also improving sales by discussing the newest game releases. Expedia use travelers’ testimonials to give the customer a greater understanding of their service. On these travel sites though surfaces one major risk of blogs: negative reviews. Anytime you provide more information to the customer, there’s increased likelihood the customer will come across negative information (See: Mystery Shopper). Nonetheless, the internet has already made most of this information available through other areas; thus, retailers must acknowledge, learn to channel, and control the information on the net. In addition, having both positive and negative reviews lends credibility and avoids the perception of retail “brainwashing” Rafe has alluded to in our class.

Blogs can also be a valuable source of market research for the retailer as it allows the customer to “talk to” the retailer. Blogs can also heavily influence buying decisions as some see them as similar to traditional websites. As a result, internet shoppers who use blogs, spend on average 6% more than other internet shoppers (See: USAToday).

Increasingly, retailers are creating comprehensive websites with the option to customize products and purchase on the web. The internet is an unwavering force in the world of retailing, and adding a Web log is the next step to marketing your company online.

Hallmark's missing out

The tendency to create one-stop-shops is something we have touched upon several times in class. We have confirmed that it is something retailers strive to do in order to e.g. increase the convenience for the consumers and preferably, but not always, to increase profits. With this in mind, I was surprised when entering a Hallmark greeting card store. Even though the store’s greeting card assortment met most of my expectations, I really had expected to find one of the most important attributes for creating a card – pens. It struck me, how could Hallmark miss out on this opportunity?

To me, premium pens like gel, glitter, shimmer and ink pens are natural complementary products to cards and would therefore be very suitable in the assortment of stores like Hallmark from several perspectives. I believe it would increase the service level for the customers since a pen is a necessity for completing the card, and it offers profit potential.

Adding pens to the assortment expands the value proposition by increasing convenience through making a Hallmark store a one-stop-shop for the complete, unique and perfect greeting card. The brand has been built on quality and rigid attention to detail throughout time. Furthermore, the slogan has been “When you care enough to send the very best” since 1944.(1) Thus, enabling consumers to make the best cards even better is in line with Hallmark’s policy.

Hallmark has 50% of the US greeting card market,(2) which shows the potential for extensive additional sales. Moreover, they publish products in more than 30 languages and distribute these in over 100 countries, and offer online shopping via their website Hallmark.com. Not only would many customers buy one pen, but many would buy two or three pens in different colours. Assuming that the cost price for a premium pen is between 50 cent and $1, and that the selling price could be $3 and up, there are great additional profits out there for Hallmark.

Would this dilute the Hallmark brand? I do not think so. On the contrary, it could strengthen it. Expanding product assortment always has to be done carefully, but there are different ways to go about it in order to do it in the best possible way for the specific retailer. For Hallmark I see three options; branding the pens with the Hallmark brand, creating a sub-brand, or co-operating with a well-renowned and credible pen producer like Bic.

The purpose of the above reasoning is to show that understanding the consumers’ behaviour in purchasing as well as in using the product, hence focusing on consumers’ needs, not only provides more value to the customer but also benefits the retailer. Several companies are already pursuing this strategy successfully. For example IKEA is not categorizing the products in its Swedish food market according to product category. Instead, they are shelving the products according to dinner recipes in order to show complementary products and to facilitate the consumer’s purchase.

(1) Hallmark facts
(2) Ibid.

****************
Cecilia Lindau.

Wal-Mart Fined for Selling to Minors?

Although not yet a reality, in the United States this could soon be possible! On February 19, 2007, Senate Bill 238, which would mean a $1,000 fine to retailers for selling video games to kids, passed the Senate Economic Development and Technology Committee and moved on to full Senate debate. The fine would apply to those games sold or rented to minors that feature beatings, strippers, or other adult content. The bill is intended to, “enforce the ratings system by making it a Class B infraction, punishable by up to a $1,000 fine, to sell or rent videos rated "M" for mature or "AO" for adult only to anyone younger than 18.” While it seems like a simple idea - card people to ensure they are of legal age before selling them video games - I can’t help but question its effectiveness and suspect that it will require more changes on retailer’s behalf than most supporters anticipate.

We are all familiar with retailers like the LCBO who are required to turn away minors. However, in environments like this, it is much easier to enforce since none of their products are marketed towards minors and as a result, all of their marketing and POP displays are free to feature any product. Also, they can attempt to “guide people" through the aisles as they please and offer test areas without too much concern for repercussion since majority of the customers in the store are of legal age.

On the other hand, most video game retailers are not as well structured to enforce these rules especially considering the product itself is predominantly targeted towards children! This new law would likely require redesigning their layout to further separate the different classifications of games and would restrict who has access to prime shelf space. Theoretically, this could be achieved by restricting access to viewing the product to those of legal age but what impact would this have on sales if the product was not easily accessible? How could retailers market different games? Are they still liable if children play these types of games in test areas that the video game manufacturers set up to market their product? Isn’t this essentially the same as if children purchased the game and played it at home? Where is the incentive for manufacturers to cooperate?

All of these questions lead me to believe that this law would unjustly punish retailers for a problem that they are not entirely responsible for. If the product is being produced, children will find a way to get it even if retailers don’t sell to them. If society is so concerned about the content of video games they should be targeting and punishing the creators not the distributors! I disagree with this law and see it creating a lot of hassle and inconvenience to retailers without really solving the underlying issue.

Source:
http://www.thestarpress.com/apps/pbcs.dll/article?AID=200770220002

**please not that while most retailers currently turn away only 16% of minors Wal-Mart actually has a 100% success rate of turning away minors and therefore this blog’s title should in no way be interpreted as fact.

Does the department store concept work world wide?

In this course, our discussions have involved several Canadian and American department stores. These stores all offer their customers convenience by providing a large variety of goods in the same store, a concept that has proven to be very successful in many countries. But it does not, however, work everywhere. One example is Sweden where it has proven not to work very well at all.

Large department stores became very popular in Sweden during the first half of the twentieth century (since it was considered to be very American) and performed very well in the competition against smaller shops. But around twenty to thirty years ago practically all of them disappeared when they could not stand the competition from smaller shops that had emerged into larger specialty chains, which now not only competed with more competent staff, but also with lower prices thanks to larger volumes.

Today, the closest you can come to a department store chain in Sweden is “Coop Forum”, which mainly is a food retailer that also sells clothes, shoes, toys, electronic goods, white goods, sport equipment, bikes, construction equipment, furnishings and other commodities. Even though this mix is not in line with the department store definition (family clothing & apparel (20%), furniture, appliances & home furnishings (10%) and other “commodity” lines (10%)) it is probably the closest you can come to a department store in Sweden.

Even though they are a very large player on the market with impressive sales (CAD 4.5 billion), they have had several problems the last couple of years and have suffered great losses. This has led to that they have sold out several parts of the business (that has turned out to perform much better on its own). So why doesn’t the department store concept work in Sweden?

The department stores just can’t keep up with the tough competition. They cannot offer the same service and knowledge as special retailers. Furthermore, with stores such as IKEA and H&M, there is no real demand for getting cheap furniture and clothing from department stores, since IKEA (over 250 stores) and H&M (over 1300 stores) are more than large enough to press prices (and also include a bit of fashion). Also, the low-price food chains, like Danish Netto and German Lidl poses a big threat. Moreover, with the increasing trend of awareness of fashion and home styling people demand more specialty shops with exclusivity and fashion, which you simply just can’t find at a department store. The increasing numbers of shopping malls also makes it easier to find all you might need at one place.

To conclude I would say that even though department stores seem to flourish in Canada and the US, I can't see any that there is a bright future for department stores in Sweden.

Reference:

http://www.ikea.com/ms/sv_SE/about_ikea/facts_figures/ikea_group_stores.html

http://www.coop.se/includefiles/moduler/ccms/show_page.asp?iMappeID=182&sSideNavn=Coop+Forum

http://www.hm.com/se/omhm/faktaomhm/kortomhm__hminbreif.nhtml

Primark - "Look Good, Pay Less"

In the UK, the retail value-clothing market is thriving. At the expense of retailers with more established, quality reputable clothing lines, several companies such as Matalan, Tesco, and Asda (a wholly owned subsidiary of Walmart) are pushing all the right buttons by offering consumers low-cost, high-fashion clothes which overall constitute exceptional value for money.
Primark, a subsidiary of Associated British Foods plc, is arguably the fastest grower in this emerging sector with 162 stores in the UK, Republic of Ireland, and a small presence in Spain. The success and growth of the company is primarily down to two important concepts, both which we have discussed in detail in class – retail value proposition and product assortment strategy.

"Our low prices are the result of technology, efficient distribution and supply, bulk-buying and the fact that we spend almost nothing on advertising." 1

Unsurprisingly, the overriding RVP of Primark is price. The company is able to negotiate cheap prices from manufacturers in Asia and Eastern Europe because of the high volume of turnover that it focuses on achieving in its stores. At the same time, it accepts lower profit margins on its products, all in all ensuring price points that are well below anything that the majority of retailers can offer. This cost-focus presents for Primark a trade-off with other RVPs such as customer experience – Primark stores are often heaving with people, messy, and plagued by long queues – but customers know to expect this, and it is not ‘customer experience’ that they are looking for when they shop at Primark. Recent awards in categories such as ‘best retailer, ‘value for money’ and ‘best shop in which to spend £50’ serve to illustrate the company’s popularity.

