MARK 660 Retail Marketing Management

Dollarama

2010-03-21T21:54:00.000-07:00

It is not the size of Wal-Mart, but Dollarama is doing much more aggressive for low price. All items were at $1 one year ago and some items are still at $1 and some items have been adjusted to $1.25, $1.5 and $2 now. What is its pricing strategy and how it sustains and develops?

With extreme low prices for small living items, Dollarama penetrates into market quickly in Canada in the past several years. Currently there are 8 stores in Edmonton and each store is with considerable large square foot. Without too much effort on advertising, customer traffics are quickly built up and customer flows are constant.

It seems the price-quantity curve doesn’t work for the products in this store because the prices are fixed. Its products still match with its image although now some prices have been adjusted to $2. Customers always can find some useful items so the transaction pretty stable and the sales largely depend on traffic.

The perceived value of the products is so high that few customers consider prices over the convenient. One example is the steel screen for sink. It captures small particular even the hairs but maintain sufficient water flow. It is easy to compare to another scenario that needs to pay hundreds bucks to hire plumber for plug. So for this example, the perceived value is at hundred bucks while the price of this screen is $1. What customers get is price excitement plus the convenient.

Even though we ignore the fact that all items are sourced from oversea particular from China and some international trade issues may exist, we still can follow the trajectory to see that price is set originally from customer’s willingness (or market) down to cost. I would think the prices are still extreme competitive after the adjustment because of two reasons, one is no such competitors on the market for similar products, another is the perceived value is so high that $0.25 to $1 up is still at the lower end of the spectrum.

However, it is worth to discuss how to make customer lifetime value as high as possible. Obviously, the acquisition cost has been already paid and should be constant for foreseeable long time, words-of-mouth is expected other than expensive advertising in the future. Customer retention rate should be at high level without big change. The only thing to increase the CLV is to increase the margin and there are two approaches might be considered. One is to increase the selling prices and this looks pretty feasible at current stage. Another is to lower variable cost particularly on hourly salary given the fact that retail format and location will be unchanged, specifically; the store might consider vending machine for the goods or automatic scan-then-pay way in the future if the labor cost will be skyrocketed.

This store is a kind of black horse in retail business and make retail giant such as Wal-Mart hard to squeeze it out from market by pricing tool. If Dollarama is able to manage the growth by controlling the numbers of new stores and prices adjustment, it should be able to keep decent growth by more brand recognizing in North America.

2010-03-19T19:41:00.000-07:00

Pop-Up the shopping experience

Pop-Up Stores

The Pop-Up store concept has been around for a few years now but is gaining traction especially after the downturn in the economy. A pop-up store opens up at an empty retail location for a few days in a major city and is found more during the holiday season. Major retailers sell items in high traffic areas to make that extra push to improve their brand awareness, and also use it as a venue to sell new products. Like any other industry, retailers are looking to reduce expenses in every possible way particularly rental spaces in this case. What these pop-up locations provide are outlets that will garner high foot-traffic numbers and emphasize on the extra value to customers through promotions. The retail industry has become very dynamic and there is an increasing focus to maintain a high customer relationship through retention and marketing. In a pop-up store concept, all that has to happen very quickly. You have to do really heavy marketing to draw attention and draw people in immediately.
I’m sure we have seen many small pop-up store brands these days but guess what, the big brands are finding their way into this space.

Holt Renfrew

Last December, Holt Renfrew opened a pop-up store in downtown Toronto for five days. Barbara Atkin, VP of Holt Renfrew Fashion Direction, stated that this was an opportunity to test out a new method of “pure design”. The store resembled an attic concept and was very unique in the sense that it wanted to draw those customers who regarded Holt Renfrew as an expensive store and would hesitate to step in. Furthermore, an interesting aspect is that the store did not carry the HR branding in this pop-up store. It was smaller and more personal than its big box fashion which aimed at providing advice, meeting customers especially those who felt uncomfortable trolling up to a flagship store. This strategy would help them build many first time relationships with customers and ultimately drive traffic to their flagship stores.

American Eagle

American Eagle Outfitters introduced its pop store, 77kids, a children’s brand from AE, at Pittsburgh’s Mall at Robinson last December. After an overwhelming response from customers, they decided to keep the store open till late April this year. AE believes at creating a totally unique value creating experience at the store with a wide variety of trendy spring collection for all kids. In addition, customers can shop the full 77kids spring assortment at a touch screen kiosk in the store, which also provides an opportunity for AE to capture customer behaviour. I believe this would help them to cater to a specific target market and listen closely to the customer needs and preferences.

Container Shipping Store

Puma introduced its first portable Puma store called the Puma City. The 11,000-square-foot retail store is made of 24 refurbished shipping containers. The building was even built with international travel in mind, meeting international building codes, dramatic climate changes and ease of assembly. This industrial tri-level super store has an open design, with built in shelving, recessed lighting, large expansive outdoor decks and seems perfectly suited as a night club. It’s really impressing to see how this concept drew a lot of people to the store. I believe this surely created a unique customer shopping experience and most likely increased the customer lifetime value.

http://industry.bnet.com/retail/10004588/toysrus-american-eagle-and-others-bet-on-pop-up-stores/
http://www.businessweek.com/bwdaily/dnflash/content/feb2007/db20070206_949107.htm
http://www.businessweek.com/smallbiz/content/nov2009/sb20091112_724305.htm
http://www.Martiniboys.com/Toronto/citystock/Concept%20Store/1516.html
http://gliving.com/puma-city/

2010-03-19T09:54:00.000-07:00

Bought a new suit lately?
A growing number of men are visiting travelling tailors when they want to buy a suit. Tailors like Maxwell Clothiers or Raja Fashions will set up shop in a hotel suite for a few days every couple of months in cities across the world. Men come in, have measurements taken, choose from 20,000 fabrics and innumerable styles. Two months later, a made-to-measure suit arrives in the mail. All for a price that is ½ the cost of having it done locally. As they say in their own words, “a high quality product at an affordable price.”
What kind of suit do you get out of it? They truly have a vast selection of fabrics, much more than the off-the-rack suits they compete with. Also, style choices are nearly limitless; indeed the biggest problem in attracting new clients may be the overwhelming and possibly intimidating number of options. Their main competition is not the tailor made $3000 Saville Row suit. Most customers seem to be off-the-rack buyers who aren’t looking for brand and don’t mind paying the same or a little bit more to get a great cut.
The experience does not exactly compete with the high end either. Customers are packed in with each other and have said it feels a little like an assembly line. But, that is how price is kept down and is a reasonable trade-off. Only being able to access the tailors every 3 months is an inconvenience however, the frustration is mostly offset by the size of the purchase. A suit is a larger ticket item and whether you have an upcoming occasion or need it for work; you usually have the ability to plan ahead.
After sale service is also incredibly important. Without reputation or any enduring local representation, it is a little unnerving to give some guy in a hotel room your credit card. In the early years that was likely more of a challenge but the business model has been around for several years and these companies have received mainstream media coverage. Online consumer reviews are mostly favourable with complaints centered more on minor style issues rather than major problems.
On a suit there is no conspicuous branding. The lack of visible logos or labels can help decrease part of the brand experience and allow for easier entry from new companies. Even industry insiders say to focus on cut and cloth, not brand.
Price is the most important part of the value proposition. You do not get a big brand, but, those who would have purchased a $1000+ suit would already be spending in the range it costs to have a tailored suit made locally. All the tailoring is done cheaply in Hong Kong and China. As stated at the outset, their value proposition is quite simple; good selection at affordable prices.

How the recession and global warming boost promotions

2010-03-14T11:44:00.000-07:00

Shoppers are increasingly price sensitive and demanding regarding retailers’ offers. Prices, discounts, coupons – everything is carefully studied before a shopping trip. The recession affected the shoppers’ purchasing power and consequently their shopping patterns. They want more customized offers and more convenient ones.

Meanwhile, their concern about the environmental impact of their consumption behavior grew. This trend appears to settle and Wal-Mart took the lead of the industry when promising last month it would lower greenhouse gas emissions by 2015. It would include reducing transportation emissions and waste for fresh foods. Such a commitment already encouraged its competitors to follow. Indeed, when Wal-Mart decided to rethink its supply chain organization to make it greener, UK hypermarket retailers decided to directly tackle the consumer behaviour issue. It sounds logical: Wal Mart has an Every Day Low Prices – EDLP - policy and focuses on efficiencies even in the conception of its green strategy. Hypermarkets are different; they rely more on trade deals to generate traffic in their stores and, as a result, created green sales promotion tools.

Recently, hypermarkets customers have been demanding for more immediate and meaningful discounts instead of points or product offers. One of the most successful sales promotion tools used by supermarkets to counter EDLP is the Buy-One-Get-One-Free – BOGOF. They always loved to use those manufacturer-funded "multi-buy" promotions. If they can promise manufacturers that they will sell 20 % more during the operation, the manufacturer can be convinced to provide the "get-one-free" element of the offer for free. In return, the food company gains market share and its factories are kept busy. It seems to be a win-win situation, as supermarkets get free produce and win over customers. In the UK, it has proven very successful as more than 80 % of all promotional activity within supermarkets is a BOGOF or a three-for-two. The only drawback may rely in the fact that it backfires on brand equity as customers gradually lose sight of a reference price.

A recent study by the Cabinet Office which showed that UK households bin 1/3 of all food they buy - worth £ 420 a year and amounting to 4 million tons a year - highlighted the negative action of supermarkets like TESCO, Asda or Sainsbury’s.

In recession and environmental concern times, their promotional campaigns were accused of encouraging waste. This bad publicity had a surprising effect: it encouraged innovation.

Thus, TESCO created a new promotion: the BOGOL, aka Buy One Get One Free Later.

It allows shoppers who bought participating items to claim their free item the following week, using a voucher they received at the cashier. This campaign was so successful – sales and image-wise – for TESCO that Sainsbury’s decided to follow with a “buy now free next time” campaign on selected items. Nevertheless, those offers are limited to make good business sense: customers can’t receive more than four “free next time” coupons in a single transaction.

Those operations seem incredibly positive at all levels; supermarket chains improved their Price and Convenience categories at once; they offered a consumer-centric solution to avoid waste and allowed customers to not carry large packs around the store and back home; they created publicity and traffic simultaneously. It also represents a new step towards customization; it suggested an adapted promotional campaign to promote a healthier and more environmental-friendly consumption behavior, which perfectly fits the consumer’s state of mind. Fresh products might now have an adequate promotion tool: consumers might buy them when they really need it.

A flexible, sustainable and customized sales promotion tool has been created.

COSTCO...THE PROOF IS IN THE PUDDING!

2010-03-07T19:32:00.000-08:00

The Costco warehouse selection is vast and climatic: from food, household products, auto products, electronics to furniture, it has always created that element of ‘finding the treasure you have been looking for at a great price and good quality too’. Costco corporate buyers have consistently provided a great selection with limited supply keeping demand and repeat business sky-scraping as shoppers maintain excitement of what new products will be in store next. Furthermore, the special exclusivity you feel when you get a high quality, hot ticket item at an excellent price makes you want to go back for another trip or at least make sure you check out what Costco has when you need that other hot item.

Traditionally, expensive marketing campaigns generate brand awareness with time. Costco generates brand awareness by offering high-quality prices at great prices in popular items with wide appeal. If Costco corporate buyers feel they can offer a better PL product value than what’s offered by current manufacturers- they do so. This allows them to control the quality of the product, drive prices of national brands down, and achieve higher efficiencies in their supply chain. CEO Dick DiCerchio states ‘the working rule is that all Kirkland products must be equal or better than the national brands offering savings to our members.’ Costco’s brand awareness is much like ‘the proof is in the pudding’. Existing products have built trust with members and now Costco can ride the front end of the PL wave as 81% of North America consider PL products extremely good value for money. This is exceptional!

Further brand awareness is marketed to existing members in flyers dependent on the class of card you carry and is also provided now through education in the Costco connection magazine: http://www.costcoconnection.ca/connectioncaeng/20100304#pg30.

For example, this article boasts the savings you get with Kirkland OTC products compared to national brands sold right at Costco! Traditional polo shirts are featured with higher quality fibres, fitted styles at ½ to 1/3 of the price of national brands comparable product. Baby wipes are featured showing exclusive, proprietary, all natural fibre derived from 100% sustainable forests. Now that is something for moms to talk about! Moreover, they appeal to small shop owners for resale of their own product with individual packs and barcodes. They educate their market on how clever designs in products allow more product per pallet which reduces costs, lowers their carbon footprint, and lowers costs for us....with unannounced added benefit of higher profits for Costco! If you cannot get to the Costco store, no problem! Get it online, have it in 2 days!

As the world turns to more customized personal shopping from examples of mi adidas, to the young Gen Y entrepreneurs selling customized chocolate bars right over the internet to programs offered by Loyalty one through data base management, to Costco’s awareness of needs of members and trust in PL products, Costco is well on its way turning good loyal customers into assets. I am personally surprised at how much I spend each time I go, but I still seem to return –each time spending more than anticipated. Way to go Costco in building me a bigger basket time and time again!

http://www.miadidas.com/
http://www.costcoconnection.com/connection/201003#pg25

http://www.costcoconnection.ca/connectioncaeng/20100304#pg30
http://www.costco.ca/

Executive News Report from ACNielsen Global Services, September 2005. “The Power of Private Label An insight into consumer attitudes”

2010-02-12T19:18:00.000-08:00

ING, Getting other to tweet its value

ING DIRECT’s use of social media is both creative and effective. Surrounded by the mediocre attempts of many corporations to broadcast through social media, ING truly breaks through.

In July of 2009, ING started the FairFees website and twitter account. ING differentiates itself from other banks by competing on price. The twitter account actively solicits Canadians to tweet their anger over bank fees.
Obviously ING is the antithesis, as it does not charge any fees. TD Canada Trust, Scotiabank, RBC, and CIBC all have twitter accounts but they all seem to be used more for press releases than anything else. It is difficult to see any of these sights engaging customers to the same extent.

