Results Count ... everything else is conversation.

Best Buy Needs a Makeover from the Body Shop

CE consumer experience pales in comparison to facials

The IMS Retail University curriculum has grown beyond the foundation course focused on fundamentals.  In the “Experiential Retailing” workshop, participants evaluate different retailer’s ability to engage consumers by personalizing their experience.  Last week’s class yet again validated that the “ladies of body care” are heads and shoulders above the experience levels in consumer electronics.

 

The 5 Ps of Consumer Experience

Previous posts have highlighted the 5 Ps of experiential retailing.  In view of the low ratings for consumer experience by last week’s Retail U class, the 5 core principles bear repeating:

· People

· Process

· Personalization

· Place

· Products (Solution)

The whole is greater than the sum of the parts.  To truly create a “wow” consumer experience, the retailer must be able to execute the first four P’s in order to be able to earn the right to offer a product solution.

One of the tenets and principles of Retail University is that you must get “on the floor” to fully understand the dynamics of retailing.  This is particularly true for best practices on how to engage consumers, and how to differentiate through experience and service.

Retail U shoppers rate CE experience at the bottom

Not surprising, the Retail U class found the consumer experience to be woefully lacking in retailers like Target, Walmart, and Sears.  Indeed, it was just a challenge to find any store staff on the floor.  When an employee was found, the typical response to a question was to point to an aisle … with some words of encouragement to search “over there”.

Best Buy is the last national US CE retailer with an assisted sales floor.  Indeed, the new CEO, Brian Dunn, has made numerous statements about differentiating Best Buy through personal service via the “Blue Shirts”. 

Therefore, it is quite remarkable to hear the “mixed reviews” of Best Buy from the Retail U shoppers.  The best engagement and execution came from some of the Magnolia staff who did execute the 5 Ps.  But even in Magnolia, a number of shoppers were never greeted … and simply left standing in aisle, trying to use some of the power items on display.

The Ladies of Body care blow away Best Buy on Experience

In the Experiential Retailing class, we ask the class to go out and shop for something they know, and for something outside of their comfort zone. When you shop for something you know and have researched, it is very easy to ask informed questions and guide the selling process.  Said another way, when the shopper understands what they need, they make up for a lot of deficits in the sales person, process and merchandising.

When asked to go shop for something they know nothing about, the courageous males of the class go to The Body Shop, or Bath & Body Works to inquire about skin care.  Inevitably, these shoppers are the last ones back, but the first to raise their hands to share their experience.

In fact, you can’t get the males or females, who shopped for skin care, to stop talking about their experiences!  They rave about how they were greeted and made to feel comfortable in the store.  Some are even offered tea.  But, what is most compelling for the shoppers is how the “ladies of the store” take the time to ask lifestyle questions to personalize a solution … and a regime (process) for each individual consumer.

Results Count – The Proof is in the Bag!

While all Retail U participants are asked to complete a mystery shop evaluation for the 5 Ps, they are specifically told not make a purchase.  What happens?  In each class, several bring back “body bags” … and they can’t wait to show off their new skin regime purchases!  It’s never a single item.  In meticulous detail, they describe both why they need a total solution, and how the ladies customized skin care just for them!

Clearly, the “ladies of body care” are head and shoulders above “Blue Shirts”.  They have “people skills” that make them highly successful in engaging consumers, in non-threatening ways, to sell very personal solutions.  They also have a process and the training to execute a personalized experience consistently across different consumers.

Why aren’t there more women on the CE retail floor?

The enlightened CE retailers are trying to appeal to the CPO – the woman, who is the Chief Procurement Office of the home.   Best Buy has even created a special pilot store appealing to women, designed by women.  Best Buy store managers would do well to recruit some of these talented “ladies of body care” to balance out the male dominated blue shirts across all stores. 

While people skills are necessary for engagement, they are not sufficient to create best of breed consumer store experience.  The “ladies of body care” would not be as successful in any CE retailer without the other 4 Ps. Why is so hard for CE retailers to create an environment, and the process to personalize the experience for consumers based on lifestyle needs, versus tech specs?  Perhaps, it is because many CE products are now commodities, sold as components on the basis of low price.

To execute Brian Dunn’s mission of differentiating on the basis of consumer experience will require a complete makeover of “Big Blue’s” ability to execute all 5 Ps at the same level of consistency as the “body shops”.