Primark , with the slogan "look good, pay less", targets primarily the fashion conscious, price conscious under-35s segment, both males and females. The success of its product assortment strategy lies in its ability to find out what’s fashionable, design a budget version, and bring it quickly to stores – it takes on average just 6 weeks from the initial concept stage for Primark to start selling a specific item in stores. Teams of buyers are employed to travel internationally, seeking out both emerging fashion trends and low cost suppliers, ensuring a minimal lag between what people see in their favourite fashion magazines or TV shows and what they can find at Primark stores.

However the company is not without its problems. It is currently involved in several lawsuits over accusations that it has copied the designs of rival retailers. A more critical current controversy is a report which accuses Primark of serious human rights abuses and sweatshop labour in its Asian factories (this despite the fact that Primark was recently accepted into the Ethical Trading Initiative). From a business perspective this is a serious concern for the company. The consumer segments (students and young adults) through which Primark has thrived are the same segments that are likely to take most issue with such claims of unethical business practices. Whether the reputation of the company will be tarnished by this incident remains to be seen – indeed, it stringently denies these claims and has vowed to investigate any unethical working practices in its factories.

Personally I don’t think that their market position will be much affected. Many of their main rivals - Asda included - have undergone similar scrutiny, and the RVP of Primark is so strong that it is quite capable of resisting the charges of the rumor mill. While there may be a small proportion of people who will be outraged enough by these claims to boycott its stores in future, I think that the majority of consumers can expect - and will expect - to look good and pay less for a long time yet to come.

1http://www.open2.net/money/briefs_20051206_primark.html
http://www.nosweat.org.uk/node/156
http://news.bbc.co.uk/2/hi/business/4466986.stm
http://www.primark.co.uk
http://en.wikipedia.org/wiki/Primark
http://www.ethicaltrade.org/

Martin H

Spring Break shopping raises some questions about RVP

A closer look at Abercrombie & Fitch – What keeps us coming back for more?

Friday morning welcomes shopping day #1 at Sherway Gardens – 500,000 sq. feet of prime retail shopping delight (1). Of the 240 stores I am most excited to visit Abercrombie and Hollister.
Friday afternoon I enter Hollister. Amidst my shopping excitement the smell of cologne hits my nostrils and brings me back to discussions of customer experience. Now a million thoughts begin to pop into my head as I observe the store. Among them;

1) This smell is giving me a headache. (I later learn this new smell has a name – Jake. I learn this because at the cash employees are required to ask if you’ve met Jake and Malaia. After an awkward silence they unenthusiastically explain Jake and Malaia are the new cologne and perfume. (Ah! I get it.))
2) The lighting is so dark I can hardly see anything, especially the faux palm trees I keep running into; rendering the store a retail obstacle course.
3) Cash line is long and changeroom line even longer.

Abercrombie turns out to be a watered down version of the negative traits of Hollister; slightly better lit, a bit more space, and a less pungent smell. (Line for the changeroom still ridiculously long.)
These store conditions are clearly unappealing, however, I FULLY INTEND ON RETURNING to these stores – and I’m not alone! February 2007 A&F’s net income increased 20% with net sales up 18% (2). Let’s take a closer look at A&F’s RVP to help explain this retail mystery.

Price: Definitely not the focus for A&F. Most of their clothes are premium priced in comparison to competitors such as American Eagle.

Selection: A&F Tier 1 stores carry all current clothing items in all styles and colors. Selection decreases down to Tier 4 stores which will carry less merchandise with a smaller amount of sizes and colors.(3). A&F sticks to a core category offering* and does not differentiate based on selection.

Convenience: A&F has 944 stores in the U.S. and 6 in Canada (4). I drove 40 minutes out of my way to get to there, and searched another 20 minutes to find it in a remote corner beside The Bay – not too convenient.

Looking at the RVP equation it becomes even fuzzier what attracts me to this store! This leads to the question – how can a retailer differentiate itself on customer experience when all the elements surrounding that experience are seemingly negative? Can it be that ANY unique store experience is enough to keep us coming back? Do these ‘negative’ experiences serve an alternative purpose? Let’s re-examine these observations.

1) Overpowering smell - Every time I breathed I was reminded of my A&F/Hollister experience and ,in fact, employees are instructed to spray the cologne every half hour throughout the store (5)
2) Long lines. Forced me to take in my surroundings which happened to be massive lifestyle ads located in direct sight of anyone waiting in line.
3) Annoyed employees asking if I’ve met Jake and Malaia. Seemed a tad crazy at the time but I remembered the names didn’t I?
4) Dim lighting. Made me spend a lot more time in the store searching for clothes I might have missed.

Upon closer examination it seems that all the ‘displeasing’ elements of the A&F/Hollister experience just may serve a strategic purpose – one that keeps me coming back for more!


* See http://www.abercrombie.com/ for men’s and women’s clothing line.
(1)
http://www.toronto.com/shopping/listing/213387
(2)
http://www.abercrombie.com/
(3)
http://en.wikipedia.org/wiki/Abercrombie_&_Fitch
(4)
http://en.wikipedia.org/wiki/Abercrombie_&_Fitch
(5)
http://en.wikipedia.org/wiki/Hollister_Co.

So you don't feel left out of the experience - Meet Jake and Malaia!!!
(www.hollisterco.ca)

SND/Popeye’s Supplements: Let’s get JACKED!

(Sorry Kyle, the post [exlcluding references etc...] is about 39 words off, as in over)

The consumption of sports supplements is a growing phenomenon all over North America, with publication of Men’s Health Magazine, at least 1.8 million men(1) are becoming more concerned with their physiques and use supplements as a regular part of their diet in hopes to look better(2). But where can one purchase such products? Everyone has heard of GNC (General Nutrition Centre) and with them being a large global brand, consumers are led astray into believing GNC is their only and best choice (they actually overcharge and lack selection). I present to you a better alternative: Popeye’s Supplements/Sport Nutrition Depot (SND). Put into RVP terms, here’s why:

Selection:

Walking into an SND store will simply overwhelm the customer with the variety that they can choose from. Offering a large variety of brands is vital to serving this niche market. Consumers are willing to try new brands until they find one that’s just right for them; there is considerable brand loyalty once a consumer finds a brand they like. This brand loyalty is brought upon by factors such as the taste, how well it mixes and whether the ingredients cater to the needs of each individual e.g.: fat loss, weight gain etc… By offering these large assortments (over 40 brands) (3), SND can meet the various preferences of the whole market. Not only is there a large assortment of brands, but the breadth of products offered from each brand is amazing. SND provides all the products offered by their favourite brand; a one-stop shop for customers.

Experience:

SND employs an open-concept store; you walk in and all you see are supplements. By using the whole store area purely for products, SND can maximize the amount of products they can put on display and allow clear visibility of ALL the products offered; making life easier for the customer and helping with impulse purchases. The staff are exceptionally friendly and though some of them may be “jacked” they all have good knowledge of most of the products and can offer you good advice and don’t make you feel intimidated in such a “muscle bound” environment.

Price:

SND’s greatest advantage is their price. They charge significantly (about 30%) less than what GNC charges. By using GNC as a reference price for supplements, customers will find that SND’s prices appear significantly more “honest”. Price is a vital factor to SND’s success and customer loyalty.

Convenience:
Aside from locations in easily commutable areas, what makes SND is that they sell Whey Protein in bulk. By buying in bulk, the customer can save time and don’t have to worry about being out of protein and save the hassle of the trip. Buying in bulk gives even lower price/kg for customers and they can save money, inspiring more loyalty. Selling Bulk products give SND a huge competitive edge and another reason to stay away from GNC. Not only that, but SND also offers online ordering, capitalizing on the recent online trends and making supplement purchases even more convenient.

With the recent purchase of SND by Popeye’s supplements(4), their presence in Canada has pretty much doubled overnight into what is now 40 locations nationwide, giving customers “Lean prices and Huge selection”(5).

Check out www.sndcanada.com

(1)http://en.wikipedia.org/wiki/Men's_Health_(magazine)
(2) especially amongst University students who are looking to impress girls, or in reality, themselves.
(3)Taken by counting the number of brands offered on their website.
(4) From speaking with staff members.
(5) SND’s slogan

Note: GNC tried to purchase SND for $20M. The owners were going to agree until they found out GNC would just close down all their stores and try to monopolize the industry (and rip people off). Recognizing that customers deserved better prices and selection than GNC, SND approached Popeye’s (who shares a similar philosophy to SND) and was bought by them for $15M.

Renowned Toronto Eaton Centre— Retail Value Proposition

The Toronto Eaton Centre is more than just a shopping centre. It is also one of the tourist destinations in Toronto. It is the third largest mall in Canada and is recognized as one of the most best known retail shopping destinations in Toronto, attracting approximately 50 million visitors annually, with about 25% of the visitors being tourists. What makes it so successful? In the following, it will analyze the retail strategy of the Eaton Centre.

