Denner: Switzerland’s number one discounter in alimentary products retailing

Denner is the number one discounter in Switzerland’s food and beverage products offers with more than 428 branch offices throughout the country and has a payroll of 3’500 employees. Moreover it owns 295 “satellits”; they are independent retailers who carry Denner’s assortment and as well as others products categories.

According to its full year 2007 figures it has outperformed the Swiss market average and its turnover was CHF 2.7 billion, an increase of 4.3% vs. 2006. The Superdiscount format contributed 3.3% of the total turnover, at CHF 2 billion while turnover for the Denner Satellit fascia was CHF 7 million.

Denner’s mission goal is to focus on an effective Policy of discount; it is providing the best quality product for low prices for a limited number of products, mostly alimentary goods.

Its assortment covers the most daily needs in terms of products, with 75% of those goods account for brand names and the rest is regrouped under the Denner’s brand “look for the best”. It tries to provide to its customers with new choices every week by adding non-food items to its current product categories. One of its recent added products line for gourmets is “Primess”, a premium private label that carry superior quality, high end products compared to its basic offers.

Denner focuses its competition strategy against its direct competitors, Migros and Coop, on price, still fostering better quality goods to its customers. Migros move to enter this segment was its now well famous M-budget, a private label that spread its low cost offers, at an incredible pace, now to nearly 70 commodity products. Despite this new entrance by competitors in the segment, Denner carries on a good strategic marketing and thus assuring its loyal customer base. Denner’s main customer segments are students, singles, low income families and others opportunists who would like to experience good quality products for a competitive prices.

This overall competition and the potential entrance of external players, such as Aldi, a German discounter; Denner is forced to expand its business arena for assuring a guaranteed revenue base in the future. In order to cope with these new market constraints, it launched “Voyages Denner” with collaboration and under the direction of Direct Voyages SA. By partnering with low cost airlines and hotels in local destinations, it is providing competitive offers to exotic destinations, such as North African countries, Thailand or even cruises in the Mediterranean Sea.

The Denner’s RVP is truly good for such a discounter, in a sense that it carries a large selection to satisfy the most daily needs in alimentary, the convenience is higher than any others discounter in neighbouring countries and as to the experience there is nothing unforgettable, yet satisfies its customer base. The discounter such Aldi or others major discounter in Germany, France, they don’t give that much importance to the display on the shelves and keeping a good looking of the store, whereas Denner display its assortment as good as the high end products suppliers such as Migros or Coop. Moreover it is located in strategic neighbourhood. From personal buying experience, Denner was the only food retailer located nearby the residential area where I used to live during my studies in Lausanne. These features give credit to Denner and its customers remain loyal and are reluctant to switch the supplier, even with the tentative of Migros with its M-budget.

The reason why Denner’s products have a perception of high quality in customer mind is that it carries the entire assortment for low cost, whereas Migros could have two different brand of same product side by side with one M-budget and the other brand label. The discrepancy in price between both products tend to create a perception of lower quality related to M-budget products, which doesn’t happen among Denner assortment, since it doesn’t make this kind of distinction among its product lines.

This overall competition trends in food retailing, which is totally new in Switzerland landscape, since most of industry sectors are based on few suppliers, thus the citizens pay premium price for supposed high quality. Thanks to such competition among suppliers customer benefits paying low prices and still get good quality products.

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links:

• http://www.denner.ch/fr/sortiment/sortiment_3074.htm?1

• http://www.voyages-denner.ch/

Best Buy: Segmentation and "Personalized" Stores

Best Buy is recognized as an industry leader in electronics retailing, and is often credited as being a highly innovative and “customer centric” organization. While most retailers develop a clear picture of their target market(s), Best Buy has taken an interesting approach to customer segmentation that seeks to put a face and a name to each segment it serves – and to market to each group accordingly.

Instead of referring to each customer by long-winded descriptors such as “high-income middle aged women”, Best Buy has implemented a system where each desirable customer segment is assigned a codename, such as “Barry” – the wealthy professional man, or “Jill” – the affluent soccer mom. Best Buy believes that using such names allows its customer service representatives to conceptualize customers in a more personal way.

The retailer has also launched an experiment in which it is tailoring specific locations to suit the needs of the different personas. Using geomatics data and customer profiling, the company has converted a select number of stores to appeal to a particular segment. For example, the “Jill” stores feature specially trained soccer-mom-friendly customer service representatives, hidden “Jill” express check-out lanes and music that is likely to appeal to Jill and her children. The Barry stores, by contrast, are more likely to feature leather couches in front of plasma televisions… the sort of environment in which Barry could envision sitting down and drinking brandy. So far, Best Buy’s experiment seems to be paying off… stores specially tailored to specific customer personas have seen an increase in sales vis-à-vis their more generic counterparts.

Personally, I believe that this strategy is an innovative method of driving up sales through a retail experience that is more relevant to the most profitable target markets. Traditionally, most big-box retailers have tended to avoid the specific store-level remodelling initiatives that Best Buy has undertaken. Yet for Best Buy, its combination of segmentation techniques and “personalized” stores are proving to be an effective way of bringing in desirable customers. For example, its shift to cater to “Jill” in some stores is a tangible reflection of the fact that women are heavy buyers and influences of big-ticket consumer electronics items. I also find it interesting that Best Buy has been able to integrate geomatic segmentation approaches into the equation; it uses various geographic, demographic and psychographic data in determining which locations should cater to which persona. With respect to the RVP, Best Buy appears to be increasing its emphasis on the experience component as a source of competitive advantage. Moving forward, it’s possible that a large scale roll out of the targeted store concept will be able to drive increased sales across the organization by better catering to the specific needs and mindsets of different customer segments.

References:
“Best Buy’s Giant Gamble”
http://money.cnn.com/magazines/fortune/fortune_archive/2006/04/03/8373034/
“Profiling for Profit”
http://www.washingtonpost.com/wp-dyn/content/article/2005/08/16/AR2005081601906_pf.html

The Brand Squeeze in the Retail Age - A Brand Manager's Nightmare?

Never before in history have multi billion dollar brands been so significantly squeezed from so many directions. Brand managers are fighting for their brands identity, indeed, their very survival. “How so?” you may ask. Well, they are facing a quadruple squeeze, if you will. Allow me to explain:

The first and most obvious squeeze is the retailer. Wal-Mart, has a database larger than that of the Pentagon, a workforce larger than US military forces, and a sales turnover of $256 billion that makes it 250% larger than any consumer goods supplier. It is not a stretch therefore, to say that with such size comes great influence over consumer choice and perceived selection. The real issue for brand owners therefore is that as retailers become more polarized and powerful, they have the leverage to concentrate, or dilute the brand message depending upon whether or not they see a complementary relationship between the brand’s value proposition and the store’s RVP.

The second of the squeezes is the “shopper”. Shoppers, unlike consumers, are in charge. They make their own decisions and genuinely adore the process of shopping. They have been empowered by retailers who have understood them like never before, and serviced them with increasingly better value propositions. No longer are they passive servants to brands - they are masters to their new shopping universes insisting on clarity, participation and involvement.

The third squeeze is that of the ultimate brand replacer- private labels. Again, this squeeze is largely driven by the efforts of large retailers constantly trying to differentiate themselves in a highly competitive market and to increase customer loyalty through private lines. What is most alarming for brand managers is the fact that on a global scale, the difference between the numbers of customers who are store loyal versus the number of people who are brand loyal is sharply declining. A global survey conducted by A.C. Nielsen and BBDO Europe revealed that only 23% of people worldwide were prepared to change stores if Gillette wasn't there and only 17% if Colgate wasn't there. Also, the success of premium private labels in Canada and Europe is continuing to erode market share of well known brands as it becomes an increasingly profitable option for retailers.


Finally there's the last squeeze: the media squeeze. With the emergence of the online media and TV audiences becoming increasingly fragmented, it is now very difficult, and wildly expensive, to stand out. Gone are the days when merely creating brand awareness for a product was enough to drive sales - which begs the question: In this new environment, is brand awareness even achievable, or more importantly, relevant? Promotions encouraging customers to try and buy are increasingly centered on the premise of brand selection, instead of awareness. However, this brand selection focus is further complicated by the changing nature of the very communication channels through which brand managers are trying to reach shoppers.

Now, as someone who is going to be stepping into the world of brand management soon after graduation, I’m a little.. concerned.

- Kunal Datta

Sources/Articles/Notes/Additional Readings

• Retailization: Brand Survival in the Age of Retailer Power ; Lars Thomassen (Author), Keith Lincoln (Author), Anthony Aconis (Author)
  
• “ Retail Power: Making Or Breaking The Brand ”; Brian Moore, EMR-Namnews

• Will private label drive out manufacturer brands?”; Helen Passingham-Hughes, Admap, October 2004, Issue 454, pp.56-57
  
• “Brands, be yourself!”, Driss Farissi, ESOMAR, Retail Conference, Budapest, April 2005
  
• “Brands, retailers and consumers. Are we moving towards a new equilibrium?”, Judith Passingham and Stephan Buck, ESOMAR, Marketing Research, Edinburgh, September 1997

More Technology in Retailing Effective?

With the majority of purchase decisions made at or near the point of sale, retailers are embracing technologies that enhance their point-of-purchase (POP) displays.

Communication through technology is enabling retailers to connect with target consumers through three ways:

1) directly

2) indirectly through sales associates

3) through in-store experiences.

1. DIRECT SHOPPER COMMUNICATION

Mobile Devices have provided an entirely new way to reach customers by enabling access to the internet – with information when customers need it, information that is critical to purchase decisions, such as reviews and peer recommendations.

This can totally change a retailer’s RVP by changing the experience and convenience aspect since customers can customize their information whenever they want. Also it is information that retailers can use to influence buyer decisions before consumers even reach the retail store.

2. INDIRECT COMMUNICATION THROUGH SALES ASSOCIATES

Instead of utilizing kiosks to completely replace sales associates, POP ambient and mobile technologies can be used as an education tool for sales associates. This will enhance the retail value proposition of retailers in experience and convenience. Sales associates can easily utilize the information on the fast-paced fashion trends in a high-end retailer thereby enhancing experience to consumers. The consumer is now able to shop and buy with a minimal expenditure of time and effort the latest fashion trend.

3. SHOPPER COMMUNICATION THROUGH IN-STORE EXPERIENCES

In addition to communicating with shoppers both directly and indirectly through sales associates, it is also important for customers to have in-store experiences with the brand.

EXPERIENCE STORES

Increasingly more brands have been opening their own experience stores. These new experience stores use technology so customers can immerse themselves in and become more engaged with the brand and products.

Another example of a technology-enhanced retail experience is the NIKEiD Studio at Niketown in New York City. The store window has been converted to a touch screen that people can use to customize Nike products and email their designs to friends. Later on, they can purchase their creations on their home computer or inside Niketown.

This does make me question what is the return on these technologies, in that does it encourage purchase decisions? Or is it simply entertaining in the store level.

While the new media has the potential to create a better in-store experience and so build customer loyalty, the trials have yet to achieve that potential. At a number of levels, every second counts

• Whether the seconds are invested in understanding shopper behaviour and how the new media should be utilised to drive changes in behaviour
• Or ensuring that the POP message is communicated quickly enough to impact on the purchase decision.

This is an interesting concept to enhance the overall experience of customers in a retailing store however it is very important to integrate it effectively with your RVP/product offering. I think it will be interesting to see if this evolves to the amount of mass customization similar to the store of the future example we saw in class.

Sources:

How ambient technologies enhance the "magic of retail"


Through the shopper's eyes; A New Perspective on the In-Store New Media Debate

Wal-Mart's RFID Efforts: Store of the future? Or ticking off suppliers?

Wal-Mart has just increased pressure on its suppliers to comply with its Electronic Product Codes pilot program. This program will require all Sam's Club's pallets to be RFID tagged for all distribution centers by October 2009 and will require each sales item to be RFID tagged for 2010.

As of January 30th, 2008, all Sam’s Club suppliers that ship their merchandise to Sam’s Club Distribution Centres located in Texas are required to include an RFID tag on each pallet, or face a $2 fee. A Wal-Mart spokesman says, “It's really designed as a short-term solution for those suppliers that may need a little more time to implement their own tagging solution”. Fees are set to increase to $3 next year.

Wal-Mart touts this new development as a way to, “continue serving our customers and providing them with the best products at the lowest possible price.” In fact, Wal-Mart’s Electronic Product Code website indicates that out of stock items using RFID technology were reduced by 16 percent and were replenished three times faster than non-tagged items. Also, stores with RFID tags were 63 percent more effective in replenishing tagged items than control stores and experienced a 10 percent reduction in manual orders, which reduced excess inventory.

Additionally, many suppliers have been surprisingly impressed by Wal-Mart’s RFID program. Daisy, a cottage-cheese and sour cream maker has publicly spoken out in support of the Wal-Mart initiative. Daisy's information systems manager, Kevin Brown, says he “can track, by lot number, how quickly pallets of products make it to stores and when they're unpacked using Wal-Mart's Retail Link Web site for suppliers, since Wal-Mart has readers at its dock entrances and on its cardboard-case compactors. If a Wal-Mart store is scheduled to run a sales promotion on sour cream, certain information will signal that the promotion is taking place as planned, such as the destruction of a large number of cases in order to fill up the waist-high coolers typically used for refrigerated-product promotions.”

However, many suppliers and consumers are unhappy with this recent development. In fact, as of January 15th, more than 15,000 suppliers had yet to comply with Wal-Mart’s request for pallet-tagging. At a cost of $0.20 - $0.30 per RFID tag, many suppliers, already operating on squeezed margins, don’t see the benefit or don’t have the technological systems in place to make use of this data influx. Additionally, concerned consumer groups have staged protests outside of Wal-Mart’s Bentonville and Dallas stores, calling this initiative “pervasive commerce”. You can see out some of the arguments against RFID technology here: http://epic.org/privacy/rfid/

Personally, I believe that RFID technology is coming whether these suppliers like it or not. Additionally, I give Wal-Mart credit for its phased implementation approach. Wal-Mart’s suppliers have known of Wal-Mart’s intention to implement RFID technology for years, and should have known that Wal-Mart would eventually resort to strong-arm tactics. That’s what Wal-Mart does! I also think that it was intelligent for Wal-Mart to start this program in its Sam’s Club stores where fewer suppliers are affected. Also, Sam’s Club suppliers will find it more difficult to complain about a $0.20 decrease in margin when they are selling in bulk quantities.

However, I do have a few problems with Wal-Mart’s approach. First of all, I believe that $2.00 is an unreasonable price to charge these suppliers to affix RFID tags on their skids. While it will get suppliers motivated to affix their own tags in the future, 15,000 suppliers who may not have had adequate time to implement their own RFID affixation program are being charged unfairly. Perhaps Wal-Mart could implement a program whereby these suppliers could pay a cheaper price as long as they could guarantee that their program will be implemented by a certain date. Then, if the supplier’s program is not implemented, they will be charged according to Wal-Mart’s unreasonable pricing scheme. Additionally, while $0.20 - $0.30 might not be an issue when it comes to tagging Sam’s Club skids, suppliers are going to have a very difficult time when Wal-Mart requires that every sales item is tagged (only 2 years away). How can Wal-Mart ask a chocolate bar manufacturer operating on $0.20 margins to pay for a $0.20 RFID tag? While the cost of an RFID tag is expected to decrease greatly in the next few years, even a $0.02 RFID tag will eat greatly into the profits of low-margin items. Wal-Mart will need to develop a strategy that will assist these suppliers and will need to show tangible benefits of RFID technologies to all suppliers.

In regards to the consumer groups and protesters, many of the concerns voiced by these groups are unfounded. “With RFID technology anyone can drive down your street, point a scanner at your house, and ‘read’ all the tagged products within.” In fact, many of the same issues were hotly debated when barcode scanners first came into practice. It will be up to Wal-Mart to educate the masses on its specific uses for RFID technology and ensure that consumer privacy standards are carefully followed so as not to face public backlash en masse.

http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=339&contId=6181 Wal-Mart’s Electronic Product Code policy

http://walmartwatch.com/blog/archives/pressuring_suppliers_wal_mart_demands_rfid_tags/ Wal-Mart Watch. An organization that aims to challenge the world’s largest retailer to become a better employer, neighbor, and corporate citizen.

http://www.againstthewal.com/#Wal-Mart_expands_RFID_requirements__ Anti Wal-Mart blog site.

http://www.informationweek.com/news/showArticle.jhtml?articleID=205900561 Information Week Article about Wal-Mart’s recent announcement.