 

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

Learning is Reciprocal…

Nothing like an adventure abroad to broaden horizons

My standard close in US Retail U classes is that you’ve got to get out of your corporate hometown in order to understand retail.  That punch line is even truer today, as retail continues to rapidly evolve.  But, “getting out of town” is even more crucial in understanding international retailing … as I learned again on my last Asian tour.

You don't see many Retail U class photos like this one from

Hanoi, Vietnam

 

Retail workshops in Vietnam, China, Thailand and Australia

I am more preoccupied with retail than most.  In preparation for building an International Retail U course, I also read a significant amount of trade publications and press on international retailing.  But, there is just no substitute for going and experiencing retailing first hand.  I recently had the fortunate opportunity to do a “retail tour of duty” in Asia and Australia.  

As an interesting sidebar, no one ever quite knows to what to do with Australia, and too often it gets lumped in with the rest of Asia.  While Asia may be the closest area to Australia, the flights are still very long from Asia to the “land down under”.  Retailing in Australia seems to be similar to Western Europe. Harvey Norman, the dominate CE retailer in Australia, most closely resembles the decentralized store model of Media Markt.

 

Fortunately they let the old professor teach in English

 

International Impressions

One of the most interesting opportunities was to conduct a “workshop” with distributors and retailers from across Southeast Asia.  In this case, the learning was definitely two way – with the “professor” doing more learning than the participants.

Here are some the “professor’s” key take aways and impressions:

·         Two step distribution through distributors is not optional, it is a requirement to reach and stock the small retail shops

·         As CE margins erode, distributors are under tremendous pressure to turn their inventory to be profitable

·         Inventory turns, GMROII and market basket metrics are just as valid in Asia as in the US and EMEA

·         While organized retail and global retailers are growing in presence, most of the volume (80%+) in Asia goes through small shops and IT Malls

·         Some of the “local” retailers in competitive markets are achieving much higher turns and GMROII than US retailers

·         “Haggling” or negotiation is integral part of the shopping process

·         Corp Headquarters can never truly understand “localization” requirements – they need to rely on their great people in the market

No substitute for Sampling Culture

If you know anything about me at all, I firmly subscribe to an “eat about it” mentality.  There is no better approach to understanding culture than to sample local food and customs.  Somehow eating about it usually leads to “drinking about it”, and that is where the true insights usually develop.

Rest assured, I have travelled enough to know that you take your life in your hands if you sample from the street vendors.  However, I had a number of great opportunities to sample local food and customs at the retail workshop lunches.  Trust me, I have never seen anything on a plate at a US workshop lunch that even closely resembles the lunch at the Qingdao retail workshop.

 

Qingdao - Not your typical Retail U lunch

A sincere note of appreciation and thanks!

I am always amazed and overwhelmed by the hospitality of the wonderful hosts at international retail workshops.  Not only are they gracious and competent hosts in organizing the workshops, they also give unselfishly of their time to enable this old man of retail to visit local retail shops.  I will post a number of retail store photos next week from the local shops.

So a sincere thank you to all my hosts in Asia and Australia that made these workshops memorable learning experiences for the participants …  and professor!

Join Retail University now on Facebook

Facebook @  IMS Retail University

In an effort to reach out to all of the recent participants in Retail University, as well as the 12,000 past graduates, IMS has created a fan page on Facebook.  If you have a Facebook profile, simply use the search bar to search for:  IMS Retail University (spaces between).  Click on option to “become a fan” and you will receive updates as the fan page is updated. You can also click on the Facebook badge that is located on the bottom right of our blog. It will take you directly to our fan page, if you have a Facebook profile.

The IMS Retail University fan page will provide information on upcoming events … and future sessions like those planned in Vietnam, China and Australia this July.  You will also see periodic retail news headlines and links to retail articles that are noteworthy.

The Retail U fan page is not intended to replace the ResultsCount.  We will continue to post in-depth insights and observations on the blog weekly, and send monthly e-newsletters to subscribers monthly.  

Become a Facebook fan today:  IMS Retail University

 

Retail University held in Redmond, WA

Snapshots of International Retailing

What we can learn from the “eye of the consumer”

As promised, I was able to take literally hundreds of photos inside retailers visited during my last International Retail U workshops.  What makes these photos unique is that I literally hung the camera from my neck and snapped photos as a consumer would see a store.  The composite of retailer photos across countries provides insights vendors can use to improve marketing, merchandising and execution.

