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Only 5,000 iPhones sold in China … Why?

Even the best product will fail without localization

As I prepare for our next Retail U International course, I’m looking for case studies which illustrate how even the best will fail if they don’t localize to fit the market.  What better case study than the utter failure of Apple to launch iPhones in China!  The early sales suggest that Apple totally missed the critical success factors for international retail.

 

iPhones fall flat in China’s fast growing market!

While China’s overall retail market shows signs of the global recession, sales of luxury brands and premier technology still show very positive growth. In particular, the cell phone market is booming in China. Therefore, it is not surprising that Apple decided to officially take the iPhone to the Chinese market with its tremendous potential for growth.  

Initial projections from China Unicom (Apple’s carrier partner) were that over 5 million iPhones would be sold in the first few years.  So what happened? The best guess is that Apple has officially sold only 5,000 iPhones!  How can projections be so far off for this mythical “Jobian” device, which is so popular in other countries?  When I visited Australia this past year, people were standing in long lines just to have a chance to buy one.

One could argue that the price is too high in China.  An iPhone costs $750 US dollars or more in China.  While that is certainly much more than other countries, it hasn’t stopped the younger Chinese from bringing in “cracked iPhones” at a high price.  Current estimates indicate that there are 2 to 3 million “cracked” iPhones already in China.  So, the demand for the hardware is certainly there.  And, the Chinese youth are estimated to be replacing phones every 12 months.  So, why has Apple been so unsuccessful?

When in China, do as the Chinese do … or would prefer

The old adage about “when in Rome do as the Romans would do” is still the bottom line caveat for international retailing success.  Far too many companies from the west have taken what works in western retailing, and tried to replicate it abroad.  Case in point:  Walmart’s failures abroad in not adapting to local culture, especially in Germany.

Shaun Rein has written an excellent piece in Forbes entitled:  How Apple and iPhone Blew it in China.  Rein argues that to be successful in China, Apple will have to change strategy, and fast.  His observations very closely parallel the key learnings from my recent trips to China:

1.  Customize to local consumer preferences.

This caveat sounds pretty basic and it can be.  But, it is often the most overlooked!   Apple is used to launching iPhones with large carriers, who have monthly contracts and data plans.  But, the majority of the Chinese prefer “pay as you go” plans.  Monthly plans are a pain and paper work is a major hassle … and contracts don’t transfer easily in China.  In fact,, many Chinese text rather than call to save money.  Most people I met carry different “SIM” cards for different areas to cut down on roaming costs.  So, the first critical lesson for Apple is bundling phones with plans is not consistent with local culture and usage patterns.

 

2. Choose the right partner(s)

Again, this sounds basic, but it is critical to success in markets like China and India. Apple is used to choosing large national carriers with a lot of leverage.  In the US, the carrier partner AT&T benefited greatly by having an exclusive for iPhone, and vice versa for Apple launching it.  China Mobile is most the dominant carrier with about 70% share.  Apple’s partner China Unicom is perceived to have less quality in signal.  And, according to Rein’s article, the China Unicom customer base has less household income.  In short, the Chinese customer who prefers to just “top off their minutes” is not about to switch to what they perceive as an inferior carrier just to get hardware.  Hence, the growth of “cracked” iPhones in China continues to escalate, which can’t please Apple who desires fanatical control of its hardware, systems and Apps.

3. It’s about the “ecosystem”, not just hardware

Apple has been tremendously successful with “closed” consumer systems.  In music, it was iTunes.  With the iPhone it has been the 100,000 Apps.   But, the ecosystem has to match local preferences and culture.  The number of “cracked” iPhones clearly demonstrates a demand for the hardware device and interface.  Apple will not be successful unless it works with its partners to localize a value solution that fits the consumer’s lifestyle and preferences.  Even if there are the most fantastic iPhone Apps written in Chinese, they mean nothing if the consumer finds it impossible to deal with monthly contracts and restrictions that do not match how they use a device for mobile business and connections.

It’s not just the western companies going to eastern countries or to “emerging” markets.  There are a number of Asian companies that have been less than spectacular in bringing products to the west!  Lenovo trying to sell computers in the US comes to mind.

The bottom line:  There is no universal product or approach that fits all markets, especially in technology.  The winners are those that take the time and effort to localize to fit culture and consumer preferences.  Case in point, McDonalds has become the master of fast food retailing by localizing both products and services.