Selection of shops
Consumers and visitors can spend a day-long trip in the Eaton Centre where provides a wide variety of products and the services. Consumers can find everything there. At one end of the centre, where is located at the Queen Street and Yonge Street, there are a few department stores like Canadian Tire, the Bay, Sears. These department stores are mainly targeted at the mature adults and home bodies segment. Unbelievably, there are more than 285 retailers in the four-storey and long-corridor-like centre. Consumers can find many categories of shops like skincare shops, fashion shops, electronic and telephone shops and sportswear shops there. And consumers can find many famous brands there like Ambercrombie and Fitch, Sports Chek, the Body Shop. All these shops are mainly targeted at the youth and younger adults. For catering the group of children and their parents, the centre consists of many toy shops like Mind Games and Disney store and the children apparel like La Senza girls and BabyGap. People can also find some other shops there like Indigo Book and Music. There are some shops like Godiva Chocolatier and Saint Cinnamon targeted at people who like specialty food. In 2004, the Eaton Centre also attracts new anchors such as H&M to establish Toronto flagship store. The Eaton Centre tries to attract the middle or high income group of people. From the analysis, obviously, People can find everything in the Eaton Centre. What the success of this centre is that it can target different ages and group of people as it has large range of selection of shops, goods and services.

Customer experience from the design and layout
The Eaton Centre is somehow an architectural model for shopping malls. The design and layout are very unique and special there. There are two portions of the Eaton Centre. The retail portion of the complex features a four-level shopping centre with a glass-domed ceiling running the length of the centre. Hanging from the ceiling, one finds a mobile of a flock of Canadian geese and Flight Stop. It gives people a feeling of modern. For the layout, the shops are located at the two sides. The length of the centre is long. It seems that people cannot see the end of the centre. It gives an impression to people that they can never finish their shopping. There is a lot of unexpected fun when going ahead. Its special design may somehow retain consumers to stay longer. Besides, the ceiling is so high that people do not feel pressure when going shopping. People feel there is plenty of space. And the decoration is relaxing. There are many benches and palm trees in the centre. It provides a relaxing ambience for people to shop around the mall. It is another reason for people spending long time in the centre. The other portion is the office buildings. Connected to the apexes of the centre are three office towers, which loom at an estimated 300 feet each, and accommodate over 60 organizations. The overall feeling of the centre is dynamic and energetic.

Convenience
The Eaton Centre is located at the downtown of Toronto although it requires a large piece of land. The accessibility is very high here. People can reach there through different buses. And under the Eaton Centre, there is underground trip connecting from the Eaton Centre to different part of Toronto. It is very convenient to get there. Zigzagging around historical sites, such as Old City Hall, and Holy Trinity Church, it has indeed woven itself into the urban fabric. It is a strategy to attract tourists. After going to the famous historical sites which are traditional and old, people can get the Eaton Centre easily and take a look at the other sides of Toronto, which is dynamic and modern. The advantageous geographical location of the Eaton Centre totally explains why it can attract many local people and tourists each year.

The Eaton Centre is not just a shopping centre, but it is a tourist destinations. The turnover rate of customers is very high. From the analysis, it shows that the success of the Eaton Centre is due to its careful selection of shops and services, unique design and decoration and good location. The retail strategy of the Eaton Centre is totally adopted the theory of retail value proposition.

Reference:
http://www.toronto.com/shopping/listing/000-212-724

http://www.torontoeatoncentre.com/home/index.ch2

http://www.torontoeatoncentre.com/dyn1/index.ch2

Healthy and Environmentally Friendly -- PC's new strategy

Recently, the President's Choice, a private label brand in the large chain grocery store Loblaws introduced a series of healthy and environmentally friendly products under the brand's name. It is part of Loblaws' new strategy in focusing its customer segment to middle income and more health conscious consumers.

Three new brand names are developed in PC's new positioning strategies. The PC Organics provide a wide range of agricultural products from fruits and vegetables to derivatives like dairy and juices. It is easy to understand that this is targeted to the environmentally conscious customers that are willing to pay more for the value for the environment. The other one is PC Blue Menu which focuses mainly on processed food like biscuits, frozen meat, condiments as well as canned food for the customers who care about their health more. Another one is PC Mini-chefs, and the product assortment is mainly on healthy and readily-made food for the children.

From observation the new PC products are focusing in two dimensions in the RVP -- experience and convenience. The "Healthy Insiders Report" is available online and also in the store, giving consumers the information about the "upgraded" PC product and a unique experience in shopping. Large signs for the new products are present in the store and the products are stacked outstandingly from the other products. That means consumers can identify and buy the PC healthy products using a minimal amount of time. Special recipes for the healthy and environmentally friendly products are also available to increase consumer convenience and also the retail value of the new PC products. It is in the starting stage that Loblaws' commitment on the new products seems to be not very deep, and it may be explained as a testing to the market for a good strategy. Pricing is not the emphasis of PC healthy products but they are priced reasonably compared with the homogeneous products of other brands.

What are the impacts of the market with the introduction of the new PC products? In my opinion they can help Loblaws to distinguish its RVP elements from the major competitors like Walmart and Sobeys, in which they have different focuses like sharp pricing and convenience. As it is a fresh concept this may attract and retain the middle class customers as they are willing to spend more for environmental friendliness and health. This is very important for Loblaws to maintain its position as a leading grocery chain corporation in Canada and to have growth. The Canadian grocery stores market cannot growth much because the population is quite stable. People are demanding higher standards of living and healthier products and the PC brand can provide the retail value at a lower price compared with other brands and stores. But does it help a lot to 'steal' customers from other competitors and help Loblaws improve the stagnant profit problem? We have to see how the social trend for health and environmental protection aligns.

Is it a good idea to charge for plastic bags?

When we talk about experience in retail marketing, it does not only include buying experience in the store, but also after-sale experience.

One of the after-sale experience is having our goods packed in plastic bags. It is seen to be a norm, but not always.

IKEA has recently announced that it is going to charge US customers five cents for disposable plastic shopping bags. With all the problems plastic bags create such as flooding and endangering wildlife, IKEA the prioneer hopes to cut the 700 million plastic bags it gives out per year to half, and eventually eliminate all.

What will the customers feel being charged 5 cents for the bags? It has something to do with the price of the products customers buy. If he is buying products worth $50, I bet he won't bother to save that $0.05 (which is 0.1% of $50) for 1 bag which can conveniently wrap all the things he bought. But if he is buying, say $5 goods, that bag will cost him 1% of the total value of goods. Therefore whether the plan will work to eliminate the use of bag depends on the average spending of customer in the stores. But after all it is still only a little portion of the value of goods.

There are a lot of ways to preserve the environment and save bags. For example, staff can be trained to pack the products in a more efficient way to save bags. Like Price Chopper, customers can also be provided used boxes to carry their goods. However as most of the people in the States have their own car, they can easily transfer the things they bought from the cart to their car and then back home. I guess it may not create a big problem for them without the plastic bags. Those people who need the bags so desperately will be the ones who don't have a car and have to take a bus, but they can still bring their own bags to carry the stuff. Thus getting an environmentally-friendly image by charging plastic bags is not a bad idea, and it gains a lot of publicity to promote their green image as well.

Looking around the globe, some places have already tried to eliminate bags. In Hong Kong, it had several trials -- "No Plastic Bag Day" -- in 25 major retailers and totally 2000 stores to charge customers 7 cents to 15 cents for a plastic bag. It turned out a great success, with little complaints and saved more than 80% consumption of bags. It is planning carefully to continue the movement regularly, once in every month. As there is a large population in Hong Kong without cars and people are not used to be charged for bags, the movement and also the government have a great concern in the feedback or even rebound.

Preserving the environment is definitely a global trend. How to do it is the question that every retailers should contemplate. I think IKEA has done a good job here in respect to charging for bags. Will there be other retailers come up with other resolutions? We'll wait and see.....

Source: http://ca.news.yahoo.com/s/reuters/070222/us/usreport_environment_usa_ikea_dc_2

-By April Yeung

The Future Customer

After watching a video in class depicting a futuristic grocery store, Bruce Reed (our executive in residence) brought up some very important concerns. Even though everything in the video seemed to be great from the retailer’s perspective, what about the customer’s perspective? Will some seniors have trouble operating a computer to navigate a store?

Technology has allowed retailers to offer an incredible number of selections at prices so low that people are finding themselves with more goods then they know what to do with. The experience in these giant stores can be overwhelming. It can take a lot of time to navigate around a store like Wal-Mart that is the size of four football fields. On the other hand, many argue that despite the lineups these giant stores inevitably have, being able to get all the products you need from one store can actually save time. While both arguments are valid, in the future, shifting demographics will begin to favor stores that can cater to an aging population.

Research has found that 52 percent of online shoppers value the extra time they save by shopping online, while 16 percent appreciate the ability to find exactly what they want.[1] The more money you make, the more your time is worth and the more likely you are to own a computer. It’s a perfect fit. The growth of internet retailers can be attributed to a population increasingly looking for ways to save time.