New Retail Photo Galleries – A click away on your left

We are in the process of reorganizing the retailer photo galleries found in the navigation bar to the immediate left.  We will be grouping retailer photos within major regions.  For example, North America now contains both the US and Canada. India and China are listed as separate markets, due to the number of recent photos, and their importance as emerging markets.

Within each major region, each photo is tagged with a caption noting the specific retailer and location of where the photo was taken.  In the interest of space, we have limited the photos to representative examples of consumer electronics.  If you are looking for something specific and can’t find it, please contact us, and we would be happy to research our growing photo library to see what we have on file.

Initial Consumer Insights through the Lens

Time and space do not permit an exhaustive analysis of all the retail photos and highlights.  We will be covering more details in our International Retail U course and through future postings here.  Suffice it to note that many vendor headquarters are “country-centric”.  The new retail photos clearly demonstrate the need for localization.  It is also readily apparent that one size does not fit all or even most retailers – there is a pressing need for more flexible execution of merchandising in retail formats that don’t have the space, or the same shelving as traditional big box retailers found in the US and Europe. 

1.     Apple is amazingly consistent

Apple is the one retailer that is the most consistent across all stores in all markets.  As you can see from the photos of the Apple store in Munich, all of the branding, fixtures and merchandising is nearly identical to other Apple stores.  What is not immediately evident in the photo below is how consistent the quality of consumer experience is across Apple stores.

First Floor Apple Store; Munich, Germany

2.     More top retailers going global – driving organized retail option

Many of the major retailers are “going global” and building their stores in major markets across the globe.   The international stores for Best Buy or Carrefour are more “vertical” (multiple floors), but contain many of the core brand and fixture elements.   

While the retailers like Best Buy localize some aspects, they are bringing organization to categories with some logical adjacencies that help sell market basket and services.  Notice the classic “serpentine” fixtures in the Best Buy store photos from Shanghai.

Notebooks on serpentine fixture in Best Buy, Shanghai

3.     IT Malls still Rule … and Dominate Sales

Consumers still prefer to shop IT Malls in Asia Pacific, India and China.  The majority of the consumer electronics volume still goes through these multi-level malls of “let’s make a deal” shops.  As a “westerner” used to the more laid back approach of Best Buy or Saturn, there is no way to appropriately illustrate via a photo the aggressive salesmanship of the booth people.   

What can be illustrated in the photos is the radical difference of first floor IT Mall booths dominated and merchandised by vendor brands, versus the upper floors’ unorganized stalls, bins and dumps of parts and gadgets.    

To begin to “crack the code” on IT Malls will clearly require a different approach of how to deal with the different nature and sophistication of retailers on each floor.   The photos below highlight the difference between the first floor organized booths, versus those inhabiting the lower rent, lower traffic upper floors.

Branded Shops on First Floor, IT Mall China

Unorganized Booth on Fourth Floor, IT Mall China

4.     Learning from “local anomalies” and successes

One of the retailer successes that personally intrigued me was Harvey Norman, which is classified as more of a “department store” selling electronics.  The latest unofficial stat from Australia is they command something like 38% market share. As you can see from the photo, the merchandising may not be spectacular, but they know their customers and how to run promotions!

Promotional Driven Harvey Norman Store, Singapore

One of the most successful retailers in Singapore is “Best”.   What a name … wonder where they got that from.   They not only had one of the largest TV and home theater selections that would exceed most Best Buy stores, they exhibited some of the best consumer-centric merchandising - logical side by side choices, which enable the consumer to quickly compare screen size, technology, etc.

Side by side TV comparison in Best, Singapore

5.     Category Management may still be a Foreign Concept

Category management in CE generally lags far behind that of the packaged goods industry.  While the global and local big box retailers are beginning category merchandising in focus categories like gaming, true category management is highly dependent upon data, analyses and focus on building category sales over moving commodities at a price.

One aspect of category management is “SKU rationalization”.  Less facings, organized in logical ways for consumer decisions can increase sales and reduce inventory risks.

The photo below shows the plethora of SKUs and literally hundreds of facings of mice and keyboards in retailers such as Challenger in Singapore.   As bigger formats emerge, there is an opportunity for the fundamentals of category management execution on the part of both vendors and retailers.

A wide array of selection at Challenger, Singapore

While retail may not be as “healthy” in these financial times, the traffic in the IT Malls and retailers indicate that shopping is still the national past time in most countries.