What case studies or stories do you have regarding the need to localize for success in foreign markets?

How a Clown trumps a King …

Executing innovation 58 million times a day

For obvious cultural reasons, I did not see a McDonald’s while traveling in India.  But, the “Golden Arches” have literally popped up everywhere worldwide. Say what you will about fast food, but there are 58 million customers a day that are “Loving it”.  While their mascot might be a clown, McDonald’s has become the “king” of fast food retail by innovating so that local customers can “have it their way”.

Beyond the brand glitz of slogans and icons

I need to give an upfront apology to my international friends for all the branding and English slogans.  But, I couldn’t resist the irony of mixing the branding and slogans to describe the paradox of what has transpired in the international competition of the two US based fast food retailing giants – Burger King and McDonald’s.  

I guess if your company name is Burger King, you need a “King” as an icon (or at least a crown?).  I’m certainly not a branding expert, but that king character is one strange looking dude that can sure scare the grandkids!   I’m also not sure that “King” translates real well internationally.  On the plus side, Burger King’s slogan implies personalized service: “Have it your way”.

But … Who doesn’t love a clown!  Ronald McDonald was created as a mascot with universal potential to appeal to kids and families.  The real irony is not the clash of mascots.  It is how McDonald’s has out executed Burger King on their own slogan of “having it your way”.  McDonald’s has become a master of adapting in ways to fit local culture and markets.

“Loving It” translates into Real Results that Count

Fast food restaurants are one of the toughest forms of retail.  It has all the attributes and even greater challenges than any traditional retail store: employee staffing for long hours, 365 days a year, perishable inventory with daily life cycles, challenges of market basket and comp store growth, and the challenges of serving masses of customers with different tastes!

While Walmart and Carrefour might be dazzling in terms of sheer size and revenue, McDonalds’ numbers are simply amazing. Clearly, McDonalds’ customers are “loving it”:

· McDonald’s serves an incredible 58 million customers a day!

· 26 consecutive quarters of positive comp store sales

· McDonald’s Quarterly Earnings Growth +5.90% vs. Burger King -6.8%

How McDonald’s localizes for local markets and culture

McDonald’s is 10 times the size of Burger King in revenue. That didn’t just happen … it comes through constant innovation and attention to details.  McDonald’s is the “king” of localizing execution to consumer preferences and culture. In the words of Jim Skinner, McDonald’s CEO, “The downturn we’re in cannot be an excuse for sitting still”.

Some pretty amazing McDonalds Innovations:

· Specialty coffee programs to grab share from Starbucks

· Touch screen kiosks in Europe

· Home delivery tests in Asia!

 

Localized McDonald’s menus you may not have seen:

· Shrimp on the menu in Japan

· Beer on the German menu!

· Wine on the menu for France

· SPAM on the menu in Hawaii!

 
  

Yes, that’s right! Who knew that Hawaii has the highest per capita consumption of SPAM – the homogenized meat from a can. McDonald’s took the time to find out how to serve it their way.  In the words of Jim Skinner:  “They love it, and we serve it!”

While McDonald’s is known for their “Golden Arches”, they have are one of the best at executing The Platinum Rule - serving customers the food they want and enabling them to “have it their way”.

And that my friends is how a “clown” beats a “king” … an invaluable case study in how to innovate and localize for international retail success.

The Platinum Rule – New standard for service

Why the “extra” ordinary will thrive and be profitable

Did you know about the “Platinum Rule”?  Neither did I.  It’s not about reinvesting your stocks into precious metals.  Once you experience “platinum” service, you’ll never be satisfied with just “gold”.  These are the times when the best of breed will thrive by “going platinum”.  The extraordinary will kick it up to “double platinum”.

The Gold Standard vs. the Platinum Rule

Most of us have been taught some form of the “Golden Rule” – do unto others as you would have them do unto you.  In the past, retailers have incorporated the Golden Rule as a standard for how to treat customers. Certainly, customers value empathy, respect and like to be treated as guests.  Good service begins with courtesy and etiquette.

The Golden Rule is now being replaced by the “Platinum Rule”.  Who knew?  In all my years of working in retail and service industries, I had never heard of the “Platinum Rule”.  A quick internet search reveals that someone named Tony Alessandra generally gets credit for the phrase based on his book The Platinum Rule.  I’m not here to hawk Tony’s book (he appears to be doing more than fine), but I would definitely recommend more reading on the Platinum Rule. 