Retailers that recognize the link between time and money can differentiate themselves from big box stores. This starts with having a more focused and therefore more easily navigated product offering. Research has found that few retailers state that convenience is their primary Retail Value Proposition.[2] However, demographics illustrate this is something that retailers cannot afford to overlook.

The baby boom generation accounts for anyone born between 1947 and 1966 and makes up almost one-third (9.8 million) of Canada’s current population. As this large group ages, retailers will be faced with shifting preferences. Young adults tend to have less money and need to spend a large portion of it on their children. During those years it makes sense for them to get a membership to Costco in order to be able to purchase large quantities of goods at the lowest possible cost. However, as people age and their children move out of the house, they spend less money on durable goods and more money on services. They no longer value large volume discounts because they do not have as many mouths to feed. Instead, they focus their demands on higher quality products and superior service.[3]

We can already see those retailers positioned to cater to the aging population are beginning to flourish. Specialty grocers such as Longo’s and Sunripe have outpaced their big box counterparts in terms of growth. I can see why. When I retire I don’t want to be shopping at Wal-Mart buying stacks of Kraft Singles. I want to be at Pusateri's getting some cheese with names my guests won’t know how to pronounce!

---

[1] http://findarticles.com/p/articles/mi_hb3242/is_200012/ai_n7940598

[2] Richard Ivey School of Business: Note on the Retail Value Proposition

[3] Industry Canada Research Publications: Canada in the 21^st Century Demographic trends

Lessons from ‘Life’: Moving Up the Private Label Ladder

Mango Mandarin Tropical Body Polish! Coconut Lime Body Wash!
What is this new ‘Fresh Blends’ line featured on the shelves of my local Shoppers Drug Mart?
Shock! Dismay! Could it be? These beautifully packaged products are … Life Brand?

Packaging and has a lot to do with private label perception, and without a doubt Shoppers Drug Mart took this fact into consideration when, in 2004, they repackaged and reformulated 600 different SKUs under their stagnant Life Brand. Additionally, 200 new SKUs were added during this brand revamp.

While in 2003 Life Brand represented 11% of Shoppers Drug Mart sales, in 2007 sales are predicted to reach 15%, rendering this makeover a success. Consumer and industry reaction to this brand update has also been very positive, with the Life team earning industry recognition for their private label metamorphosis.

In general, there are four different types of private label strategies, and Shoppers’ ‘Life Brand’ seems to be on the ascent:

Value Innovators: Superior price/performance combination
Premium Branding: Additional qualities or features of the products; premium packing and price comparable to leading brands
Copycat Branding: Very similar packaging to the category leader, but priced slightly below; often similarly named
Generic Branding: Lowest priced, plain packaging, low quality; the ‘traditional’ private label

Starting off as a generic brand, Life slowly went through the phase of copycat branding and has now graduated onto a ‘premium branding’ strategy with their ‘Fresh Blends’ beauty line.

Private labels, or ‘exclusive brands’ as Shoppers Drug Mart calls them, are an important growth tool for many retailers. With 100% household penetration, private labels are indeed something that appeals to everyone. Not only does a private label improve a chain’s retail value proposition through increased selection (greater breadth through more SKUs), the often competitive prices of private labels (on average around 30% less than leading brands) can also forge consumer loyalty through the ‘price’ benefit. Furthermore, “proprietary products” such as Life Brand help retailers collect higher margins while building the retailer’s overall brand.

What is the future of private labels? If the high-penetration of private labels in Europe is any indication, the Charcoal Beef is here to stay. Recent trends in the private label market also show a great emergence of products in the premium private label category, as detailed above. Apparently, Life Brand is on to something. To make this switch to premium, private label marketers are getting increasingly creative and better targeting certain consumer segments with these premium products. By creating ‘exclusive products’ only available at their stores, retailers can increase shopper loyalty as well as capture increased sales.

Take a lesson from ‘Life’!

- Jayme Jenkins


Sources:

Shoppers Drug Mart Life Brand:
http://www.shoppersdrugmart.ca/english/life/index.html

SDM grows stake in own brands:

http://findarticles.com/p/articles/mi_hb3007/is_200411/ai_n13450674

Drug and Cosmetic Sales Boost Shoppers’ Drug Profit: http://money.canoe.ca/News/Sectors/BiotechnologyHealth/2007/02/08/3559470-cp.html

Book Review: Private Label Strategy:
http://208.223.219.130/twduff/home.nsf/stories.rss

KPMG Report: Consumer Loyalty and Private Label Products
http://www.kpmg.ca/en/industries/cib/consumer/documents/CustomerLoyalty.pdf

Private Label: Seizing a greater share of the global shelf:
http://www.euromonitor.com/Private_label_Seizing_a_greater_share_of_the_global_shelf

Kraft’s Private Label Lesson:
http://www.reveries.com/reverb/essays/outthere/hoyt20.html

AC Neilson Private Label Reports 1 & 2:

http://www.ivey.ca/ezone/main.asp?ID={9229E38C-8CF6-4BFE-8534-4FC9A6A835B4}
http://www.ivey.ca/ezone/main.asp?ID={9229E38C-8CF6-4BFE-8534-4FC9A6A835B4}

Lululemon - Yoga Powerhouse - Making You a 10/10!

Lululemon was created in 1998 by Chip Wilson, an entrepreneur from Vancouver, Canada. For many at Western, Lululemon is a status symbol, but for the true lulu guru, it's a way of life. Lululemon all began one afternoon when Chip Wilson was attending a Yoga class and noticed not just that the entire class consisted of women, but that most women were wearing men's clothing, just in a smaller cut. Chip saw opportunity that day, an opportunity to design the perfect piece of clothing that flattered any woman, no matter what shape.

Since 1998, Lululemon has grown to over 650 employees and 36 stores worldwide, with plans of opening 20 more this year. How has this retailer grown so quickly? and what makes this brand so exciting? Well, Chip has given customers one more place that they can look their best. The gym used to be a place where you wore your oldest/most "unstylish" garments. Now, Chip has given people the chance to wear something that does not only look good, but is by far the most comfortable piece of clothing they own.

What makes this product so special?

Chip noticed that women were wearing Lycra because they liked the way it stretched. However, "Lycra only looks good on you if you're a 10 our of 10" says Chip. So, Chip needed to think of something new; something that was thicker, had a matte finish and wicked away sweat. So, he devised a Lycra-nylon blend referred to as "Luon" to do the job. This fabric was nothing the athletic industry had ever seen before, so many were interested to give it a try.

Lululemon is committed to consistent innovation; and who better to do the work than your own customers! Lululemon offers sponsorships to a select few people from a variety of sports - in different age categories and with varying abilities - with clothes in exchange for their views on how each item performs. This provides Lululemon with important information about how their product is viewed by their customers, allowing them to really fine tune their RVP.

Customers really feel at home when they visit their local Lululemon. This is because each store is customized to whatever geographic location you reside in. Wilson has encouraged each store manager ("educators"as he calls them) to put their own individual flare into their shop, even though the stores sell identical lines of clothing, same type of customer experience all with a strong yoga undertone.

"For example, the North Vancouver store might put on a snowshoe running clinic for those traveling to the Rockies, while a Winnipeg store might offer a long-distance running course to help customers prepare for the Manitoba Marathon each year on Father's Day." Source: Business Week

Lululemon is not just selling a product. They are selling an experience for their customer that is carried out of the store and ingrained in their everyday life. Lululemon's positive messages and commitment to sustainable development are at the core of their business strategy -- yes, they do sell you clothing, but they are also trying to sell you a healthier way of living, in hopes that when you wear your Lulu's, that you are not just wearing the pants, but that the stylistic "a" symbol on the back represents your commitment to "keeping healthy, exercising and drinking eight glasses of water a day." Lululemon strives for it's customers to embrace the lifestyle it promotes.

Personal Experience:

At first, I refused to purchase anything from Lululemon as I attributed Yoga with being strictly a women's activity. I later learned after going in with some of my friends two Christmas ago, that they have an entire line of men's clothing. I brought myself to trying on their men's cotton blend pant, because I couldn't face the idea of wearing this "Luon", as nothing should be clinging to these legs. The minute I walked in the change room, one of their "educators" asked for my name and wrote it on the whiteboard outside my door, which I thought was very personal and established a good connection right off the bat. They even have suggestion forms for you to fill out and draw picture of you would like to see in the store!

Ok, so the minute those pants went on, I was hooked. They are by far the most comfortable piece of clothing I own and have since made sure that my two sisters and Mom get their first pair of Lulu's. I really shouldn't have done this, because we can't stop shopping there. I have since bought pants and shorts out of the "Luon" fabric, and guys, it doesn't look anything like the girl's pants... so, we're ok!

An interesting development in Lululemon's product engineering is their use of silver, and I mean the actual metal (up to 7%) in nine different pieces of clothing. "Silver prevents bacteria from growing, it doesn't allow a stink to form. So, at the end of a good hard workout, the clothes don't smell."

Later in the school year, we will be looking at Lulu's creation of it's subsidiary company called OQOQO - which focuses on clothing made from sustainable fabrics. These stores are not as present as Lululemon, and have actually been shutting down and integrating their products into the main Lululemon locations instead.