The Flushing Success of the Toilet Bowl

Other than reading, what else do you do when sitting on the toilet bowl? Would you like to have a meal on the toilet? While you may think it is an awfully disgusting idea, there are many young and adventurous individuals who are willing to wait up to three whole weeks and pay a price to do so. In Taipei, a major city of Taiwan, a toilet-themed restaurant was established by a young entrepreneur to delivery this unique catering experience to the general public.

This restaurant, “Marton”, was named after the Chinese word for toilet - Ma Tong. In this restaurant, the interior decors creatively replicated a bright and clean washroom environment. Urinals are modified as lamps. Sinks and bathtubs are converted into tables. Nonetheless, traditional chairs are replaced by toilet bowls with special designed seat covers. To further resemble the overall toilet concept, feces-looking/brown coloured food and beverages such as fudge ice-cream, curry, and milk tea are being served in toilet bowl or urinal shaped dining wares. Although the food selection at Marton is quite narrow, less than 5 major categories with a few variations in each, all of them are carefully selected by the owner to reinforce the sensational experience to its customers.

Since Marton’s customers place significant value over the restaurant’s distinctive setting and ambience, Marton is able to demand a fifteen to thirty percent premium for its very basic food offerings. A regular frozen yogurt that costs Cdn$1.00 would be sold at Cdn$1.20 at Marton and a regular Cdn$6 meal set would be priced at Cdn$7.50. This pricing strategy does not materially affect customers’ perceived price value because Marton's product assortment typically ranges from Cdn$6 to Cdn$10 in price, which is generally considered as very cheap to local dwellers.

Located in an old building within a small street in downtown, Marton is not nearly as visible and accessible as other casual restaurants. However, interested customers would consider this inconvenience as a minor factor and should be very willing to travel great distance to enjoy this fun and exciting catering experience. The reason is that the owner, Mr. Wang, had brilliantly patented this toilet restaurant concept to capitalize on his monopolistic operations upon commencement of the business.

In brief, Marton’s fine balance between price and experience has created tremendous value to its customer and contributed to the remarkable success of the 26 year old founder. One may question that this idea is just another short-term fad. However, Mr. Wang had proved otherwise as he was conducting his pilot project on the street, selling ice cream cones in toilet bowl shaped containers at a premium price. Daily sales have surpassed one thousand units and a huge buzz was generated in the city shortly, which ultimately led to the full roll-out of the restaurant concept. Today, Marton has already opened another larger chain store and has become a major attraction of Taiwan. With this in mind, would you be tempted to dine at this fetish-like concept restaurant?

You-Tube Video Link:

http://www.youtube.com/watch?v=3sJCKRRmCIQ&NR=1

Related Links:

http://yeinjee.com/asianpop/toilet-themed-restaurants-in-taiwan/
http://au.travel.yahoo.com/great-outdoors/taiwan/toilet-restaurant-taiwan.html

LiFE ONLiNE: boycotting the mall

Web 2.0, the new frontier. You can bank, socialize, and even run a business without ever leaving the comfort of your own home. But just how much has the internet affected our lives when it comes to the big "S". Just how much has the internet changed our lives when it comes to the retail experience?

THE EXPERiMENT: Is it possible to survive a month without ever visiting the Mall, a big box store (such as Wal-Mart), or any physical retail format... without giving up the high-fashion, health-conscious, deal-sniffing lifestyle that I am accustomed to. So, I cleared out my fridge, cleared my credit card, and googled a list of possible candidate sites that would facilitate my anti-mall lifestyle.

THE TOOLS: A visa card ; the internet ; and a mailing address (a downtown apartment close to a post office really helps!).

STEP 1: Food Basics. first things first; the top priority was getting some food. All I had remaining was a box of cereal and a couple of eggs. But this part was going to be easy! Grocerygateway.com and its "freshness guarantee" delivers produce right to your doorstep. Register, click on eggs, cheese, carrots, soy chicken, cereal - pretty much everything your local Loblaws or Sobeys would carry. Grocery Gateway leverages the power of the internet to provide ease and convenience to the time-crunched consumer - at a small premium. It's a wonderful system... as long as you live within their delivery area. Which we - residing in beautiful London, Ontario - don't. Sadly, with nothing but a promise to be contacted by email when "service in the residential area becomes available", my hungry roommate and I piled into a car and drove to the nearest Loblaws. Looks like Galen Weston will be getting my grocery dollars for a while longer...

STEP 2: Costco.ca - the online one-stop shop. While iTunes usually suffices for all of my music (and now movie!) needs - sometimes it's just necessary to get that physical copy of the Spice Girls greatest hits CD, or that Jericho Special Edition DVD Boxed Set. Costco.ca also came in handy for getting my almost-last-minute Valentine Day present, providing possibly the best deal around for a digital camera.

And when Costco.ca doesn't suffice, such somewhat notable sites such as Amazon.ca and Ebay.ca exist to fill all of my consumerist needs (from basketballs to watches to books).

STEP 3: Sexy Styles - leaving Guess and the Gap behind. Somewhere in my month off from the mall, I decided that I needed a new pair of jeans. And here, in the world of fashion, the online shopping absolutely exceeded any in-store experience I have ever had. As a size 30 x 32, trying to find a perfectly fitted jean can be a right nightmare. But a visit to the online boutique JJ Denim provides access to a massive collection of hot styles; a far bigger assortment than I would find in all of Masonville Mall. The ability to use Paypal, Visa, Mastercard, and Amex makes the online shopping extremely convenient as well.

Another great sites was A|X Canada. It's the Canadian portal of American Exchange, with such great deals for their 2008 spring collection that I spent over 200 dollars on my first visit. Also, International Jock had a fabulous selection of swimwear, boxer-briefs, tank-tops, and sports gear from a variety of top designers. I'll be expecting my new 2xist purchases within the next ten days.

DRAWBACKS: Want that instant gratification of buying that new sweater? To see it, hold it, feel it, wear it? You won't find that online. Leaving the mall behind means planning your purchases. The ten-day-or-longer shipping times means that buying that new shirt for going out on Saturday night, needs to be planned two weeks ahead.

Also, shopping online is always a risk. Reputable sites usually have excellent security features - but that's not what I mean. It's the risk of buying a size small and have it hang loose as a tent because you really needed an extra-small. Returns and exchanges are plausible, but inconvenient for both the shopper and the online retailer. For someone who does not know their sizes very well, a trip to the mall is still a better bet.

The dynamic of online shopping is very different from a sociological standpoint. For me, a trip to the mall - even without buying anything - is a very social exercise. In comparison, buying my things online was often less fun.

Currently, many of the online retailers are American. Thus, while the advertised price for a pair of Diesel swim-trunks may be $29.99, with the addition of shipping costs and duties paid, the final price can be quite painful. It's something that the wise online shopper takes into account when browsing, a lesson I quickly learnt.

CONCLUSiON: I won't be giving up the mall anytime soon. Even though there is a much smaller collection of fashions at my fingertips, the physical retail experience has a social element that their online counterparts still haven't captured. However, a noteworthy percentage (approximately 30%) of my shopping expenditures will move online. Let's face it: It is quite impossible to find a pair of Energie jeans, especially at a reasonable price, in this city.

As more people become accustomed to shopping online - and as online retailers expand their reach - I would not be surprised to see others adopting my hybrid shopping habits. It'll be interesting to see how (and if) physical retailers will be fighting back...

Sources/Links/Related Articles:
"Bezo on the future of retail"
"Ecommerce 2.0?"
"4 Trends that signal the future of online retail" - Influential Marketing Blog

Costco.ca
A|X - Designer Clothing at Armani Exchange
JJ Denim for men
International Jock
iTunes Store - Apple Canada

The Gap: Selling to everybody means selling to nobody

It doesn’t seem like long ago when Gap was the fashion retail giant that got “Everybody in cords” while singing along to the tunes of “Mellow Yellow.” But now, over 10 years later, the outlook is indeed, rather mellow. Gone are the days where consumers flooded into Gap retailers to purchase the classic, yet cool t-shirts, jeans and khakis that made the brand famous. Instead, shoppers are crowding into H&M, Abercrombie & Fitch, Coach and Hollister to fulfill their fashion needs. So what went wrong for Gap?

The company tried to reach too many consumers at once. In fashion retailing, it is more than just selling something that people can cover their bodies with. It goes beyond just the piece of clothing and the customer service but extends to the brand, what it portrays and what it stands for. By buying clothes from a certain retailer, the consumer is buying into its message and using it to define herself as an individual. This is why a carefully crafted position in the market is so important. With the rise of stores like H&M and Abercrombie in recent years, clothing retailers became very successful at being focused on what they stand for and who they are targeting. H&M draws the trendy individualists looking for the most up-to-date high fashion pieces without the extravagant price tags. With Abercrombie, they are targeting the popular, all-American teenagers and purposefully creating a dark and alluring atmosphere in their stores to derail those who do not fit the mold. Even from class, we see Home Depot is targeting a niche market of homeowners who are interested in DIY initiatives while seeking knowledge and expertise.

Gap, in contrast, is without a niche market. The company is trying to portray the role of the cool, classic teenager, while speaking to the young, motivated professionals and donning the part of a casual, chic mother. But by trying to sell to everybody, you are selling to nobody. It creates mix messages to consumers on what the brand stands for, leaving them with nothing to identify with. Gap has lost sight of its RVP in providing the classic yet trendy selection of clothes that spoke to its market and instead, is offering a boring selection that plays on the basics in hopes of appealing to the masses. However, people don’t want to buy from a store that offers everyone everything, just as enthusiast cyclists don’t want to shop at Canadian Tire, which offers everything from low-end hobby bicycles to high-end specialty bicycles. They don’t want to shop with the leisure cyclists nor identify with them.

So, what does Gap do now? I believe that they need to find a focus, a niche and speak its own message amongst the crowds of fashion retailers. This message must be reflected in everything from the merchandise to the retail display to the consumer shopping experience so it becomes one coherent brand. When the Gap starts to speak a focused message, consumers will begin to listen again.

Articles:
"Minding the Gap"

"What Gap Needs to Do Now"

"Gap Is in Need of a Niche"

The Store that Sells … Naps?

If you walk down West 57 Street in New York, you may come across an interesting new shop with a rather unusual product offering: naps. The store is called Yelo, and they have developed and trademarked a new “product” called the YeloNap. The retail storefront showcases not only high-end sleep related products, but also displays when the next available nap can be purchased. Yelo has turned sleep into a product, packaged it, trademarked it, and is selling it in the marketplace.

Specialty merchandise such as expensive lotions and cashmere blankets are sold and displayed throughout the store, but main selections are posted on the “Treats Menu”, similar to a coffee shop. At the counter, naps can be ordered in various lengths. Combos combine naps with massages, reflexology, and even beverages. A 20-minute nap costs $12; adding a 10-minute massage gives you a total of $40. Reflexology can put the price over $100.

So how does Yelo get away with charging a premium for something that has traditionally been free? The primary reason seems to be the experience. Various factors reinforce the message that Yelo is a brief escape - an urban oasis. Located on a loud, busy street, customers enter a different space when they walk into Yelo’s quiet, softly-lit location. If a customer purchases a YeloNap, they are led to private chambers containing a proprietary YeloChair designed for quick relaxation. Each YeloNap experience is customizable, with adjustable light intensity, colours, music, and scents. Purified air and cashmere blankets add to the luxurious experience. A YeloNap is nothing like dozing off in a cubicle or resting on the subway. It’s also not just about purchasing sleep; it’s the total experience of entering a world of relaxation, well-being and indulgence. As Yelo becomes more established, the name may become synonymous with luxury, wellness, and high-quality. It would be interesting to see if the name could be leveraged to add private labels to their merchandise mix!

Founder Nicolas Ronco likens his product to bottled water: sleep that is transportable and safe. The logic seems to be that like drinking bottled water on the go, people will visit Yelo when they are tired but away from home. This relates to the last component of the RVP – convenience. Yelo’s RVP works on most dimensions, but I think the key to their success will be in bringing convenience up to almost as important as experience. Most people won’t travel far for a bottle of water. Likewise, most people won’t travel far for a nap, even if the total experience is great. Therefore, Yelo must be conveniently located close to its customers. Since most people don’t want to travel far or wait for a nap (Yelo only has 7 rooms), additional rooms or locations may encourage more people to visit Yelo on their breaks. Perhaps this new concept will catch on in the future, and we’ll be seeing many more exhausted professionals trading in their power lunches for a power nap!

Yelo - Official Website
http://www.yelonyc.com/what-is-yelo.cfm

Youtube Clip of Yelo
http://www.youtube.com/watch?v=18-cvCkpw1U

M-Budget: The success story of a Swiss private label

Credit cards, mobile phone offer, car rental or energy drinks. At the time of its launch, no one would have thought that Migros’ low cost private label, M-Budget would differentiate its assortment so widely.

Everything started in 1996, when Migros, #1 of the Swiss retail market, launched a line of 70 commodity products under the label M-Budget. Initially, the target segment was families with low income but fast, a lot of other people began to buy M-Budget products because of the good quality despite their low cost.

The concept of M-Budget, since the beginning, was to focus on the product and save some money on the marketing and the packaging.

The packaging is standardized, everything is designed with a green background where Migros is written in white (See illustrations).

Using it’s image of low cost label, M-budget launched in 2005 a mobile phone offer using the Swisscom(State owned mobile company) network and sold the sim cards for 19.80 Swiss francs including 10 francs air time, instead of 50 swiss francs for its competitors. Then in 2006, M-budget partnered with Mastercard and GE Money Bank to provide a low cost credit card service. The only difference with the other Swiss credit cards is that it has no annual fee.

In 2007, M-budget’s 615 products accounted for 698 millions of Swiss francs (~$ 640 millions) in Migros revenue which represents 3.70% of Migros’ revenue.

The initial commodity products are still in the assortment and a lot of other products going from other commodities to more complicated ones like a bike, a skateboard, watches or furniture have been added.

Still in 2007, a survey from the ad agency Advico Young & Rubicam revealed that M-Budget was one of the Swiss’ 20 favorite brands.

So why has M-Budget been so successful over the past 12 years?

First of all, it took advantage of the poor competition in term of grocery retail chains in the country. Migros Group is actually the number one on the swiss market with 37% market share and with just one competitor which is COOP and accounts for 35% percents of the market. Otherwise, there are only secondary grocery stores.

Then, I think Migros did really well in understanding the customers’ needs. They identified at the beginning the need of a reliable low cost brand on the market and have been able to grow while adapting to the new needs of the market in term of low cost goods and now services.

And finally, Migros hasn’t carried national brands for a long time before the 1990s and so people who were shopping at Migros were used since the beginning to use Migros product, usually unlabelled. So it didn’t make a big change in their shopping experience to choose a product labeled by Migros.

In the future, M-budget may be threatened by the recent development and big investments made by Aldi (german hard discounter) to enter the swiss market.

Sources (french):

M-Budget's assortment

market situation

Master work about M-budget

Migros on Wikipedia

The Brain Drain May Have Slowed, But the Cash Drain is Just Beginning

Canadians have long been used to seeing higher price tags on products sold in Canada versus the US, but as the dollar skyrocketed this past year to reach, exceed, and then maintain approximately par value, Canadians began to wonder why they were still facing considerably higher price tags than their American counterparts. In fact, the gap had grown! In few industries was this more evident than the auto industry, in which a consistent 20% gap had grown. This sense of injustice, not just in the auto industry but in all retail industries, has resulted in record numbers of Canadians crossing the border in search of greater discounts.

Traditionally, American outlet stores near the border have been able to draw Canadians across the border as a result of their greater selection and the fun, ‘adventure-like’ experience offered. Now, however, with lower prices on top of these other two strengths, the RVP offered by cross-border retailers has proved to be too good an offering to miss out on.

This is a huge issue for Canadian retailers, resulting in major losses as growth has become stagnant. The idea of cross border shopping is at the forefront of the consumer mind: most of us have gone across the border recently, are planning a trip, or have utilized online purchasing in order to reap the great savings that our strong dollar has resulted in. So why are Canadian retailers not responding? Why has so little price leveling been done?