ING is a relative newcomer to Canadian banking and has successfully captured market share from competitors in a short timeframe. Its value proposition and business model are much more targeted than the major Canadian banks.
In selection, ING started out with savings accounts and mortgages, two very basic products. This lack of selection can actually be an advantage in customer acquisition as many clients find financial products confusing. Also, servicing and infrastructure costs are lower due to the simplified processes.
ING does not compete on its convenience. It is only available via remote channels such online or telephone, features already offered by major competitors. In fact, ING is somewhat less convenient as funds are essentially only available via electronic funds transfer to a chequing account at another bank, which can take 2-3 days to process. Neither does ING compete on the customer experience it offers. From my own experiences, telephone banking is completely indifferent. ING’s online experiences have a little more differentiation, as they feel less cluttered and more intuitive than other online platforms.
Back to price. ING offers good rates. The rates are not necessarily the best rate available but they are the finance equivalent of an everyday low price strategy at a discounter. As mentioned before, ING also actively promotes how they have no fees. How do they do it? ING will only open savings accounts for customers who have existing chequing accounts with a Canadian financial institution. This matters because to open a bank account in Canada, a company representative must physically view a client’s identification. ING piggybacks existing brick and mortar institutions. By limiting itself to customers with existing chequing accounts, it can meet identification requirements without investing in the staff and physical presence it would take to perform the checks itself.
This brings us back to the FeeFree twitter page. When I looked at the first page, all of the complaints are for services that ING does not even provide. Complaints overwhelming concern fees for chequing account-type transactions or items such as drafts that ING does not provide.
The FairFees website, created by ING, uses a similar strategy. It hosts this video, starring the ING DIRECT CEO:

Keep in mind while you are watching that ING doesn’t offer the services that most of these fees are charged for.
ING has done a great job at carving a very profitable niche forcing some Canadian banks such as Scotiabank and CIBC to try competing directly by offering high-interest, online only, bank accounts. However, these accounts have a $5 service charge for every "non-online" transaction. Probably just spurring more indignation.
By very carefully selecting the products to compete on, using competitors infrastructure, and by being the most effective harnesser of social media it is likely ING will continue to erode the market share of the big five.

MAC Cosmetics-Artistic, Cutting Edge, Unique

2010-02-12T14:41:00.000-08:00

MAC Cosmetics was founded in Toronto, Canada by Frank Toskan and Frank Angelo in 1984. MAC's products were originally designed specifically for professional make-up artists, but Frank and Frank brought the luxury to consumers worldwide at an affordable price. The success of MAC came from the high quality, vast selection of products along with their vision of make up as an art rather than more focused towards skin care.

Estée Lauder Companies acquired MAC in 1998. One year prior to the acquisition, Frank Angelo, passed away. The challenge then became keeping the small vibrant company’s vision and success and combining it with the knowledge and business strategies of a large company.

MAC is a unique store, thriving solely on private label products. With a sole focus on the fashion industry, MAC is at a high risk if their private label misses the newest trends. Fortunately, MAC has mitigated this risk well as their artists are always responsible for the runway models makeup and thus are able to tell their retail clients the upcoming trends. Hot off the press fashion news! Wow!

When Frank & Frank first opened MAC, the customer perceived a very high RVP. They had cutting edge selection hot off the runway, personalized ‘runway like’ experience not only for the customers, but for the employees as well. They offered a fair price point for the experience of having the luxury of a makeup artist beautifying you while sitting amongst a hand painted floor in a handcrafted chair- allowing you to come out feeling completely satisfied with your experience. Employees of MAC felt upper classed, got paid higher wages, were very loyal. The love for MAC poured out of their persona as the makeup artist beautified the customer. This parallels with businesses such as Henry Singer and Nordstrom’s where they do not compete on price; they deliver superior customer care and experience right down to the finest detail. Furthermore, similar to these companies, MAC employees upheld such pride in the business and their creativity with a reflective compensation scheme allowing them to be amongst the highest paid in the industry.

Since the acquisition, the experience has moved from the ‘runway experience’ to just another cosmetic counter. From this, the experience in the RVP has declined. New stores don’t have traditional hand painted artist tiles, but a classic cosmetic retail outlet look in the retail store architecture. The Artists have now transitioned to cosmetics staff, with training focused on sales with profiling of the ideal customers rather than training focused around creativity for artists.

Their brilliant social media presence provides more fashion iconic envy than the store itself now.

On their website, http://www.maccosmetics.ca/whats_new/wnoverview.tmpl, MAC allows the customer to profile themselves (Brilliant Evolution from Estee Lauder). They do make you feel as though you can go on the website without making yourself feel like you don’t have a place if it is your first time either looking at makeup products or if you simply are returning. The demographic they market to want to see beauty and get the education and fortunately this is something Estee Lauder has maintained very well in social media.

Experience for a customer through the private parties held yearly is still upheld, just no longer over the top. It appears that Estee Lauder being a power retailer, has chosen to excel on selection while maintaining consumer experience, convenience and price at an acceptable level shifting away from models similar to Nordstrom’s and Henry Singer.

External Links

Richard Ivey School of Business, The university of Western Ontario, Case 9B05A016, “Note on The Retail Value Proposition”, Page8,17.

http://www.maccosmetics.ca/templates/looks/looks_landing.tmpl

http://en.wikipedia.org/wiki/Make-up_Art_Cosmetics

Augmented Reality ( AR) and Retail: Get in there!!

2010-02-12T14:03:00.000-08:00

What is Augmented Reality?

One of the newer digital technologies that is creating some noise right now is Augmented Reality, or AR. AR is the technique of overlaying graphics on a real-world image so the graphics enhance and recontextualize the scene. In simple words, AR visually merges the real world with the virtual world. Retailers realize the significance of remaining updated with technology since they have to cater to the ever changing technology savvy customer base.

How does it work?

AR requires an advanced phone or device with a special application. Users point out an image that the AR application uses to determine the scene geometry. Users can view it coming to life on a computer screen by holding it in front of the camera or shooting it with a mobile device.

How can this virtual technology be successful for retail?

We know that online stores are limited when trying to show how their products fit on customers. AR applications will likely focus on AR applications for location-based search, games, lifestyle, education and reference; multimedia and entertainment and social networking. There is also a value created for retailers, as it helps them tackle the product imaging space to see if they can start connecting product images to product data that will be valuable to consumers.

As a retailer

Segmentation: AR will help retailers create better segmentation strategy especially addressing key generation trends, lifestyles and behavior of their customers.

Targeting: This technology can be easily extended to retail outlets for example, Point of Sale at the store. A well defined product line and advertisement can make a huge impact and easily influence the purchase decision of the consumer within no time.

HUGO BOSS uses Augmented Reality

Augmented Reality technology gurus, Total Immersion, have introduced their first store front experience at Hugo Boss, London, UK. Hugo Boss decided to take window shopping to a whole new level. The promotion campaign, “Black Magic” was live for three weeks in December 2009, both inside and outside the store. So this is how it works. Firstly, the AR window display targeted the passerby with an effective strategy to draw in potential customers. When people took the free “Black Magic” cards that were handed out, a sparkly “Season’s Greetings” appeared and a virtual fashion show would begin, allowing the customer to live the experience.

Secondly, after they drew customers into the store, they had an AR screen that allowed customers to play a game of blackjack, by scanning the image on their card. If they were lucky enough to pick a winning card, they won an in-house coupon of £50. It’s amazing to see how this resonates with the Retail Value Proposition of Hugo Boss. An entirely different game with technology, forced people to stop by to experience the technology and of course the motivation to win by stepping into the store. AR also removes the space constraints to retail by offering a wider selection of products. It also created a different strategy to generate repeat business through their in-store Blackjack cash prize. Hugo Boss also aimed at increasing traffic to the store and potential conversion. Furthermore, for someone returning from work, the AR display is relaxing and convenient to find out more about the products and services offered even if they don't want to enter the store at that particular moment.

I believe it will take a while for retailers to adapt this new technology until most the smartphones or other devices are capable to support the AR technology.

Source:

http://www.shopperculture.com/shopper_culture/2009/10/augmented-reality-ar-at-retail.html

http://nishithsblog.wordpress.com/2009/12/29/how-augmented-reality-can-be-used-in-retail-marketing/
http://blog.taragana.com/pr/hugo-boss-wows-with-augmented-reality-shopping-experience-10921/

http://www.doctor-retail.co.uk/hugo-boss-uses-augmented-reality-in-window-display/

“Keyshopping”, or How to counter e-shopping

2010-02-07T10:44:00.001-08:00

Today French retailers are struggling their way out of the recession in their home market; Carrefour, though successful in developing countries, saw its sales decrease by 8% in the third quarter of 2009 and Groupe Casino sales fell by 9%. A decreasing purchasing power in France seem to have impacted the supercentres format in particular and many retailers are considering downsizing their stores to improve space productivity.

Nevertheless, in the retailing landscape stands an exception: Auchan. It decided to go the opposite direction and increased the size of its flagship stores in the suburbs of Paris. And it works! But its success is not only related to the stores’ size. Auchan applies the “3-in-1 rule” in its supercenters, ie an Every-Day-Low-Prices offer, a large assortment, premium brands and private labels so that the customer covers 90% of its purchases in the same location. Thus, Auchan maximizes 3 out of 4 categories of its retail Value Proposition: Selection, Price and Convenience. Recently, the retailer decided to offer an outstanding customer experience on top of it through innovation. Its Velizy store – in the suburbs of Paris - is its flagship store for this new 4-in-1 concept thanks to technology (automatic cashiers) and a new concept: Keyshopping. (view of Auchan Velizy and Welcome Keyshopping screen)

Keyshopping is a service allowing customers to prepare their grocery shopping online to turn the grocery shopping experience into a smooth and valuable transaction. If the innovation works well, it will be set up gradually in other Auchan stores. The process is very simple: Let’s say you want to buy the basic basket for your French breakfast. You want some milk, orange juice, croissants, baguette, jam and fresh butter.

You are first faced with a screen where you choose the categories of those items, as the following picture shows.

On the right, your groceries list gets automatically written up. You can then click on “refine” (“affiner”) to choose a given brand, and be able to see the prices offered by your store. You also have the opportunity to skim through the promotions catalogue and to see the details of every item. Once you have selected the items on your list, Keyshopping computes the total for you.

And gives you a map of the store to make your trip the most efficient possible.

You can print your itinerary in order to get to your car the fastest way possible, or you can print it in the store at a computer terminal.

The main advantage of Keyshopping is that it reaches a new level in customer service, and considerably improves the shopper’s experience. It allows consumers to spend more time in the desired areas of the store and shows a transparency approach from the retailer which improves its public image. On the other hand, customers may go through the store too quickly and the whole strategy of retailers consisting in encouraging impulse purchases may fall apart.

This pilot test has achieved significant results, but its success may be temporary. Its strategic location may hide the flaws of this new concept; indeed, it is one of Auchan’s largest stores in the Parisian area, and its customers characteristics are very specific. They are suburban workers who do not usually appreciate the shopping experience and have an increasing tendency to shop online. The concept may not be applicable in other parts of France with different psychographics and a dominant taste for the traditional weekly shopping experience.

Nevertheless, one objective of this new strategy has certainly be reached: free publicity.

External Links:

http://keyneosoft01.dedie.ate.info/auchan/index.jsf

http://www.challenges.fr/magazine/1/0195-028262/auchan_se_nourrit_d_hypers_toujours_plus_grands.html

http://www.01net.com/editorial/400580/auchan-calcule-litineraire-ideal-pour-faire-ses-courses-en-magasin/

Proctor and Gamble to Open Online Store

2010-01-31T21:38:00.000-08:00

Proctor and Gamble (P&G), the world’s largest consumer goods manufacturer, announced recently that it will launch an online store in America beginning in the spring. P&G offers consumer staples; with 24 of the brands they own each bringing in retail sales of over $1 billion each year (their brands include Tide, Crest, Ivory, Gillette, and Braun). While quick to point out that they are not attempting to bypass traditional retailers like Wal-Mart, Target, and the major supermarket chains, the reaction from the major retailers can’t be positive. Despite stating that the online store will be a testing lab to learn about customers and e-commerce innovations, P&G could one day try and by-pass their current retail channels.

Private Labels

The growth of private labels is a large concern for brand name manufacturers. Retailers control the shelf-space within their store. While consumer demand, active category management and category advisors may take some of the control away from the retailers, they ultimately control what is placed in their stores. Private labels provide retails with much higher margins than brand name goods – even though they sell for less than brand name products, private label goods are much cheaper for retailers to source directly. Private label sales account for 16% of sales in North America and are growing at roughly 5% per year while brand name goods are only growing at 2% per year (Source: ACNeilson Report 2005: The power of private labels: A review of growth trends around the world). With consumers looking for a bargain and retailers looking to boost margins, brand name manufacturers are losing market share on both fronts. Selling direct to consumers would offer P&G a chance to boost its market share and hopefully boost its margins as well.

Challenges

Online grocery shopping has been tried many times before. Some companies have been successful, (Tesco, Peapod), but there are a number of well-known failures (Webvan, Publix Direct). The big challenges in entering the online market include distribution to the end consumer and convincing consumers to change their traditional shopping behaviour and purchase staples online. On the distribution front, P&G has partnered with PFSweb, which is an ecommerce outsourcing company. Convincing consumers to move their shopping online could be much more difficult. P&G will likely draw considerable anger from its existing retail channels if it tries to heavily promote its online store or significantly undercut its retail prices through the online store.

While P&G is currently saying the right things about its venture into ecommerce, it’s hard to view this as anything other than a trial run to eventually compete head to head with bricks and mortar retailers. If the cost of delivery and distribution can meet or exceed current margins and the online store reaches critical mass it likely won’t be long before P&G is competing against traditional retailers. The online store could offer a better Retail Value Proposition than traditional retailers (at a minimum better price and greater convenience).