I personally like Lululemon because of their ethical business practices. For example, having worked in retail for 5 years during high school and university, and being paid minimum wage, you have nothing to motivate you or encourage you to sell the product. Lululemon pays their employees above minimum wage + commission (and the employees aren't even competitive with each other!) as well as ensures good working conditions at all of their manufacturing facilities, even the ones overseas!

In conclusion, Lululemon's commitment to the environment, their promotion of a healthy lifestyle as well as a superior product put this retailer in it's own class. Their commitment to the customer and the community is nothing I have ever seen before. It is also important to note that as they get bigger, they have only got better at what they do! I promise you, once you buy that first Lululemon item, you'll be hooked! They are worth every penny.

Sources:

Wikipedia - lululemon atheltica
http://en.wikipedia.org/wiki/Lululemon

lululemon athletica - Home

www.lululemon.com

Business Week Article:

http://www.businessweek.com/innovate/content/feb2006/id20060222_778307.htm?chan=innovation_branding_anatomy+of+a+brand

lululemon - home page - faq

http://www.lululemon.com/about/faq

How to make millions with Yoga Clothing - Chip Wilson Story

http://uncommonbusiness.blogspot.com/2006_09_11_archive.html

REI -- Working Out

In the class, we discuss about the shopping experience and how retailers compete with other retailers by improving the shopping environment. However, if a company has more than one sales channel, the retailers’ business might be badly affected by the competition with other sales channels of their own products as channel conflict arises if manufactures use the web to go directly to consumers and bypass their stores.

REI, a renowned supplier of specialty outdoor gear and clothing, serving the needs of outdoors people through 78 retail stores in the US and also by direct sales via the Internet, telephone and mail, has successfully solved this potential problem and turned channel conflict into channel cooperation. And now its website functions as a sales channel that complements its physical stores.

There are several successful means to solve this problem:
Firstly, their in-store employees are quite sophisticated as they are true outdoors enthusiasts and they do their jobs based on their own experience and deep knowledge of the equipment that REI sells. And the service and advice they offer is professional and influences the customers a lot to win their loyalty to REI products.

Secondly, at REI, a cooperative with 2 million members, many products for sports such as climbing, mountain biking and skiing are technical. Customers not only want to research before they buy, they want to try before they buy. REI has exploited these characteristics by building in-store climbing walls as well as hiking boot and mountain bike test areas. To that end, REI views the website both as a sales channel and a driver to stores.

Thirdly, free in-store pickup for online orders is a strategy specifically designed to get people into the stores. And to make that strategy as cost-efficient as possible, the company uses the same trucks that restock its stores to fulfill online orders slated for in-store pickup. To make this work, REI integrated order information from the website and replenishment orders from stores at its distribution warehouse.

Meanwhile, to support large inventories with limited floor space, REI has installed web kiosks through which customers research the additional 68,000 items in REI’s inventory as well as 45,000 web pages of product information. Thus REI customers can visit REI stores, test products and research the numerous alternative REI products available to them in REI’s vast inventory. REI tracks customer information on all purchases made in any channel by its 5.5 million members. Therefore,Kiosk implementation has allowed it to dedicate floor space to test areas while simultaneously attending to its breadth of inventory. Customers can utilize the strength of each channel and have consequently increased their spending. For the customers, they can order the product that is not in stock in the stores from the web. For REI, they also use the web to cross-sell products that aren’t available in stores.

Furthermore, they like to introduce products on the Web first and then move them across to the catalog or store business, as they can bring a product to market much quicker without the restriction of printing deadlines, which also help to reduce the advertisement cost.

As a result, existing REI customers who shopped online for the first time increased their store spending by 22% and customers shopping more than one channel spent overall more than in the previous year.

---Lujia Bao
http://www.businessweek.com/innovate/content/nov2005/id20051115_663687.htm?chan=search

Mall Matters

In our last class, we discussed how store design affects a retail experience. But what about the design of the mall itself?

On a recent shopping trip, I experienced a different breed of mall, The Somerset Collection in Michigan. Two of the basic areas of design we discussed for retail stores, physical layout and interior design features, also apply to mall design. Somerset’s physical layout is unusual; it is split into two sections on opposite sides of a road, linked by an enclosed tunnel. One side is luxury stores like Coach, and Gucci, while the other half has stores like Abercrombie and Fitch.

The interior design of Somerset is impressive; there are high ceilings made of skylights, towering palm trees and huge fountains. There is no food court, only higher end restaurants. Comfortable seating is located throughout the mall. The design compliments the luxury stores, and extends their atmosphere out into the mall itself. But…we know space is profit for retailers, so how can Somerset give up so much space to design features? I think the answer lies in this mall’s ability to draw customers from a large area and increase browsing time once shoppers arrive.

One explanation for Somerset’s success is that it is exceptional enough to draw consumers from a larger trade area than traditional malls (remember our discussion of the areas each LCBO store serves?). We felt it was worth the two hour drive! Somerset has established itself as a destination for shopping through its store selection, high quality restaurants and beautiful design.

I also think Somerset’s design increases sales due to browsing by enough that the loss in retail space becomes justified. When people browse, as opposed to destination shop, they spend more. USA Today conservatively estimates that browsers spend 15% more than those who come to a mall with a specific purpose. Malls with features to enhance shopper comfort, like Somerset, cause shoppers to stay longer and as a result, spend more.

This focus on making the mall a destination and keeping customers browsing is evident in the latest trend in mall design, the “lifestyle centre”. These centres are created to look like a picturesque city street, and are open-air; they are designed for strolling. Plenty of comfortable seating, entertainment features, and upscale restaurants/stores make lifestyle centres a destination. There are rarely large anchor stores, unlike a traditional mall.
There are over 100 lifestyle centres in the US, with 10-20 new centres opening per year. As customers increasingly shop with a specific purpose, I think the goal of lifestyle centres is a reversal back to the mall as urban entertainment. It’s working; lifestyle center average $500 in sales per square foot, versus $330/sq.ft. at traditional malls. The costs are also notably less to operate an open-air mall in comparison with the traditional format (just think, no A/C costs), a savings that may translate to lower rent for retailers.

There is no doubt that mall design impacts the bottom line of the retailers it houses. Both Somerset Collection and lifestyles centres seem to indicate the future in mall design is more non-retail space, to draw consumers in for relaxation and browsing. The traditional concrete behemoths we’re used to are on their way out.

http://www.thesomersetcollection.com/

A detailed description of a “lifestyle centre”: http://www.retailnavigator.net/three.asp.

Pictures of lifestyle centres; http://www.slate.com/id/2116246/

“Shoppers turn to town centers”, USA today: http://www.usatoday.com/money/industries/retail/2007-01-31-anti-mall-usat_x.htm

“Not a mall, it's a lifestyle center” CNN Money http://money.cnn.com/2005/01/11/news/fortune500/retail_lifestylecenter/)

Outside Opportunities. Daniel Hurwitz. Chain Store Age. New York: Mar 2005.Vol.81, Iss. 3; pg. 126, 1 pgs

This article has a description of the history behind the first mall (its architects called it “a pleasure dome with parking”) :

Evolution of the Shopping Mall Stephen Lebovitz. Chain Store Age. New York: May 2004.
at: http://proquest.umi.com.proxy1.lib.uwo.ca:2048/pqdweb?did=637972931&sid=2&Fmt=4&clientId=11263&RQT=309&VName=PQD

Rona - The one-stop shop aims for the top

Two summers ago I worked for a homebuilder as a labourer. One day my boss told me to go purchase a hose and some caulking for the work he wanted me to do. At the time, I wondered where exactly I could find both items of such unrelated nature. There was only one place in proximity that I knew would cater to this demand. Within five minutes upon entrance to the Rona store I had found exactly what I needed. The only downside of the whole experience was knowing that it was time to go back to work.

Rona is the largest retailer and distributor of hardware, home renovation and gardening products in Canada. With 620 franchise, affiliate and corporate stores across Canada, it generated $5.7 billion in sales last year. Rona is a one-stop shop for all types of home products. The main consumer segments are tradesman and young families. I was not exactly a tradesman, but my experience that day was much like that of your standard plumber or carpenter. Young families will go to Rona to purchase the products they need to continually build up their home.

Recently, Rona has been aggressively growing through acquisitions. Just this past month, they acquired Noble Trade Inc., a plumbing and heating supply wholesaler. This marks the most recent of a long string of acquisitions in the past year. The main reason for this acquisition was to grow their home retail services through expansion in the plumbing and heating market. This move will allow them to diversify their customer base as the larger product offering will bring in new consumer segments. In addition, they believe that Noble Trade Inc. will help diversify the company’s business, which will help smoothen out the cyclicality commonly found in the retail sector. This acquisition, along with many others, has allowed Rona to become more vertically integrated. Rona will control many of its cost of goods allowing for a better gross margin, and therefore, a better financial condition.