For the most part, retailers have just been slow. Many argue that since their inventory was purchased up to a year ago (at a less favourable exchange rate), that they would be losing money by marking it down at this point. Some argue that a price cut will negatively affect their premium brand images, while still others claim that the high prices are a result of greater tariffs and a higher cost of doing business in Canada. In the case of auto dealerships, they are hampered by manufacturer-set MSRPs, and many manufacturers have the mentality of North American being one market: they don’t care whether a sale occurs in the US or Canada. In an attempt to keep customers while not losing margin, retailers have responded by lobbying the government for tariff cuts, by increasing consumer advertising, and by integrating a greater number of incentives and perks into their offering.

Going forward, I think that these current efforts are temporary solutions at best. Retailers have been holding off on price changes, hoping the dollar will drop once more, but this is no longer an option. Wal-mart, Indigo, and Toyota are examples of companies that have wised-up to the situation and who are using well publicized price cuts ‘as a result of the increased power of the Canadian dollar’ to create advantage in the marketplace. Companies such as these are few, however, and until we see market-wide price adjustments, the flow of Canadian cash will continue southwards. The companies which do make the adjustment, however, are leveraging the most powerful piece of the RVP and will be able to use this to their significant advantage.

Sources:
Indigo Cuts Book Prices
Volkswagon Joins Move to Cut Car Prices
Roundtripping
Canada-US Pricing Dilemma
Toyota Slashes Prices
Canadians Make Run for Border

Virtual world.. real shopping..

At the end of previous millennium first successful ecommerce retailers emerged and gave their customers hope for secure payments. Amazon.com or eBay changed the way we use internet today and let us spend money without having to leave the house. Just turn on your laptop, log on to your favourite online outlet, fill your virtual shopping cart and check yourself out. Convenient? Precisely.

Therefore it is not surprising that the online shopping market has grown rapidly over last couple of years. According to a Nielsen Media research on online shopping the number of online customers has increased by 40% in last two years. Internet surfers in UK, Germany, US or South Korea go online mostly to shop for books, media or electronics, but many have tried purchasing clothes, shoes and even a submarine.

Convenience is the Alfa and omega of e-retail. It might be true that shopping experience is something you are giving up if spending your money online. You don’t get to enjoy free samples, you can’t touch or feel what you’re just about to buy and the security issue is also a bit of downside to online shopping. What if the item you purchased comes with a flaw? In this case it is usually more convenient to take it back to a brick store than shipping it back and waiting for reply. Click-and-mortar businesses found this to be very favourable and its real life presence helped them boost online sales. Wal-Mart, Circuit City, Best Buy or Target all figure in the top 10 list of e-retailers and although online grocery retailers are experiencing difficulties all over the world, Tesco stores enjoy strong online sales in UK as it simply extended its services to make shopping more convenient while building on its strong real life presence.

Experience and convenience set aside, many find the price factor to be extremely important and mostly favourable for e-retailers. With servers such as pricegrabber.com, shopcartusa.com or shopping.yahoo.com bargain hunting has never been easier. One has the opportunity of browsing several stores all at the same time thus saving both time and money.

Virtual world

On top of that we are starting to spend more and more time online anyway. Canadians are together with US and UK part of the big three on facebook adding new friends and photos, posting tons of messages on walls and even buying virtual gifts for friends every day. Not just virtual, though, Mars Snackfood UK started offering chocolate bars as gifts that one can send to facebook friends which they can pick up using their unique cell phone voucher at over 12,500 stores nationwide.

However facebook is not the first to switch from virtual to real shopping. Second life, a virtual world created by Linden Labs lets its users to interact, purchase land, build real estate and most of all spend money. Although its creators claim that Second Life is intended to be a 3D social network such as myspace or facebook, its residents spend an equivalent of nearly $1.5 million each day on both virtual items for their avatars and real life products for themselves.

Real life companies like Circuit City, Sears, Sky Mall and pretty much all major car companies have outlets in Second Life. They allow you to wander around the store, try iPods or watch new movie previews on flat screens just like in real life and encourage you to visit their websites. In this way virtual life seems to offer the missing piece of low customer relationship to ecommerce.

As some propose, Second Life could serve as a 3D web browser and completely change the way we surf the web once again.

Sources:

The Hindu Business Life - The 'e' in retail
rediff.com - How we will shop in the future
KZERO - Too Fast, Too Curious. Cars in Second Life part 1.
Directions Magazine - eCommerce and the new era of Virtual Retailing

Ambitious plan?

For years, the US have been considered a “forbidden land“ for British retailers. Now, after extensive market research, Tesco is going to give it try. As one of the biggest international retailers, they plan on opening 150 new Fresh&Easy format stores in California, Nevada and Arizona this year. Tesco executives estimate that this expansion will require a minimum investment of $250 million. However, company executives understand that this investment alone will not be enough and that success will hinge on an excellent expansion strategy. Indeed, gaining market share in the competitive US retail market will be a daunting challenge for Tesco.

So what is this Fresh&Easy all about? Let`s begin with the latter part – Easy. Easy to reach and easy to shop, in other words, convenient. According to Tim Mason, Tesco`s first man in the US, stores should be located very close to each other, so that customers will not have to drive more than one mile. Another aspect is a simple store layout that allows customers to navigate through the store quickly. It certainly sounds good, but this strategy alone, would definitely not be anything brand-new in the US. There are other retailers with similar concepts of neighbourhood stores, who are more established in the area.

What can Fresh&Easy stores offer that American stores cannot? Is it that Fresh part of their slogan? Is it a fair price? Certainly not, there are many other retailers offering fresh food for a reasonable price. What differentiates Tesco from other retailers is its selection. Tesco brings a variety of products, which may be common in other countries, but not in the US. Products, which you can not get from any other American retailer. It does not necessarily have to be a completely new product. Often times, products which come with different packaging, are seen as new products by consumers. The flip side is that customers are not used to these products and some may view them with distrust. In the end it all comes back to a customer.

Tesco, in accordance with its concept of glocalization, wants to tailor its stores, so that they suit best the needs of surrounding communities. In the case of southern states as California or Arizona for instance, it means focusing on the large Hispanic and Asian community. The needs of many groups are different and it is going to be difficult to meet the wishes of all groups at the same time. What should make it possible is the store format. Fresh&Easy stores are very small when compared with most of their American competitors. While some may view these small local outlets as costly, this strategy enables Tesco to focus on unique American communities.

Tesco Chief Executive, Sir Terry Leahy, believes that their American venture will be successful . Only time will tell whether his assessment is correct.

Sources:

http://www.guardian.co.uk/business/2007/nov/09/tesco
http://www.tescocorporate.com/page.aspx?pointerid=14163CB2412F41B1BD7765AC8DBE49EB
http://w3.cantos.com/07/tescoint-709-lz6v7/interviews.php?task=view&type=video&i=1&med=asx&cnt=bb&url=http://w3.cantos.com/07/tescoint-709-lz6v7/video/tsco-d004-bb-v-3.asx
http://en.wikipedia.org/wiki/Fresh_&_Easy
http://www.freshandeasy.com/

Stealth Retail Marketing..is it ethical?

Stealth marketing (also known as undercover marketing) occurs when consumers do not realize they are the targets of a marketing campaign. It is anchored on the premise that word of mouth generates the most buzz and remains the most effective form of promotion. For example, a marketing company might pay an actor or socially adept person to use a certain product visibly and convincingly in locations where their target consumers will be present. Throughout the time the actor is there, they will also talk up their product to people they meet in that location, even handing out samples. The actor will often be able to entice consumers to buy the product without those consumers even realizing that they are being marketed to. The main objective of this technique is to get the right people talking about the product without it appearing to be company-sponsored. Apparently, anybody who sidles up and attempts to engage me in conversation may be a Hidden Persuader.

This tactic can be retraced to the 1920s, when Macy’s held a large inventory of long white gloves that they were trying to dispose of as quickly as possible. Macy’s asked 25 well-dressed women to don the gloves on the subway. People took note and asked the women about the gloves; it took the retailer only a few weeks to sell out of the gloves after that incident. Almost 90 years later, retailers are still using the same influential methods of attracting consumers. For example, Sony Ericsson used stealth marketing in 2002 when they hired 60 actors in 10 major cities, and had them approach strangers and ask them if they would mind taking their picture. The paid actor then handed the befriended stranger a brand new T68i cell picture phone while talking about how cool the new device was. A usual act of civility was then converted into a branding event from a powerful endorser: an enthusiastic user of the product being demonstrated.
However, it is believed that if marketers fail to reveal their vested interest in selling a product, they run considerable risk of backlash from the community they are trying to entice. In cases where consumers conclude they have been manipulated into being interested in a product, they generally get angry over being coerced and react negatively to the company or its agents which subliminally targeted them.

The Federal Trade Commission (FTC) could possibly end marketers’ propensity for stealth marketing. According to the FTC, the practice where people are paid to pitch products in a setting without disclosing to the public their intentions, does not follow the FTC’s “Endorsement Guidelines.” They have concluded that “the failure to disclose the relationship between the marketer and the consumer would be deceptive unless the relationship were otherwise clear from the context.” Consumer Alert, a consumer advocacy organization, argues that stealth marketing is an act of desperation on the part of the advertising industry. It is considered to not only be unethical to deceive people, it is also as intrusive as telemarketing. But is this really being deceptive? Paid or unpaid endorsements, people are exposed to new products everyday. Television executives have cracked down on celebrity stealth marketing in order to avoid airing paid celebrity endorsements posing as unpaid personal testimonials. They have started to implement strict policies demanding full disclosure of any endorsements for guests appearing on their networks.

Despite attacks from legislation and the public, it looks like stealth marketing may be difficult to fully control and could well be here to stay. However, as its popularity grows, it loses its uniqueness and companies will continue to search for more creative tactics in order to stand out in the increasingly competitive marketplace. In my opinion, stealth marketing is only just the next necessary step to advancement in retail marketing and people can either choose to buy into the product or not. No one is forcing the general public to purchase a product…these employees are simply letting you know that these products exist.

Resources:
ARS Technia: http://arstechnica.com/news.ars/post/20061213-8413.html
Wikipedia: http://en.wikipedia.org/wiki/Stealth_marketing
“Stealth Marketing : how to reach consumers surreptitiously”, Kaikati, A.,California Management Review, Vol. 46, no. 4
Canadian Business: The Perils of Posing: http://www.canadianbusiness.com/entrepreneur/sales_marketing/article.jsp?content=20070412_121647_4368

A Canadian retail store from the perspective of a Central European

At first glance, a supermarket in Canada looks quite the same as a supermarket in my home country, the Czech Republic. Yet, when viewing the store more carefully, small things that matter start to appear. These differences are caused by a diverse cultural and historical background. They also indicate that the Canadian market is more mature and saturated than the market of Central and Eastern Europe.

One of the most visible differences is the store size. Czech specialty stores like drugstores and apparel stores are significantly smaller. The maximum size of a Czech drugstore is about 2,200 square feet, whereas the Canadian Drugmart has about 15,000 square feet. There isn’t such a large contrast between the size of Czech and Canadian supermarkets and hypermarkets. Yet, there is a tendency to reduce store size in the Czech Republic, whereas Canadian stores are experiencing growth.

The concepts of private labels are distinct from each other. In the Czech Republic, Slovakia and Poland private label products are commonly inferior to the national brands. A recent study indicates that private labels in Poland are on average by a half or even two thirds cheaper than the national brand. This huge price difference can make the customer suspicious, whether this product is “usable” at all. From my consumer experience, some of these products are good, but a lot aren’t. Moreover, I have problems remembering, whether I didn’t like the can of corn from Euroshopper or the one from Clever. Therefore, my dissatisfaction with one private label passes over to other private labels and I buy a strong national brand instead. I presume this is a common way of customer thinking and therefore the proportion of private labels in Central Europe remains low. In my opinion, the private labels need to be more distinguishable from each other and should also bring other values to the customer than a saving in price.

Canadian private label products, which I came upon, are seemingly of a good quality and are offered at a reasonable price. Trust in a particular private label can simplify a shopping trip at a grocery store and bring good revenue to the retailer. Sometimes, it is quite difficult for the customer to choose a product when there is a large breadth of assortment. When he/she knows that the private label product meets his/her general requirements, he/she can easily pick this product (the packaging is usually quite visible) and carry on shopping.

I have further noticed that more effort is put into creating more practical packaging in Canada and that the stores are more often laid out in a way to encourage impulse buying. The entrance into a supermarket is usually very wide, enabling a more free flow of customers. The barriers preventing the people from leaving without paying are not so apparent.

To sum it up, it is clearly visible, that the mature Canadian market and more demanding customers make the local retailers focus more on their RVP and persistently search for areas of improvement.


[1] http://www.mobchod.cz/index.php?itemid=61
[2] CHARLES, G. Own label brands lose cachet. Marketing. London: Oct 10, 2007, pg 4
[3] LEWIS, H. The top ten European food retailers' purchasing trends: Management briefing: What is happening with private label in food? Is the market growing at the expense of branded goods? Just – Food. Bromsgrove: Mar 2006, pg 13

The Story of the Mass Merchant and the Private Label Brand

By the time Loblaw Companies Ltd. (Loblaw Co.) launched its premium private label brand, President’s Choice, in 1984, it was already one of the largest grocery chains in Canada. A former second-tier grocer, Loblaw Co. had developed its core middle-market-targeted grocery business over several decades and was now taking advantage of growth opportunities in adjacent businesses by redefining its corporate strategy.[1] It developed a portfolio of store formats across the country and committed itself to “providing Canadians with a one-stop destination in meeting their food and household needs.”[2]

In order to be the superior Canadian grocery shopping experience, Loblaw’s had to cater to different market segments using a “good, better, best” strategy. Developing store formats (“banners”) such as No Frills (“good”), Fortino's (“better”), Loblaw Grocery Stores (“best”) allowed Loblaw Co. to fulfill its corporate objective.

There was only one problem with that strategy. Loblaw Co. was able to achieve the “good” and “better”…but not “best.” Loblaw Grocery Store (Loblaw’s) was simply viewed as “better” by Canadian consumers.

Why?

Loblaw’s became a victim of its own retail value proposition (RVP) – the very same value proposition that had brought the store format so much success in the past. Loblaw’s had historically focused its proposition on high convenience in terms of location, mid-range / “value” pricing, and selection that, although abundant in breadth, lacked variety.

Customers bought into the RVP. In fact, the proposition was so convincing that when Loblaw Co. began to pursue growth by attempting to alter the proposition, customers were not convinced. Loblaw’s faced the same problem with which other major Canadian retailers, such as Canadian Tire, were struggling. How does a retail format traditionally associated with value elevate its brand? [3]

Loblaw’s unexpected solution was a private label brand: President’s Choice. Loblaw’s private label is allowing Loblaw’s to break away from “better” and into “best.” Let us examine the mechanism fueling this phenomenon.

Retail winners often focus on and excel in one or two key RVP dimensions. [4] Ten to twenty years ago, Loblaw’s did not focus as much on selection as it did on price and convenience. As a result, customers today instinctively associated a certain price level and experience[5] with Loblaw’s. It is often difficult to change this ingrained consumer instinct, despite an attempt to change the aesthetic feel of the store and experiment with price levels.

Instead, when attempting to change the perception of a brand, it may be prudent to focus on aspects of the value proposition of which customer’s do not already have a strong preconception. In Loblaw’s case, “selection” was the competitive dimension it had not focused on as strongly in the past. Loblaw’s observed a strong deficiency in selection amongst its competitors in premium foods that were healthy, high-quality, organic, or ethnic. Through PC, Loblaw’s could fulfill these market needs. The private label allowed Loblaw’s to identify consumer wants itself and convert them into high-demand, “premium-lite”[6] products relatively speedily. This flexibility allowed Loblaw’s to derive competitive advantage through providing variety and quality in selection.[7]

Interestingly, the PC line, along with adjacent ventures,[8] does appear to be elevating Loblaw’s brand towards the premium segment. As the PC line expands even further, which it appears to be doing, Loblaw’s might make it to that “best” category after all.