External Links

Forbes: P&G to Peddle Products Online

The Microsoft Store

2010-01-31T20:30:00.000-08:00

In October 2009, Microsoft took a page from the Apple playbook and opened its first two retail stores in Scottsdale, AZ and Mission Viejo, CA. While it’s not uncommon for manufacturers to open their own one-off showcase stores (M&M’s World in Orlando for one) these stores are usually located in cities with heavy tourist traffic (New York, Las Vegas, Orlando). With their choice of locations, Microsoft is likely viewing these as test stores to see if the concept would work nationally, or to adapt the concept on a smaller level into major electronic retailers such as Best Buy.

Store Concept

Like Apple Stores, the Microsoft stores are bright light, modern stores, with lots of individual stations to try out laptops, test the Zune music player, play XBOX 360, browse through software, and purchase accessories. The stores also feature a large help desk (the “answer desk” to Apple’s “genius bar”) to assist customers. Unlike Apple however, Microsoft is not the main manufacturer of the computers for sale. Their main offerings (and largest source of company revenues) are the operating system and software to make the desktops, laptops, and phones run and perform.

The Retail Value Proposition

Selection:
The stores feature all of the main Microsoft products and software. Also available are computers from major manufacturers who run the Windows operating system. However, there is very little at the stores that wouldn’t be available at major electronics retailer such as Best Buy.

Convenience:
With two stores to date, and Microsoft products sold in dozens of other retailers, convenience is not a major factor in the Microsoft stores.

Price:
The Microsoft stores are not discount stores. Items sell for full manufacturer suggested retail price and there are not significant sales events.

Experience:
Through their new stores, the main value Microsoft is offering consumers is the store experience. Showcasing all of the different products that Microsoft has and allowing customers to experience them in person helps to improve the image of Microsoft. With Apple being seen as the cool brand, the stores provide Microsoft with a better way to show consumers that they can offer the same quality and innovation that Apple does.

Category Management

Microsoft relies heavily on retailers and PC manufacturers to get its OS and software to consumers. At first glance, you would imagine retailers opposing Microsoft’s initial foray into retail stores. However, a recent study by Bell, Wang, and Padmanabhan shows that independent retailers are able to charge a higher price for manufacturer’s goods with a company store in the vicinity. The same study also shows that independent retailers can focus more money on marketing as they don’t have to worry as much about consumer’s information gathering at one store and then price shopping to find the cheapest offering in the area.

It will be interesting to see how Microsoft’s journey into a retail store unfolds and if they will be expanding any time in the near future.

External Links

CNET: Inside the Apple, er, Microsoft Store
Microsoft News Center: New Retail Stores Connect Consumers With the Best of Microsoft

Shopping experience in WEM

2010-01-26T18:37:00.000-08:00

Judged by our experience that after Christmas is the best season for shopping in Edmonton, my wife and I started a half day journey in West Edmonton Mall last week. Our target was women apparel in this big commercial area. We know retailers are taking the momentum in this season to generate revenue and at same time to get rid of older fashion clothes and prepare for next year. We are pretty sure we can identify the value of our targeted product by our age.

The value concept may be some disparity between my wife and me. My wife looks at fashion and price carefully and she also pursue perfect particular when make selection and would spend extra long time on this. While, I always want to head up to the category area where I can find what I want, so my value concept includes time investment and effort on exploration, or convenient.

We entered into Laura first. This is a specialty store for middle-high end women clothing and located in second floor and immediate close to the elevator, the shine light and wide glass window allows walker takes snapshot when passing by, models in the window clearly give me a concept that what kind of product and at what pricing level they are selling. I like it by my first impression.

70% discount labels were placed anywhere in this store in this particular season and gave me vision impact. Matching with the quality of the products, this 70% was just good because lower wasn’t enough to attract and higher would arise other suspicion. By my understanding, the discount rate in this season has even more meaning than the actual price because majority products are Laura-Brand and no same product from other store is for price comparison. What can be compared is just nominal discount.

One Asian-looking staff quickly approached for help. She is our complexion and warmly inquiry for needs. I noticed there are relative more staffs working in this medium size store and are diversified so the distance with particular customers are shortened quickly. This warm atmosphere reflects store’s mission on excellent customer service. My wife really like the pricing and customer service and really want to buy pants but unfortunately the inventory didn’t include the right size and color.

We left with disappointing on selection at Laura one hour later. We then decided to go to The Bay, a department store with over century history whose mission is declared for customer value. Immediately I got two kinds of opposite feelings when enter the store, one was space pressure from vertical ceiling because the horizontal is so wide, another was disharmonical fewer customers. Without clear signal for category, We had to march to explore and energy gradually diffused.

The quality of the product is good enough to match the pricing level and 30% discount is good enough considering the pricing generally lower than Laura’. However, the outstanding is about the selection, there are so many different products and so deep range regarding the size and color. My wife was happy with the selection but I had to accompany the long journey. At the time, I really hoped there are some benches I can seat to await my wife’s shopping. Unfortunately, there are not.

The biggest dissatisfication is about the layout format of the store. How convenient the store will offer to customer if categories are setup clearly for example by region and by different color paint on wall? I really happy with the deep selection but really worry for The Bay regarding its cost on surfacing. Is it possible to better manage the category or setup store-in-store and lease the space to other outside retailers? Regardless changes required, The Bay needs to improve customer traffic and format by creating more convenient. Surprisingly, my wife found what she wanted and we paid and left two hours later.

As conclusion, retail for garment is really seasonal sensitive and tricky. Price isn’t the sole element that can make sales while consumer behavior may dominate the result. There are lots of things can positively contribute to sales but one point of imperfection will lose sales. Personal thinking Laura does much better than The Bay generally. However, just one little bit weakness on inventory lost the opportunity for sales. Meanwhile, poor operation of The Bay can get some sales for certain customer group. What will happen if The Bay changes its operation by improving customer experience particular on service, reshaping the format and better category management, and Laura improves on inventory? Maybe other issues will come up with individually for them later but certainly both of them will increase the sales and go to higher level of competition and customers can benefit from their upgrading. (By Hemin)

Welcome to Retail Marketing Management 2010

2010-01-04T12:38:00.001-08:00

This is the blog for the MBA Retail Marketing Management course at the University of Alberta's School of Business.

This course is designed to provide an intensive introduction to retail marketing management. The course outline details the required materials and the assignments that are integral to this course. Students can now find the outline on the "syllabus" section of the ULearn website.

You might also want to check out some of the post's from last year's course blog (see the links on the right).

Happy New Year!

Kyle

Class Blog is closed Until Jan 2010

2009-04-06T12:17:00.001-07:00

Thanks to everyone for the interesting posts to the class blog for 2009.

The blog is now officially "on vacation" until January 2010, when my MBA section of Retail Marketing Management kicks off again at theUniversity of Alberta's Business Schoool.

Trying to innovate in Retail

2009-04-01T14:57:00.000-07:00

The only constant variable in business world is change, that’s why many different industries and sectors are trying to find innovative ideas that can help them to be more competitive in this tough economic times .

Talking about in particular of the retail industry in the last years have been developed a lot of new concepts , projects and ideas in an attempt to increase profitability , efficiency , brand awareness and share market through the basic concept of better understanding the costumers needs. In this blog I will describe two very innovative ideas that are trying to meet consumer need´s and improve consumer experience.

The first project was developed for a worldwide company named IDEO . This company is a consulting group for product innovation and design. In 1999 they developed a new shopping cart for ABC in order to show how is that its innovation process works, they came up with a new shopping trolley. Basically what they did was to design an open frame with six standard hand baskets that would nest inside in two layers. The shopping experience change because people can use the cart to carry all its groceries however if they want to move quickly trough the shelves costumer don’t need to take all the cart with them , they just need to take a hand basket and once that they finish to choose products they can set back the hanbasket in the cart. At checkout, costumer can pack the groceries in plastic bags that neatly hook within the frame without using the hand baskets. I have to mention that this shopping cart includes new features like an spot for a cup of coffee and more safety for child seat. The cost to produce this new invention is exactly the same cost compared with the current shopping carts. This product is still at the prototype stage because unfortunately for IDEO this product could not be commercialized among retailers. Probably this projects has not been successful because even when includes new features and new design maybe the costumers don’t need these features , and in the other hand IDEO has to prove that this new shopping experience based in this new cart will increase the sales and the value for the costumers in the retail segment otherwise would be very difficult for the retailers to invest in this project.

The second project that I found very innovative is a restaurant named “The Bau House Café” located in Seoul, Korea. This project was developed for a man that loves pets , so basically what makes different these restaurant is that you will find dogs and cats seating next to you, because in these please you are not only allowed to bring your pet with you but also your pet can seat in the same table and you can order food for you and your pet. Right now is a very successful restaurant because not only pet owners come to this place but also many kids and young people visit these please attracted for the funny environment. I think that this concept is successful in this country because maybe there is not enough sanitary or health regulations, because if somebody try to copy this concept in a first world country would be very difficult to get the permit to operate. However in Korea this restaurant found a costumer need and developed these new concept with a very innovative idea that attracts new costumers.

In conclusion I can say that even when it seems like everything has been said or has been created in the retail world these two little example show us that always we can find a room to innovate.

--- Posted by Kyle on behalf of G.H. ---

Sources:

http://www.ideo.com/work/item/shopping-cart-concept/

http://www.npr.org/templates/story/story.php?storyId=4800612

http://domattica.wordpress.com/2007/05/26/bau-house-cafe/

http://blog.futurelab.net/2007/08/ideo_the_shopping_cart_and_the.html

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

http://www.mapsofworld.com/mexico/population-in-mexico.html

Return on Consumer Engagement

2009-03-20T17:01:00.001-07:00

How important will digital interactivity with the consumer be in 2009? I am guessing it will be more significant post 2009 which will be known as the year some of the most important developments emerged in consumer technology and interactive browsers for use in retail formats. But do retailers always need to spend millions on expensive CRM technology when there are cheaper alternatives right under their nose?

There was a time when web presence, usually through a website was sufficient for the retailer to engage in cross channel communication. However, today the clear winner is the retail entity that is able to share dialogue with the consumer, online through a multitude of tools like blogs, social networks like Facebook, Orkut etc. The bottom line depends on how the retailer chooses to portray itself. For example, Louis Vuitton is a luxury brand that has long wanted to penetrate the younger market. Contrary to popular belief that Facebook might be too cheap a place to feature itself, Louis Vuitton struck a deal with Facebook and now fashion savvy Facebookers are able to buy and send interactive Louis Vuitton gifts to each other, worth anywhere between $40-$100. The ploy has worked well, a lot of young wannabe Louis Vuitton buyers loved being able to buy an online gift, which was nothing, more than a picture but a million times cheaper than the original product. It simply didn’t matter that they could not see or touch as long as they felt they belonged to a group of Louis Vuitton buyers. Others who followed in line were Ferrari and Harry Winston.

The use of social media by retailers is not limited to creating an artificial experience or point of engagement for the consumers. Rather, it has become a means to gain consumer trust by creating a platform that asks for consumer help, like how Sephora asks Facebookers to vote on products they should stock or remove and gives the opportunity for social media users to become product testers, further forging a bond. Many retailers are looking towards conversations in social media to help understand what they could improve. I would call it, the cheapest possible CRM tool ever which if used well, could substitute return on dollar investment with “Return on Engagement” which is practically for free! What is the point of investing in interactive mirrors in stores, RFID enabled trolleys etc, when consumers can easily voice their bad opinions about their experience on platforms the retailers aren’t bothered to control? Instead, it makes sense to use social media to find out what core consumers like or want in terms of in-store experience. Mostly, this can be far cheaper and less bugging for consumers compared to stopping them in store for surveys or telephonic/mail interviews.

What else could social media help with? In this day and age, retailers cannot only be concerned with what appears about them in print and popular media. The speed of information transfer is far more rapid in social media. Consumer blogs, review sites, You tube, face book have recently become power packed platforms hosting outcries, ground breaking news, all of which are well out of reach from editorial command. Consider what happened with the HP smart touch tablet PC. HP spared no expense in publicizing the product as the world’s first. However, in a matter of days, reviews, blogs and other social media tools spread the word that HP did not live up to its promise. This is why smart retailers these days have a online reputation salvage strategy that often extends to digital, broadcast and now “social media” to curb web mutiny.

Some traditional retailers may feel, why go through the hassle of handling what seems to them a bunch of immature media with a short expiry date. Handling the social media landscape can get over whelming but the fact remains, retailers must accept that “More is the new less”.

A Choice to Make for IKEA in China: Lowering Prices or Going Green?

2009-03-20T15:00:00.000-07:00

The Sweden-based Company IKEA had already successfully established itself as a global retailer of well-designed yet affordable home furnishing products (IKEA) before its first entry into China in 1998. But in China, IKEA was first considered as expensive as other western high end brand names because the income levels of Chinese people are simply no match for those of people in the western countries. (A very simple example would be, in the 1990’s you can probably buy a very nice hard wood table from a local retailer in China with CAD $40, which was about ¥280, very likely equal to one week pay for a university graduate. What could you buy with the same amount of money in IKEA in 1990’s?)

IKEA has then been constantly working on lowering its prices for Chinese customers during the last 10 years. The major reason why their products were more expensive 10 years ago was that most of them were produced in Europe and then transported to China, hence the high labor and transportation costs. Now IKEA has successfully moved a large portion of its procurements into China and has lowered its prices by at least 50%, and as a result, it has seen a great increase in its sales revenue.

Despite IKEA’s great success in lowering its prices, and despite the fact that the size of China’s middle class has grown substantially, IKEA is still considered as a luxury brand for many people. For a very long time and till now, the target market segment for IKEA China still remains to be the young professionals who have relatively more dispensable income, tend to spend more on home furnishing products, and to whom the modern style of IKEA products has a stronger appeal. It has been observed that the brand IKEA has become attached to the middle class identity for these young professionals. If IKEA continues to lower its prices, would it lose their market share in the newly-emerged middle-class?

Since 1999, IKEA (IWAY) has been working on becoming more eco friendly, by charging a price for plastic bags, requesting suppliers for green products, and increasing the use of reusable energy in their stores. However, they were facing huge obstacles in China while initiating these green acts.