Musings from the Roving Retail U Professor

Observations from Munich, Shanghai and Singapore

As I indicated in my last post, I had a wonderful opportunity to serve as a “Prof” for three Retail U workshops in three great cities.  One cannot expect to get an unbiased view of retail from just 3 cities, but direct observation beats speculation.  Here are my take aways from the Retail U workshop participants and personal shops of CE (Consumer Electronics) retail in these metro markets.

Munich – The “free” netbook marches on … and on!

In terms of the classic CE retailers, the tech bench is becoming a permanent fixture in big box CE retailers like Saturn.  Not only does it serve as a major differentiator beyond price, it plays a critical role in both customer satisfaction and increasing profitable attachment of services in the market basket.

But, the real news from Munich and throughout Europe is the invasion of the telcos into the traditional PC retailing arena.  One only needs to walk down the street to see the myriad of signs in the telco shops advertising free netbooks with a broadband contract.  There is no way that traditional CE retailers can compete on the “low end” without recurring service contract revenue.

Typical netbook promotion from European telco store.

Retail U workshop participants confirmed that many telcos are now putting out their own direct bids for orders of 500,000 netbooks or more.  With the telcos doing the specs, it becomes all about acquiring new telco contracts at the lowest price.   

This is not good news for CE retailers, Microsoft or the potential consumers.  Many of the “free” netbooks from telcos come stripped to bare essentials loaded with a Linux derivative.  If the consumer expects to do more than surf the net, there will be a real consumer satisfaction issue.  

The return rate on free netbooks from telcos will be a critical measurement to watch in short term.  I personally did not see any ability for telcos to offer any real consumer service or support for netbooks in store, other than basic setup on their network.  Telco contracts typically stem the tide of hardware returns through punitive Ts&Cs, but there could be a real backlash from consumers expecting more of a notebook computer experience than is possible from a stripped down netbook.

Shanghai – Big Boxes invade, Malls still preferred

Admittedly, Shanghai may not be a typical Asia metro market to study retailing. It is an interesting case study to watch the invasion of the global big box retailers.  Everything from Best Buy to Barbie now has a store front in Shanghai.

Best Buy started with a flagship store that is bigger than the typical US store.  Best Buy has expanded to six additional stores in a somewhat smaller footprint.  Beyond the traditional Best Buy store, the real experiment unfolding in Shanghai is Best Buy’s conversion of a local chain called Five Star Appliance.  The new Five Star format that opened May 1^st has an Apple store-within-store concept.

In any country, the global brand must compete with local brand and formats.  There were no lack of shoppers in mega store environments of Yolo and Suning.  These shopping emporiums offer consumers an equal, and even larger selection of both local and national brands than Best Buy does.

Best Buy competes head to head with Suning in Shanghai.

The Retail U workshop participants confirmed what is often written about in the press … local shoppers prefer the IT Malls.  The IT malls contain floors upon floors of small shops hawking their deals of the day.  There is no question that you can “haggle” a better price if you know what you want … and speak the language fluently.

IT Malls are of course where the system integrators use a “sushi type menu,” where you can point to the software you want loaded on your machine, right there with blazing speed.  Of course, it is not genuine or legal software.  It is offered with the excuse that consumers expect it … and everyone else does it.  It is very difficult to compete with “free” when it is piracy.

Singapore – Where shopping is a national past time

Within a small island city-country, there is not much else for the 5 million inhabitants and tourists to do but shop … and do they shop!

There is no lack of shopping malls in Singapore … from the very high end fashion designer shops, to the small stall electronics malls specializing in particular brands or components.  One begins to wonder how all of these small booths offering very similar assortments compete with each other.

An emerging trend in Singapore seems to be the growth of the local brand “mega store”.  Singapore retailers like Challenger and Best carry an assortment of products and brands that would rival a Best Buy or Saturn.  In many ways, their assortment offers a composite selection that is greater than some IT Mall composites, with the consumer advantage of being able to see side-by-side comparisons of brands, size or technology.

Amazing array of peripherals in Best store, Singapore.

What appears to be lacking or at least not evident to this shopper observer is SKU rationalization. There were literally dozens of locations of mice and keyboards within the same store … with literally hundreds if not thousands of SKUs.  While selection can be an advantage, it becomes a liability when the category choice overwhelms the consumer, and cannot be supported in terms of gross margin return on inventory investment.