Other Links:

http://www.strategymag.com/articles/magazine/20020325/smith.html?print=yes
http://www.gwlrealtyadvisors.com/gwlra/CNTAsset/Dynamic%20Times%20in%20Food%20Retailing%20-%20ENGLISH.pdf


References & Notes:

[1] Corbett, A. The Right Ways to Grow. March 2005. Canadian Business. Feb. 12, 2008.
[2] Loblaw’s: Company Profile. 2008. February 12th, 2008.
[3] Murray, K. Canadian Tire Retail: Bicycle Category. Richard Ivey School of Business
[4] Murray, K. Retail Value Proposition. Richard Ivey School of Business
[5] Note: A large part of the Loblaw’s experience was focused on convenience
[6] Premium-lite store brands are those which started with leading manufacturer brands as the standard and then attempted to make a superior product at a lower price. Reference: Kumar, N. Premium Store Brands: The Hottest Trend in Retailing. March 20, 2007. MarketingProfs. Feb 1, 2007. http://www.marketingprofs.com/

[7] Similarly, the "Code Blue" post accurately observed that Blue Menu products give Loblaw's an advantage based on selection. Contrary to the post, however, I feel that PC products will allow Loblaw's to sustain competitive advantage in the long-term. Although private labels are imitable, the PC product line (along with other Loblaw's ventures) is helping strengthen the preception that Loblaw's is "better."

[8] Loblaw’s is attempting to complement PC with a range of premium-lite non-grocery products (e.g., Joe Fresh) as well. Reference: Duff, M. Loblaw’s Combo Stores Cover Both Ends of the Market. DSN Retailing Today. Feb 9, 2005. Vol. 43, Iss. 3; pg. 1, 2

That was easy: Staples’ Turnaround

After recording their first decline in same-store sales in 2001, Staples interviewed customers for some insight into their poor performance. 8:1 was the dreadful ratio of customer complaints to praises.[1] Above all, customers were looking for a simplified shopping experience and a helpful and knowledgeable staff. From these suggestions Staples developed their “That was easy” marketing campaign which personified the changes made at the retail level. The slogan, representing a more targeted product selection and a simplified shopping experience, is widely considered to be a success. Staples is now a $18 billion company, up approximately 260% from its 2001 market cap of $5 billion.

Traditionally, Staples selection strategy has been to carry everything in office supplies under one roof. Attempting to cater to a wider audience Staples continuously added to the breadth of their products while sacrificing the depth. The result was stocks out on key items, high inventory costs on obscure items, and an overwhelming amount of choice. To remedy the problem Staples removed approximately 800 SKUs from its inventory – including items such as Britney Spears backpacks. Subsequently, Staples introduced guaranteed stock on key items such as printer cartridges.

After enjoying some success with more a targeted selection, Staples placed an increased focus on private label products. Staples exploited the fact that their brand name is better known than some of their product manufacturers: “We're the ones that have the relationship of trust with the customer," said Chuck Rubin, president of North American retail. "There's no better way to assure that than to make it ourselves."[2] Realizing that the end users of office products are often the best engineers, many of Staples private label products are designed by third party inventors who enjoy royalties on every sale. One popular invention was a combination lock that uses letters to form memorized words.[3] These higher margin private label products have increased customer loyalty, and have armed Staples with a negotiating tool against suppliers.

At the heart of Staples turnaround was a greatly improved customer experience. Exemplified by their “That was easy” campaign, Staples ensured that the customer’s experience was as simple as possible. The first step was to increase the size of the signage inside the store so customers could easily identify every aisle. Staples also invested heavily in training employees to inform customers of the specifications of their products. Popular items were placed closer to the front entrance so customers could quickly complete their shopping trip. This transformation also took place online at Staples.com. The company completely redesigned its website to make the online shopping experience even easier. “Easy reorder” options were introduced to speed up the ordering process, as well “Tell me More” and “Help me decide” functions which provided information on every product.[4]

Staples successful turnaround demonstrates the benefits of paying close attention to customer’s opinions. By focusing on the customer’s two most important components of the Retail Value Proposition, Staples positioned itself as the place to go for office supplies.

---

[1] Marketing Made Easy Before it could reap the rewards of a new ad campaign--and its iconic Easy Button--Staples needed to simplify itself.
Michael Myser. Business 2.0. San Francisco:Jun 2006. Vol. 7, Iss. 5, p. 43-45

[2] http://www.post-gazette.com/pg/06194/705612-28.stm

[3] http://www.post-gazette.com/pg/06194/705612-28.stm

[4] http://www.internetretailer.com/internet/marketing-conference/64154-staples-reinvents-site-new-easier-staplescom.html

Ringor Cleats: Is Online Retailing the Future of Athletic Shoes?

Nike’s launch of “Trash Talk,” a basketball shoe made from manufacturing scraps, is another reminder of just how many athletic shoes are launched in a year. The fight for shoe shelf space at retailers is intensifying. Instead of taking on major brands in this battle, Ringor has its own approach.

Ringor manufactures softball and baseball equipment. Instead of selling to retailers, its products are available through its website (www.ringor.com). Their flagship product, softball cleats, has developed a loyal following because of the differentiated RVP.

Ringor’s RVP centres on unique selection. It offers a dominant assortment of women’s softball cleats with astounding breadth. Between choosing colour, width, a pitching toe, and ankle support, there are over 250 styles to choose from before considering sizing! Since softball is not a major Canadian sport, selection is often very limited to a couple brands of black men’s baseball cleats at major sporting retailers. (It was only thanks to Ringor that I could find functional cleats that matched my Western uniform.) Ringor is not constrained by floor space as an online business, so it can afford to offer such breadth.

Selling apparel online, especially footwear, is challenging. Footwear fit has a big impact on performance, so athletes value the opportunity to try shoes on. Ringor can meet this challenge successfully today because it has established itself in the tight-knit softball community. Word-of-mouth referrals are high; I purchased Ringor after a teammate let me try hers out.

Somehow Ringor had to gain its initial credibility. One way they did this was by setting up booths at major American softball tournaments, allowing potential customers to try on cleats and purchase them in person. Once Ringor had the initial face-to-face interaction and sale, they found customers were more open to ordering online.

I don’t believe retailing athletic shoes online will make in-store retailing obsolete. While it offers great potential for selection, other aspects of the RVP must be sacrificed. Customers must have an Internet connection, create an account, and wait for delivery. I didn’t mind doing this because the softball cleat selection at retailers was small. For a sport like basketball, selection is larger. Online retailing could increase the selection even more, but diminishing marginal returns make it reasonable to assume that the greater selection will not be worth the convenience trade-off.

The selection-experience trade-off is the more important one. The trust-building experience of walking into a store and walking around in a shoe before purchase is difficult to mimic online. Ringor had to set up booths initially to gain customers. Since the experience is a crucial step to a sale, I do not expect Nike basketball shoes to pull out of National Sport’s shoe department.

The real opportunity for businesses similar to Ringor lies with niche sports. As long as manufacturers can recreate the purchase experience temporarily, such as at major competitions, they can retain customers who will accept inconvenience and a lack of experience in exchange for a rare opportunity to choose from a broad selection.

Rhea Jankowski

Sources:
www.chron.com/disp/story.mpl/ap/fn/5539643.html
www.sportsnet.ca/basketball/2008/02/16/nash_shoes/
www.ringor.com

Code Blue: President’s Choice Blue Menu Products a key differentiator for Loblaw’s in the increasingly competitive Canadian grocery business

Wal-Mart’s recent entry into the Canadian grocery business has certainly posed a major threat to Canada’s leading grocer Loblaw Companies Ltd. because of Wal-Mart’s ability to out-compete on price. However, Loblaw’s is distinct for having arguably the best private label brand in North America, something that will be extremely difficult for Wal-Mart duplicate. The President’s Choice brand has been central to Loblaw’s strategy for defending its turf in the Canadian grocery business that can be summed up as the TV commercials say: “Worth Switching Supermarkets For.”

One strategy in particular has been to grow the President’s Choice brand by adding healthier options products to its portfolio under the Blue Menu brand. In 2005, Loblaw’s decided to re-brand its healthier options PC products from “Too Good To Be True” to Blue Menu. They started with 80 frozen and packaged SKUs that were healthier options to existing PC products and added an additional 25 new products. A testament to the Blue Menu initiative’s success is that the product assortment has grown to over 250 SKUs across nearly every grocery category.

An Ipsos-Reid poll conducted around the time the Blue Menu initiative began indicated that 90% of Canadians surveyed said they were trying to eat healthier than they currently are. Thus, Loblaw’s decided to go with a strategy that is being more frequently used by large retailers in order to differentiate themselves from others: Focus on the selection aspect of the RVP and offer consumers an assortment of products that cater to a major trend in consumer purchase decisions. We discussed in class a similar strategy used by The Home Depot where they started their line of Eco-Options to capitalize on the trend that consumers are being more environmentally conscious with their home appliance purchase decisions.

Reasons for Success:

1) Branding and Marketing

Coincidentally, Code Blue is the hospital colour code for cardiac arrest and it is no doubt that the nutritional aspects of Blue Menu foods will help prevent consumers from suffering such an unfortunate incident. Brand consultant Ted Matthews claims that “one of the most powerful memory tweakers is a visual colour-coded one.” And as a result, consumers know which store to go to find the blue healthy products and when they’re in the store, the products instantly tweak this association when they see the blue packaging on shelf. The packaging also boldly states health benefits to the consumer highlighting aspects such as how much less fat there is than other PC products and high-fibre. Walking through the Masonville Loblaw’s location it is clear that Blue Label products are getting much in-store support consisting of multiple signage and special middle of aisle displays, all of which encouraging consumers to try product.

2) Quality for Value

As a Blue Menu product consumer, I can vouch for the products matching the high quality that consumers have come to expect from President’s Choice and as a result of the lower prices than national brands deliver excellent value to the consumer for both taste and dietary reasons.

Blue Menu products will certainly be a reason for consumers to “switch supermarkets” in the short term but I do not feel that it is a long-term competitive advantage. Wal-Mart should realize that it will need to invest heavily in developing its own strong private label brand in order to overtake Loblaw’s and with its size and buying power, it certainly has the resources to do so.

http://www.loblaws.ca/en/

http://www.presidentschoice.ca/FoodAndRecipes/BlueMenu/Browse.aspx

http://www.instinctbrandequity.com/media/print/pdfs/fp_loblaws_blue_menu.pdf

http://www.allbusiness.com/retail-trade/clothing-clothing-accessories-stores-stores/513606-1.html

Trading Up in Troubled Times – Defending the Viability of New Luxury

Five years ago, a new theory of consumer behaviour became popularized with the book “Trading Up: The New American Luxury”. In this publication, authors Michael J. Silverstein and Neil Fiske identified 23 categories of goods and services across which a market of 122 million middle-income Americans were “trading up” to higher levels of quality and taste. Valued at $525 billion, the New Luxury market was assigned growth rates of 10-15% per annum and was predicted to reach US $1 trillion by 2010.

However, in light of recent economic stirrings, a January 2008 edition of Business Week imparted a different tone, raising the question “is the mass luxury movement dead?”. Unemployment is on the rise, borrowing has slowed, and the housing crisis has diminished many households’ net worth. As overall consumer spending slides, it is conceivable that one could assume “trading down” is the new “trading up” (as outlined in Stephanie’s previous post).

Yet Michael Silverstein disagrees. As ‘overworked, isolated, worried and unhappy’ consumers seek out products that offer greater emotional value, “the trading up phenomenon is quite recession proof”. Indeed, for consumers who may be forced to delay the purchase of big ticket items such as lavish cruises or plasma TVs, the premiums commanded by small ticket items such as Starbuck’s espressos and Bath and Body Work’s hand cream represent “accessible luxury”, and are affordable ways to treat oneself.

The question then remains – as a retailer who does not want to get “stuck in the middle”, which strategy should be pursued, and how can an RVP be crafted to best support the chosen strategy?

Consumers looking to trade down are most apt to do so with conventional, un-differentiated products. As a consequence, selection, experience, and even convenience are set aside in favour of obtaining the best possible price. Retailers looking to capture these consumers must be prepared to deliver everyday low prices, deep volume discounts, or recurrent promotional pricing. However, without sophisticated supply chain management, an aspiring “trading down” retailer may be likened to the last banana in a room occupied by 800 pound gorillas (pet-named Walmart, Costco, and Sam’s Club!).

On the other hand, retailers can successfully position themselves for “trading up” by providing their consumers with a distinct genre of products and services. The desire to be emotionally engaged by the product and/or retailer elevates the importance of customer experience in the new luxury’s RVP. Customers seek aspects of craftsmanship and human touch in the production and delivery of their purchases. As a result, selection may be best satisfied through a path such as mass-customization, where breadth is extensive, but variety and depth are limited. While products must be accessible, convenience takes backseat to the sensory stimulation and customer care required from the purchase experience. Victoria’s Secret’s personalized bra fittings, Williams Sonoma’s aromatic sales floor, and Starbuck’s “extra-hot, no whip, lactose free” menu options all provide superb customer experiences that exact premiums of 20-200%.

With sales in these low-ticket, high margin operations staying strong, it seems that even as the health of our economy has weakened, a pulse still very much exists in the life of new luxury!

- Lauren

http://www.bcg.com/impact_expertise/publications/Book_Trading_Up.html
http://westernfarmpress.com/news/farming_column_luxury_marketing/
http://www.nytimes.com/2008/01/20/weekinreview/20barboro.html
http://www.businessweek.com/bwdaily/dnflash/content/jan2008/db20080117_605401.htm

THE NIKE RUNNER'S LOUNGE

THE PERFECT PRETAIL EXPERIENCE

THE CONCEPT. Wouldn’t it be nice to walk into a running store and spend hours looking at shoes and clothes, trying them on, walking around in them, asking the store employees for different sizes, and not feel guilty about not buying anything? Thanks to Nike, this guilty pleasure is possible! At The Nike Runner’s Lounge (NRL), you can do everything you would at a normal store, except buy anything.

THE EXPERIENCE. NRL is a haven for runners to hang out, talk about running, and prepare for or recover from runs. You can try on Nike shoes and apparel with the help of Nike running experts, download songs to your Nike+ iPod, prepare for runs by using the stretching area and checking out local run routes, or recover from runs by getting a massage and eating waffles – all for free! Amidst the location on Yonge Street in Toronto, one might assume it’s a store. Not exactly. At least, not by definition. At NRL, they don’t sell anything!

PROMOTION OR RETAIL? Some may argue that this is merely a form of promotion. Many retailers find ways to show the benefits of their products outside of the retail point of purchase. For example, GM participates in auto shows to promote the benefits of their cars. However, Nike is different. They have devoted a permanent storefront location to the sole purpose of promoting the Nike Running brand. This brings up the other argument – NRL is essentially a Retail Store. The only thing missing is the actual purchase. But, this purchase step can easily be done at a nearby Nike store or sports retailer. In the efforts to come to a conclusion on this concept, I have merged the two ideas into one. Something that I like to call “Pretail”.

PRETAIL. I define “Pretail” as the step prior to the actual retail purchase. The function of a “Pretail Store”, such as NRL, is to emphasize at least one of the Retail Value Proposition categories. NRL emphasizes customer experience, providing a relaxed environment for runners to talk about running and make decisions on shoes and apparel. The pretail store can be successful if customers are positively affected by a strong customer experience and negatively affected by purchasing pressure because the experience is separate from the purchase. By investing in this pretail store, Nike is assuming that creating this environment will drive sales at Nike retail outlets.

THE FUTURE OF PRETAIL: Open for less than a year, the effectiveness of NRL is still under scrutiny. However, it seems as though Nike has found the right niche to exploit the pretail store idea. Can other retailers find the right niche to develop the perfect pretail experience? Will we see lululemon open up stores strictly for yoga and trying on apparel? Maybe the experience aspect of retail needs to be done outside of the actual retail store. As contradicting as it may sound, runners love the idea.

RESOURCES.
Nike Running: http://www.nike.com/canada/nikerunning/
Canadian Runner: http://www.canadianrunner.com/content/view/12813/2/
CNW http://www.newswire.ca/en/releases/archive/May2007/03/c4669.html
Toronto.com: http://www.toronto.com/shopping/listing/520710
City News: http://www.citynews.ca/blogs/insidebt_10612.aspx
Toronto Sun: http://blog.canoe.ca/run/2007/05/03/run_lounge_run_lounge

Outlet Stores: Keeping up with the Jones' at 75% Off

Certain stores and brands in our society evoke thoughts of wealth, class and desire, but have often been unattainable for the average Canadian or American: Burberry, Armani, Fendi, Chanel. Pricing, a key component in the retail value proposition, often says a lot about a store or brand. And while these stores and many others have experienced success on the likes of Rodeo Drive and 5th Avenue, they have realized that they can attract the middle income population through outlet stores.