So what’s the difference?  The Golden Rule states that you should treat others as you would like to be treated.  The Platinum Rule changes one subtle word: treat others as they would like to be treated. Very subtle change … BIG difference.

Experiencing the difference between gold vs. platinum

If you read Results Count, you know that I’m an aspiring photographer.  In the quest for better photos from the next African safari, I of course justified shopping for some new equipment.

The sales person from the Retailer B was definitely practicing the “Golden Rule”.  He thanked me for coming in, asked how he could help. He showed me a couple of new cameras with features that he really liked.  He even told me why he would get the service protection plan.    Even though I did not buy, he thanked me for coming in to shop.  While the guy in the polo shirt was very courteous, he was totally focused on “telling to sell”, from how he saw the world as a photographer, and a sales person.

So, what was different about my “Platinum” experience?  After personally welcoming me to the store, and asking my name (Golden Rule stuff), the sales person shocked me with completely different questions:  Why do you think you need a new camera?  What kind photos do you want to shoot … and where will you display them?

Very, very subtle … but totally platinum!   The sales person was focused on me as a photographer, not selling me a camera he would like as photographer.  No “telling to sell” features and benefits, it was all showing me how to use cameras to find one that will get the shots I want.

What it takes to step up to Platinum

The pitfall of the applying the Golden Rule to selling is that you make assumptions about what the customer wants based on how you see the world.   What if the consumer does not value the same features or doesn’t see the same benefits?   The key to executing the Platinum Rule to both service and selling is to enable consumer input and choice.

There are countless ways to step up and engage consumers with choice:

· Alternative ways to search for information

· Alternative types of information – print, photos, videos

· More than linear demos – let consumers choose the paths

· Sales people and process that “guide” rather than tell

· Alternative ways to check out – in-store and online

Indeed, the secret sauce of Apple stores has been how they execute the Platinum Rule to engage consumers in exploring solutions they want to explore … in ways they want to explore.  It will be interesting to evaluate the success of Microsoft stores based on executing the Platinum Rule of guiding consumers to their choice, vs. “telling to sell” the Windows brand.

Kicking it up to “Double Platinum”

It would be easy to dismiss the Platinum Rule as only applying to expensive or technical products.  But the principles of going Platinum can apply to almost any product or service.

In doing research on the Platinum Rule, I ran across an interesting story from Bryan Williams who had his tire stolen. The attendant does a good job of platinum service by finding the tire and wheel Williams needed to replace the stolen one.  But, after describing his situation, the manager asks a simple, verifying question:  “You did order the wheel locks to prevent another stolen tire, right?”

 

Double Platinum Service = Providing the customer service and value beyond what they originally thought they needed.  

In other words, based on discovering what they perceive they need, anticipate what else will add value … exceed their expectations.

The three rules of customer service are all valid and not mutually exclusive.  The Golden Rule focuses on empathy.  The Platinum Rule focuses on meeting the consumer’s expectations.  The Double Platinum rule focuses on creating value and benefits beyond expectations.

Tough?  Sure!  Takes more time … yes!  But, those organizations which invest in the Double Platinum to provide extraordinary service reap two huge benefits:

· Increased market basket and profitability today

· Raving fans with passionate loyalty

Does Double Platinum Rule really work?  Well, I walked out with a new camera, tripod … and I returned for a backpack to schlep everything to Africa.  I’ll post some safari photos next April if I meet my expectations.

 

What is old is new again – Coupons are back!

How coupons have re-emerged in a digital age

Coded coupons were used by Claude Hopkins in 1909 to test consumer responses to headlines and promotions.  Hopkins is often credited with being the father of direct marketing.  As coupons re-emerge in today’s digital world, marketers would do well to read his book, Scientific Advertising.  You have to love a marketer that measures results!

Coupon clipping in frugal times

During the US depression in the 1930s, coupons surged as a marketing tool.  Shoppers became extremely frugal and used coupons to find bargains and stretch budgets.  During the depression, coupons were found everywhere in print – newspapers, magazines, inserts and even in flyers.  Coupon clipping literally became a way of life for consumers to save money, and for marketers to track and measure results. 