Rona competes with other home hardware giants such as Home Depot, Canadian Tire, and, soon to enter Canada, Lowe’s Cos. Inc. Rona’s recent acquisitions represent a move to increase their already wide product offering so that they can become the dominant one-stop home hardware shop. The majority of the Noble Trade stores are going to be kept intact; however, Rona is going to sell Noble Trade products in their stores nationwide. The acquisition of Chester Dawe allowed them to offer this market leader’s prominent building materials and hardware products. Curtis Lumber was acquired to offer a greater selection of lumber products at Rona stores. As discussed in class, offering a greater selection allows for a greater retail value proposition to the consumer. This aggressive acquisition strategy has been successful for Rona, as they add to the retail value proposition, more consumers are attracted to their stores and income continues to rise.


Sources:
http://www.canada.com/nationalpost/financialpost/story.html?id=1fa3877b-1468-4e0d-afaa-7dfbb2319988&k=0

http://www.theglobeandmail.com/servlet/Page/document/v5/content/subscribe?user_URL=http://www.theglobeandmail.com%2Fservlet%2Fstory%2FRTGAM.20070207.wrona0207%2FBNStory%2FBusiness%2Fhome&ord=9054135&brand=theglobeandmail&redirect_reason=2&denial_reasons=none&force_login=false


http://www.rona.ca/webapp/wcs/stores/servlet/ContentServlet?assetId=20864&langId=-1

www.rona.ca

Mass Customization: Who Can Do it and Who Can't

Who else has joined the mass customization trend? None other then Lego building blocks. Yes, the company that fostered so many childhood memories is now offering kids the opportunity to make their own designs, brick-by-brick. Using downloadable digital software, customers can design their own structure, have the bricks sent to their home, and even share these masterpieces with other online users.

I can’t help but wonder how this idea came about. Were children writing thousands of letters pleading with Lego to customize their products? Or, is Lego the new Toyota that has discovered a cost-efficient operations process that will overtake the world. The answer is neither, which is why I am compelled to answer the question: who should mass customize?

Customization is actually more ubiquitous than first considered. You all order pizza don’t you? Many companies have created the illusion of mass customization without actually achieving it. As we all know, selection is one of the pillars of the retail value proposition. But a company with huge breadth is not necessarily selling a highly customizable product. The difference being that some companies make mass customization 100% of their focus (Dell) while others deem it an initiative (Adidas, Proctor and Gamble: Reflect.com). The latter group is jeopardizing future sustainability, not only for their customization project, but also for their original product lines. In Lego's case, the online initiative will either be a fad, or it will eliminate the middle man, thus reducing its presence in retailers.

The intention of mass customization is to create a market of one, yet some companies may inadvertently be using this methodology to define markets they already knew existed. For example, how much customization actually exists within mi adidas? The project could inevitably by an expensive means to determine everybody likes black shoes with lights that go on when you start walking. It is pretty obvious to a manufacturer of light bulbs that mass customization would be an expensive way for management to determine that nobody cares. Certain products have no right to even consider practicing mass customization; generally, these companies are quite cognisant to this fact. The challenge therefore arises for those industries that would potentially find customization advantageous. Let us not forget that if properly instituted, mass customization lowers inventory, increases customer satisfaction, and adds insights into future trends in the market.

One major caveat for those companies considering mass customization is the effect on their original product lines. First, from a manufacturing perspective, the practice of customization is an 180 degree turn from their existing production process and supply chain; the investment is both costly and time consuming. For Lego, going from pre-packaging sets to hand-picking bricks must have been costly. Second, from a marketing perspective, how could you sell a brand new product if your customers can go online and customize something very similar? Lego introduces, on average, 400 new sets every year. Cannibalization and the cost of disrupting lean operations are two major deterrents against mass customization.

Is it really necessary for a target market 12 years and under, who apparently are highly adept at software design, to purchase their online creations for a premium? Nice try Lego, but my little cousins are just as amused by a standard box of Duplo.

-Doug

James Gilmore, “Market of One.” http://www.amazon.com/exec/obidos/ASIN/1578512387/thevirtuarlist
Brick-by-Brick: Lego’s New Building Blocks
http://www.fastcompany.com/magazine/98/dispatch.html

Brand Confusion and Loss of Focus at Canada’s Largest Grocer

Loblaw Companies recently reported its first quarterly loss in 19 years. Part of this loss is due to a large accounting write down, but even without this write down sales have become stagnant at Canada’s largest grocery retailer. Recently appointed Executive Chairman Galen Weston Jr., also known as G2, addressed the recent struggles:

“Our consumer price image wasn't as good as we thought it was, we've done some work to solicit input from them and they're giving us some pretty loud messages. On the other side of it, they still love our stores, they still love our products, they still believe in the consumer promise of our formats. We just have to get back to delivering on it.”

I agree with Weston that ‘price image’, and more specifically the relationship between price and brand, has become very confusing throughout Loblaw’s different banners. As a consumer, I struggle to understand the differences between the many different banners under their umbrella including: Zehrs, Loblaws, Independent, Dominion, Fortinos, and Superstore. I have intentionally left out No Frills as they are the only banner that has a clearly defined retail value proposition. The obvious question to Weston is: can Loblaw Companies successfully manage seven different banners?

Different banners do allow Loblaw to reach more than one segment, but if customers are unsure of which segment they fit in or shop at the wrong banner, the confusion may push customers to select a simpler competing brand. The obvious solution for Weston is to phase out three or four banners in favour of the ones that are best positioned to target a particular segment. This branding strategy is familiar to Loblaw as they already apply it to their President’s Choice and No Name brands, which both offer products to two different and easily identifiable segments.

Loblaw Cos. financial results highlight another problem plaguing the retailer in the last eighteen months. Weston’s aggressive Walmart defense strategy: to increase assortment variety to include house wares and clothing has distracted them from their core business, selling groceries, and has not been well received by customers. I believe the lack of success with these new products is due to customer perceptions. Loblaw’s has developed a reputation as Canada’s best for a specific assortment of goods; whereas Walmart is known for their incredibly low costs on an enormous variety of goods. Loblaw’s attempt to protect their sales by increasing product variety would be similar to Forzani Group offering automotive parts to fend off Canadian Tire’s sales growth in sporting goods.

Loblaw’s success hinges on their ability to further differentiate with improved customer service and value-added products while improving margins on their grocery offering. Although it must be difficult for G2 to watch the World’s largest retailer attack his family’s business, focusing on parts of the business that Walmart cannot compete with will help Loblaw's return to profitability.

-Simon Moody

Sources:

Loblaw Companies Limited - http://www.loblaw.ca/

Loblaw Shoppers Not Impressed, Marina Strauss. Globe and Mail.

Loblaw Said It Has Fourth Quarter Loss on Writedown. Bloomberg News.

Is Wal-Mart the Store of the Future?

Our last class discussed the science of shopping and ended with a video depicting the possible future of retail shopping. In the video, each product had a RFID tag allowing items to be restocked instantly and checked out efficiently. Wal-Mart has been using RFID tags on pallets and cases, but they have reached some setbacks in getting to item-level use.

Wal-Mart has been using its leading edge logistics to give it a price advantage, but another breakthrough is needed for Wal-Mart to maintain this industry leadership as competitors Target Corp. and CVS Corp. are closing in. Wal-Mart currently mandates its 600 largest suppliers to use RFID tags on cases and pallets and RFID technology has been deployed at 5 distribution centres and 1000 stores to date. AT Kearney estimates that the cost of this deployment is about $400,000 per distribution centre and $100,000 per store, which seems quite affordable given Wal-Mart’s size. However, it is the suppliers who are having troubles adapting to the RFID technology. RFID on cases and pallets is $0.15/tag compared to barcodes which are a fraction of a cent, not to mention the large investment that is needed for readers, transponders and computer software to track the shipments. To this point, it is not particularly clear whether or not the shift to RFID has led to savings for Wal-Mart, and the RFID ROI for suppliers is years away.

In the video we saw item-level RFID tags, but the way these tags work would result in a much more prohibitive cost for suppliers. An item-level RFID tag has to go on every single unit of a product and costs $0.40, as opposed to a barcode which works for all units of a specific product. This would mean that variable costs go up for each unit of a product, and RFID would therefore be infeasible for low-cost items. However, there is hope for the future, as RFID Times estimates a tag below $0.05 will be available by 2013.

I personally think that this could happen before 2013, and the shopping experience we saw in the video could become a reality. Using their power, Wal-Mart is continuing to push its suppliers to use RFID at the pallet and case-level. Competitors have followed many of Wal-Mart’s innovations in the past and I don’t think RFID technology will be any exception. As larger competitors like Target Corp. and CVS Corp. adopt RFID, the value for the item-level RFID is increased, which is referred to as the ‘network effect’, and economies of scale would then result in a lower cost per tag. Wal-Mart will ask its suppliers to start supplying item-level RFID much like it mandated with its pallet and case-level RFID, and with the lower cost, it will not be too unreasonable for suppliers to comply, with competitors following closely behind.

And before you know it, you’ll be trying on suits in a magical mirror and checking out of Wal-Mart in a matter of seconds.

-- Chris P.