First of all, their customers seem to be annoyed when they were asked to pay extra for plastic bags and uninterested in the idea of bringing their own shopping bags. Unlike here in Canada, thousands of people who went into IKEA stores in China came by train or bus or other types of public transition (that’s why IKEA have located all of their stores in China close to major public transition systems), which is usually quite crowded). Put this factor into consideration, it becomes understandable why the Chinese IKEA fans are not really fancy of the “no free plastic bag” concept.

Secondly, the majority of suppliers in China simply don’t have the necessary technologies to provide green products that meet IKEA’s standards. If IKEA were to insist on the green standard, they will have to either reduce the number of suppliers they do business with or to assist their current suppliers in adopting the new technologies. Either way, there will inevitably be an increase in costs.

Needless to say that IKEA has faced numerous challenges in China, culturally, politically, and social economically, many of which have been successfully overcome. This time, however, it seems that IKEA really need to think it through, before they move on with their initiative of going green, because it might put their grand goal of lowering prices on hold.

Fashion marketing & luxury brands

2009-03-19T18:51:00.000-07:00

How do the clothes reach the public and the target consumers after they are designed and fabricated? That is where the Fashion Marketing team comes in. Fashion Marketing combines the elements of advertising, design and business administration, as well as a solid understanding of the fashion world, in order to take a new clothing line and get it the attention it needs to be successful. People will always need clothing, so opportunities in fashion retail will always be in demand. You must also take in mind that with the fashion retail business being plenty, prices must be competitive, or you will not draw in the necessary business to keep your franchise afloat.
Who would be more interested in a red A-line skirt with blue embroidery: a new mother or a 15 year-old girl? These are the questions a good Fashion Marketer must be prepared to ask and answer when working with a new clothing line. Fashion Marketers have a good sense of popular culture and on what will be stylish in the future. In a sense, they are the visionaries of the field who not only recognize what will be successful and which consumer group will be the most interested, but know how to market the clothes to these target groups. Across the consumer spectrum as a whole, buyers consider quality characteristics including design, finish, durability, dependability, safety, taste and texture.
Most of Fashion Marketing is behind-the-scenes: keeping abreast of fashion trends and consumer buying habits; putting together advertising campaigns that target specific consumer groups and appeal to their tastes; being mindful of the broader picture of the fashion world and what new style innovations are being introduced into the field. Fashion Marketers are the savvy idea people, the connectors between the designers and their public.
A new global luxury brands survey conducted by The Nielsen Company reveals the world's most coveted luxury brands and finds that Gucci, the flagship brand of French luxury group PPR, is number one. Chanel and Calvin Klein tied for second place in Nielsen’s 48-country online survey that was conducted in November 2007. In fourth place came Louis Vuitton, followed by Giorgio Armani, Christian Dior and Versace.
Calvin Klein, Ralph Lauren and Diesel top rankings for designer brands currently bought by global consumers. These brands are the most accessible and affordable to first-time luxury brand consumers. From perfume to underwear and a basic t-shirt, these brands offer a “designer” cache at a fraction of the price. These brands also understand it’s important to embed the brand values in smaller items to initially attract the consumer because when the consumer has more disposable income, they will upgrade within the same brand to more expensive items.
According to the Nielsen survey, 35% of global consumers said they would buy a mobile phone if it was co-branded with a luxury brand - a sector that fashion giants such as Prada and Armani have already taken advantage of.
One in three global consumers said they would buy a co-branded luxury designer laptop, and one in four said they would buy a “designer” flat screen TV. One in six global consumers even said they would like to buy designer branded MP3’s and kitchen appliances.

Resources:

http://www.insideretailing.com.au/Default.aspx?tabid=53&articleType=ArticleView&articleId=2376&h=Gucci-reigns-as-the-world
http://www.fashion-school-finder.com/What-is-Fashion-Marketing.htm
http://www.scribd.com/doc/10961604/Fashion-Marketing

RFID - Technology

2009-03-18T22:23:00.000-07:00

This is not my main post. However, RFID is also one of my favorite topics to write about. So I thought I will at least share with you two interesting videos that I found about RFID. The first one is a really informative video about RFID technology which is produced by METRO group. I highly recommend this video if you are interested to know more about this technology and its applications.

This video shows one of the applications of RFID:

I hope you enjoy the videos.

Link to more videos:

http://video.google.ca/videosearch?source=ig&hl=en&rlz=1G1GGLQ_ENCA317&q=Future+store&lr=&um=1&ie=UTF-8&ei=UNbBSbfaOInYsAOK7MH9Bg&sa=X&oi=video_result_group&resnum=4&ct=title#

2009-03-18T15:06:00.000-07:00

Shoppers Drug Mart Pricing Strategy

Shoppers Drug Mart (SDM) was founded in 1962. It is still Canada’s only nationwide drugstore. Its closest rival with similar business model, London Drugs, operates mainly in western Canada. London drugs has 69 retail stores located across British Columbia, Alberta, Saskatchewan and Manitoba compared to Shoppers Drug Mart with over 1000 stores across Canada. SDM ranked 8th biggest retailer in 2007 in Canada. In terms of store format I will categorize SDM as a mix of convenience and specialty store. SDM specializes in its core business which is pharmacy services while offering other health and beauty services such as cosmetics and fragrances. It also offers limited lines of food products. In its newest stores it also offers photo services along with cosmetics, over the counter medicines, Carlton cards section and food aisles. “The stores combine "Health, Beauty and Convenience" in their design” (The company). What is SDM value proposition? I would say SDM has more emphasis on convenience. Having prime locations (close to customers), free parking, a number of 24 hour stores, and offering extra services such as in store post offices(at some locations) makes SDM a convenient shopping destination. Additionally, SDM is usually in close proximity to some other big retailers, why? They simply benefit from the high traffic of other retailers. As an example, I visit SDM every time I go for grocery shopping at Safeway located in Whyte Avenue. Newer stores try to improve their position in selection criteria of RVP as well. Experience, is not necessarily a strong factor in SDM value proposition. What about the price? SDM fundamentally uses High/Low pricing strategy in comparison with Everyday Low Pricing (EDLP) and usually charges premium prices on most of its offered products. SDM stores are usually located in high traffic, convenient, prime locations and this is partially the reason for charging premium prices. There are benefits for SDM by following High/Low pricing strategy. First, the company enjoys high margins on sold products. Second, because the prices are usually higher compared to other retailers when there is a sale at the store it creates excitement for consumers as they see the difference between original price and the sale price. From my personal experience, excitement from SDM sale can be even higher than normal sale at other retailers since sale prices at SDM are usually lower than what you can get at superstore or even EDLP stores such as Wal-Mart. Furthermore, SDM offers Shoppers Optimum card as a loyalty card and with every purchase some points will be awarded and can be redeemed for discounts after reaching certain levels. Shoppers Optimum also adds to the enjoyment of shopping at SDM. Third, periodic sales help getting rid of items which do not sell very well normally because they are not popular items or are priced too high. This way SDM can increase its inventory turnover. However, there are issues in using High/Low pricing strategy. Price wars, increased advertising costs, and higher rate of order volatility and therefore stock outs are some of the concerns. Private Label (PL) produces is a strong part of SDM business model. PL’s market share in North America is about 16% and its sale is growing at a rate of 7% (ACNielsen report, 2005). PL’s at SDM are mainly about price and value. “Life” Brand was one of the first Private Labels offered at SDM. Today, other private labels such as “Quo” brand for cosmetics, “get” brand for stationery, and “Nativa” brand is used for organic foods which are exclusively offered in SDM. Overall, SDM is one of the successful retailers in Canadian market.

Reference:

http://en.wikipedia.org/wiki/Shoppers_Drug_Mart
http://www.shoppersdrugmart.ca/english/index.html
http://www.londondrugs.com/Cultures/en-US/default.htm

‘What to Eat?’ ‘MK!’ (2)

2009-03-17T22:16:00.000-07:00

[Recommendation for this blog: Please watch the commercial below before reading this blog. To understand the commercial, you need to know two significant key sentences. The first one is “Kin-A-Rai” which means what to eat. Another one is “Pai-Kin-MK” which means go to eat at MK.]

In the early 2000s, MK aggressively launched a TV commercial, “What to eat” “MK!” The commercial uses Thai-lexicon as a jingle song. It is very well clarified MK’s position to serve everyone such as students, working people, family, mature and health conscious people as shown in the commercial. Also MK communicates that customers not only can have a meal, but also can enjoy, relax, and have a great time at MK with its well-prepared food served by well-trained staff. The commercial became the “talk of the town”. Since then, whenever we thought or we talked about “what to eat,” MK popped up in our minds, naturally.

When I think or talk to someone about “what to eat,” MK still pops in my head. The lexicon reminds me of MK. And MK reminds me of all the experiences I have had at MK. I strongly believe that the same thing happened to many Thai people as well. The commercial was successful because MK reminds customers of pleasant experiences at three stages, before and after going to MK and during their experience at MK.

MK has maintained the food quality and its unique and delicious taste. The fast, nice, and friendly service by polite and well-trained staff is imprinted in their customers’ memory. For example, I had an experience having 9 queues before me at MK, and it took me only 15 minutes to get a table during peak hours because MK used the headset to communicate within the restaurant. Before the use of the headset, I had to wait at least 20 minutes for 3-5 queues ahead of me (but it was worth the wait).

MK offers a variety of menu selections such as seafood set for two or for four people. They also offer MK family set, MK set, Economy set, Mixed set and so forth. This allows customers to customize their own hot-pots, by ordering each assortment in small dishes. For example, customers can order a small dish of salmon, two small dishes of squid, and one MK family set. If customers do not want to have hot-pot, MK also has single dish menu of noodles or rice; Thai or Chinese food or Dim Sum. Moreover, customers can enjoy Thai or Chinese desserts or Thai ice-cream (e.g. coconut and mango). Thus customers can have varied kinds of food and share their happy times together in the same restaurant.

Furthermore, MK Suki is healthy and tasty food that weight-conscious and health-conscious customers can eat more of feeling less guilty. After customers finish the meal, serving staff can print out a calorie calculation report that includes average calories consumed individually for each table from their PDA. Therefore, it is only at MK that customers can have such a wonderful experience enjoying what they eat and sharing a wonderful time with friends or family.

When customers hear “MK,” it reminds them of all the experiences they have had in the restaurants that are memorable and subliminally convinces them to go back. Last year, I went back to Thailand and had MK with a new experience that was impressive! On the hour, all serving staff will exercise in the restaurant. It is a great strategy since staff can exercise and can entertain customers at the same time as shown in the video clip below. I am very excited about what will be the new experience I will have on my next visit.

Up to this point, there is no doubt that MK will be successful in their industry of highly competitive food outlets. MK devotes tremendous efforts to maintaining food quality, exceptional service, and innovation in their operations in order to exceed customer expectations of their experience. The ultimate return is long-term loyalty from customers who realize that they can have the most interesting and pleasurable experiences only at MK, not anywhere else.

Resources:

http://www.mkrestaurant.com/

http://www.youtube.com/watch?v=yd8jj6e_ZhY&feature=related

http://www.youtube.com/watch?v=n8spc4dp_cg&feature=related

‘What to Eat?’ ‘MK!’ (1)

2009-03-17T21:53:00.000-07:00

Dining is considered a hobby for many Thais. It may sound strange for many people that dining can be a hobby. In Thailand, confirmation of this is that there are food outlets everywhere from street vendors to five-star restaurants, from on main roads to alley-ways and from day to night. Because of the large number of food outlets, the competition is tremendously aggressive. However, “MK Restaurant” or “MK Suki” or “MK,” which is one of the largest Thai-owned chain restaurants has been successful even when the economic crisis occurred in Asia during 1990s.

Background & Current situation

MK is a family restaurant that originally was founded in Bangkok in 1962. MK offers hot-pot (Suki) and Thai-Chinese food. Currently, MK restaurants have 293 restaurants in Thailand and 17 restaurants in Japan that are operated under MK Restaurants Co, Ltd. The size of MK restaurants varies depending on locations. Some branches have only 35 tables with limited space; some have more than 100 tables. The company also operates MK delivery; Yayoi restaurants, Japanese restaurants; and, “ณ สยาม,” Thai restaurants.

The recession in Thailand affected the company growth rate in 2008 decreasing from double digits of its growth rate to one digit for the first time in the last 23 years. Interestingly, average spending per person at MK is $7 although the range of purchasing a meal for one person from a street vendor is between CAD$0.70 and $1.4 (minimum wage in Bangkok, the capital city, is approximately $7 or 203 Baht a day). Having said the company has faced the recession, still, its overall revenues in 2008 were approximately $282 million or 8,000 million Baht. The company projected its overall revenues would exceed $355 million or 10,000 million Baht within three years. Eighty per cent of those revenues would be from MK restaurants including upcoming over 20 restaurants in 2009.

Quality Consistency

The most crucial factor in the food business is the most difficult thing to do. That is maintaining consistency in food quality such as taste, freshness and cleanliness of food. Without these consistencies, the company would not be as successful as it is today.

Customers expect to have the same taste as their prior experience. MK has a reputation for its secret recipe, especially its dipping sauce which has unique-herbal-scent and is definitely very tasty. The dipping sauce is a significant representative of MK. It is the best dipping sauce ever since no one else can replace MK sauce for decades.

Yet, adding seasoning in each meal is Thai people’s habit. MK thus offers such seasoning as sugar, chili, lime juice, and crunch garlic to customers to season to their own taste. Usually, customers add 3-6 crunch cloves of garlic, 1-6 pieces of chopped chili, and 1-5 tea spoons of lime in the dipping sauce so that customers can customize their own taste. Because of the amount of seasoning the customers consume, some restaurants charge for seasoning. But MK does not charge for seasoning even when lime prices have skyrocketed by 250%; unlike some restaurants that serve vinegar as a substitute for limejuice to reduce their costs.