When the economy improved, coupon clipping diminished as shoppers were not as pressed to save nickels and dimes.  With the advent of EDLP, there was no need for paper discount coupons, at least at Walmart.  However, as the current economy again stresses family budgets, the “old marketing” of coupons has re-emerged, especially in the new digital media.

Couponing in a digital age

Coupons have traditionally been associated with groceries and packaged goods items.   And, Nielson data indicates that coupon clipping is in vogue again in the US.   Nielson reports that 1.6 billion coupons were redeemed in the first half of 2009, which is up 23% year over year. 

While most of the consumer packaged goods coupons are still coded paper, there is an evolving trend toward digital. It is now estimated in the US that 40 million people print online coupons.  With pioneers like JC Penney and others now accepting digital coupons on phones, many future coupons may in fact never get printed.   This is already the case with digital coupon redemption at internet shopping carts.

Do your own simple online test of digital coupons

Coupons may not be as “sexy” as other visual media, but they are highly valued by consumers.  Most importantly, they drive sales. The “coupon moms” of today not only value the savings discounts, but highly value the convenience and time savings of being able to search and redeem digitally.  In fact, the major digital break through has been digital coupon consolidation sites.

Still wondering if this applies to your business or consumer electronics?  Do your own personal test.  Go to Google or Bing and type in “coupons” and a category like “electronics”.  Look at how many digital coupon consolidation sites like “CouponCabin” and “CouponMom” emerge.  Indeed, one of the core value props behind Bing is “Cashback”.

Results Count … especially with digital coupons

There is ample evidence to indicate that coupons can and do drive sales.  With digital couponing rapidly increasing, coupon reach to more consumers is increasing, as well as redemption rates.  All good for consumers, but what do marketers get?

Today’s marketers would be well advised to go back and read Hopkins book Scientific Advertising.  Hopkins original genius was “coding” the coupons so that he could measure the results of different headlines, offers and messaging.  

With digital coupons today, there is a multitude of new opportunities to collect marketing data about the consumers using them, where they are using them, and to systematically test what works best where. At a minimum, today’s marketer using digital coupons must do more than merely discount price and measure sales. 

Just like in 1909, the ability to measure coupon impact hinges on systematic coding, testing different variations and tracking sales results.  If you are not measuring at least some of the following, you are not harvesting key insights and value of coupons in today’s digital world:

· What is the original source of the coupon?

· Did the consumer go through search engine(s)?

· What are the most effective means to directly deliver coupons?

· Where do consumers redeem digital coupons?

· What factors / attributes most affect redemption rates?

· In addition to the coupon item, what else is in the basket?

· What is the incremental sales and ROI impact of different offers?

Perhaps coupons never really went away, at least with consumers.  Coupons are not as sexy as “flash & splash” of  other digital media.  But, the data suggest that coupons, especially digital, have become a major factor in driving retail sales both online and in-store.

Today more than ever … Results Count!  Today’s marketers would do well to rediscover the power and insights that coupons can provide … IF there is systematic measurement of attributes that drive profitable results.

 

Why Retailers Need to Rediscover Peter Drucker

Drucker’s timeless quotes about customers still apply

Peter Drucker has often been credited as the guru of modern business management and organization.  When I was in graduate school, Drucker’s works were required reading in many business classes.  Even though that was three decades ago, many of his insights are timeless … and especially relevant for retailing in these turbulent economic times.

“The purpose of a business is to create and keep a customer.”  - Peter F. Drucker (1909 – 2005)

While searching for a blog topic, I rediscoverd this quote from Peter Drucker.  It struck me that it is especially relevant for these times.  With falling stock prices, the primary focus of many top managers is on short term revenue.  The science and art of “creating and keeping” customers seems to have been lost to cutting expenses to meet quarterly profit.

Pricing and Promotion do not “create” lasting customers

In the mad scramble to boost sagging revenues, many retailers have resorted to promotions and discounted pricing in order to drive “traffic”. The death spiral of pricing actions has resulted in eroding margins, which in turn creates pressures to reduce services in order to cut expenses.  All too often, the services cut are those that consumers perceive as the value differentiators beyond the price.

Price does drive traffic to retail stores and web sites.  If “significantly lower”, price will convert temporary sales.  But, price driven traffic is transient and quickly shifts to the next better deal down the street, or on the web.  Unless the retailer has the infrastructure and capacity of a Walmart or Amazon, it is impossible to “create customers who keep returning” based solely on price across a broad selection.  