In the past outlet stores were an effective way to move inventory that was not selling as quickly as planned for high end retail stores through low RVP benefits (selection, customer experience and convenience) and low prices. The outlet store has since evolved into a strong retail channel, mostly through outlet malls.

Outlet malls are distinct from other stores for a few reasons. They are often located in areas that have middle class populations, but are not as convenient to get to as other stores and traditional malls are. This is done to take advantage of lower rent prices and the fact that consumers are willing to drive longer distances for lower prices. The selection of stores has grown large, but is different from a traditional mall because of the elite brands available. Within the stores, the selection varies based on the store, but often the depth of inventory is low. The constant factor for all outlet stores however, is low pricing. It is because of the low prices that customers are willing to drive longer distances to search through less merchandise and with less assistance.

Though stores still use outlets as a way to get rid of merchandise in an organized fashion, the reasons for having outlet stores have also evolved. High end brands have come to view the stores as a way to attract the middle income person to their brand at lower prices, in hopes that they will turn into the higher end purchaser in the future. In their regular retail outlets, they offer the RVP benefits at higher prices which may cause some consumers to switch as they earn more money.

Outlet malls have also become a huge tourist attraction. Prime Outlets International in Orlando states that more than 50% of shoppers are tourists and similarly at Spyder’s outlet store just outside of New York City, at least 40% of shoppers are tourists. Coming from St. Catharines, close to the Buffalo border, I can attest that with the US dollar decreasing, cross-border shopping has significantly increased in the past year and outlet shopping has been a portion of this.

Overall, outlet stores have become a strong channel for distribution of high end products through a unique RVP. I believe that they will continue to grow in the future. With the downturn in the US economy consumers will be looking for ways to reduce their spending, but won’t want their purchases to suffer. The outlet mall will be a good place to turn for many consumers.

http://retailtrafficmag.com/retailing/trends/prime_retail_growth/
http://www.thestar.com/comment/columnists/article/95980
http://www.outletbound.com/

Can Steve Jobs Sustain his Midas Touch?

It’s hard to imagine a world without Apple – heck, the iPod is even making its presence known in the global currency markets through the” iPod Index”. So, while the Apple iPod is being used to measure the strength of currencies based on the prices of the iPod, we wonder, what did Apple do to get THIS big?

Prior to the internet revolution, Apple’s sales operated through a network of authorized dealers. These dealers were unknowledgeable and simply poor marketing for Apple. Consequently, after entering into a number of failed partnerships and facing weakening market share, Apple decided that the only way to gain market share and have exclusive control over the retail experience was to open their own stores. In 2001, Apple opened a series of retail stores to display their entire line of computer products. The primary goal of this retail initiative was to bring in new customers and have better control of the customer retail experience.

Well, it seems that Apple got it right – their overall market share has increased dramatically since the launch of the retail stores and their products are selling unprecedented numbers. In defining their Retail Value Proposition (RVP), so that customer experience and price prevail over selection and convenience, Apple has achieved this massive overhaul in the technological marketplace. Apple has successfully distinguished themselves not only by the products they offer, but by the way their customers experience their products. Apple’s retail strategy is concentrating on an “ownership experience” over a “buying experience” for the customer. The primary ownership initiative for the customer stems from the hands-on approach that these stores offer. In allowing customers to “test drive” their products, Apple knows that once you touch them, you’re hooked. Coupled with this approach, the face-to-face help, friendly Apple staff, and the “Genius Bars”, where customers can ask questions and get solutions to their tech problems, Apple has proven that it has created a unique retail experience for the customer.

Like Starbucks, Apple clearly competes on product differentiation, and not on cost leadership. Apple has created a RVP that consumers view as desirable and differentiated. Therefore, with the price of iPods and iPhones at upwards of $380 and $600 respectively, and an entry level MacBook Air notebook at $1,799, consumers are more than willing to pay these prices because of Apple’s perceived RVP. Essentially, consumers value what they pay for – they don’t in fact, value things they perceive as free or undesirable by their peers.

However, Apple does not price its products so that they are unattainable, as we have seen with the recent price cut of the iPhone. There has been speculation by some that the price cuts were due to lower than anticipated sales; however, some analysts are reporting the opposite. They believe the success of the iPhone is evident and the price cut simply is allowing Apple to take the product more mainstream. It is said that this price cut will allow Apple to take their product faster into the marketplace than any other product in technological history.

Furthermore, with a drop in their share prices and some negative press regarding the new MacBook Air, there is concern that Apple cannot sustain their wildly successful performance thus far. However, as long as Apple can continue this momentum in churning out desirable products that peak consumer demand and interest, and offer them in their signature style in their unique retail outlets, it can be said that Apple’s future is safe.

Check out Apple’s Latest:
MacBook Air – Official Ad
http://ca.youtube.com/watch?v=ezaP6gFUNhI

MacBook Air Parody
http://ca.youtube.com/watch?v=Z0ERgZ9dztk
Overview of the MacBook Air
http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9062959&pageNumber=4

Sources:
“The Perils of Taking the iPhone Mainstream”
http://www.wired.com/gadgets/mac/commentary/cultofmac/2007/09/cultofmac_0919?currentPage=all
iPod Index Website
http://www.smh.com.au/news/technology/ipod-index-trumps-the-bigmac-one/2007/01/18/1169095897045.html
History of Apple
http://en.wikipedia.org/wiki/History_of_Apple
"Apple Ready to Shine Again"
http://www.thestreet.com/s/apple-ready-to-shine-again/newsanalysis/hardware/10402735.html?puc=_googlen?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

Build-a-Bear: MVP Of The RVP Arena!

With shrinking margins on stuffed animals and the rise of dominant discounters, Build-a-Bear has found a way to turn a commodity product in to a premium priced product.
For those living under a rock, let me explain the process:

You choose an outer shell (bear,dog,etc), stuff it, fluff it, sew it up, and dress it. The process appears deceptively simple, so how have they managed to differentiate themselves?

Experience: The engaging experience begins right at the threshold where you are greeted by an energetic staff member who explains the entire process. Without the energy and enthusiasm the whole process loses its luster, as there are stages of dancing, singing, and the making of a thoughtful wish as you warm the heart of your new animal. No other retail experience asks for so much participation from the buyer, and consequently the opportunity has managed to breach every generation and gender with the possibility of rekindling childhood memories. The process is truly high touch/emotion not high tech!

Intuitive Store Design: Even without an explanation, the store design creates an intuitive/easy-to-follow process from start to finish. The brightly coloured decor and oversized signs make the steps easy to follow, and the assembly line format guides the buyer from one step to the next which has the affect of escalating commitment, as it is difficult to backtrack if you change your mind. Customers, as a result, spend more time enjoying the experience and product offerings and less time asking questions about the process.

Personalization: The retailer has expanded upon both the variety and breadth of its product offerings, but limits depth to only a few of each SKU. An infinite number of accessory combinations combined with product scarcity creates the perception of a truly unique product, while incenting customers to purchase sooner rather than later in order to secure a limited item. Although the unique retail experience encourages product trial, the large and ever changing product assortment encourages repeat purchasing, as there is always something new to discover. In addition, with the help of their advisory board of kids, they change their product offerings 11 times a year, while buyers/designers continue to lower inventory costs and grow sales/sqfoot. The buying process is quite impressive compared to the challenges faced by retailers with even less product variation (ie. Canadian Tire).

Marketing: Each creation comes with a birth certificate as part of the experience, but requires the buyer to input personal information in to the database. Unbeknownst to the user, the information is likely used to target their marketing pieces and collect market research to ensure buyers/designers are filling their stores with the best possible products. Together the advisory board and consumer inputs allow Build-a-Bear to focus on growing the business rather than understanding it with costly market research, and who better to suggest product changes than an advisory board of real customers!

Through a combination of employee enthusiasm, creative market research, and an ever growing and changing product mix, Build-a-Bear has managed to sustain growth, but going forward the experiential element might prove difficult to replicate online and retailers aren’t likely to sit idle much longer with such enticing margins. So how long can they sustain this differentiation? I for one can ‘bearly’ wait to find out!

Article Links:

http://www.playzak.com/article.asp?id=90
http://www.businessweek.com/magazine/content/05_23/b3936412.htm
http://www.mpdailyfix.com/2006/12/buildabear.html
http://boston.bizjournals.com/boston/stories/2004/02/02/smallb2.html
http://www.buildabear.com/

A Grassroots Movement - How Grassroots and other Eco-Retailers are competing with traditional retailers... and winning.

"Our lives begin to end the day we become silent about things that matter". These words, originally spoken by Dr. Martin Luther King Jr, are unlikely to conjure up images of a home and living retail operation.

To Robert Grand, however, they have as much to do with his retail value proposition as the products he sells. Robert is the founder of Grassroots, an eco-retailer located in Toronto, Ontario. From bio-cleaning products to recycled office supplies, organic bedding to eco-fashion, his stores have a little bit of everything. His business is certainly smaller than your local Home Outfitters. Yet, the Canadian entrepreneur intends to change the way we live our lives - and he seems to be succeeding. Suddenly, Dr. King’s words on the Grassroots website appear completely in context.

At first glance, Grassroots and other eco-retailers are defying the basic principles of the retail value proposition. There are very few stores, so running out for kitchen cleaner could only be described as inconvenient. The selection, although seemingly rich in variety for such a small retailer lacks breadth and depth. The stores have few bells and whistles, suggesting an average customer shopping experience. Lastly, the price can only be described as punishing.

So how are these retailers not only surviving, but sustaining 20% annual growth? Likely, because they aren’t really selling products. They are selling a political, spiritual and lifestyle choice. When you walk out of Grassroots with a $7.00 roll of deodorant, you haven’t been ripped-off, you have expressed your political beliefs and casted a vote for a sustainable society.

Increasingly, that proposition is appealing to the masses, so many large retailers are jumping on the green bandwagon. Yet, Grassroots has stayed ahead of the curve and established credibility with the customer. It does so in many ways: carbon neutral supply chains, sustainable energy sourcing, profit sharing with environmental organizations, eco-educational workshops on every topic from eco-menstruation to back-to-school shopping, and more. In short, the way in which Grassroots operates reinforces their message that sustainability is a choice we all can make and it encompasses more than just what we buy - it’s how we operate. It requires such intimate environmental knowledge and effort that it’s a difficult strategy to copy.

Knowing its customers demand nothing less, the Grassroots RVP suddenly makes a lot more sense. The prices reflect the real-costs of production. The selection of eco-friendly products is much broader than other retailers. Convenience is unmatched for the eco-conscious consumer that doesn’t have time to do the research. Finally, the experience is rewarding: like Paris Hilton buying a $25,000 bottle of wine, that $7.00 deodorant is reinforcing someone’s sense of self. And unlike Paris, that someone believes their purchase is changing the world.

When is the last time a retailer offered you the chance to change the world for $7.00? You see why the Grassroots RVP is winning?

Links:

http://www.grassrootsstore.com/
http://www.blogto.com/video/2007/12/green_toronto_grassroots/
http://www.cbc.ca/video/popup.html?http://www.cbc.ca/mrl3/8752/news/features/going-green071126.wmv
http://www.grassrootsenvironmentalproducts.com/video.htm

Other Eco-Retailers

http://www.nigelsecostore.com/
http://www.ecoretailonline.com/
http://www.branchhome.com/
http://www.re-modern.com/
http://www.vivavi.com/

The Glocalization of Tesco

No matter where you are in the world you can see similar stores and brands. The world is getting smaller and people are now sharing similar tastes and similar needs. This is the effect of globalization. You are now able to see many retailers extending its stores worldwide, meeting the different needs of that local market. This is also the aim of the biggest UK retailer’s Tesco, which tries to tailor their offerings to meet the local market as well as maintaining the high standard customer experience.

UK is Tesco’s core business area, contributing 80% of the profit. The growth in this area comes from new space, extensions to existing stores and a multi-format approach. Sales of the non-food products also contributed to the growth of the company. The foundation of Tesco’s international strategy is “exporting culturally customized versions of its marketing formula for hypermarkets, the popular department store–supermarket combination that sells massive amounts of food and household goods in a single store”(1).

Tesco’s overseas strategy is based on six elements:

• Be flexible – since each market is unique, different strategy will be needed
• Act local – tailored the offerings to meet the local supply chain
• Maintain focus on a few countries – develop and strengthen the brands within the countries that they expanded to
• Use multi-formats – even within that local market there are still different segment of customers that will requires different store format
• Develop capability – develop the customer experience through people processes and systems
• Build brands – creates relationship with customers through branding

For example, in Thailand, customers are not used to the Western style of neatly package and convenient portions. Thus, Tesco had adopted a similar style of traditional wet markets that Thai people are used to. They also provided highly trained employees to create a pleasant customer experience within the stores.

The key in entering an international market for Tesco is to ‘think global, act local’ or ‘glocalization’ – understanding and response to the cultural differences of that country. The stores in every country have similar looks and mostly located on the outer skirt of the cities for lower cost. They offer large parking space as well as wide selection at every store. Shelves are stocked with varieties of brands, much more than other hypermarkets. The services are also very important since all the staffs are trained using the resources from London Headquarters, making the shopping experience at Tesco different from other hypermarkets.

Entering into an international market is a challenging task for all retailers. But by adapting to meets the local needs as well as maintaining its core value, retailers like Tesco, entered the market successfully and was able to sustain their profit and growth.

(1): http://www.strategy-business.com/press/16635507/11670

http://www.tescocorporate.com/asiadetailed.htm

http://www.tescolotus.com/company/otop.asp

http://en.wikipedia.org/wiki/Glocalization

"The Coach Conundrum" -The Rise and Fall of the Mass Luxury Movement

In the past decade, middle-income shoppers have been splurging; their discretionary income being expended on $300 saucepans, $600 scarves. It seemed like everyone and their little sister had the latest Coach handbag or Tiffany’s bracelet. And I’m as guilty as the next Coach-toting, lululemon-sporting Western girl sitting next to you in class. This “phenomenon” earned many nicknames: mass affluence, new luxury, “masstige”, and was best summarized in the 2003 book “Trading Up: The New American Luxury” written by retail experts Michael J. Silverstein and Neil Fiske. They suggested that Americans with household incomes of $50,000 and above tended to “trade up” to high-end products in categories like kitchen appliances or bedding that are emotionally important to them, while perhaps pinching pennies elsewhere to compensate.

Many retailers capitalized on the trend of targeting the aspirational luxury consumer, which helped them post significant earnings and growth rates. However, many faced the dilemma of having to seriously rethink their retail value proposition. Luxury retailers were used to catering only to the wealthy, the customer who not only craved the personal attention and care that they received when shopping for jewelry, clothes or handbags, but saw price as being representative of status and prestige. Therefore, these retailers had the advantage of being able to use a higher price to make their offer more attractive. But how did they get ME into their stores? In the case of the aspirational luxury consumer, it was quite the opposite, in that the only way that they would purchase that luxury brand is if it was offered at a lower price. So retailers started offering merchandise at what was called “entry-price” points so that what used to be unattainable was now looking a little more affordable to the middle-income shopper, who, in a time of cheap gas and cheap credit were looking for an upgrade.

However, we are now entering into a time of a “trading down”economy. Affordable luxury is suddenly not looking so affordable in a time of rising gas prices and decreasing home values. Companies such as Tiffany & Company, Nordstrom, and Coach are experiencing decreased sales and plunging stock prices, which is only going to get worse in the fears of an impending recession. Coach has even gone as far as offering discount coupons to stimulate sales. Perhaps this crash was inevitable; middle-income consumers may have been living in a dream world, purchasing at a level of consumption that they really could not afford. But I know how good it feels to buy goodies from the luxury retailers that were previously reserved only for the rich. Perhaps, this is a sign that high-end luxury retailers need to rethink about who they want to be targeting, as well as determine if their strategy is well-focused enough to sustain in a time of economic uncertainty. In the meantime, I will at Coach, taking advantage of the discounts.