Sources:
http://www.rfidgazette.org/walmart/
Globe and Mail, Thursday, February 15, 2007, B17, ‘Wal-Mart suppliers balk at radio-activated tags’

New retail strategies in the market: Nike's case

In yesterday’s class we talked about mass customization, we analyzed the “mi adidas” case and some other retail issues were discussed. One of the main points was the importance of using new technologies in retail marketing, and the current trend in the market (with brands such as adidas) of focusing their strategies out of the point of sale. Recently, Mark Parker, the new CEO of the huge multinational brand Nike announced that the main objective for the company is to increase the sales by 50% during the following five years. To reach this objective Nike has decide to give a turnover of 180º in his retail marketing strategy by increasing the number of their own stores all over the world.

One of the main marketing purposes is to add value to the product or service that any company is offering. In general, companies can add value using two different ways. They can either focus on the brand (creating a brand image to catch the target they want), or focus on adding value using the point of sale. It is pretty clear that Nike has done huge efforts in creating a brand image all over the world in different and innovative ways, although they obviously care about the points of sales they have, Nike expends huge efforts in branding and they use the retail sports companies as the principal way to sell their products.

In the year 2006 the company had revenue of US $15,000 million and the stores of Nike represent 12% of this amount. The new strategy consist of opening 100 of new Nike stores all over the world, in order to increase stores’ sales from 12% to 15% and reach the objectives that Mark Parker is looking for. The most important thing to develop this strategy is the way Nike is going to focus on customer service in every store, and under the policy of “our customer is the only one that decides” the company seems to want to improve the customer experience in the point of sale and using new technologies they are going to try to increase customer’s loyalty.

Moreover, Nike had developed some initiatives in the same line of increasing customer loyalty. They create overseas communities that share an interest in sports using their website. The latest and the most interesting one is: “Tune your road”, using Apple as a partner (both take a huge advantage of their brand image in the market) they have linked the popular combination music + running with training and specially the fact of competing with people all over the planet at any time.

In conclusion, after the internal re-organization that Nike did in their categories-now they have sports categories (soccer, basketball…) instead of product categories (shoes, clothe and equipment)-. They are willing to take advantage of the retail marketing using their brand awareness and new technologies in order to grow their customer loyalty. Regarding the cannibalization problem with sports retailers, the CEO said that this strategy is not going to affect retailer’s sales at all. We will see in few years if they reach the ambitious goals that Mark Parker is proposing now.

Gerard

Source: http://www.infobaeprofesional.com/interior/index.php?p=nota&idx=40632&cookie

Making anything out of plastic and heat

This is what we were talking about at the end of the Mi Adidas case yesterday:

http://www.youtube.com/watch?v=kuGvPhglGEc

http://www.wired.com/news/technology/0,1282,69113,00.html

Pretty crazy stuff!

Build-A-Bear Workshop: Mass customization at its best?

In today’s class, we discussed the “mi adidas” mass customization initiative. One of the discussion questions asked us to consider what the future of mass customization will look like. Well, the success of retailer Build-A-Bear Workshop (BBW) has me believing that the future is now.

BBW demonstrates that mass customization is a possibility - and a profitable one. With over 200 stores worldwide, it is no wonder that BusinessWeek ranks the stuffed-animal chain as the 40th hottest growing business in 2006. This is actually down from 2005, when it was ranked 25th.

For those who are unfamiliar with the BBW concept, allow me to explain. BBW is a specialty retailer of plush animals and related products. The store is designed to allow its customers to create their very own customized teddy bears or other stuffed animals. Not only do customers select from up to 30 types of teddy bears, they also stuff, dress, add sounds to, and name the bear any way they want.

The concept behind BBW is to create an experience around a familiar product. Does this sound familiar? Perhaps it is because this is the concept that Adidas had in mind when it launched its mass customization initiative. Whether it is a shoe or a teddy bear, the concept of mass customization is an attractive one to retailers (and manufacturers) because it is a mode of differentiation. We all know that differentiation leads to price premiums. In fact, each bear retails for approximately $32, but when you throw in the accessories, it comes as no surprise that the BBW achieves $600 per square foot in annual sales.

By allowing its patrons to customize their stuffed animal, BBW increases the entertainment value (a.k.a. experience) of the store and its products. As the video today said, mass customization means that BBW customers enjoy the process of buying. This high level of satisfaction with the buying process enhances the consumer’s confidence in the product and gets them to focus less on price. Customization has led to high entertainment value and high selection, resulting in a strong RVP for BBW.

So, why has BBW been so successful whereas Adidas had so many issues? The company has a business model that allows for controlled variability or what Kyle called “superficial customization.” There is a high degree of mass production involved in the BBW business model as many of the components are standardized. As with the bag manufacturer in the video, BBW postpones customization as long as possible by mass producing the options of bears, clothing, etc. The accessories and bears are modular and the customers can only choose from options that BBW offers.

Whether you think that BBW is a fad or the future of retailing, there is no doubt that right now there is no bear market for Build-A-Bear.

-Andrew Rapsey

http://www.businessweek.com/hot_growth/2006/company/40.htm

http://www.businessweek.com/magazine/content/05_23/b3936411.htm

http://www.businessweek.com/investor/content/may2006/pi20060512_392646.htm

http://www.businessweek.com/mediacenter/video/newsmakers/3c4f481f4dca31992598b84f5462f8e4e013ece8.html

Feel free to check out the Build-A-Bear location in London (http://www.buildabear.ca/aboutus/contactus/findastore/storedetail.aspx?WorkShopID=228). If the idea of fighting in line with 5 year old children isn’t your thing, you can also purchase a bear and accessories online.

Pop-up retailing: Now you see it, now you don't

The Canadian retail landscape today can be described as bland and predictable. With the few notable exceptions of tourist destinations such as West Edmonton or the Eaton Centre, or rare extravagances such as Square One or Vaughn Mills, shopping malls are for the most part dull and uninspiring. The big-box power-centres that are becoming a suburban staple are essentially clones of themselves – one can find the same Home Depots, Wal-Marts, and Future Shops everywhere. It is impossible to differentiate one retail value proposition from another. But there is an up-and-coming retailing phenomenon that is taking the world by storm (and represents the RVP in a whole new context), and sooner or later it will win over Canadian consumers – it is the fascinating concept of pop-up stores.

The basic idea involves establishing a presence in a prominent, high-traffic area in a trendy neighbourhood in a metropolitan city, and then closing up and disappearing within a matter of days. Fully exploiting its sense of urgency, exclusivity, and uniqueness, this retail equivalent of a consumer blitzkrieg has the power to generate incredible buzz and publicity for a retailer or designer brand way beyond anything a traditional advertising campaign can do. In this day and age of hundred-dollar PVR’s skipping through multimillion-dollar TV spots, pop-up stores allow retailers to break through all the clutter and noise in a saturated market and deliver its message directly to the trendsetting masses – all for about the price of a billboard.

Everyone from chic designers to mainstream retailing icons have jumped on the pop-up bandwagon. Vacant’s exhibition-esque stores have made appearances in worldwide cities, showcasing one-of-a-kind limited-edition designer items for up to a month. American discounter Target has used 4-day pop-ups to promote its designer labels by Isaac Mizrahi (in Rockefeller Center) and Proenza Schouler (in Lower Manhattan). Nike set up shop in Soho just long enough to sell 250 pairs of its Zoom LeBron IV shoes. Perhaps the best example was demonstrated by Japan’s Uniqlo. In anticipation of its new flagship store in Soho, Uniqlo announced its U.S. entrance in a literal way – it transformed two shipping containers that made daily appearances, showing up in Manhattan’s Union Square one day and Cobble Hill in Brooklyn the next day.

As we discussed in class, shaking off a customer’s perception of your brand image is quite difficult when trying to move down- or up-market. Pop-up stores allow upscale brands/retailers to offer premium products at a discount, while creating brand and product awareness. Similarly, it allows mainstream/midmarket brands/retailers to move up by offering limited edition/exclusive products to trendsetters. Pop-ups also offer an invaluable opportunity to communicate with customers. Whether the goal is to showcase a new product before its official release or test the waters in a new market, the information that can be acquired from interacting with customers in a new way is often more important than the short-term profits. With all these benefits for such a low cost, there is no doubt that one day Canadians will be catching fleeting glimpses of these pop-up stores in a major city near them.


Sources:
BusinessWeek
TrendWatching.com
International Herald Tribune
NPR
Retail Traffic Magazine
USA Today
CNN Money/Business 2.0
FastCompany.com

Wal-Mart Goes Digital

In class, we have discussed the growing presence of the internet in the minds of consumers, and the effect it may have on retailing. Well, it seems retail giant Wal-Mart is looking to take advantage of the “online” craze, as they announced today plans to launch an online movie download store.

Much like Home Depot looked to their EcoOptions product line to give them a competitive edge with the growing “green” trend in the marketplace, Wal-Mart is hoping to capitalize on a generation of consumers becoming increasingly comfortable with using the internet as a shopping tool. Additionally, with some analysts predicting DVD sales falling off in the near future, Wal-Mart is attempting to respond before this becomes a serious threat. Although I believe its expansion into the digital movie download realm will help them establish a first-mover advantage in this category among big box retailers, they are faced with stiff competition from other large players like Amazon’s Unbox store and Apple’s iTunes store.