Pictures are worth a thousand words

I was able to take my camera into the stores and snap almost a thousand photos “unobtrusively” – code word for I was not asked to leave and did not have my camera confiscated.   I will be posting pictures to illustrate core retailing concepts.

While a picture is certainly worth a thousand words in describing the environment, assortment and merchandising, it cannot convey the context of the experience.  Pictures cannot convey the IT Mall intensity of the commissioned sales associates to western shoppers used to big box stores with more laid back staff. 

To capture the essence of the consumer experience, you still have to get out there on the floor.  I will try to provide some context as we post pictures of sample retailers.

The ABCs of International Retailing

Why you need a passport to study today’s retailing

As I was preparing for my international Retail University workshop in Singapore, my hosts politely pointed out that Club Warehouses are not prevalent in Asia.  While not a dominant retail format in Asia yet, clubs just are one form of retail that is expanding internationally.  As retailing continues to consolidate into fewer large players, those dominant retailers are rapidly expanding their stores abroad.  I am about to embark on my two week around the world retail adventure, where I plan to look for three ABCs of recent retail expansion: Apple, Best Buy and Clubs.  

The sun never sets on Apple

Apple is the current anomaly of being a vendor with very successful retail stores that seem to scale on a worldwide basis.  Sony does have some 200 stores worldwide, but they do a fraction of Apple’s volume.  While Lenovo has a very successful chain of stores in China, its success is largely in Asia.

Apple is continuing to expand globally by opening stores in a variety of formats: large flagship stores, smaller mall based stores and stores within stores.

It is almost impossible to keep up with the new Apple store openings.  Recent headlines point to a new store in Las Vegas, the store near Louvre in Paris, to Apple stores in Shanghai and Sydney.  The sun literally never sets on the Apple empire of flagship stores.

What is perhaps more noteworthy however, is the more pervasive expansion of Apple stores within stores.  ChinaTechNews is reporting that Apple will open 40 Apple stores within Five Star Appliance stores.  Five of these new Apple stores are scheduled to open on the upcoming Asia Labor Day of May 1, 2009.

 

But, the real backstory is that Five Star Appliance was purchased by Best Buy.  Best Buy International has also signed a worldwide, strategic cooperative agreement with Apple for distribution.

 

Best Buy continues to expand

While highly successful as a consumer electronics retailer, Best Buy is perhaps the new model of international retailing.  Best Buy has become a business partner in a number of international ventures in Canada, Europe and China.  

Not only did Best Buy invest in Carphone Warehouse in Europe, they literally brought the concept of “open cell phone purchase” to the US, which has been dominated by the stranglehold of Telco consumer contracts binding hardware.

While the current economy has curtailed some Best Buy plans to open more of the larger format stores abroad, the Five Star Appliance announcement clearly shows that Best Buy is investing strategically with partners as a retailer and distributor.

Clubs now taking on the world

The big box hypermarkets like Carrefour, Tesco and Walmart have been very successful in Europe and Latin America, as well as the US.  However, the club warehouses have traditionally been more limited to countries where consumers buy in bulk and have transportation to haul it home and store it.

But, club store warehouse formats with memberships for both small businesses and consumers also seem to be expanding abroad.  The US based Costco store is scheduled to open a warehouse in Sydney in July.  In addition to the home based US stores, Costco already operates 535 stores in Canada, Mexico, Britain, South Korea, Taiwan, Japan.   

What will be interesting to watch is how these large format stores adapt merchandise to local tastes and culture.  Even more important, will local consumers continue to pay the club fees?  Costco reports that 88% of consumers worldwide renew their membership.  So, it would appear that clubs are yet another retailer format that will put pricing and distribution pressures on local retailers.

In search of pictures worth a 1000 words

If you don’t see a blog for a couple of weeks, it’s because I’ve packed the passport and camera for a two week adventure to participate in several international Retail University workshops. I have a wonderful opportunity to practice what we preach … to get out of town and country to observe retail first hand in several countries.

Stay tuned.  If I avoid retail security I will post retail photos from Europe and Asia.

Differentiate or Die!

The #1 Retail U sound bite reflects current retail reality

Workshops this past week mark more than 20 years of IMS Retail University.  The basic fundamentals and metrics of retailing have not changed much in two decades.  In fact, the “science” of retail is more critical than ever.  What is new in Retail U are the key strategic insights on how these fundamentals and metrics apply.  In today’s market place, both retailers and manufacturers must differentiate or die!