-Steph

http://www.businessweek.com/lifestyle/content/jan2008/bw20080131_592614.htm?chan=search
http://consumerist.com/346700/recession-fears-bring-mass-luxury-movement-to-an-end
http://www.businessweek.com/bwdaily/dnflash/content/jan2008/db20080117_605401.htm?chan=search
http://blogs.wsj.com/wealth/2007/01/10/mass-luxury-and-other-oxymorons/
http://www.nytimes.com/2008/01/20/weekinreview/20barboro.html?_r=1&oref=slogin
http://www.istockanalyst.com/article/viewarticle.aspx?articleid=1244692

SARS Attack: How Hong Kong Retailers Survived the ‘Demand Shock’

Severe Acute Respiratory Syndrome (SARS), an unprecedented, highly communicable disease, had its first and frightful attack in several countries in the world in 2003. Not only did the deadly disease raised public awareness regarding health issue, it also resulted in great ‘fear’ among people; people who consume goods and service. This ‘fear,’ rather than the disease, in fact brought the worst out of economies of affected nations. Therefore, it is correct to assume that such industries as tourism and retail sector—whose performance is function of consumers’ purchasing power, and more importantly in this case, “confidence”—would be most severely hit by the impact of SARS. So how did players in these industries handle with stagnant performance during those times and yet revive after the disease had faded away?

More certain were the examples of how SARS was having an effect on retail operation in Hong Kong, a country whose retail sector plays a somewhat dominant role in economy and whose impact of SARS was among the most prominent. The economic activities and operation, particularly in tourism, entertainment and retail sectors nosedived beyond any expert’s worst-case expectation. The situations in retail sectors could be observed in three stages:

1. In March 2003, following the Amoy Garden outbreak and the immigration of residents to quarantine camp, retail industry reported a 70 percent drop in pedestrian traffic and sales performance.

2. Twenty to Ninety percent drop was recorded in April (against the same time in 2002). Easter Holiday did not bring a significant rebound to the performance.

3. Slight improvement on average retail sales could be observed in May. However, the average was still 30 to 40 percent below last year sales.

Finding a sharp decrease in pedestrian traffic, some stores had shortened business hours. Number of employees was cut. Some came up with promotional sales to drive ‘per-basket’ dollars from a handful consumer. The stores that remained open altered their assortment to include a wider range of healthcare-related merchandise such as face masks and antiseptic products, while reducing the space for entertainment and easily perishable products. In addition, home delivery—which was thought to be limited to food industry—suddenly became ubiquitous in this period. Even grocery and convenient stores started to home deliver low-margin groceries to households in neighboring area. Lastly, the emergence of SARS also led to an increasing and more prevalent role of online shopping in Hong Kong.

The above-mentioned responses from the retail sector were at best aimed to alleviate the impact of the deadly disease on business bottom line. These, coupled with such governmental supports as Rental Relief Measures or ‘We Love Hong Kong’ Campaign were believed to better Hong Kong retail sector greatly. Eventually, the retail sector saw a rebound by 20-30 percent and 50 percent in 2004 and 2005 consecutively. As time passed by, what Hong Kong retailers had experienced from SARS was thought to be just another ‘severe’ “temporary demand shock”[1].

[1] “Temporary Demand Shock,” Citigroup Economic Analyst, Don Hanna

Sources

http://www.buyusa.gov/china/en/sars13.html
http://www.siteselection.com/ssinsider/snapshot/sf030421.htm

http://ieeexplore.ieee.org/Xplore/login.jsp?url=/iel5/9518/30166/01385795.pdf

http://www.acrc.org.hk/sars/industry.asp?doc=retail
http://www.welovehongkong.com/eng/overview_en.htm
http://www.teslasociety.com/sars1.jpg

Scared of online shopping? Have no fear, The Epicenter Collection is here!

I hear people talking about it every day. But I am not doing it, even though every one else seems to be doing it. Although it has been hard, I have said NO to online shopping.

Although there are more consumers shopping online than ever before, there is a significant portion of us so-called “weird” consumers who choose not to shop online. To many, online shopping is the greatest thing since sliced bread. Well, call me old-fashioned, but I like to see, smell, and touch what I am buying.

For those of you who are “conservative” shoppers like me yet are desperately yearning to fit in with the masses…Eureka! There is now a solution!

In mid-2008, the first Epicenter Collection is planned to make its debut in Delaware, USA. This revolutionary retail concept will showcase products from various e-tailers and catalogue companies in a virtual mall-like setting. Shoppers would receive a SpreeGo, a proprietary hand-held electronic device, which would register credit card information. Customers could scan labels of products they want to purchase with the same online point-and-click process. Purchased products can be shipped to a customer’s house free of shipping costs or purchased through a conventional check-out line. This concept enables traditional consumers to “touch-and-feel” while shopping, which is otherwise lost when shopping online.

Retailers are becoming multi-channeled, attempting to serve consumers in every venue available. Many brick-and-mortar chains are recognizing the need to become top online retailers. On the contrary, online retailers, such as J. Jill, and catalogue companies, such as Victoria Secrets, are now opening retail stores. The more accessible a brand is to all consumers, the more successful that brand will be. Simple.

The Epicenter Collection concept makes it easier and cheaper for online retailers and catalogers to get merchandise to mall-goers. Start-up costs at Epicenter are estimated to be 20% of the cost of setting up a conventional location. A department store-like space will be divided by partitions, allowing each store front to utilize existing infrastructure and systems. Merchants will also be freed from hiring salespeople and maintaining store inventory. A few roaming employees will be available to address customers’ needs and free home delivery will enable merchants to minimize in-store inventory. Virtually speaking, a merchant is never “out-of-stock” since SpreeGo orders are fulfilled from the company’s central warehouse. Conclusion: overall low risk retail option for merchants.


Merchants would offer a slightly enhanced RVP to shoppers – 1) selection: stuff only available online or in catalogues would be available to the masses and all SKU’s are guaranteed to be available, 2) experience: interactive showroom, 3) price: free shipping, 4) convenience: option to avoid check-out lines and annoying salespeople. Although some may question, what isn’t there to love, I am not sure my fellow traditional shoppers are ready for a Jetson’s-like shopping experience that intertwines technology so heavily with tradition. I still enjoy interaction with knowledgeable salespeople and leaving the mall feeling accomplished with a needed purchase. Regardless, Epicenter Collection is a powerful concept for online companies. Traditional retailers, beware.

Sources:

http://www.epicenter.net/index.html
http://www.epicenter.net/ShopCtrsToday_08_07_07.pdf
http://www.backchannelmedia.com/newsletter/articles/1606/Retail-Concept-Aims-to-Combine-Shopping-Experiences-Targets-Home-Shopping-Network

The New Store on the Block

In today’s retail environment, it seems like expansion is the name of the game. More locations means more sales right? The answer is yes and no.

We’ve come across the same store sales (SSS) metric in class. It is commonly referenced by the business community to understand growth in the face of expansion. SSS allows retailers to differentiate between the drivers of new sales: organic sales growth or new stores. As identified in the LCBO case, cannibalization between stores is common. SSS helps us track the impact of new stores on existing stores' sales.

Usually, SSS increases as new stores are introduced. New stores increase awareness and promote the retailer, enabling existing stores to capitalize on their experience (and familiarity with local preferences) to increase sales. New stores build this experience over time limiting their immediate cannibalistic effect on existing stores' sales. The revenue growth curve (RGC) for a new store, therefore, is beneficial to existing stores.[i] An example is our favourite pharma-retailer Shopper’s Drug Mart which saw SSS figures increase as a consequence of new store openings.[ii]

The situation becomes more complex for a retailer like Starbucks. With massive brand awareness, the RGC for new Starbucks locations looks quite different from those in other industries. Existing stores compete for the same customer base as new stores, cannibalization occurs, and SSS decreases. Starbucks has recently seen a decrease in their SSS metrics in the US in large part due to cannibalization. [iii]

A lack of brand recognition is also unfavourable. Consider the example of department store giant Macy’s which recently reported a dramatic 7% decline in SSS. Macy’s has had great difficulty catering to local tastes and consumer preferences. The store has seen declining profitability as they make their way up RGCs in new markets. Whilst normally this would have a beneficial impact on SSS, lack of brand recognition in markets like Chicago (where the chain of department stores replaced a local institution) did not serve to enhance sales as expected.[iv]

What are the implications for retailers? Essentially it requires understanding ‘where you are’ to be able to address the more unnerving ‘where you’d like to be’ and ‘how you get there’. In the case of Starbucks, rapid expansion without considering brand equity led to cannibalization. If the company wants to continue with their expansion strategy they must differentiate the new stores in such a way that they are able to capture a greater number of consumers. It may involve adjusting store formats to address different consumer preferences or perhaps distinguishing the RVP for different segments of the population. In the example of Macy’s it becomes a question of gaining experience in new markets to better serve consumers and increase brand awareness i.e. their new ‘My Macy’s’ concept. Shopper’s got it right: leveraging the brand, they added value through new stores, changing store formats to appeal to a wider customer base. SSS increased and everybody is happy with the new store on the block.


Resources

[i] http://seekingalpha.com/article/62893-starbucks-traffic-decline-is-due-to-cannibalization (Starbucks)
[ii]http://www.bloomberg.com/apps/news?pid=20601082&sid=aT5n5T05Tf5Y&refer=canada (Shopper’s Drug Mart)
[iii] http://www.investorguide.com/stock-archives.cgi?date=020405 (Starbucks)
[iv] http://www.marketwatch.com/news/story/macys-same-store-sales-fall-farther/story.aspx?guid=%7BCB9F077B-7442-439B-91BF-D4EC41A4585C%7D (Macy’s)

SEPHORA—The Effects of a Retailing Makeover

Sephora boasts over $10 million is sales annually and operates approximately 515 stores worldwide. Recent store expansion has focused on North America with 126 stores, 8 of which are in Canada. So how has the world fallen in love with Sephora? What seems relatively simple is actually a complex integration of all RVP components and emerging trends in retailing. Some of the most pervasive trends in retailing are the rise of the internet and private label products and the demise of the department store. Sephora has capitalized on all these trends to become the global leader in cosmetics distribution.

Internet
Sephora.com was launched in the U.S. in 1999 and Canada in 2003 to become the site for beauty on the web. It offers the largest and most diverse selection of beauty products on the Internet and caters to every customer type. With over 12,000 products available, the vast selection makes Sephora a convenient, one-stop shop for one’s beauty needs.

Private Label
Although Sephora carries over 250 high-end/luxury brands, including makeup, skin care, fragrance, bath, and hair products, and beauty accessories, it still chose to integrate private label into its product mix. While this may seem odd, it proves to be an amazing use of brand equity. Sephora has become synonymous with high quality beauty products and consumers trust the brand to distribute the best products available. So why not use this trust to sell products at lower price points to attract new customer segments and drive volume? Sephora has successfully positioned itself as a premium retailer at a mass-market level because of their moderate-to-high price range.

Department Store Despair
A report by PWC points out that consumers are demanding better pricing, better assortment, more convenient store locations, and a simpler shopping experience. Most department stores have not been able to deliver on these demands and have become vulnerable to the rise of specialty retailers. Specialty stores like Sephora have the luxury of offering a tailored experience due to their focused product assortment. Shopping for cosmetics at Sephora is a hands-on experience where all 5 senses participate. The open-sell format allows for self- discovery of new brands and the many testers make the experience more exciting and satisfying (than being told what to buy at a traditional counter). But for those who do need help choosing the right bronzer or eyeshadow can rely on knowledgeable sales staff. Sephora has branded the service aspect of their business as the “Science of Sephora.” The program ensures that salespeople understand how to address different skin types, and how to identify complementary scents and colour palettes for its vast customer base.

Sephora is more than just a makeup mecca, it has revolutionized the buying process of cosmetics by deconstructing the RVP model to include current retailing trends.

Resources

Sephora
www.sephora.com

Hoover’s Company Records, Sephora USA, Inc.

Toronto.com, Sephora Profile
http://www.toronto.com/shopping/fashion_beauty/listing/515399

Financial Post, But where's the 'je ne sais quoi'?
http://www.financialpost.com/magazine/Story.html?id=130536

Retail Traffic Magazine, Department Stores Uneven Decline
http://retailtrafficmag.com/mag/retail_department_stores_uneven/

Gloss-Undercolors: Revitalizing Benetton’s Brand

Although Benetton is not as well known in North America, the name still commands significant recognition across Europe, along with new interest in emerging markets in Asia and Latin America. With a lot of my family living in England, I grew up with a significant amount of Benetton clothing. But as I hit the teenage years, Benetton fell out of favour with me, along with the fashion industry at large. With retailers like Zara and H&M introducing fast fashion clothing, by bringing fashions from the runway to their stores in a turnaround of roughly a month, the classic Benetton was falling behind. Benetton’s main source of recognition came from their ad campaigns known for their shock value. With images ranging from prisoners on death row, to a priest and nun kissing, from promotion alone, Benetton could not be accused of being dull. However, regardless of the fact their ad campaigns garnered a huge amount of recognition (along with controversy), those who ventured into Benetton’s stores would find the clothes to be anything but exciting. As David Yelland of the London Times aptly put it “The [obsession] with shocking consumers with advertising, in the end, meant that advertising was far more cutting edge than the product itself.

One of the main problems that Benetton was dealing with the time was their lack of focus in terms of their RVP. Benetton became famous for their classic cardigans, available in a multitude of colours, at a relatively inexpensive price. However, as other retailers in their category moved ahead with trends, Benetton quickly got left behind. Benetton muddled along for a few years by maintaining heavy spending on ad campaigns, but while that may have brought consumers to the store, it failed to compel them to buy products. So what is one of the things Benetton did to revitalize their image? Enter Gloss-Undercolors. “Undercolors” is the intimate clothing line offered by Benetton that consists of underwear, nightwear and beachwear. In 2007, Benetton introduced 30 new concept stores showcasing just the Undercolors line. The “Gloss” stores use feminine colours and fittings to showcase their two lines, “Fun” – everyday, comfortable and flirty pieces – and Charme – simple, seductive pieces.

New stores opened rapidly during the second half of 2007 throughout Western Europe, with 50 more new stores planned to open this year, with 15 of them being in India alone. Benetton has been scaling back their stores in North America, and has been looking towards expansion in emerging markets instead. To evaluate this move on financial results alone, it looks like Benetton has made a good choice, from turning around losses in 2005 and 2006, to straight quarters of profits through 2007. Although more time is needed to properly assess the success of the new “Gloss” stores, and the impact they will play in revamping Benetton’s brand, both product lines have shown positive results in the few short months these stores have been open. If this trend continues, along with the continuation of positive results from their other product lines, Benetton’s future is looking very bright.

Sources:
http://press.benettongroup.com/ben_en/releases/2007-11-09/
http://production.investis.com/ben_en/releases/2007-11-13/
http://www.fibre2fashion.com/news/company-news/benetton/newsdetails.aspx?news_id=44795
http://women.timesonline.co.uk/tol/life_and_style/women/fashion/article2589185.ece
http://business.timesonline.co.uk/tol/business/industry_sectors/media/article1040955.ece
http://www.forbes.com/markets/2007/11/13/benetton-apparel-retail-markets-equity-cx_ml_1113markets30.html

The Battle of the Buyers versus Strategic Shoppers: Can Buyers Ever Win?

As I will be entering the retail world this summer as an assistant buyer for a fashion retail company, I have a particular interest in the current battle going on between buyers and strategic shoppers. It is common knowledge that the retail industry is struggling to survive given the state of the economy, but that’s not the only reason why.

As a buyer, your main priority is to select an assortment that will fly off the shelves at the original price. However, if your item is not selling fast enough or there’s leftover inventory when the assortment is to be turned over, then it’s time to implement a markdown. Normally, it is safe to assume that if your item is not selling well, it’s because your consumer did not like it. However, the strategic consumer is a contradiction to this rule as they are willing to buy full price sometimes, but at other times they will wait for a bargain.

As a strategic shopper myself, I understand the process that one goes through to make the optimal purchasing decision. I tend to browse the same stores regularly, which has given me some insight into how fast each store turns over their inventory (and thus marks down the majority of their assortment). As an example, I tend to browse American Eagle Outfitters every September when I return to school, only to return in late October to find everything I wanted at a discounted price. Thus the battle begins.