Another challenge for MK is to keep the food fresh since the average temperature in Thailand is around 30 degree Celsius. Food spoilage was a significant problem at MK which it had to overcome. MK currently is able to serve not only fresh food on its red “condo” dishes, but also fresh seasoning that the freshness can amazingly increase customers’ appetite.
The quality and the freshness of their food consistently exceed customers’ expectations. Almost 300 restaurants across Thailand are obvious evidence that MK is capable of maintaining quality over time.

Innovation

Due to the high traffic in each restaurant, innovation has become another key implementation for MK. During the last week of any month (pay day), especially Friday night, most restaurants have the highest traffic. MK is supporting each serving staff with a headset to communicate to each other and a Personal Digital Assistant (PDA) to take orders and print bills. MK is the first restaurant in Thailand that has adopted a PDA system to serve customers.

The use of PDAs enhance MK’s serviceability to upscale service. It decreases serving staffs’ travel time between a table and the kitchen reducing customers’ waiting time and increasing customer satisfaction. Additionally, problems of scrawled handwriting no longer exist. Also each serving staff is able to print out bills from individual PDAs immediately when the customers ask for bills. It reduces distance to commute from the table to the cashier as well.

The popularity of MK has never faded. The evidence for that is long-line ups during dinner time and during weekends. The headsets play a significant role in shrinking waiting time for customers. Every branch has staff at the entrance to manage the queue of customers. The staff communicates with serving staff inside the restaurant to fill vacant tables. Longer line ups at MK does not mean longer waiting time compared to other restaurants. The implementation of the head-set and PDA system are some examples of important innovation at MK in order to exceed customer expectations.

This is some background of the strategies of MK. The question is how MK executes its strategies and which level that these strategies can influence consumers. Please continue on the second part.

Resources:

http://www.mkrestaurant.com/
http://www.gotomanager.com/news/details.aspx?id=77518
http://www.youtube.com/watch?v=7jGW2K2zsak&feature=related

Dreaming of Spring...

2009-03-17T18:38:00.000-07:00

Hole’s Greenhouses and Gardens is an Alberta business with a remarkable story. Their founders, Lois and Ted Hole began selling vegetables on the roadside more than 35 years ago. Since that time, they have grown into a 2.5 hectare facility that includes a 1.5 acre trial garden, retail operation and state of the art facilities – including a growing range that is home to approximately five million plants.

As a family business in its second generation, it is interesting to see how the two sons of the founders have moved the business in a direction that is very innovative, while still keeping the spirit and heart of the business very much alive. Lois’ two sons, Jim and Bill, are in the process of moving the business onto a 4.5 hectare piece of land that will not only be the home to Hole’s Greenhouses but also to a number of other groups that share their belief of environmental stewardship. One of their goals in this new venture is to reduce energy demand by 20% - by using the latest environmental controls and energy-saving systems. http://www.unearththepossibilities.com/

I have had the opportunity to hear both Lois and Jim Hole speak on their business, the community and on gardening. While they are very different in their mannerisms, their passion about people and gardening is the same.

The Holes have a retail gardening centre and have written dozens of gardening books. At competing garden centres, their books are used as reference materials – certainly a testament to their credibility in the industry!

In terms of their greenhouses, Holes is a “luxury” gardening centre. It has unmatched selection, quality and customer service. Holes always stands behind the quality of their products and have created a name in the industry that is far-reaching. Holes never apologizes for their prices, they stand behind their products and know that the money spent will reward a gardener many times over.

Their business focus is evident and unwavering. Their product is superior and others in the industry always use them as a bench mark. On their website, it says: “When customers ask why our plants can be more expensive…” “The short answer is, we grow the best quality plants and then determine the price. We never cut corners…” Although it may seem backwards to determine pricing in that manner, it is important to remember that some of their costs are outside of their control, their product is highly perishable and they have many weather/utility-related costs.

Time spent at Holes is very pleasant – the store is well laid-out and has clear product information. It is always clean, carts are always available and products are clearly priced. For anyone who likes to garden, this store is heaven… There are many small things that add up to a great experience – plastic to protect your car, free plants at the check-outs and an information counter with product information and knowledgeable staff.

Hole’s has an effective website and e-commerce business set-up. They have done a great job of using the website as both an informational resource and sales tool - within the limits of their product categories. http://www.holesonline.com/

The Holes look beyond gardening and have a much broader focus – on the community and life itself. This family’s impact on the community is evident. You don’t have to look very far to see its impacts – the Lois Hole Library in Edmonton’s West End, the Lois Hole Hospital for Women at the Royal Alexandra Hospital and many, many other causes. Partners in their new project include University of Alberta School of Industrial Design, the University of Alberta School of Energy and Environment, and the Canadian Institute of Retailing.

I have been lucky enough to work for several companies who manufacture and sell high quality products – and are very committed to giving back to their communities. Personally, I am much more inclined to spend a bit more money on something that really matters to me - and it may be true that my customers near Holes see me a bit more often during gardening season…

« There all is order and beauty, Luxury, Peace and Pleasure »

2009-03-17T12:04:00.000-07:00

When Carla Sozzani opened 10 Corso-Como in Milan in 1990, she invented a new kind of retail, where customers could find everything they need in a single store, without separating departments. In 1997, another concept store opened in Paris: Colette; the success was immediate. In a world where customers are overexpose to brands, these new innovative stores inspired retail chains, which try to make a difference by the experience they are offering to their clients.
So what is a concept store and what is the key of their success? Lesson on 3 steps based on Colette analysis.

Concept stores offer an unique mix of brands and products to their customers. From fashion, to shoes, home accessories, books, CD, cosmetics, food and toys, everything they sell is highly selected. These stores do not follow trends, but they launch them. They provide an unique vision of the world, and took avant-garde’s position to surprise and attract wealthy-streetwear-educated customers. Imagined as a magazine, products are regrouped under “collections”. There is no inventory. Most of the goods sold are offered in limited units, created by well-known brands in exclusivity for the concept store. This latest possesses exclusive rights to sell them. For instance, Colette regularly offers exclusive Adidas as the Adicolor model, those classical Adidas resellers and even Adidas stores are not able to provide. Because of this exclusive selection – limited edition and partnership with luxury brands – products’ price are generally high, reinforcing the promise of exclusivity sold by these concept stores.

The communication strategy of theses kind of retail is also particularly interesting as no advertisement is done to drive traffic. These stores attract customers by words of mouth and reputation. Cited in travel guide as highly innovative and something “worth to visit it”, they attract tourists, which visit them as an attraction.

People go there to see, what will be offer tomorrow. Concept store are often considered as showroom, or a “mini lifestyle emporium” as 10 Corso Como likes to say. Thus their conversion rate is quite hard to evaluate as the border between potential customers and people considering these stores only as a “museum” is thin.

All of these ingredients are major constituent of the experience deliver to customers. Whereas it is usually possible to differentiate the selection from the experience of stores’ retail value proposition; it is not the case here. Their unique products’ selection serves the experience created and expresses the iconoclasm culture of these stores.

Inside, everything is designed to create a different atmosphere by playing with customers’ senses. Colette provides customers a 8,000 square meter store with almost no shelves. Products are exhibit on tables and customers go from one to another. At the first floor, temporary “exhibitions” of clothes emphasize the “gallery” aspect of the place. The music displayed and the perfumes in the atmosphere are those sold in the store. Last hungry customers can buy something to eat in the “water-bar” located downstairs.

This unique experience allows concept stores to keep customers inside for a while and then to assure they will regularly come back. Well-known companies used these examples to create showroom for their brands. Thus the Citroen Store in the Champ Elysée, Paris aims at promoting the brand image but do not directly aims at selling cars. Moreover, it is interesting to see the parallelism between department stores which are declining, probably because they are to big, no enough “personal” and try to fulfill a too wide range of customers; and the emergence of concept stores, which offer a variety of products but all in coherence with the “spirit” of the place, and which, to a certain extend, inspired the creation of new chains as Urban Outfitters…

Sources:
- http://www.10corsocomo.com/#world/
- http://query.nytimes.com/gst/fullpage.html?res=9D01E5DD113CF933A25753C1A9669C8B63&sec=&spon=&pagewanted=1
- http://www.colette.fr/
- http://en.wikipedia.org/wiki/Colette_(boutique)
- http://images.google.com/imgres?imgurl=http://hypebeast.com/image/2006/04/adidas-adicolor-colette-6.jpg&imgrefurl=http://hypebeast.com/2006/04/adidas-adicolor-colette/&usg=__vxKIiviyeLrNQrTGGCys1jo5YQw=&h=398&w=530&sz=53&hl=fr&start=39&um=1&tbnid=lXf4tThVTPQYYM:&tbnh=99&tbnw=132&prev=/images%3Fq%3Dadidas%2B%252B%2Bcolette%26ndsp%3D18%26hl%3Dfr%26client%3Dsafari%26rls%3Dfr-fr%26sa%3DN%26start%3D36%26um%3D1

Does Microsoft Wanna Be an Apple??

2009-03-15T21:22:00.000-07:00

The rivalry between the Mac and PC continues…

Microsoft has recently announced that it plans to open Microsoft branded retail stores to distribute its products. This is not the first time Microsoft will open their own store; they opened a store in 1999 that lasted a short two years before it was closed down. The alleged cause of the store closing was a poor choice of location as well as being in the same mall as a Sony Playstation store. The close proximity of the two video gaming distributors caused Sony to give Microsoft the boot.

Traditionally Microsoft has distributed their products through big box retailers like Best Buy and through online sales. According to Microsoft COO, “we’re working hard to transform the PC and Microsoft buying experience in retail by improving the articulation and demonstration of the Microsoft innovation and value proposition so that it’s clear, simple and straightforward for consumers everywhere”. The buzz about this proposition is that Microsoft will have to create a pretty special in-store experience for this to be different from their current big box distributors.

Major matters of concern for Microsoft are in the overall strategic decisions they have to make. Choosing suitable locations for the stores is essential for this to work. Designing store formats will be equally as important. If they decide to merchandize all of their products, they will have to go with a larger format store; possibly in a substantial size range. Perhaps they will elect to go with a smaller format and tailor the product selection to a specific demographic of consumers who they expect will go to the store to purchase. They may instead simply offer a smaller assortment of SKUs. If their main objective to open their own branded retail stores is to improve articulation of their value proposition so that it is straightforward, I personally think they have to only display a selection of their products so as not to overwhelm customers. They will also need to take into consideration their use of technology inside the store. If they create a low-tech store, it will have an opposite effect on their retail value proposition.

What makes this action so curious is the invariable ‘copy-cat’ picture this paints for the Mac onlookers as well as the fact that Microsoft doesn’t manufacture PCs. The Apple stores are notorious for unique concepts in merchandizing, completely different store layouts, no wrap-and-pack areas (they bring the cash-machine to you), and extremely savvy staff. Will Microsoft have a store filled with boxes of software? For this to work, Microsoft will have to transform retail technology and personal devices distribution as we know it.

Microsoft has already created a concept store. While it looks nice and new and clean, there is nothing transformational about it. Hopefully they will push the standard to a higher level of modernization for the retail industry. They are certainly in an optimal position to do so.

http://www.fastcompany.com/blog/robert-scoble/robert-scobles-innovators-and-geeks-blog/what-microsoft-can-learn-about-retail-ap

http://www.pcworld.com/businesscenter/article/159781/microsoft_retail_stores_a_risky_proposition.html

http://www.engadget.com/2009/01/13/microsoft-builds-pretend-retail-store-wants-to-play-house-later/

http://www.microsoft.com/presspass/press/2009/feb09/02-12CVPRetailStoresPR.mspx

The way you make me feel.......

2009-03-11T13:50:00.000-07:00

It may be the title of an 80's hit by Michael Jackson but I think it's also the wave of the future in brand positioning.

Rob Britton struck a nerve with me. The idea of an airline looking to form an emotional attachment to their consumer would never have been my initial thought on how American Airlines would look to compete. Then it occurred to me that every retailer you see today has begun to shift away from simply marketing a product’s functional benefits and towards how a product makes the consumer feel. Is this the strongest (and smartest) way for brands to be placing themselves in the mind of the consumer? As humans we want to feel a connection so it makes sense that retailers are now tapping into the emotional void inside all of us.

The Evolution of Dove

Here is a company that I feel has mastered the idea of building an emotional connection with the consumer. Dove (under the Unilever portfolio of brands) is well known for several years ago launching the “Evolution of Dove - Campaign for Real Beauty". Not once in any of their media did they specifically market a product, yet the attention and following they built was massive. I still tear up when it comes to the True Colors commercial and I have seen it over 100 times!

The company transformed the portfolio image from merely commodity products and attached a very raw and personal image that every woman in the world can identify with. When I use their products I feel I'm doing my part to better the world, yet the silly part is I’m just buying soap.

Emotional connections and RVP: My emotional affair with Starbucks

I am not afraid to admit that when it comes drinking coffee, Starbucks has become somewhat of an addiction but it’s not the coffee that keeps me coming back. I make a habit of buying my coffee from the same few locations if I can, and have developed relationships with the Baristas. It’s sad to think, but I see my family at Starbucks more than I do my actual family! Everyday on my way to school I’m met with a familiar face who knows my name, a smile and a beverage that is prepared without me having even to order it! Not only am I provided with convenient access to the product at home (there are over 20 in Edmonton alone) but I also have visited Starbucks in 15 different countries. Truly I can get espresso and water almost anywhere these days so what keeps me coming back? Every visit I am provided with both the product and experience I have come to know and expect which makes days that I don’t go to Starbucks hard to get through. The real win for Starbucks is the fact that when considering where I am going to buy my coffee from, I would rather drive out of my way to go to Starbucks and pay a significant premium for their product without consideration. In my mind Starbucks has used an emotional connection and played on how their brand makes me feel to create an RVP for me that is rare, unimitable and something I have yet to feel with any other retailer.

“Sticks and stones may break my bones, but Starbucks will never break up with me.”

Canadian Tire: Got Milk?