Does this mean that retailers should not offer promotions and price discounts?  Absolutely not.  Grocery retailers have been using “lost leaders” to drive weekly store traffic for decades.  The key is the service and in-store experiences which: a) drive a profitable market basket beyond the lost leader, and b) create the satisfaction levels, which consumers perceive valuable enough reason to return consistently.

“Keeping customers” requires value creation

Drucker’s insight regarding the purpose of business is profound and extremely relevant for today’s retailing.  The purpose of any business, including retail, is NOT sales or revenue generation per se. 

Financial metrics are a by-product, and indeed an outcome of the core business of building, keeping and enhancing relationships.  To keep a relationship with core customers requires investing in services, which differentiate the consumer experience beyond pricing available at Walmart or the e-tailers.

To repeat a caveat used here many times, retailers must “Differentiate or Die”.  In applying Drucker’s fundamental premise regarding the purpose of business, retailers who thrive will invest in those differentiators that create and keep customers.

Consumer Electronics case study playing out before our eyes

The “Battle Royal” between Walmart and Amazon versus Best Buy continues to play in the press, in ads and in store.  Differentiation beyond price is clearly evident in Best Buy’s TV ads highlighting services and the talent of “blue shirts”.  

But, Drucker’s premise of the core business being creating and keeping customers is perhaps most evident in Best Buy’s recent descriptions of themselves and their value proposition:

“Best Buy is a services company who has stores, not a retailer with stores who offers services”. 

At the end of the day, strategy and positioning are not worth the paper they are written on if you can’t execute in-store or online.  Today’s consumer has access to worldwide pricing online.  And, it is this informed consumer who votes everyday on Drucker’s premise of whether the retailer is worthy of keeping them as a customer.

In the words of Arthur Freed:

“Don't try to be different. Just be good. To be good is different enough.” … if it creates and keeps customers!

Case studies of international retail … and beer

There is no substitute for first-hand experience

In preparing for a new Retail University course on international retailing, I have been “Binging” and “Googling” as many sources as possible.  Photos are still worth a thousand words, and we are continuing to post new photos from recent shops of Asian and Australian retailers (see photo galleries left side).  But, in the words of Paul Harvey, “the rest of the story” lies in the context of experience on the retail floor, online … and in the bar.

Hanoi – Case study for “trickle down” of best practices

My recent Asian retail tour took me to Hanoi for retail meetings and workshops.  On the surface, Vietnam appears to be like many emerging markets.  In fact, many of the participants in my retail workshops described retailing in Vietnam as “barely emerging”, and quite limited in consumer electronics.  Even in Hanoi, most of the consumer electronics shops are quite small, specialized, and have limited assortments.

 

Hanoi – Typical small computer shop with limited space & assortment

As can be seen in the photos, the typical shop space is cramped with precious little room for signage.  The laptop computers are typically merchandised in glass cases, or locked down to prevent theft.   In the larger, more organized retail shops, there is more space for merchandising and branding messages.  However, computers are shrink wrapped in clear plastic wrap to prevent consumer use … the retailers cannot afford to discount any demos due to damage.  

 

Hanoi – Bigger store with POS merchandising, but PCs wrapped to prevent experience

As the saying goes, it is dangerous to make assumptions.  If you only see the small specialty shops of the Old Quarter of Hanoi, CE retailing appears “limited”.  Even in the larger organized shops, consumer experience is limited to one demo machine at the desk with staff.  While I don’t speak Vietnamese, the overall strategy of these shops is very similar to IT Malls, which “force” interaction with the commissioned sales staff who “customize” a system for you based on your “haggling ability”.

 

Hanoi – Typical small computer shop with one demo machine for staff

The danger of being a tourist is that you can inform an impression by virtue of where you shop.  If I had only seen the stores in the photos above, I would have drawn a similar conclusion about the emerging status and challenges of CE retail in Vietnam.  Which is why you need a local guide who knows the culture and retailing in the local market!

Critical shopping question – Who is the best retailer everyone learns from?  When you ask this question, there always seems to be one or two retailers who clearly standout and differentiate.  Contrast the photo of the TRAN ANH COMPANY Hanoi store below with the photos above.  This multi-level store serves both consumers and businesses.  