How can buyers outwit strategic consumers?

The answer is surprisingly simple: lean inventory systems.

If buyers reduce the depth of their assortment, then there will be fewer sizes available in each SKU, which reduces the likelihood that the strategic consumer will be able to find their size in the SKU they want to purchase after it’s been marked down later on in the season.

The positive effects of lean inventory have been proven in a research paper done by Gérard P. Cachon, professor of operations and at Wharton, and doctoral student Robert Swinney. Their research shows that when strategic consumers are factored into a theoretical model, lean inventory systems are, on average, 67% more profitable.

What this strategy necessitates, however, is not practical for all retailers. Lean inventory systems are also referred to as ‘quick response’ systems, inferring that retailers need a comprehensive supply chain that can respond faster than most current systems.

A fashion retailer who has executed this strategy well and is known for it worldwide is Zara. It takes less than two weeks for a skirt to get from Zara's design team in Spain to a Zara store in Qatar or Paris or Tokyo, as much as 12 times faster than the competition. Shoppers at Zara have been trained to not waste time buying an item they love because it might not be there a mere two weeks later.

So there is hope for me after all…

~ Michelle Kilian

Sources:
http://www.forbes.com/2007/06/01/best-buy-retailing-ent-sales-cx_kw_0601wharton.html
http://www.allbusiness.com/construction/4266194-1.html

A Love Triangle: Women, Shopping, and the RVP

It’s official. There is a new key consumer on the block. Smart companies are shifting the way they design, manufacture, and market products. The tide has turned – and it’s turning toward the female shopper.

Women are responsible for more than 80 percent of consumer purchasing decisions – and their buying power is growing. While the median salary of men has stayed fairly stable, the income of women has soared 63 percent in the past three decades. As an increasing number of homes are headed by women, marketers can no longer ignore this powerful and under-served segment. For years, the differences in the buying behaviour of women and men have been ignored, and as discussed in class, the psychology behind the shopping habits of women and men are quite different. Branding and advertising build awareness; yet, females are less likely to be swayed by ads make product enquiries much more extensively. The majority of their buying decisions happen on the floor. So this means that even the retailers that do not belong to an industry that has typically recognized the importance of the female consumer, such as beauty, fashion, or family, had better prepare for change. That’s right car dealerships, financial services firms, and electronics stores – I’m talking to YOU.

Take, for example, retailers such as The Home Depot, Rona, and Ikea, who recognize that the knowledge that women are involved in 75 percent of home improvement decisions is a powerful tool (don’t mind the pun). In our Home Depot case, we learned that they are aggressively gearing their marketing efforts toward women. They have widened their aisles and improved their lighting to create a more pleasing retail environment, and they have grouped home décor merchandise to help women envision what it would look like in their own homes. The Home Depot has also branched into home installation services which have widely attracted women, and they offer classes that teach them about do-it-yourself home repair. Taking the home improvement category one step further, there are many retailers who are pursuing partnerships with television programs such as Trading Spaces, which are watched mainly by women. Even more interestingly, companies such as Tomboy Tools and Barbara K are providing tools specifically for women – they come in brightly-coloured matching sets and are targeted at “thinking moms who don’t have time to think”.

So what does this mean for the RVPs of retailers going forward? Women, pressed for time and skeptical, are difficult consumers to crack. Businesses must carefully tailor their marketing initiatives to capture this key segment, even in traditionally male-dominated industries. Take a page out of the book of Harley Davidson, who now runs a website dedicated to female bikers, who are now make up over 10 percent of all motorcycle sales.

For those of you who still believe it’s a man’s world: if women make 80 percent of consumer purchasing decisions, and consumer spending is worth two-thirds of the GNP, I suggest you don’t pursuer any opportunities in a career in retailing.


For more information:

http://www.businessweek.com/bwdaily/dnflash/feb2005/nf20050214_9413_db_082.htm

http://www.trendwatching.com/trends/pdf/2007_08_forevertrends.pdf

http://www.charleson.ca/pdfs/issue750.pdf

Authentic You Inc.

Spending is not the result of a booming economy, or a promising stock market, rather I believe that Consumerism has become the driving force of our culture itself. Shopping has become a quest for meaning and personal identity. But how did we get here? Is our ubiquitous, largely non-discursive media the result of our own predilections? Or are we being bashed over the head into identifying ourselves with our valuables rather than our values? Is the media a mirror, reflecting the requests of society? Or is it rather a barrier – curtailing our ability to lead authentic lives?

James Twitchell in his book Lead Us into Temptation attempts to explain how society arrived at its current state – we simply chose a new religion. Whereas in the past, people went to religious institutions to achieve meaning and transcendence, today we head to the mall. The new liturgy is advertising, and the pastor is on Prime Time. He argues that we arrived here quite happily and consciously. We were given the choice to spend or not to spend; we chose to spend, and our media environment reflects that predilection.

Twitchell then details the evolution of advertising and such techniques as branding, packaging, database marketing, and psychographics. It was around here that I grew suspicious of Twitchell’s argument. If consumers are such eager participants in the process, why must marketers pursue them so arduously? Why are companies like Prizm making millions to gather data to sort us into such categories as “Blue-Collar Comfort" or “Cosmopolitan Elite”? If we want your product so much, why was global advertising spending over $450 Billion in 2007[1]? Does society really want that much money going into attempts to influence our purchases? Assuming we truly value the retail experience, shouldn’t they get their sales without all the brainwashing[2]? Couldn’t this money have been allocated to some practical cause (i.e. health research, global starvation, etc.)? If this is really what we want, why are privacy concerns raised consistently in class? I thought we desired to be catered to…

At one point, Twitchell observes: “What advertising does is add meaning to otherwise interchangeable and often unnecessary products.”[3] How can that be something a sovereign consumer wants to happen?! Where is my ‘personal well-being’ in the RVP equation? I once heard Don Tapscott say that “the way to put shareholders first, is to put them last.” I maintain that retailers are still too provincial in their stakeholder models; they include my dollars, but not my well-being. William Bernbach once said: “All of us who professionally use the mass media are the shapers of society. We can vulgarize that society. We can brutalize it. Or we can help lift it onto a higher level.” I felt that our current mediascape exhibited the former. So I dropped out. I haven’t watched television or read a magazine in over three years, and I’ve never been happier.

---

[1] http://www.emarketer.com/Article.aspx?id=1003650

[2]Dictionary.com - brain·wash·ing: any method of controlled systematic indoctrination, especially one based on repetition or confusion.

[3] Twitchell, James B. Lead Us Into Temptation: The Triumph of American Materialism. Columbia University Press. 1999. Page 71.

The Consumers of 2008

Who are the consumers of 2008? What do they want and how do businesses grab their attention? These are the questions savvy retailers must ask in order to successfully compete in this rapidly changing economy. While browsing some online marketing magazines, I came across the notion of the EXPECTATION ECONOMY.

Intrigued, I ventured further into the article, which highlighted who these consumers are and what they want. Unlike vague generation descriptors such as ‘Generation X’, I saw this description and immediately knew who they were. It’s us folks, the well-informed consumers with high expectations and access to millions of resources. We’re known to exhibit fake loyalty to the underperforming brands when the best of the best isn’t available. We no longer support brands in their quest to become better, we just move on to a different one without any explanation. According to the article, younger generations will also succumb to the expectation economy, particularly because they have such fantastic role models (us) and access to information on anything and everything.

With thousands of sites, magazines and blogs at our fingertips, we can competitively analyze millions of products in the blink of an eye. For example, check out Luxist.com for the latest in luxury must-have items or Gizmodo.com for updates in cutting-edge technology. This influx of information has triggered individuals to vicariously consume any product or service through these consumer reports without actually purchasing anything.

So how should retailers compete in the expectation economy? The article advises to look cross-industry because in the demand for the best of the best, anyone can be a competitor. The expectation economy has cash to spend, and until they’ve decided where to spend it, everyone’s a competitor. Consumers are presented with more alternatives than ever before when it comes to spending their disposable income. As a result, retailers need to work harder at differentiating their offers.

Are companies adapting to the expectation economy? Absolutely! For example, Vuru allows consumers to create their own nutritional supplements from a list of over 2000 vitamins and minerals. Their Retail Value Proposition places emphasis on convenience, experience and price. The service caters to consumers’ demands for the best of the best because it allows them to create their own superior supplement instead of purchasing dozens of different vitamins.

Consumers can go on to the site, research the available supplements and pick out the ingredients that they deem to be the best. This saves consumers valuable time from visiting a drug store, picking up multiple supplements and remembering to take them daily. Delivery right to the consumer, combined with a sleek, attractive packaging, allows Vuru to charge a premium price for its product and service.

Is it realistic for consumers to demand such premiums and will retailers be able to meet such expectations? Maybe. Will it led to hyper customization? Who knows. All I know is I won’t be happy until I can wake up each morning and have my shower pressure, wardrobe and breakfast choices customized to match my mood.

- Rachel Cooper

For more information:

http://www.trendwatching.com/trends/pdf/2008_01_expectationeconomy.pdf

http://www.vuru.com
http://www.gizmodo.com

Retailers Expanding In-house Services: Wal-mart walk-in clinics

Retailers have always looked for ways to increase their margins by providing additional services like pharmacies and photo centers in grocery and retail superstores. But as some of their existing services have started to become obsolete such as photo centers thanks to digital technology, stores like Wal-mart are looking for new helpful services to turn into profit centers.

Wal-mart recently announced it is about to open 400 walk-in, in-store clinics with Wal-Mart brand name by 2010. Wal-mart has been quick to jump onto the trend as medical services are leading this move into retail stores such as Target, and CVS Pharmacies, and thousands of new clinics are planned to open in stores over the next couple years. Wal-mart maintains that the clinics won’t require appointments to get quick treatment and will still be able to offer cheap fixed-price treatment for minor illnesses.

The clinics fit with Wal-mart’s RVP which is offering low-priced goods within their convenient locations. Patients have the added convenience of having their clinic located within a Wal-mart which has an in-house pharmacy as well carries a number of over the counter items that patients may need to purchase in order to treat their illnesses. While current customers will now have a low-cost health clinic inside their local supercenter, further adding to the notion of one-stop shopping. Wal-mart adds even more convenience by providing patients with pagers to let them know when it is their time to see the doctor and can also automatically transfer patient’s prescriptions over to the in-house pharmacy in order to reduce wait time .

The clinics are a smart move by Wal-mart as they can potentially draw in lots of new customers into their stores, who can now shop while they wait to be seen by the doctor thanks to the pagers, plus patients will be more likely to transition to customers of Wal-mart’s in-house pharmacy thanks to the automatic transfer system. This means Wal-mart not only generates new revenues from customers who decide to use the clinic’s service, but also generates incremental revenue from customers who now decide to switch over to Wal-mart’s pharmacies.

Can others learn from Wal-mart, CVS and Target? Are there other value-add services that might be popular in other retail settings? Organic and premium grocery stores, such as Whole Foods and Trader Joe’s, could offer nutritionists and dietitians that help shoppers choose healthy foods for their families, or Home Hardware could partner with local contractors to provide in-home installation services for simple things like ceiling fans.

Almost any retailer could add specialized repair and design services that could increase revenues in their stores. However, the essential thing that retailers need to consider is whether or not the added service fits with their own RVP. For example, it probably wouldn’t make much sense for Canadian Tire to start offering courses for hardcore mountain bikers as their position in the biking market, as discussed in class, doesn’t fit with the enthusiast market that would be interested in that type of class in the first place. So retailers need to be sure that their services are actually value added to their current customer base, not just another stream of revenue.

Sources:
http://money.cnn.com/2008/02/07/news/companies/bc.wal.mart.clinics.ap/index.htm
http://money.cnn.com/2006/03/31/news/companies/walmart_f500_fortune_041706/index.htm
http://www.nytimes.com/2008/02/07/business/07clinic.html
http://articles.moneycentral.msn.com/Investing/Extra/InStoreClinicsBoostWalMartsHealth.aspx
http://www.walmart.com/clinics?redirect_query=clinic
http://www.usatoday.com/money/industries/retail/2008-02-07-wal-mart-in-store-clinics_N.htm

- Neil

The “mi adidas” Campaign and the Next Step – The mi Innovation Center

Recently in class we were engaged in a lively debate about the potential of mass customization and the “mi adidas” initiative. Although it was my personal belief that this initiative would be incredibly successful in the athletic footwear, I had no idea how incredibly innovative this company could be, especially in terms of their new unique retail strategy. In late 2006 adidas launched the “mi Innovation Center” (mIC) to complement the mi adidas campaign. Adidas increased their in-store presence with this new mi adidas retail store, the first of its kind and flagship store located in Paris.

Similar to the mi adidas initiative, customers jog on a computerized catwalk. Sensors embedded in the track record the pressure of their footfall and gauge the individual’s running posture. This data along with the customer’s personal information is captured to ensure that both adidas shoes fit perfectly. Customers then enter a glossy black “cube”, to customize their own “mi adidas” shoe using a large flat-screen to alter the details of the shoes by simply pointing a finger to the screen (laser and infra-red technology translate the gestures into commands). There is also a “virtual mirror” which uses the customer’s own reflection and their personal design to simulate what the shoe will look like on their feet (similar to the man trying on a suit in the “future store”). Customers can place an order if they like the shoes and receive their shipment in 3-4 weeks. Adidas has also started utilizing RFID technology on their new “Scan Table", a case that displays information about the newest adidas footwear styles. At the table, a sliding carriage can be moved over the desired shoe and then specific product information will appear on the screen using RFID technology. The measuring and fitting process is free, but if you want to buy your own specially made shoes it will cost between $40 and $65 extra (American), depending upon the style.

I have provided a brief YouTube video to give everyone an idea of this new concept in retailing, just in case you can’t believe it for yourself.
Although there is still a lively debate about the success of “mi adidas” in 2001, we must admit that this new “personalized customization” is a game-changing initiative in the global footwear market and possibly the retail industry. According to Karen Feldpausch-Sturm, Adidas' senior vice-president of global retail, “…the mi Innovation Center will change both the way consumers shop and what they expect from retail. The innovative, unique design elements and industry-leading interactive technology will enhance their in-store experience and engage them with adidas." The best part of this initiative, from a retail marketing strategy, is that customers are treated to a unique service, one that used to be reserved for professional athletes. Customers are attended to by “adidas experts” who are not your typical sales associate. With a portable hand-held PC, the sales associates records a consumer's personal data and desires, creating a user profile that he/she can view at their convenience via the internet. Adidas has successfully moved from promoting a custom product, to promoting a customized service and experience, which allows adidas to display, in a retail environment, the innovation the company has always strived for.

Sources

http://www.businessweek.com/innovate/content/nov2006/id20061103_196323.htm

http://www.press.adidas.com/desktopdefault.aspx/tabid-339/

http://www.press.adidas.com/DesktopDefault.aspx/tabid-11/16_read-7162/

http://mass-customization.blogs.com/mass_customization_open_i/2006/11/adidas_finally_.html

http://nextup.wordpress.com/2007/07/06/innovation-and-co-creation-at-adidas/

http://www.youtube.com/watch?v=gQBFaVfBi9w&feature=related

-Corey Halyk

Explosive Sales Growth for Lululemon!

Lululemon has experienced explosive sales growth despite little sales efforts. Originally labeled as a fad, Lululemon has done everything in its power to develop a sustainable business model and has been rewarded with huge success. After 20 years in the surf, skate and snowboard business, founder Chip Wilson took the first commercial yoga class offered in Vancouver and as a result opened Lululemon’s first real store in the beach area of Vancouver in November of 2000. Chip Wilson’s retail experience and leadership is evident throughout Lululemon’s growth.
The single Vancouver based store has diversified from yoga apparel to a full range of athletic and casual clothes for both men and women. They continue to deliver products that match their customer’s needs by offering large product assortments and vast breadth. Lululemon promotes health and well being creating components for people to live longer, healthier, more fun lives. They offer customers free passes to local yoga clubs and an environmental discount should they decide to re-use their Lululemon shopping bag. Although Lululemon’s thought provoking quotes have caused some negative reactions, such as their claim that “Coke and Pepsi will be the cigarettes of the future”. Lululemon has succeeded in creating public awareness on various social issues.
Lululemon is definitely a leading retailer when it comes to a well integrated RVP. Presenting customers with a variety of selection of products and accessories Lululemon continues to use feedback from staff and customers to improve designs to satisfy their needs. Predicting high turnover they carry a depth of assortment ensuring that inventory is plentiful and each customer can find their size. All of Lululemon hires are athletic enthusiasts, trained for weeks and have tried on every line of clothing prior to serving customers. The staff are not compensated through commission therefore they are looking out for the customer’s best interest, enhancing that customer’s experience. In addition to offering a variety of sizes they strive to customize each customer’s purchase providing complimentary hemming therefore making each purchase convenient. As well, by expanding so quickly Lululemon has achieved the goal of making their product accessible to everyone. Although Lululemon charges premium prices, customers continue to purchase these hot products without hesitation due to the overall experience.
There is no doubt in my mind that Lululemon’s highly customer focused strategy will present an extended future of success!