2009-03-08T23:31:00.001-07:00

When discussing iconic Canadian retailers, Canadian Tire is arguably at the top of the list. Their ubiquitous presence is so legendary that Canadian Tire has openly promoted in the media that 91% of Canadians were within 15 minutes of a store. As much as having convenient locations is a significant part of their retail value proposition, it is their unique mix of product selection and reasonable pricing that sets them apart from the competition in a sustainable way. Where else can you buy your daughter's bicycle (which would be a Schwinn brand), while getting some house paint mixed, and pick up the latest household gadget all in one store? Their combination of both MasterCraft private label brands and leisure, automotive and seasonal product selection makes Canadian Tire a very difficult competitor to duplicate in the market. So what is next for Canadian Tire? Evidently it is selling milk, bread and cheese. Really.

In a recent Toronto Star article it was reported that Canadian Tire is now experimenting with four stores in southern Ontario that have stretched their product mix to include both fresh foods and packaged groceries. And so far they are reporting surprisingly good results (although the article fails to describe what “good” means.)

I suppose if I suspend my disbelief, this might make some sense to me – people are clearly changing the way they shop and that would include gravitating towards brands they trust and shopping less in general. Buying your groceries and picking up something for the house may well be capitalizing on the rebirth of the convenience store [1]. Canadian Tire has several categories of products that customers will single source already. Adding another product line might enhance their current customer experience and unique selection value. However, the reasoning behind testing groceries in Canadian Tire stores has more to do with understanding the changing landscape of Canadian consumer trends than it does capitalizing in a new product offering. To quote the new CEO of Canadian Tire Stephen Wetmore “I don’t think Loblaw has anything to worry about.” However, he also said that “Canadian Tire can’t afford to be complacent amid a downturn that that has hurt consumer confidence.”

When I evaluate Canadian Tire's retail value proposition, I'm not sure that the experiment is really worth the effort. Canadian Tire can't get into the grocery business in any serious way without changing part of their current sustainable competitive advantage. A foray into groceries would mean a fundamental change in the way consumers think about them including a radical new store layout. I'm not convinced they would change this so soon after rolling out their 20/20 Store Vision in 2004. I also worry that adding “tomatoes” to a selection of “tires” might be too big a stretch for the average Canadian.

The only reason I can see them doing this might be to use their advantage in some of their more remote locations in Yellowknife or Whitehorse. Other competitors such as Northwest Company's "Northern" stores already have a successful mixed bag of snowmobiles, soap and sausages in the North, but at such low margins that it creates a substantive barrier to entry in that market. But if that was the case why not test this idea there then? The grocery segment might be being tested as a loss leader category. Once people are in the store, it can be very tempting to also pick up something for the home, or browse for an upcoming seasonal need. This is the only reason I can see them justifying the experiment.

On the one hand, I applaud the idea of a retailer taking a proactive approach and trying to drill down to understand the psyche of the Canadian shopper. But I wonder if this is more about the gimmick than the grocery sales. Judging from the comments listed from readers on the article, the idea doesn’t seem to resonate.

[1] Murray, K. "Retailing Management: Lecture 1", University of Alberta, January 6th, 2009

From Rob Britton, Guest Lecturer on February 25

2009-02-20T12:48:00.001-08:00

Hello, 686 Students,

I’m looking forward to meeting you and working on the “live case, and excited to be visiting the U of A and Edmonton for the first time. I’ve traveled the length of Canada, from Vancouver Island to Cape Spear, Newfoundland, in every Canadian province, but have never been to Edmonton. You can find out more about me on my teaching and consulting site, www.AirLearn.net.

In class, we’re going to see if we can do anything to create sustainable brand differentiation in a business that the marketplace has long regarded as a commodity. But we don’t have big budgets to do that, and there are some other challenges that will make this a great project.

Listed below are some “facts of life” about our business that are worth thinking about before class.

• The two types of carriers – old ones and new ones – are very different
– Labor rates and productivity
– Customer expectations

• Profit margins are thin – or nonexistent

• High fixed costs (70-80% of total) drive decisions

• It’s hard to match supply and demand
– When demand declines, airlines cannot remove costs quickly enough, or proportional to the decrease
– Low barriers to entry

• Airlines are capital-intensive, labor-intensive, and energy-intensive

• The airline market is competitive, but the markets that supply the business are not
– Labor and airports are monopolies
– Airframes, engines, and others are oligopolies

• Government influence has been and remains enormous
– The legacy of domestic regulation
– Infrastructure on the ground and in the air
– Excessive taxation
– Continued regulation of international flying

See you soon!

The first international supermarket chain in IRAN

2009-02-13T20:07:00.000-08:00

In this post I will try to explain the current retail market environment in Iran and the recent changes that could have fundamental impacts on the traditional retail market in the country.

The traditional retail market in Iran includes many small retailers operating in a variety of sizes, some of them as small as 10 square meters. The main reason for small retail store format popularity is partly related to limitation of available space and the extremely high prices of land in large cities. Most of the households have access to at least one relatively small retailer in a walking distance of their homes. Therefore, the most important RVP (Retail Value Proposition) of these small retailers is convenience.

RVP = SELECTION+EXPERIENCE+CONVENIENCE / PAID PRICE

However, convenience and relatively short travel distance is not the only RVP associated to small retailers. As a result of small size, it is hard for these retailers to compete in selection criteria of RVP. These small convenience stores provide medium variety, narrow breadth and shallow depth assortment. However, it is surprising that these small retailers provide most of the essential daily needs of the consumers by providing favourite and highly demanded products. Customer experience is also a big part of traditional retailers RVP. Being located in close proximity to the consumers, most of the owners know their customers by name or face. Customers are usually warmly greeted by the owner which is part of their strategy in creating loyal customers. Prices are usually matched with the retailers located in the same area since it is easy for customers to compare prices. Charging higher prices for daily needs would result in losing customers to competitors.

In recent years, a greater variety of retail formats have been introduced to the big cities. Farmer’s market, category killers and super stores are among the most common formats. These retailers are usually located in suburban and urban areas where the required land is available and there is a reasonable population around. The capital city, Tehran, with a population of about 8 million, is the biggest consumer market in Iran. There are currently a few local supermarket chains operating in the capital and other major cities. They are mostly government owned and therefore not highly competitive. According to Sarmaye newspaper, a local newspaper in Tehran, these supermarket chains are still far behind the competition comparing to the international standards. The economists believe subsidies from government prevent the supermarket chains of a natural growth path.

Lack of competition is one of the main reasons for slow growth of big-box retail formats in Iran. However, there are signs of fundamental changes under way in policies and scopes of operation. According to latest news, French supermarket chain Carrefour is planning to open its first store in Tehran soon. This is the first international company to enter the Iranian retail market which could have a huge impact on the local retail market. There is the high hope that opening of the first international retailer in the capital city will have positive psychological and economical impacts and will change the traditional retail practices and unsuccessful government economic polices.

This project is a contract between Majid Al Futtaim, Carrefour's representative in the Middle East region and Iranian officials. The company has a contract for renting a land in western region of Tehran for 20 years and will invest about $12.6 million on the project. The construction for the five story building has been started and it is predicted to be finished in 2009. “Majid Al Futtaim plans to operate a total of 30 shopping malls throughout the Middle East by 2015” (Planet Retail, 2008) .

References:

http://en.wikipedia.org/wiki/Tehran
http://www.sarmayeh.net/ShowNews.php?15460
http://www.ameinfo.com/119221.html
http://www.arabianbusiness.com/index.php?option=com_content&view=article&id=10785
http://www.regoverningmarkets.org/en/news/south_asia/carrefour_to_enter_iran_this_year_through_franchise_partner_pakistan_part_of_regional_focus.html

Wal-Mart Mexico: “Six different types of business models”

2009-02-13T17:04:00.000-08:00

The economy of Mexico is the 12 the largest in the world, the population in Mexico is estimated around 109 million in 2008.In the last 15 years many transnational companies started to interest in Mexico as a place to invest. One of these companies is Wal-Mart, the biggest retailer in the world .In 1958 a Mexican company named Aurrera Launched one of the first Grocery Store Chain in México, and for 36 years, was one of the most important retailers in the country..In the 90´s Wal-Mart was interested in entering the Mexican Market and in 1994 Wal-Mart bought “Aurrera ”.
One of the reasons why I choose this topic is because in Mexico, Wal-Mart has a very different business structure in comparison with other countries, and I will explain why.
Wal-Mart Mexico has six different types of business models:
Wal-Mart’s largest type of store model is the Supercenter. This is a superstore, and is a very similar concept compared with the Wal-Mart stores around the world. There are total of 153 stores Mexico with more than 90,000 products, and each store averages 8,697 square meters in size and the Supercenters generates 28% of the total sales of all Wal-Mart stores with annual sales of $7 million USD.
Sam’s Club is a members’ only warehouse shopping club with 91 stores and 4,100 products, with an average of 7,600 square meters per store, and generates 26% of the total sales of all Wal-Mart stores with annual sales for $6 million USD.
VIPs is a chain of restaurants well known by its service and low price. This chain has 367 locations an average of 228 seats per restaurant and generates 3% of corporate revenues with annual sales of $0.7 million USD.
The Superama store model is a format that is very similar to Sobeys (in Canada) and these stores are located in residential zones. The price of products in Superama stores is set slightly above average price found in the market and these higher prices are part of its pricing strategy. Superama has 67 stores with an average of 1,747 square meters of space per store, 25,000 products and generates 3% of corporate annual sales of almost $1 million USD.
Suburbia is a clothing store tailoring to middle class families with 84 stores located strategically in neighbourhoods. Each store is approximately 4,216 square meters in size and generates sales of $1 Million USD.
Bodega Aurrera is a super store that caters to families with low income by providing products with the best prices in this market segment. There are 442 stores country wide with more than 49,000 products, and average of 3,899 square meters per store and generates 33% of Total corporate sales with annual sales of $7.3 million USD.

As you can see in Mexico, Wal-Mart has not only participation in the grocery industry but also in restaurant and cloth industry. But what really surprised me is the fact that in 2008 Wal-Mart launched its own bank named “Banco Wal-Mart”. Basically what Wal-Mart is doing is diversify its services in Mexico.

Sources:

http://en.wikipedia.org/wiki/Economy_of_Mexico
http://www.mapsofworld.com/mexico/population-in-mexico.html
http://www.walmartmexico.com.mx/1formatos.html

Understanding the distracted SHOPAHOLIC

2009-02-13T10:38:00.000-08:00

Ever stood at a store like Guess and fought a really strong urge to buy skinny jeans that you don’t fit in but may fit in like 2 years or so, or maybe never? Or gazed longingly, (or greedily) at a $400 limited edition Swarowski pendant? How about standing in a luxury kitchen appliance store and buying chrome table ware that you will never use but think “oh but it looks awesome and everyone with good taste should own a set!”? Did you quell the voice in your head and give into buying? If you did , then count yourself among a breed of shopaholics, highly revered by retailers. You my friend are the sort who would consider it a crime to ignore the offer “ 5 Victoria Secret body gels for only $25”. In your eyes you are practically saving money . When everyone else heads towards mutual funds as an investment option, you buy vintage Pradas or a trinket or two from Tiffany’s thinking it will double in value over time! And some of it does actually. Anyways, so where am I going with all this talk ? The fact is that die hard , shopaholics are getting diverted today and that is bad news for the retail world, especially the higher end of it. Shopaholics may not be brand loyal but they favour several designers, retail outlets, generally anything that is a huge fad or an absolute must have product – in their language , they call it a Holy Grail product. Anything that is featured on the Vogue editor’s choice section , is an absolute must have.

If any of you have had a chance to read the Shopaholic series by Sophie Kinesella, you will understand the exact psychology of a true shopaholic, in this case of the heroine “ Rebecca Bloomwood”, who itemizes her clothes by the designers she wears and goes through highly emotional pangs of longing for the latest and greatest in clothes, shoes, bags and accessories. If Becky can’t afford a Denny and George scarf that normally retails for around more than 300 GBP, she runs to Accessorize and buys cheaper products to soothe her wounded pride and for a spot of cheer. Becky loves her cuppa from Starbucks because she loves being able to say “Grande Latte” and feels she belongs to a special group of people with IQ’s that allow for understanding the complicated choices at Starbucks.

So what is happening to the Beckys on this planet? They are getting distracted by sophisticated counterfiets that these days resemble their original counterparts to the last minute detail. A fake prada, Gucci, Blahnik at less than 1/4^th of the original price makes it easier to justify the otherwise extravagant purchases. Now fake Gucci doesn’t necessarily have to miss a ‘c’. These days, seasoned shopaholics know exactly where to find the best counterfeits, it could be anywhere from EBAY or a seedy looking backstreet in LA, where a masked guy sells his ware from a car’s boot. The only difference is that the fake Fendi Baguette will have a tiny label on the inside , that says “made in Bangladesh” and not Made in Italy, like the original would. Better yet, shopaholics have the options of renting their favourites , lets just say it’s like a Blockbuster outlet for bags and shoes.Places selling counterfeits do not offer the “heavenly experience” of special lighting, concerned staff, personal shoppers etc, but they are selling faster and doing better than Prada in recessionary times.

The other day, I was at a popular, non designer clothing retailer and liked a plain cotton tank top, the price was $72. My first reaction was does this store take me for an idiot? I went to H&M next and got a similar top for $19! Tada!! The thing is shopaholics are getting smarter. They want the look and the feel that screams designer but costs like shopping at H&M . Its like a shoe that doesn’t fit right anymore, the sooner the high end retailers grasp the change, the better will they fare with this discerning shopaholic crowd. Roberto Cavalli for example, teamed with H&M to release the low end , but extremely stylish Cavalli wear. To the utter disbelief of the H&M store in Toronto,people lined outside since 3 am and all the stock was sold out in 8 hrs and the store recorded a stellar figure in per day sales. That is the reward of understanding what a shopaholic wants , they can be swayed from heading to counterfeits , with the right incentive.

How the department stores in Paris changed their retail value proposition.