The Law of the Retail Jungle is brutal and clear –     Differentiate or Die!

In retail, the lines between channels are blurring and even being erased. Circuit City and CompUSA were not just competing against Best Buy as their nearest consumer electronics competitor.  When Walmart and e-tailers focused on electronics, it did not take rocket science to determine who would take share based on commodity pricing.  But, taking temporary share means nothing if you don’t have the execution excellence to make operations and inventory dynamics profitable.

The slippery slope of eroding retail price and margins

CompUSA and Circuit City dramatically underscore the prerequisites of being world class in SG&A and operational excellence, if attempting to compete on price.  In the current economic environment, there is neither credit nor investor patience to develop the infrastructure to compete with the capabilities of Amazon and Walmart.  The comparative overall stats from the retailer’s own 2007 financial reports clearly tell the story:

Retailer	SG&A%	GM%	Turns	“Rule of 100” (GM X Turns)	GM $ / sq.ft.
Amazon	18.1%	22.6%	13.5	311	NA
Best Buy	18.5%	23.9%	6.1	145	$ 212
Circuit City	23.6%	20.7%	5.0	103	$110
Walmart	18.6%	23.4%	8.1	191	$141

Source:  2007 Annual retailer financial filings

When SG&A “operating costs” exceeds gross margin profit by 3 points, you can’t make it up on sales volume or turns!

Retail Survivors sell “basket solutions” not products

Best Buy survives and thrives by differentiating services to build a profitable market basket.  On the consumer front, the sales processes and Geek Squad are critical to attaching profitable accessory sales to “loss leaders” of PCs and printers.  Even more importantly, Best Buy has literally transformed beyond consumers into an authorized VAR (Value Added Reseller) offering integrated solutions and services to businesses.

Some manufacturers don’t “get it” either –              Differentiate Products or Die!

Consumers are selectively focusing where to “trade down” on price, and where to “splurge” to enhance their lifestyle.  For example, consumers are buying low cost notebooks or switching to even lower cost netbooks. But at the same time, they are upgrading to smart phones, which enable ease of mobility with lifestyle “apps” to stay even more connected expanding social networks. 

Retailers are still cutting both labor and inventory costs to reduce SG&A.  As they go through “SKU rationalization”, they are looking beyond manufacturers that can build products at a price point.  They are searching for “partners” who can “think like a merchant” to help solve:

·         Profitably growing basket through high margin attachments

·         Creating high margin solution and service opportunities

·         Driving long term relationships through maintenance & upgrades

·         Increasing repeat trips and overall customer satisfaction

·         Increasing consumer engagement and conversion rates

In short, retailing has transformed beyond just “moving boxes at a price”.

Bottom line for manufacturers:   Differentiate products on more than just feature set and price!  Someone will always trump the low end.  To survive and thrive on the retail shelf, give the consumer compelling value reasons to purchase lifestyle benefits, rather than features in a box at lowest price.

Twitter: Inanity or valuable business tool?

Can you afford not to “tweet” or “follow”?

Like many of you, I thought that Twitter was the stuff of youth - just another version of IM to tell friends what you are eating, doing or watching.  The recent headlines from the biggest players in the industry indicate that Twitter is becoming an integral business tool.  With literally billions of tweets out there, can you afford to be on the sidelines?

Trail Signs of Twitter Legitimacy

Twitter seems to be popping up everywhere in the news.  Not only is it grabbing headlines in the industry press, it was just featured on Nightline this week.  Perhaps a crowning jewel of legitimacy is that Twitter Execs were included with Google, Facebook and MySpace to attend the exclusive P&G’s strategic “confab on social” called Digital Night scheduled March 9^th.

Twitter as Microblogging

Twitter was never intended to replace email, blogs or IM (instant messaging).  Twitter is a free service that gives you a maximum of 140 characters to answer a basic status question:  “What are you doing?”   Postings are called “tweets”.  Twitter allows establishing social connections to plug into conversations on the literally “inane things” people are doing at the moment.  You can literally tie Twitter to Facebook to parallel post “what you are doing”.  But, you can also follow genuine issues, topics and exchange of ideas with close contacts, establish an impromptu meeting, social gathering … or listen to potential customers!

 Key:  Listen as much or more than you Tweet!