Lululemon
http://www.lululemon.com/home

National Post
http://network.nationalpost.com/np/blogs/fpcomment/archive/2008/01/15/lululemon-stops-bashing-coke-and-pepsi-by-peter-foster.aspx

Canada.com Where perspectives connect: Edmonton Journal
http://www.canada.com/edmontonjournal/news/story.html?id=43024ac1-3e90-439a-bf3b-e20f18fdc554&k=1439

Even Better than the Real Thing: Blurring the Luxury RVP as Copycats go High Tech

It’s no secret that capitalizing on the right trends and offering a selection that is in tune with consumers’ fickle tastes is the key to success for luxury fashion designers. Vendors such as Prada and Luis Vuitton have focused their RVP around a proprietary brand selection that attracts customers on the basis of their luxury and exclusivity. It’s also no secret that knock-off products have long attempted to piggyback on the success of these retailers. What’s worthwhile to note is the level of sophistication that these manufacturers have adopted over the last 15 years.

The charactiture of the copycat manufacturer working out of a dilapidated factory does not paint an accurate portrait of the business. Today’s vendors are tech savvy entrepreneurs who have established sophisticated supply chains in the Far East. They create their own brands that use designs that are virtual carbon copies of the latest creations from the runway. One of the biggest weapons they have against established luxury vendors is their speed. Within 48 hours of a designer garment’s debut in a fashion show, an independent retailer can forward a composite computer image to their supplier in China or India[1]. These plants employ thousands of workers with capabilities in electronic tailoring and design. As little as fourteen days later, truckloads of merchandise will be on their shelves, ready for sale[2].

The fact that copycat manufacturers can move months ahead of established brands translates into an RVP that offers convenience to customers, who don’t want to wait for popular styles to hit the market. These brands also have been able deliver convenience through tools such as eBay and online retailing to extend their geographical reach, and can ship direct to end customers straight from their factory. Copycat labels have also vertically integrated forward into end consumer retailing. They have begun to introduce the element of a complete shopping experience, by purchasing urban real estate and creating showrooms of their own. The additional RVP benefits regarding price are obvious – a self proclaimed fashionista can strut down 5^th Avenue in a near facsimile of a Prada or Gucci outfit, at 10% of that original retailer’s price[3].

A major frustration to luxury retailers is that these generic labels aren’t breaking any laws. A designer can register an American copyright for their logo, but not for the design specifications of their actual garments[4]. Luxury retailers are pushing for an extension of the law to include “similar looking garments[5]”, but the likeness of one item to the next often proves to be too hazy and subjective for the courts to determine.

While some have estimated that this practice has eaten away about 5% of the $181 billion American apparel market, others have suggested that copycatting is healthy because it induces the “forced obsolescence” needed to propel new trends in the cyclical fashion industry[6]. Either way, beating designers at their own game has proven to be a lucrative victory for those who are up to the challenge.

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[1] http://www.youtube.com/watch?v=gK0SYRz8tRY

[2]http://www.nytimes.com/2007/09/04/us/04fashion.html?pagewanted=1&sq&st=nyt&scp=13

[3] Ibid

[4] http://www.newyorker.com/talk/financial/2007/09/24/070924ta_talk_surowiecki

[5] Ibid

[6] Ibid

From premium to just plain ordinary: Will this bold strategy work for Starbucks?

You walk into a warm and cozy atmosphere, with aromatic smells and inviting staff. You order your venti iced mocha frappuccino, grab a comfy couch, and just relax. This is what Starbucks offers, a “third place”, a place away from home and work, a place where you can order a quality cup of coffee made just the way you like it.

Starbucks’ affluent customer base has long enjoyed the company’s offerings, evident by the company’s lucrative bottom line. Their RVP has centered on giving each customer high-quality drinks in a relaxing atmosphere with great service, a focussed approach leading to astounding success.


However, announced in early January 2008, they are test marketing a new idea in the United States, the $1 coffee. Served in 8 ounce cups, 4 ounces less than their smallest coffee cups, they will be in direct competition with chains such as McDonalds and Dunkin’ Donuts. With everyone scrambling to figure out if Starbucks is downgrading, the company’s CEO Howard Schultz reassures its stakeholders that their intention is to maintain their current leadership position in the high-end market while attracting new customer segments.


The timing of this strategy makes sense since the U.S. is in a market downturn, leading to lower spending on discretionary products such as premium coffee. As well, the drop in price is not as dramatic as is claimed. Currently, a 12 ounce cup of Starbucks coffee costs $1.63 USD when you bring your own mug. However, it’s the changing perception to the customer that is the real threat.


Gone is the idea of a store exclusively catering to people willing to pay more for quality and experience. Now you have another customer group to service who just want something cheap and quick. Starbucks’ attempt at creating a multi-dimensional RVP, with the second dimension being a fast, cheap, quality cup of coffee, creates two contrasting approaches that are hard to imagine in one brand.


Starbucks became an enormous hit when they started with their differentiation strategy whereby they provided “affordable luxury”. By competing with McDonalds and Dunkin’ through price, they are pursuing more of a cost leadership strategy. This multi-segment approach may work for some, but like the vast majority of companies who try it, will cause them to lose focus on their core competencies. Consequently, this will confuse customers.

Furthermore, while it is easy to go from being a high-end to a low-end brand, this concept does not work as well in reverse. We have seen this from Canadian Tire’s failed efforts in stocking premium products to attract customers at higher price points.

Overall, Starbuck’s test strategy, if implemented large-scale, could critically erode their brand name and alienate current customers. In their efforts to reduce the impact of declining sales, they should increase research on new product and service offerings to minimize the decline in current consumer purchases.

In the long-term, riding out this economic downturn will mean that they maintain their brand image for when the economy is back up and running.

Source article: http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSN2355697420080123
To learn more about this topic, the company, and its changing strategy, please visit:
http://www.theglobeandmail.com/servlet/story/RTGAM.20080208.r-cover09/BNStory/Business
http://www.starbucks.com/aboutus/pressdesc.asp?id=822

Starbucks’s Canadian Website:
http://www.starbucks.ca/en-ca/

Wal-Mart Celebrates Year of the Rat

Wal-Mart is traditionally viewed by many as a big-box behemoth that imposes its low-priced, minimal-quality reign wherever it goes, and crushes stores that cater to local preferences in the process. While this may be the case in some locations, Wal-Mart Canada has begun taking steps to better match its 298 stores with the communities in which they operate. By means of its “Store of the Community” program, Wal-Mart is attempting to “focus hiring, support of local groups and charities, as well as merchandise, on the specific needs of the communities [its] stores serve.” Using AC Neilsen and Census data, Wal-Mart Canada identifies the population culture clusters that exist around its outlets, and then modifies some of its stores’ merchandise and assortment to suit the specific needs of each store’s local customers. More than just tweaking products and quantities, “Wal-Mart is making a concerted effort to market to local trade areas.”

Today, February 7^th 2008, is the start of Chinese New Year and it is not going unnoticed by Wal-Mart. The retailer’s ability to geographically and demographically segment its customers has enabled Wal-Mart Canada to offer Asian Canadian customers traditional Asian merchandise at 20 select stores nationally. In the long-term and on a permanent basis, Wal-Mart will continue to carry authentic Asian products, as well as items geared to or favoured by the Asian community in seven stores across Canada. According to Jim Pilkington, a Divisional Merchandise Manager for the “Store of the Community” program, the retailer “is dedicated to offering [its Asian Canadian customers] the convenience, distinct products and everyday low prices they’re looking for,” which remains consistent with Wal-Mart Canada’s general Retail Value Proposition. Wal-Mart Canada is able to deliver superior convenience by expanding the breadth of its stores’ assortment to include specialty Asian foods, housewares, clothing, and entertainment items. The ability to conveniently purchase traditional Asian products at Wal-Mart is even more valuable for non-Asian Canadian customers. In addition, some of the new Asian merchandise is propriety to Wal-Mart Canada, thereby improving product selection and perhaps engendering customer loyalty among Asian Canadian customers. And, of course, Wal-Mart’s prime directive of everyday low pricing underpins the addition of traditional Asian merchandise.

According to Fortune magazine, Wal-Mart imports approximately $20 billion worth of products made in China each year. Pundits have commented that there is something ironic about the generally accepted number one importer of Chinese goods announcing its plans to carry authentic Chinese products in its Canadian stores, “as opposed to the other kind it outsources.” Nevertheless, few can truly fault Wal-Mart’s attempt to make its merchandise and product assortment more relevant to the local communities and cultural groups in which its stores operate.

For more information, please see:

Wal-Mart Canada's Press Release, February 4, 2008
http://www.newswire.ca/en/releases/archive/February2008/04/c6692.htm

The Vancouver Sun Article, January 22, 2008
http://network.nationalpost.com/np/blogs/fpposted/archive/2008/02/04/new-year-gives-wal-mart-chance-to-boast-of-chinese-made-goods.aspx

Marketing Magazine Article, September 24, 2007
http://www.marketingmag.ca/magazine/current/multicultural/article.jsp?content=20070924_70205_70205
Wal-Mart's Corporate Website
http://www.walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=316

Wal-Mart Canada's Website
http://www.walmart.ca

I can remember about a year and a half ago, shopping for groceries at a Loblaws Supercenter and there being a massive rearrangement of the store’s layout—leaving a gapping hole in the center of the store. Not knowing what was going on, I was surprised when I returned weeks later to find the hole had been filled with a rather trendy fashion line. Designed by Joe Mimran (founder of Club Monaco), the clothing line was branded Joe Fresh—Joe for the designer and Fresh as the word is usually associated with food.

With Loblaw’s recent slump due to logistic problems and the addition of groceries in their American rival Walmart’s superstores, Loblaws is counting on the “cheap and cheerful” clothing line to instigate a turnaround. Thus far, the line is proving to be a success with $400 million worth of sales in its first 21 months and a projected $1 billion mark to be reached by the 2010.

With the addition of apparel in Loblaws Stores, the company is building on its current RVP stressing the value of their customer’s time by offering them convenience. Loblaws Supercenters strive to be a one-stop shop for their customers by offering quality products across a broad array of categories from groceries to furniture to electronics. They locate their stores in convenient areas with amble parking, design clear store layouts with abundant signage directing customers within the store, and offer sufficient working hours. However, with the Joe Fresh line being targeted towards a market tagged as the “family CEO”, a thirty something time-strapped mom trying to care for her family at a minimal cost, the store is adding the element of price into their value position, something Loblaws isn’t necessary known for. Loblaws must be cautious not to sacrifice its quality for lower prices as the target market appreciates the low prices and the convenience of shopping for all their family’s needs in one store, but will not waste money on poorly put together clothing in order to save time.

As the line is an assortment of mostly classic casual pieces with a few more trendy pieces to dress up the collection, the line is attempting to execute two assortment strategies. With the trendy pieces, Loblaws is following the footsteps of stores who first started the “fast fashion’ trend in Europe like Zara and H&M, offering a limited number of each piece, encouraging sell-outs and introducing new designs into stores every four weeks. In contrast, the classic pieces are meant to be staples in customer’s wardrobes, and stores are meant to be constantly stocked with various colours and sizes. But as with their grocery business, Loblaws is experiencing the same supply problems, leaving some store’s Joe Fresh selling space three-quarters empty—leaving a bad impression on customers. Loblaws shouldn’t be worried about sell-outs of the tr endy pieces, but should focus on having goods in the store at the right time when the customer needs to have them. The line’s basics need to be constantly stocked and it is essential that the new trendy pieces be in stores at the right time of the season.

In the end, what Loblaws is attempting to do with Joe Fresh and introducing ‘fast fashion’ into grocery stores is truly innovation; however the line cannot be used help turnaround the company if they have not fixed the problems that caused their slump in the first place.

http://www.youtube.com/watch?v=6yVgG4QIhNE
http://www.youtube.com/watch?v=q2V2nggtIVo

“Superstore's clothing line an unusual success story”. The Vancouver Sun. Vancouver, B.C.:Nov 27, 2007. p. D6

“Cheap, Cheerful and Out of Stock”, Report on Business:Canadian, The Globe and Mail. Toronto On: Dec 20, 2007. pg. B. 1

“Ad Missions”, Marketing, National Post. Don Mills, Ont: Nov 9, 2007. pg FP 8.

http://www.toronto.com/shopping/article/501046

http://www.cbc.ca/news/fortunehunters/trends/2008/01/the_fast_fashion_trend.php

http://www.joe.ca/

Recalled Products Impact Retailers

In recent years there has been a dramatic increase in the number of product recalls. This month alone items such as bicycles, lingerie, and infant sleeper sets have been recalled by Consumer Product Safety at Health Canada. Experts from the U.S Consumer Product Safety Commission predict that 2008 will be similar. Many of these affected goods are items composed of toxic chemicals or lead paint and can be traced back to Chinese manufacturing plants. Brands under which these products are made face major implications ranging from weakened reputations, lost sales, and class-action lawsuits. However, the impact of recalls on retailers is often overlooked, even though the effects can be equally as damaging.

Toy retailers in particular have been plagued by recalls leading many concerned parents to avoid products from brands such as Fisher-Price and Spin-Master (the maker of Aqua Dots). This weakened consumer confidence negatively affects retailers who are now associated with carrying unsafe products. Stores are also required to stock a new product assortment to fill the shelf space left over from recalled toys, an especially difficult task if the affected brand comprises a large portion of store selection, a crucial component in their individual RVP. Learning about new products and handling customer concerns are other challenges that retailers have to confront amidst pre-existing pressures to compete with the selection and ‘try-it-yourself’ experience of many electronic toy and game stores. Recognizing the high number of products to keep track of and the negative effects of these recalls on their business, major retailers such as Toys R Us have responded by conducting product testing before placement on store shelves. With more advanced information systems, these retailers are also better able to track hazardous products accidentally left on shelves by creating a ‘do not sell’ notification for employees at the point of purchase. However, smaller retailers lack the capabilities to carry out these measures, giving them a disadvantage relative to their competitors.

Adding even more pressure on retailers is recent news from the Connecticut government which plans to introduce the ‘Children’s Product Safety Act’. This legislation will require stores to track recalled products and report all disposal actions or face fines and will make Connecticut the first State to require retailers to perform such actions. If it proves to be effective at improving safety, it may lead other U.S States and Canada to follow suit. Acknowledging that manufacturers should be primarily responsible for their products, Prime Minister Harper recently announced plans to introduce mandatory product recalls (currently companies conduct recalls on a voluntary basis). If passed, this legislation will benefit retailers since manufacturers will be pressured to be more safety conscious in the production process.

Traditional toy retailers have to constantly evolve to remain competitive in the industry, and they require a steady flow of goods from their supply chain to do so. The stakes are high. If some manufacturers fail to provide effective checks and balances in ensuring product safety, they face the risk of losing out to companies who do.


http://www.woai.com/content/troubleshooters/story.aspx?content_id=1395d31d-e0ba-4ff4-a6ca-69bf94389643
http://blogs.consumerreports.org/safety/2008/01/cpsc-fines-2007.html http://www.boston.com/business/articles/2007/08/14/mattel_recall_may_impact_holiday_shopping_season?mode=PF
http://www.courant.com/news/politics/hc-cttoyact0125.artjan25,0,5419130,print.story
http://www.smartmoney.com/dealoftheday/index.cfm?story=20071112
http://www.fasken.com/antitrust_competition_and_marketing_bulletin_december2007/
http://www.youtube.com/watch?v=yhYLrg3IJ6o