 

Hanoi – CE Retailing Best Practices

There are reasons why this store sells 10,000 computers a month … and why other retailers and businesses go here to look at best practices:

·         Bright lighting, open format and shelving

·         Laptops accessible to touch, no shrink wrap

·         Multiple units with power and demo capability

·         Emphasis on brands and “genuine”

·         Knowledgeable sales staff capable of customized demos

·         Tech bench for service and customization

To understand the future of retail in any country, you need to go find the best of breed … they set the benchmarks and standards that trickle down to raise consumer expectations, which in turn drive retailer execution.

Australia – Unique environment for retailing and … beer

Australia is certainly unique.  It is the only place that is simultaneously a continent, island and country.  With the land mass comparable to the continental US, Australia only has about 22 million people.  On the surface it would be easy to make the same dangerous assumption that I made à  internet retailing must be huge in Australia.  Not!   

To more fully review the status of internet retailing with my Australian hosts, we went to the most popular of Australian retail establishments – the local bars.  There I learned that is really no equivalent of Amazon in Australia.  In the words of my hosts:  “Aussies are just not passionate about shopping online … it just hasn’t caught on here … we have too many local retailers like Harvey Norman interested in preserving stores and traffic”.

Again, I learned that it is extremely dangerous to make assumptions about culture … and things as important as beer.  You truly do need to go to the local retailing establishments to fully understand:

·         Australians are passionate about beer and genuine local brews

·         Foster’s is a “marketing scam” designed to dupe US consumers

·         Foster’s is brewed in Canada and imported for duped Americans

·         If you order a Foster’s in an Aussie bar, you will be thrown out

The status of Australian beer culture is best summarized by a passionate Aussie blogger:  Foster's is NOT "Australian for Beer". It's not true blue or fair dinkum. It's a big fat marketing lie. If you are a patriotic Australian steer clear of Foster's. It's a scam!

In conclusion, the Professor’s International Travel Research Tips:

·         Ask who is the best retailer everyone learns from

·         Always have a local guide who understands culture & market

·         When in Rome, do as the Romans do … When in Australia order Tooheys, Hahn, Boags … but never a Foster’s if you expect beer

You want more weeks in a year? Wait till 2012

NRF Releases 4-5-4 Calendars for 2011 and 2012

 

What day is it in retail?  For US retailers at least, the 4-5-4 Calendar has become the official means of keeping things consistent to enable detailed planning and year-over-year comparisons.  I’m always amazed at how few vendors have a copy or bother to look ahead.  There is no excuse, NRF just published the 4-5-4 Calendars for 2011 & 2012.

Next 53 week year in retail is 2012

We have already posted on the history and reasons for the 4-5-4 Calendar in retail.  We did leave one dangling question from that last post … when is the next 53 week retail calendar year?

As it turns out, 365 days a year is a pain for all calendars organized in weeks.  The 4-5-4 Calendar juggles the days so that the 52 weeks have the major holidays in the same calendar weeks so that sales history is more comparable and planning is more consistent.

But, with only 52 weeks in a year, there is “calendar creep”.  About every six years a week has to be added to the 4-5-4 Calendar in order to rebalance the weeks.  

The last 53 week year in retail was in 2000.  The next one will be in 2012. This is a BIG deal in retail … it creates an extra selling week to reach annual sales and sell down inventory.  The best of breed retailers and vendors plan for it well in advance!

There is no excuse -  Go Get your 4-5-4 Retail Calendars for Free

In the US, the National Retail Federation is the principle source for the “official” 4-5-4 Calendar.  They just released retail calendars for 2011 and 2012.  They are free PDF files … no excuse not to have a copy. Go get yours today at NRF!

In the tradition of leaving dangling questions about retail calendars, what day is the last day of the retail month of July on the retail 4-5-4 Calendar?

Could you keep up with the flower ladies?

The brutal one day life cycle of the Hanoi flower market

On my current trip to Asia, I just had an opportunity to shop the amazing Hanoi flower market.  The wholesalers start arriving with bulk flowers at 3am.  The “flower ladies,” who distribute flowers by bike, start arriving at first light. By midmorning, there are some retail sales, but end of life occurs by noon.  A complete retail life cycle in less than a day!

Retailing from the back of a bike …

One of the first things that struck me on the morning cab ride from the airport was all the bikes with flowers piled on the back.  While there were some motor bikes, most were bicycles.  Almost all were driven by women, who miraculously navigated Hanoi’s incredible traffic while balancing a load of flowers beyond belief.  By noon, they disappeared.