2009-02-12T23:38:00.000-08:00

Initially, the strength of the department stores’ retail value proposition was the broad selection they offered. You could find everything you needed, for a middle-to-up price market.

However, over thirty years the profit of department stores decreased dramatically. A number of factors explain this decline. One of the major issues for them is their really expensive business model. There are twice as many employees by square meter in department stores than there are in classic retail stores. Moreover, the maintenance costs of the buildings, often protected for being historical monuments, are huge. Department stores also have significantly higher rents due to their downtown location. In addition, these institutions must now compete with online stores, and the development of low-cost specialized stores located in the periphery of the towns. In order to address this decrease in sales, a number of initiatives were undertaken. The example of the Galeries Lafayette department store will be used to illustrate these initiatives.

With about € 750 millions of sales in 2004, the Galeries Lafayette Paris is one of the biggest department stores in the world. They have an international reputation and worldwide competitors come to see their latest concepts. So what do they offer?

First, they offer a luxury positioning based on a deep understanding of their location.

The Galeries Lafayette in Paris is located on Boulevard Haussmann, a wealthy area of the capital, but also one of the most attractive streets in the city. More than 120 million customers go there every year. This location allows the Galeries Lafayette to become the showcase of Parisien fashion. While catering to fashion sensitive customers counted for approximately 60% of department stores’ sales ten years ago, it represents about 90% today. Store products are chic and thus most of the time expensive. Nowadays, the value proposition is less about the selection than having luxury products symbolized by a high price.

Second, Galeries Lafayette is modern and seeks to provide a unique customer experience. It has its own private labels and its brands are strong. This allows them to differentiate themselves from other department stores, and also allows them to compete within their store with other national fashion brands. Moreover, the Galeries Lafayette developed customized and specialized stores. One example is the creation of the Galeries Lafayette House store. Designed as a “real” house, each floor is dedicated to a specific activity. In the basement you can find everything related to the kitchen, on the 1st floor products for the dinning room, and on the 2nd floor goods for the lounge etc… The store has been designed to give customers the

feeling of being at his/her own home. Another example is when the Galeries Lafayettes decided to target the 15-25 year old segment in 2004. They invested about € 8.6 million to create the “espace VO” – Version Original, which is a specialized section within the main Galeries

Lafayette store. Galeries Lafayette dedicated a sizable new “world” to young people, with a really “underground spirit”, where they could have a cup of coffee while discovering the latest fashion trends.

Third, the Galeries Lafayette excels at staying current with customers’ wishes. Even after they invested massively on certain specialized stores, the Galeries Lafayettes did not hesitate to change and modify their offer to follow customers’ desires. For example, after only four years, the Galeries Lafayettes is going to close the “espace VO” to create a 4,000m2 shoe “world” possessing the latest trends in Paris.

As the Galeries Lafayette example illustrates, department stores in Paris are moving gradually from an emphasis on selection as the key element of their retail value proposition to an emphasis on high price and unique experience. Selection is no longer the most appealing factor for customers.

However, the relative failure of the espace VO illustrates the difficulty for department stores in attracting a new range of customers. Targeting the luxury segment is risky because it limits the percentage of the population able to shop there.

To conclude, the Galeries Lafayette has been able to revitalize itself by changing its retail value proposition. However, we cannot ignore the fact that the store enjoys a strong international renown. Wealthy international tourists count for 40% of store sales, and some estimate that the Galeries Lafayettes attracts five times more tourists than the Eiffel tower…

Sources:
• http://hebdo.nouvelobs.com/hebdo/parution/p2141/articles/a287073-panique_aux_grands_magasins.html
• http://www.challenges.fr/magazine/analyse/

0042.011608/des_grands_magasins_tourns_vers_lavenir.html
• http://www.shedefan.com/article-12678696-6.html
• http://www.dyn-com.com/dyncom96/dynamique/dynamique-2.htm
• http://fr.wikipedia.org/wiki/Galeries_Lafayette

Financial products and marketing

2009-02-12T20:43:00.000-08:00

Hello everybody!

I would like to bring to your attention the world of financial products. I will also discuss the marketing of financial products in the retail sector.

First and foremost, we need to know what a financial product is.
A particular facility that is of a kind through which people commonly make financial investments, manage financial risks or make non‑cash payments is a financial product even if that facility is acquired by a particular person for some other purpose.
Financial products are products like loans, credit cards, savings accounts, fixed deposits, mutual funds and insurance. They help people save and grow their money, safeguard their assets, or meet their financial needs at the time they need it.

Dealing with financial products can be very confusing and stressful, but there are some products that people should absolutely stay away from for the sake of their financial health. Any financial product could be a potential disaster if one does not understand how it works and how it benefits them. The lesson here is that before one lays their money on the line for any financial product, one must research it and read the fine print. If one does not, a product that is potentially beneficial to others could be a nightmare for the same person.

Products fail or fall flat for a variety of reasons:
faulty assumptions or insufficient market research
structural flaws in the product
weaknesses in distribution
insufficient promotional support

Marketing financial products is different from marketing other products in many ways. This is because it is a highly-regulated sector and the basic components of a financial product are basically the same for all players. Marketing of financial products has to be carefully planned and executed in order to avoid mistakes that can be costly and hard to recover from. The target audience of the financial product for a particular product .is an important factor in designing marketing messages. Even within same financial product, they can be called with different names to distinguish branding and end user.

It is necessary to have a sound, carefully planned marketing strategy in order to recruit more customers, generating more revenue. This calls for extensive market research and competitive analysis and knowing how to lure customers by sending out the right message in the advertisements. It is a pity that many people do not understand the importance of marketing of financial products and, therefore, misses many opportunities to develop and expand their client base.

In conclusion, it can be said that financial products are beneficial to customers and the right marketing strategy would only enhance the value of financial products and make sure they get bought by the most suitable consumers for a variety of their needs.

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s763a.htm
http://www.wisebread.com/six-horrible-financial-products-you-should-avoid
http://ezinearticles.com/?Tips-For-Marketing-Financial-Products&id=385563
http://www.coolavenues.com/mbasp/ajay-finance-1.php
http://www.ledermark.com/new_market.htm

Corporate Social Responsibility (CSR) in Retail……Fad, Fashion or Staple?

2009-02-12T20:41:00.000-08:00

Corporate social responsibility is a concept whereby organizations consider the interests of society by taking responsibility for the impact its activities have on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment.[1] The question was asked earlier in the semester if eco-friendly products are here to stay. I would take that question one step further by asking “Is CSR the next hot thing to enter the world of retail, or is it just a fad??”

The retail industry is a fickle one, especially the fashion and apparel industry. Trends come and go like the rise of the tides, but I believe that CSR is a bigger trend than either hypercolor or high-tops and is here to stay. A few reasons why:

1) Customers are becoming more savvy when it comes to CSR practices. They are demanding more of retailers wanting to know where products are sourced and how they are manufactured. With better technology information becomes more accessible and consumers are no longer left in the dark.

2) Retailers that are recognized as being “CSR friendly” are reaping early benefits. Playing to a marketing strategy that very much aligns with a hot topic in corporate circles these firms are getting media coverage, being blogged about and this has helped to strengthen their image in the corporate arena.

Are there down sides to playing the CSR card? With the emergence of broad reaching technology, consumers are better equipped to gather information on virtually any topic they are interested in. What sometimes seems on the surface to be environmentally responsible is often an action that is viewed as “green washing”. It does not take consumers long to learn about sustainable business practices and they will almost certainly question retailers’ claims. In the long run, misrepresentation of corporate social responsibility will do irreparable damage to a retailer.

The Lululemon Athletica example:

This Canadian owned brand has grown by leaps and bounds over the last few years on a platform that they are “a company which creates components for longer, healthier, and more fun lives.” As I understand it this manifesto is implied to extend to all stakeholders in their value chain, not just customers. I’d be interested to ask Chip Wilson “how are the lives of children working in your offshore factories affected” or about “the non-sustainable fabrics Lululemon uses to manufacture clothes so they have a better appearance and fit.” Merely creating a spin-off brand that unites CSR and consumer needs (Oqoqo) while not changing business practices within the rest of the organization contradicts their overall retail value proposition. As a consumer this leaves me feeling skeptical of how ethical their intentions really are.

My thought is that the CSR initiative in retail will continue to evolve. In the future CSR will no longer give brands a competitive advantage, but become an industry benchmark that retailers must meet in order to exist in the marketplace. Firms that aren’t genuine about these sorts of practices however and who try to pass initiatives off on consumers are likely to end up harming their brand as opposed to helping it. Too many consumer brands have tried to position themselves in this space, such as Lululemon and other national chains. They have serious ground to cover in reversing the damage that “green-washing” has done to their image and ultimately the retail value proposition they promise their customers.

Website

www.lululemon.com

www.oqoqo.com

Case

Murray, K., Mark, K. & Sherritt, M. (2006) Oqoqo: Socially Conscious Fashions. Ivey Case, 9B06A023

Articles

http://www.iht.com/articles/2007/11/14/business/seaweed.php

http://www.thestar.com/Business/article/267598

http://thetyee.ca/News/2005/02/17/LuluCritics/

[1] As defined by Wikipedia (www.wikipedia.com)

Paying Less, Getting More!

2009-02-11T21:30:00.000-08:00

Nobody knows when this transition in the global economic crisis will end. The crisis escalates consumer’s price-consciousness to a level that affects most retailers. In January 2009, many retailers have experienced steep decline in sales; for example, Children’s Place’s sales declined by 11 per cent and Costco’s same-store sales dropped by 2 per cent.[1]

Figure 1: Children's Place Retail[2]

Not all retailers suffer from the economic downturn. Some have adverse currents like Loblaw and Wal-Mart. For retailers like them, having price-savvy customers has strengthened their competitiveness and allowed them to survive the crisis because of their lower-priced strategy.

In January 2009, Wal-Mart sales increased 2.1 per cent not only in grocery items, but also in health products, baby care and pet items.[3] In contrast, Estee Lauder, a cosmetic maker, reported profits that fell 30 per cent in the second-quarter ended in December 31, 2008. Children’s Place’s sales also declined. This illustrates the increase of price-conscious consumers and causes a high level of price competition. Consumers do not have to pay more on each item when they can choose to pay less.

For some retailers, lower-prices are the best alternative to compete in the retail “war.” The lower margin encourages retailers to launch their own brands, or private labels. Retailers enjoy more benefits from private brands since they have control and negotiating power over suppliers to produce at the lowest costs. Retailers thus offer lower price than national brand products so that they have competitive advantages over nationally branded products at lower prices and lowest costs. Higher margins will favor retailers only if consumers believe that private brands are substitute for brand products. Therefore, retailers compete on price and quality scales with respect to branded products’.

The recent news about Loblaw supports the notion that private label is feasible and profitable. Loblaw introduced low-cost fashion “Joe Fresh” in 2006. [4] It is ranked as the second-largest clothing label in Canada by unit sales; Children’s wear is ranked as the top brand as well.[5] Loblaw enjoys success of Joe Fresh. It will launch a new Joe Fresh product line in cosmetics by the end of this year. With an outlook that the economic slump will continue through year 2009, low-priced cosmetics will be another alternative treat for female shoppers.

Figure 2: President's Choice Products[6]

Overall, under this economic slump, retailers have to carefully choose their strategy. Low-pricing is not an absolute solution if other factors such as quality and convenience are neglected. Wal-Mart would never be leading in the global scale if customers had bad experiences within stores or if shopping at Wal-Mart was inconvenient. Hence, retailers must take other factors into account as well, and incorporate them into their strategy. The most suitable factor that a retailer focuses on should be the one that reflect its strategy, like Wal-Mart does. “Always Low Prices. Always.”

[1] D'Innocenzio, A. U.S. retailers report dismal January sales. February 5, 2009. http://www.theglobeandmail.com/servlet/story/RTGAM.20090205.wusretailers0205/BNStory/Business/

[2] D'Innocenzio, A. U.S. retailers report dismal January sales. February 5, 2009. http://www.theglobeandmail.com/servlet/story/RTGAM.20090205.wusretailers0205/BNStory/Business/

[3] The Associate Press. Wal-Mart same-store sales surge. February 5, 2009. http://www.theglobeandmail.com/servlet/story/RTGAM.20090205.wwalmart0205/BNStory/Business/

[4] Strauss, M., Fresh idea helps turn Loblaw's fortunes around. February 7, 2009. http://www.theglobeandmail.com/servlet/story/LAC.20090207.RDECISIONMIMRAN07/TPStory/?query=retail

[5] Ibid

[6] http://www.presidentschoice.ca/AboutPC/Story.aspx

Saks Trapped in an Identity Crisis??

2009-02-11T11:55:00.000-08:00

Saks Fifth Avenue is a generally known luxury retailer who operates 53 stores in the US. For the savvy retail-analyst (aka MARK 686 Student), Saks has a reasonable balance between variety, breadth, and depth of their product selection. They offer designer apparel for men and women as well as shoes, accessories, gifts, and cosmetics.

The Saks retail value proposition has been to offer both variety and breadth in selection of apparel from high-end designers around the world to customers in the US. Depending on the store location and size, the depth of their inventory varies; however, Saks is viewed as a luxury department store retailer. As a department store, Saks delivers a high standard of personal service to its customers and works to build lasting relationships with them. Saks conveniently offers internationally recognized designer brands locally and at a price that prohibits “just anyone” from being able to afford to purchase them. The high-prices plus the internationally sourced product helps maintain some exclusivity for the store as well as segregates its regular clientele from the average consumer. It is the apparent exclusive access to these brands that preserves their status in the luxury brand category and in the mind of the consumer.

In the early 1990s, Saks launched a new store called “Off Fifth”. Off Fifth is targeted to the price-conscious designer-brand shopper and is an outlet-store format. The stores are located in malls, outlet malls, and primarily are in suburban areas. Off Fifth offers some of the same luxury brands that are offered at Saks at lower prices and with far less variety, breadth, or depth to the selection. Additionally, the assortment at Off Fifth primarily offers apparel with the “Saks Fifth Avenue” private label.