In addition to posting your own tweets, you can follow other people’s postings.  Herein lies a treasure trove of current information … a real time pulse of what people are currently thinking and saying about a variety of topics, including your products and services.  The key here is to tap into following people on Twitter who provide value and insights within their 140 character limit for tweets.

Results Count … Can you Measure any of this stuff?

While Twitter is absolutely free, the time it takes to manage is not.  Individuals and companies need to evaluate what is gained from close connections with communities and consumers. While Twitter can be the most cost effective way to put the “buzz” out on new products, there is no guarantee that consumers will listen or go to a specific web site to purchase.  They may just buy at Amazon or Walmart.  It is not much different than the challenge of measuring traditional advertising!

Great Case Example of Twitter Real Time

Mike Schaffner wrote an interesting post regarding a tweet to a friend.  The friend asked about shoes.  Mike responded in a Tweet to check Zappos.  A very short time later the CEO for on-line Zappos responded back directly to Mike Schaffner because they had literally followed his tweet.  Scary stuff in cyberspace?  Perhaps.  But can you afford not to be plugged in to this kind of real-time consumer dialog?       

Here was my bottom line:  The CEO of Zappos, Tony Hsieh has more than 55,000 people following him on Twitter.  Where else can you get that kind of close connection with so many consumers built so rapidly for free?  Perhaps we should measure a company’s “consumer centricity” by how many consumers follow the CEO on Twitter!

Postscript:  Yes I made the leap, I’m on Twitter!

Since we are now covering social networking within our Retail University, I decided it was time to “do it” rather than talk about it.  It was amazingly easy to sign up at Twitter.com.  What is not so easy for me is constructing meaningful tweets of just 140 characters! 

How I plan to use twitter

·         To reference key insight articles I find while doing research

·         Tweet on references and tools that might be valuable to others

·         To post my status and observations when I conduct Retail University workshops, especially internationally

·         To listen widely … to follow a wide variety of interesting people both inside and outside of my industry

·         To listen to actual consumers … what are their real time concerns, issues and topics of discussion.

You can now tweet me or follow me on Twitter @chrishpetersen

What does an Ox have to do with Retail?

International retail perspectives - The Asian New Year

In case you missed it, Monday January 26^th was the start of the Asian New Year.  The Lunar New Year is a classic example of why US based companies need to increase awareness of international holidays and their potential impact on retail abroad and in the US.

Asian and Vietnamese families celebrate more than just the day starting of the Lunar New Year.  Most gather family and friends and will celebrate this entire week … some as long as 15 days.  Now this is my kind of “eat about it” New Year’s celebration!

Lunar New Year Gift Giving – The Red Envelopes

Most Asian families, including Asian Americans observing the holiday, gather family and friends for dinners and intimate gatherings.  It is customary to give relatives and children traditional “red envelopes” containing monetary gifts.

Western economies could use the Lunar New Year red envelope tradition to stimulate retail right now!

Not so Fast – There is more than One Start of Lunar New Year

While most Chinese and Vietnamese will celebrate the Lunar New Year this week, different Asian cultures such as Cambodian, Hmong, Lao and Thai observe their New Year celebrations in February, March, April or even in December.   

Like many widely observed holidays, the Lunar New Year celebrations have been adapted to school schedules … and yes, to take advantage of local and cultural retail opportunities.

First rule of international retail, ALWAYS check the local calendar for observance of key cultural events and holidays.  

International Retail University Perspectives & Workshops

As I embark on delivering international Retail University workshops this year, we are compiling seasonality factors based on different regional and cultural patterns and holidays.  We welcome any input you might have regarding international perspectives, patterns and differences impacting retail.

I look forward to reporting back first hand experiences from this year’s Retail U workshops scheduled in Europe, Asia Pacific and China.

Year of the Ox – Perspectives and Trivia

Bill Imada has written a great article in Ad Age summarizing Asian interpretations of the “Year of the Ox”.  His summary of the Ox seems most appropriate for this coming year whether we use the Gregorian or Lunar calendar:

The Ox is the second icon in the Asian zodiac. Because of its position near the top of the zodiac hierarchy, the Ox typically represents a period of renewal and rebirth, or a fresh start

People born in any of these years would be Oxen: 1913, 1925, 1937, 1949, 1961, 1973, 1985, 1997 and 2009.

May you find reasons to celebrate renewal in the Year of the Ox!