 

Flower Lady Navigating Hanoi Traffic

No one explained why there is such a demand for fresh flowers in Hanoi, but why not?  The variety and colors of flowers are simply amazing in this tropical climate. But, the heat also quickly saps fresh cut flowers, which is why this market operates in the cool of the early morning.  The reason for the bikes …  they are the most efficient means of getting the product to small shops on very small streets clogged with traffic.

All the elements of a retail cycle in less than 24 hours

I was told that bulk cut flowers start arriving in the market by 3am.  I didn’t get up to verify that one, but the market was definitely overflowing by 6am. When I arrived, the flower wholesale stalls were busy merchandising their remaining stock.  They carefully preened and sorted the stock into smaller bundles already packaged for consumers at retail.

 

Preening and Packaging Retail Bundles

Each wholesale stall tended to specialize in a few varieties. As with any supplier-reseller relationship, it was clear that there was a great deal of “haggling” by the resellers purchasing their assortment from the distributors.  The “flower ladies” carefully selected a wide variety retail flower bundles that they could sell to their regular customers and shops … and they were very choosey!   They kept purchasing until they literally could not strap more on the back of their bikes.  It is amazing what strips of rubber inner tube will hold down!

 

Haggling in the Hanoi Flower Market

By 10am the heat became unbearable for this big Nordic schlepping a camera and lenses.  The best resellers were doing what they could to “sprits” their flowers to keep them fresh.  Clearly, they were in the mood to end-of-life their products to remaining customers, especially any consumers that came whizzing through the market to pick up their own bargains personally.  By 11am, they were already sweeping up the streets to get ready for the next cycle.

10am Final Markdowns and Close Outs

End of Life at Flower Market

Why Women?

There were some guys involved in the flower market, mostly doing menial tasks.  There were even a few guys with flowers piled on their bikes, but the market was clearly dominated by women.  Why?  It could be due to women’s sense of colors and style.  They also seem to be the better flower arrangers and merchandisers.  However, a female Hanoi business colleague pointed out the logical answer: only the women are tough enough, and smart enough to thrive in this retail cycle.

The little “Redbox” rewrites movie rental retail

Kiosk success underscores the retail fundamentals

The definition of retail is: a place where consumers buy a product or service one at a time off the “shelf”.  While much has been written about the advances of internet retailing, there is little attention paid to the lowly vending machine.  Redbox vending kiosks are generating serious cash and have changed the perspectives on movie rental retailing.

The counter intuitive trend of Redbox kiosk retailing

When we first highlighted the concept of “Redbox” kiosks, it just still that … an early retail concept in fact piloted by McDonald’s.  There was considerable debate about whether consumers would rent a movie while at the grocery store, drug store or “Micky Ds”.  Many also postulated that the convenience of movie downloads or rentals from cable/satellite TV would quickly wipe out movie rentals on DVD.

Redbox is essentially a vending machine about the size of large side by side refrigerator.  This kiosk can hold up to 700 DVDs, with typically 200 popular titles.  Something must be working.  Redbox has grown from a handful of locations to over 15,000, with 5000+ more planned this year. 

Both Blockbuster and Netflix are scrambling to come up with some kind of kiosk alternative.  Perhaps, it is because the ubiquitous Redbox can generate as much as $50,000 annual revenue per machine, with no staffing present and minimal infrastructure.

What makes Redbox so successful?

From the eye of the consumer it’s as simple as:  “milk, shampoo … and a $1 movie rental.  Redboxes are strategically located in the highest traffic areas, where consumers shop for consumables like groceries, health and beauty or fast food.

The naysayers quickly point out that Redbox success comes at the time of recession, when consumers are shopping for bargains on everything.   The movie rental price of just $1 drastically undercuts the competitor pricing models.  Won’t this business simply go away when the economy turns around?  Perhaps, but there significant consumer experience factors with Redbox that go beyond pricing.