I question whether the Off Fifth stores positively contribute to the retail brand equity of Saks Fifth Avenue or whether they weaken the Saks retail value proposition. By offering Saks private label clothes at the Off Fifth stores, they reduce the exclusive nature of their brand and ultimately of their retail offering. The Off Fifth stores and formats are inconsistent with the retail value proposition of Saks Fifth Avenue.

Due to the current economic downturn, Saks made a series of decisions that may prove detrimental to the luxury brand apparel industry as a whole. According to a recent article in the Wall Street Journal, “Saks Fifth Avenue slashed prices by 70% on designer clothes before the holiday season even began”. This substantial reduction in prices forced local retailers who carried the same or similar SKUs to also reduce their prices in order to remain competitive. In addition, the 70% discount across all categories completely altered the consumer perception of the brands and the retailer causing consumers to rethink their purchases and Saks’s “unique” offering. Not only did Saks’s decision harm their own profit and reputation, but also it also severely damaged relationships with their suppliers and the equity that had been built by the designers for these luxury items.

As a result of this oversight, Saks will potentially be forced to revise its retail format and selection in order to keep its designers and suppliers happy and its business afloat. Initial industry reactions say that some designers are considering offering different items and smaller selection to department stores from what they offer in their own boutique stores. Another possibility is that suppliers may lease space within the store so that they have more control over stock, staff, and displays. If the suppliers lease and manage space within the stores, the role of the Buyer and control in merchandising will be completely altered and may have significant impact on Saks’s retail value proposition.

http://www.luxuryinstitute.com/doclib/doclib_popup.cgi?file=430-0f377c2be682418dce533625c447a8cc.pdf

http://online.wsj.com/article/SB123413532486761389.html?mod=article-outset-box

www.saksincorported.com

Shopping in Recesssionary Times - An Adjustment for Both Sides?

2009-02-10T19:16:00.000-08:00

In light of the current economy, the retail environment is going through a change that will be constantly evolving and adjusting for years to come.

Consumers are adjusting to respond to not only their personal situations but to their view of the economy overall. They are reducing their spending and are being more mindful of their spending. WSL Marketing, a New York retail consultant has found that, even in those with a household income of $100K+, 67% of consumers are asking themselves “Is this a smart use of my money?” before they buy something. This is a huge change as, in this same group, only one year ago, only 47% of them responded in this same way.

Not only will consumers be spending less money but, they’ll be spending less time in stores, and will take fewer trips to stores, to ensure that they stay within their budget. When they do go into the store, they will be drawn more towards discount and generic items. It will be much more accepted to utilize some degree of cheaper brands – and the growth of these lines will continue to greatly outpace brand lines in certain areas. Consumers still want to buy but need to find a way to adjust and make do with what they’ve got. They’ll balance their brand-name purchases with generics and private labels. Recently, Michelle Obama, touted for her fashion sense, was complimented for integrating J.Crew into her designer outfit. The visibility and acceptance of this fashion statement is quite significant in these economic times.

Cutting back has become the new norm for consumers. With pride, consumers are sharing ways to save money. This can’t be good for retailers and manufacturers. To survive, all those involved will need to be smarter. They’ll need to react quickly to this new environment. Companies are again becoming leaner. This will mean that they have a chance to become faster at making decisions – if they choose to realign their structures to allow for this.

Retailer like Starbucks are in a difficult spot in some geographical areas where every financial “expert” recommends letting go of your $5/day habit of coffee – “you’ll be amazed at how much you’ll save”. (Starbucks recently announced that they’ll slash up to 6000 jobs and close 300 stores this year in the U.S.)

So how will the retailers and manufacturers react?
They need to give the consumer a reason to buy from them – a reason to continue to shop at their store, use their brand. As consumers reduce their spending, retailers and manufacturers will be scrambling for a greater share of the market to maintain their sales. There will be close evaluation of low profit stores and lines and eventual removal of unprofitable skus. As Anthony Stokan of Anthony Russell and Associates is quoted as saying “No one can afford the luxury of propping up a mediocre performer”. Private labels and generics will increase as consumers strive to reduce their basket dollar amount and retailers strive to increase margins/profits and their share of consumer visits.

With the consumer wanting to spend less, we’ll see smaller sizes of products on sales. Consumers will not be spending as much but still want a “deal”. There will be a shift in RVP for some retailers as pricing becomes more important - consumers are demanding that. They still want to shop but need to know they’re getting the best value for their dollar.

Retailers may have less co-op ad dollars to spend in the traditional areas as manufacturers re-align their strategies to cope with the changing consumer habits. There will be less margin for error – buyers’ decisions will be more crucial and relationships between vendors and retailers will be even more important as both parties fight for their share of the shrinking consumer dollar. Retailers will have less on their shelves that doesn’t move – as Wynne Powell said, “Look at all of your products and determine if it pays the rent for the space it takes up”

Judging by the crowds on a Saturday in Costco, you might think that shoppers are still buying just as much but, according to one of Costco’s Merchandising Managers, their winter seasonal merchandise – usually gone by now – isn’t moving – and they have their new seasonal merchandise to put out but no space on the floor. Maybe consumers’ visits are just as high but it would seem that their buying patterns are not the same. The “social” event of shopping remains but the spending has definitely changed.

The face lift of Chinese department stores

2009-02-10T09:21:00.000-08:00

I grew up in a medium size city in southern China, which is now considered one of the most economically developed areas in the country.

When I was a kid (which means in the 1980’s), shopping was never considered as recreational as it is now. If we had to buy anything besides fresh veggies and meat, we would go to the state owned department store. I remember the store had walls all covered with white paint on the top half and green on the bottom half. With just a dozen fluorescent lamps hung from the roof and a few windows in the building, it was hard to examine the merchandise, especially when they were securely locked away in glass shelves. The sales representatives (store business assistant if translated directly) would usually be either chatting enthusiastically or taking an afternoon nap. If you were ever daring to interrupt them with a question, you would be guaranteed to see their eyeballs rolling from one corner to the other. I imagine, at that time, for a lot of people, shopping could be very boring. For a kid of my age, it was almost intimidating.

The department store was state-owned, same as their suppliers. Their contracts were monitored by the government and did not have to worry about the margin. They had no competitions at the time besides a few other state-owned specialty stores (e.g. the Xinhua Book Store) and the retail stores opened directly by the local state-owned manufacturers. The sales people had their “Tie-Fan-Wan” (i.e. rice bowl made of iron) and never had to worried about been laid off. Customer service was just a plain slogan.

Despite the unpleasant experience the customers got, because the quality of the merchandise was high and the prices were fair, they were still going to those stores. Besides, there weren’t many other places to go anyway.

Later in the 1990’s, as the effect of China’s economic reform started to show, the state-owned department stores found themselves caught up in the tsunami of transformation, from a planned economy to a market economy, where competition is fierce and consumer behaviours are hard to predict. Private owned and small businesses had come into play and taken away market shares; foreign big name retailers like Carrefour and Wal-Mart had squeezed themselves in to major cities across the country
(http://www.businessweek.com/magazine/content/05_03/b3916063_mz014.htm &
http://www.chinadaily.com.cn/bizchina/2006-03/21/xin_210303210924476240933.jpg). What used to be “Tie-Fan-Wan” or “Da-Guo-Fan” now is a temporary pay cheque with no guarantee.

During this big shuffle of economic terms, many large department stores in China went out of business (http://info.hktdc.com/alert/cba-e0007e.htm), some survived and a few became unexpectedly successful. The ones that survived and succeeded are the ones that had incorporated great changes to the way they do business. The shopping environment in these stores was no-longer hospital-like plain and cold, lots of new buildings were built and modern designs were often used. Bright colors are especially in favour and the stores are constantly air-conditioned.

Some of the large department stores derived their reputation from their long existence and previous dominance in the market place, promoting their brands as “Lao-Zi-Hao” (i.e. old brand name) and replying on the customers’ habitual association of the brand with high quality of the merchandise. They kept the traditional look of their buildings and at the same time incorporated the modern technology to make the shopping environment more comfortable and attractive.

Some department stores increased their sizes and developed into multi-functional shopping centres. With a supermarket in the basement, a show platform on the main floor, a food court and movie theatres on the top floor, and premium brand kiosks spread out the whole building, they have become centres of entertainment and convenience, and are attracting customers from everywhere across the city.

As the competitions are still going on, the future of these large department stores is uncertain. However, one thing can be expected is that the customers will be seeing smiles instead of rolling eyeballs from the sales representatives when they go shopping in those stores.

Some Pictures:

Inside of a mordern shopping center:
http://image18.webshots.com/18/5/78/42/196857842uQcrUr_fs.jpg
http://raser.ca/wp-content/uploads/2008/10/chingrish.jpg

A department store in Guangzhou:
http://www.panoramio.com/photo/3651671

A department store in Beijing:
http://www.urumqi.gov.cn/15shwjg/tianshanqu/zhaoshangyingzi/edit/UploadFile/20071224164127575.jpg

A department store located in Shanghai with the traditional look:
http://www.7msn.com/blog/attachments/month_0706/o2007615153721.jpg

Paris Spring department store in Shanghai:
http://www.cnr.cn/travel/sh/gwxx/200305190124_50915.jpg

SEARS Tries a New Pickup Line with Customers

2009-02-07T09:45:00.000-08:00

Evolution has its winners and losers, and in the world of retailing the latest news isn't very good for department stores. Purchasing behaviors are changing faster than this format can adapt as consumers drift away from traditional chains in favour of more targeted offerings. The attributes that originally made department stores so attractive – like offering a wide selection of products conveniently located in one store while providing a good shopping experience – seem to be lacking lustre, quality and relevance in the fast-paced retail environment.

Recently, SEARS attempted to change this result by increasing their multi-channel marketing strategy implementing a unique twist on an old concept. As reported in the Wall Street Journal, the retailer plans to create warehouse-like outlets, called MyGofer stores supported by an e-commerce site, where customers can pick up items they bought online without going into shop at brick and mortar stores. Under its Kmart banner, SEARS is converting an 85,000-square-foot department store in Joliet, Illinois and converting 80% of old retailing space to be used for warehousing products. Their strategy is that the extra room allotted for inventory will increase accessibility to selection of product while improving the ease and convenience of shopping. In some ways SEARS is using a similar strategy they used when they first started in 1895 through catalogue sales, where an information source was readily available at shoppers' homes and was supported by bricks and mortar store locations.

Some retailers like Best Buy and Wal-Mart have already seen great success in driving traffic between on-line, catalogue, and in-store marketing to create new synergies. The Financial Times reported that current MyGofer customers had same day service between ordering and being notified it was waiting at the store and that once at the store the pickup experience took less than two minutes.

The concept sounds viable – but I am not quite convinced that this is the silver bullet for them. Middle aged women – who make up a large part of their target market – are purchasing less as they age and they are less likely to be savvy online buyers. Will they order a new lawnmower, dishwasher, linen set or fragrance online to save time in picking up their items? If the products are big – like an appliance – they will still want to get it delivered and tactilely see and touch the product. Buying on line is ultimately a matter of trust and SEARS may have that trust established through catalogue sales, but their current MyGofer site doesn't inspire high quality - it feels more like a warehouse.

At best the drive through concept is a value added to customers who value time and don't require a tactile experience. But SEARS should really be focusing on more important things to drive customers into their stores. Better products, nicer atmosphere and better face to face service will make a bigger impact on their retailing value proposition in the long run. My guess is that the Department Store drive through will be more of a fad than a staple in the future.

My first blog…the fear of blogging

2009-01-29T11:36:00.001-08:00

It's hard to come to grips with how out of touch I am with technology even at a ripe old age of 41. I thought I was cool and that I would continue to be cool for a while yet. It's not like I wear my pants above my waist. I was an early adopter on computer games – I had colecovision, I had Atari, I played pong! When Beta and VHS came along, we hounded our parents to get the VHS…"the beta is a dead technology!" we screamed. I went to a programming computer camp at 14 and we sat around and learned basic and fortran and pascal. When I went to university I saw what the first Mac looked like and we were on top of technology. I've owned 10 different cell phones, spent thousands of dollars with Bell and Telus and AGT and EDTEL….doesn't this all count for something?

So I'm in my MBA class, learning about blogs and I'm slightly scared to death. Why? Irrational fear. I knew about facebook years ago, and didn't have any problems joining that? I've got over 200 friends, which for an older guy means that I'm doing ok. I saw the death of Scrabulous even as I laid my final bingo down…what is my problem?

Well, I'm facing my fear by starting my own personal slice of internet territory. Not because I'm particularly compelled to share. I've got other things to do. But more because if I don't I'm worried that I will miss out completely as technology continues to advance. First it's blogs, then it's i-phones, then it's avatars and then the next thing I know I'm rocking back and forth in a corner wondering why I can't shop for groceries on line. I die of starvation because I can't log in by i-spy wear (this is a new technology I invented in my mind where you can log in by looking – it isn't a real thing…yet).

I don't know how to post. I don't know who will read this. I am not sure how to add to it. I don't even know how to manage my account that well. But I do know that if I can do this (and really it will likely be the easiest thing in the world) I will be at least able to use my wireless Bluetooth thingy for a little while longer.

Wish me luck!

The Story of Stuff

2009-01-16T13:44:00.000-08:00

After technical difficulties in the first class, I forgot to pass on the information for the link to the "Story of Stuff" in the second class. For those of you who are still interested, please check it out at: http://www.storyofstuff.com/

Welcome to MBA Retailing!

2009-01-16T13:42:00.000-08:00

Welcome to the blog for the MBA course in Retail Marketing Management at the University of Alberta. Over the next few months, students will be posting their observations of the world of retailing in Canada and abroad.

Students are asked to post about 500 words on a retail relevant topic. Grades will be based on how relevant the post is to class content, how well concepts from the course are integrated into the post, as well as how effectively students are able to express their own opinions and point of view.

I suspect the blog will be especially active around February 13th (the deadline for the first post) and March 20th (the deadline for the second post).