In our discussions of Canadian Tire, we talked about whether a high-end bike would really fit in with the store’s mid-market image. I started to wonder how Wal-Mart, known primarily for its large and convenient retail outlets, could compete in a digital online capacity with Apple, a company known for its technological savvy, innovation, and trendy new products. However, you cannot underestimate Wal-Mart’s considerable power in dealing with its suppliers. In fact, companies often line up and compete with each other just to get on shelves at Wal-Mart stores. Currently, Apple only has agreements to carry films from two studios - The Walt Disney Co. and Paramount Studios. In comparison, Wal-Mart has been able to launch its online store boasting a lineup of films from all the major movie studios. With a great deal more product selection than its competition, Wal-Mart’s Retail Value Proposition becomes much stronger for its online store due to its wide range of downloadable films.

It seems clear that Wal-Mart’s power as a traditional retailer has given it a definite competitive advantage in establishing itself as an online retailer. Being the largest customer to many studios, Wal-Mart has quite a bit of leverage in getting studios to support its online initiative. Companies like Apple are facing a very difficult battle in this market, as Wal-Mart can use its buying power to price lower than its counterparts, a strategy that has made the company extremely successful in its traditional retail outlets. For stores like Apple iTunes to compete with Wal-Mart, they must leverage their image as a digital, trendy brand while coming up with creative marketing initiatives to fight for market share. Wal-Mart, on the other hand, must convince consumers that they are indeed a legitimate online destination for digital media. In the long run, I believe that Wal-Mart’s influence and retail power will lead them to dominate online the same way they’ve been able to do in their traditional outlets.

- Jason C.


Sources:

http://www.thestar.com/Business/article/178642

http://today.reuters.co.uk/news/articlenews.aspx?type=internetNews&storyID=2007-02-06T225941Z_01_N06243857_RTRIDST_0_OUKIN-UK-WALMART-DOWNLOAD.XML&archived=False

Creating a new store concept

In the LCBO case we tried to design a new store. This exercise raised the question of how the store should be organized to give an appropriate image of the brand.
Customer experience was not crucial however, given the monopolistic situation of LCBO. In more competitive environments or in industries where image is crucial, like fashion or cosmetics business, store organization becomes a strategic choice.
Recently Sephora, a French cosmetics retailer, tried 2 new store concepts. Why is that, and how do you change your concept?

What are the main reasons to change a concept?
- Image animation
In businesses driven by image and trends, stores have to reflect the brand’s identity.
Dior can’t afford to have stores in a bad shape and more importantly, clients expect to have an enjoyable and indulgent experience in the stores. This implies constant rethinking of how the shops are organized and small adjustments to follow trends or seasons. Moreover, it helps you create attention around your store and brand, with for example opening ceremonies, celebrities, etc.
- Respond to competitor’s strategy
In Marionnaud’s case, changing store formats is probably a response to its competitor Sephora, which offers a strong customer experience, presenting products by category instead of brand and offering testing corners or make-up classes. This put pressure on Marionnaud whose stores looked old and outdated.

The 3 main constraints to choose a concept
- Brand identity should always be kept, using features that are historically associated to your brand all over the world and that won’t be affected by time. In Dior’s case, these specific features are Louis XVI chairs, the colours old pink and grey, and panther patterns. At least one of these elements is found in almost all ads, stores, or collection.
- The second constraint on the concept is to be sure it is exportable if the company operates globally. In case it wouldn’t suit certain cultures, adjustments have to be made. Wide open space stores might fit western taste but would go against Asian intimacy needs. In Japan, women don’t show their feet in public, which implies for fashion retailers to have smaller quiet areas dedicated to shoes.
- Eventually price is important. Even if fashion and cosmetics firms value high quality service and environment, the financial return has to justify the amount of money spent to build stores.

Decision and implementation
As we have seen, this topic is of major importance for such companies, and therefore requires CEO, CFO, marketing and architects involvement. Most of the time outside architects and company architects would be involved to design the concept and make sure it can be reproduced on a large scale.
The implementation sequence is:
- New concepts are presented to the management, including plans, drawings and the “philosophy” behind the concepts.
- One or two concepts are retained and tested in real size.
- Once a concept is adopted, the company changes its major flagship and with the time renovates all stores to fit the new concept.


http://www.lsa.fr/article/page_article.cfm?idoc=90443&navartrech=1&id_site_rech=16&maxrow=77

Can The Gap be Mended?

Over the past few years, I’ve noticed a puzzling trend in what once was one of my favourite stores. Recently, I’ve found myself wandering aimlessly through the aisles of The Gap – and wandering right back out within minutes. A decline in store traffic at The Gap has resulted in nine straight quarters of declining sales. The main contributors? A commoditization of The Gap’s merchandise and a loss of customer focus.

The trendy khaki pants and polo shirts that once made The Gap so successful can now be found almost anywhere. In addition, many have noted a decline in product quality and lacklustre store appearance. All of these factors are forcing shoppers to swipe their debit cards elsewhere. Major competitors of The Gap such as American Apparel and Abercrombie & Fitch have taken The Gap’s plain t-shirts and khaki pants and turned them into products that today’s young trendsetters actually want – something out of the ordinary, something with edge.

The Gap is also facing an identity crisis. Over the past few years, The Gap Inc. attempted to diversify with Old Navy, for more price-conscious shoppers who prefer more casual clothes, and the Banana Republic, for those willing to pay higher prices for more professional and classy- looking clothing. The aftermath left The Gap somewhere in the middle. Its strategy of trying to serve both the teen and ‘yuppies’ segments has resulted in customer confusion and a lack of any real value proposition. There has been recent talk that the entire executive team at The Gap will be replaced and its parent company, The Gap Inc., will be sold to a private equity buyer.

This all seems very sad. During the 1990s, The Gap was immensely popular, and changed the way we dressed ourselves. Although its clothes weren’t overly fashionable, they were the safe, casual choice for everyday wear. However, The Gap executives failed to take notice of the fragmentation that was taking place in the marketplace, with competitors such as Abercrombie & Fitch targeting the trendy teen segment, and JC Penny targeting moms and dads. To remain competitive, The Gap resorted to price discounting to get rid of outdated inventory. The Gap’s attempt to be all things to all segments has made it a nobody.

These problems are similar to those we learned about at the Forzani Group, where increasing competition led to over-inventory problems and price pressure. With fashion trends constantly changing, retailers must be aware of changing consumer tastes and adjust their product assortment accordingly. Those that can’t keep up will ultimately fail. The Gap needs to stop trying to be all things to all segments, and re-evaluate its competitive positioning strategy. This must include finding the ideal product assortment for a distinct target segment. With so much competition in the trendy teen segment, perhaps it’s best to target baby boomers and offer casual, yet high-quality products that suit their lifestyles. The Gap must always keep its customers in mind by following fashion trends rather than relying solely on data to make its assortment decisions.

- Merridyth

Sources:
http://www.forbes.com/business/2007/01/09/gap-goldman-sales-biz-cz_es_0110gap.html
http://www.macleans.ca/topstories/business/article.jsp?content=20070122_139717_139717
http://adage.com/article?article_id=114206

Home Depot: One Foot In China

In class, we have discussed about Home Depot and its goal and strategies to become the number one retailer in Canada, and also its fierce competition with global retailers. This news of Home Depot might let us analyze the retailer giant in another angle as a new entrant in a totally different retail market in China.

Home Depot is eyeing the promising Chinese home improvement market and considering about acquiring 45% stake in Orient Home, a Beijing-based chain with strong presence in China. They are very prudent to decide which the next step is to take and make sure to pick up the right business model when they move into this market. And three aspects must be paid attention to if Home Depot wants to find success in Chinese market.

Firstly, know your local customers and changes should be made to cater to them. Compare to the stores in China, warehouse-style building is apparently not attractive in Chinese eyes. And the preference of lay-out inside of the stores is also different. Products should be placed within easy reach as Chinese are used to handle merchandise before buying. Therefore, western-style of products stacked high on the shelves will make them feel inconvenient. What’s more, the culture difference exists. Do-it-yourself, which is a quite popular concept in North America, is seemed daunting in China. It is also not practical as most of new home in China are just concrete shells. So people usually hire handymen to fix up or install all stuffs.

Secondly, according to the situation in China, Home Depot needs to hire special staffers to meet the special needs in order to expand in this market. In the other words, it needs to offer a complete package including everything from the products, suggested decoration plans to the whole installation work.

Thirdly, build a good relationship with local suppliers is quite necessary. In the world’s most promising home improvement market, fierce competition can not be avoided. Both global companies like B&Q and domestic companies such as Homeway and Homemart are big competitors to Home Depot. Good relationship with local suppliers leads them an advantageous position in this market. Furthermore, as business in China relies much on relationship, good connection with the government does help to secure better locations and good relationship with partners helps to more familiar with the local market.

Although with mature purchasing, supply and warehouse management systems, Home Depot is still hesitating when and how to move in Chinese market. However, both building relationship and familiarity with the local customers and market take long time. So may be” the longer it waits, the tougher it will be to break in”.

--Lujia
http://www.usatoday.com/money/world/2006-09-24-china-home-depot-usat_x.htm
http://www.businessweek.com/magazine/content/06_18/b3982066.htm