Redbox consumer experience & execution factors that make it work

·         Location, location … location – Redbox is where consumers shop for mainstream consumables every week / day

·         Redbox was piloted and rigorously tested by McDonald’s

·         Redbox was purchased by Coinstar, who is a specialist in vending machines, locations and servicing them

·         Assortments are carefully managed and replenished based on both hit and classic titles

·         Consumers can quickly find hot and preferred movie titles … literally right in front of them

·         Consumers can swipe a credit or debit card to rent

·         Consumers can easily return the movie rentals to any Redbox regardless of where they rented

Will Redbox meet the demand of all consumers? No.  But, the Redbox concept and brilliant execution have radically changed the movie rental business for “spur of the moment” renters who literally “bump into” the opportunity for a movie night.

From the consumer point of view, Redbox is a “killer app”! It enables a very efficient experience of finding, renting and returning at a movie for just a $1.  No hassle with finding movie guides, scheduling downloads or recordings, or returning DVDs in the mail.

Let’s see now … should I order the fries from the $1 menu, or get a movie?  Redbox has made the choice incredibly easy for busy shopping moms and many overweight dads like yours truly.

We need a worldwide retail calendar!

Where’s the online “App” for retail holidays & events?

As I was sitting on several worldwide conference calls with Asia last evening, I realized that they did not have a clue that July 4^th is a big family holiday celebrated in US this weekend.  Likewise, I didn’t realize “The Festival of Lights” was celebrated as a holiday in Hyderabad, India.  An absolutely “killer app” would be a worldwide calendar of holidays and festivals … especially those impacting retail.

Local holidays have huge seasonal impact on retail sales

Most working in retail recognize the seasonal nature of the business.  In the US, “Black Friday” (the day after Thanksgiving) is one of the two largest shopping days of the entire year.  The largest day on the internet in the US is “Cyber Monday” (the Monday after Black Friday).  The holiday seasonality associated with November and December is so dramatic in the US that retailers start locking plan-o-grams and advertising as early as June, so as not to miss peak sales seasonality.

The US is certainly not unique.  December holiday seasonality impacts sales in much of Europe, where countries also celebrate similar holidays and traditions.  However, neither the holidays nor retail sales seasonality is universal.  For example,  retail seasonality is greatly impacted by the lunar New Year in much of Asia [Year of the Ox].

With global retailing – We need a Global Retail Calendar!

The nature of retail has become global.  Walmart and Carrefour have hundreds of stores spread across many countries.  Best Buy, Apple and European CE retailers are also expanding internationally. 

Each retailer must have an internal calendar of key holidays and events by country.  Such an international retailer calendar would be essential in planning effective ads, promotions and inventory to support them.  But, I can honestly say:  “I don’t know … I’ve never seen an international calendar from within a retailer”.

What I do know is that I rarely if ever see a consumer electronics manufacturer with a current, up-to-date global retailer calendar that marks significant holidays and events by country.  If  there are any vendors who have one, it has to be in the packaged goods and food categories.  The sales in packaged goods categories are highly impacted by local customs and holidays.

Who knows how many “Independence” Days are in July?

If you don’t travel or live in another country, it’s very easy to become parochial.  Americans tend to think that Independence Day is celebrated on July 4^th and unique to the US.

Since I lived in Canada for awhile, I do remember that July 1^st is “Canada Day”, and it truly is a “bank holiday” that impacts retailing and planning.  There must be something about the heat of July that makes for a good celebration in the northern hemisphere. 

Can you name all of the “independence day” celebrations by country in July? … can you even look them up?

In searching for a worldwide calendar, I have found one that is very simple, easy to search with worldwide holidays and celebrations.  And, it is a non-profit website!  While Earth Calendar comes with a disclaimer that holidays listed may not correspond to bank or store closings, it is one of the simplest, searchable sources I have found on the web to date.  Check out the “Wikipedia” of worldwide holiday calendars:

            www.EarthCalendar.net

Major Opportunity – Create a Worldwide Retail Calendar App!

Ok, I’m probably one of the last people not to have an iPhone, so I don’t know how to search the 45,000+ iPhone Apps to find a worldwide calendar.  What retail professionals and vendors need is a worldwide retail calendar “app” that can be downloaded to any “smartphone” or calendar system.  I would gladly pay to have the Earth Calendar downloaded to my Outlook.

Note to anyone who develops this “killer app” and makes tons of money …

Please note that the US has a dearth of “bank holidays” that create 3 day weekends. We desperately need the time off for July 4^th without conference calls, so that we have time to go shopping to celebrate … with enough time to “recover” from celebrating.

Happy Independence Day to all those celebrating in July!