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MELTDOWN OF CORE RETAIL PARADIGMS. Large urban chains now in a tight spot

3 April 2012 · 22 Comments

Image: artchandising.com

The alarm bell was struck by the BBC, The Guardian and even The New York Times. Many of the retail chains that boast shops in the main commercial avenues have seen their sales drop. This has led companies to close down their points of sale, sell their shares or still more, go bankrupt.
As a consequence, certain retail areas are starting to show troubling symptoms: empty premises, less street charm and loss of visitors. Indeed, American city centres are now undergoing a progressive decline of their social life.

Being big is no longer a key to success in retailing. The location either, even if it has been traditionally defended as a core issue. In fact, many shops from large chains located in main streets have lost sales and profits. Today, traditional paradigms are falling to pieces.

Possible causes
Six factors come forth when investigating the situation:

  1. The uncertainty as regards to the future puts off customers from shopping. This is mainly reflected in home products, such as furniture.
  2. The competition of two sale formats: on one hand, the internet stores (about which a blogger remarks: “the street shops are like web showrooms. You first go window shopping and then buy online”). On the other hand, the large “supermarkets”, those typical superstores that expand their non-food product portfolio at rock bottom prices.
  3. Many commercial streets aren’t practical: it’s difficult to park, the opening hours are unsuitable, etc.
  4. In nearly every street one can find the same chains. And this phenomenon extends to most commercial centres and cities. In France they call this “Londonisation”, whereas the British New Economics Foundation (NEF) states that 41% of the city centres are cloned (“Clone Town”). (1)
  5. Most of the affected chains have something in common: little differentiation and no “soul”. It doesn’t matter if they are discount chains: low prices no longer guarantee success in times of crisis.
  6. There is a new trend arising amongst consumers in several countries, including Spain: a warmer feeling towards local shops and companies. The gigantic and excessive size of some chains seems to overwhelm clients, as it already happened some time ago with Migros in Switzerland.

Although these symptoms have a certain degree of impact on everyone and everywhere, there are cities like New York or shops -both big and small- that are still performing well. It is indeed moving to read how the British praise John Lewis, whose format (department store) is not in itself particularly original. Many customers claim their great shopping experience is due to the fact that the employees are also the company shareholders.

And what can the chains do?
Become inspired. Here are six thoughts that could help in the process:

  1. Right prices for good products are not enough. The shop must provide a positive vibe to customers, not only when they buy or consume, but also throughout their life. Every day more shops and chains target this: Luta for sportswear (luta.co.uk), Dayles Ford organic for organic food (daylesfordorganic.com), the Southafrican brand Earth Child for environmentally-friendly clothing (earthchild.co.za), or the American Giggle for parenthood products (giggle.com).
  2. In times of crisis, the price is important, but values also count. Those brands which are based in authenticity, ethics or empathy, will certainly connect better emotionally or personally with their customers. The germ of such a realization is the new proposal launched by Eroski: “Contigo” (“With you” in English).
  3. The Corporate Visual Identity (CVI) handbooks should be reviewed, as now “modern” is not a synonym for “the comfortable uniformity of all stores”. Modern now means merging in a neighborhood as a vital part of it, without loosing the original DNA of the brand-chain. This balance could be called “IVC 2.0” or “Flexicorporate Visual Identity”, and would certainly require professionals to adapt their sensitivity to the customers of each area, rather than to the predefined headquarters’ “comfort-zone”. This strategy is indeed more complicated, but also more empathic. Some years ago, Esade launched a Flexi-Logo for the Marketing Management department. It consisted of the Esade logo, the department logo and an area where every professor could place his or her own photo. Now more than ever, purism and uniformity are a thing of the past.
  4. The size in retail, although important, is no longer a recipe for success. However, we should differentiate two aspects. Firstly, the size of the shop has to be the one which properly conveys a meaningful purchasing experience. If it is too small, it isn’t playing the right music for people to hum its tune. Secondly, the size of the chain. It is inevitable that companies shall continue growing in order to become competitive, but they should also take steps to avoid being perceived as arrogant. Economies of scale are still vital.
  5. Shops should offer customers several integrated purchasing methods: the store itself, smartphones, webs, etc. (2)
  6. Costs may increase because adapting shops to each area and implementing a multi-sales method are an added-complexity. To avoid this risk, however, it is important to pay attention to the “economy of scope”, by which the company achieves more versatility with less elements. In the car industry, a manufacturer can produce different car models with very few components.

What habitats can contribute to
The commercial habitats could also consider several practical decisions for its shopping streets or areas:

  1. The main ingredient to a shopping experience is the ease with which customers can perform this activity, thus minimizing their efforts. By way of example, the schedules: shops should open when customers are prone to buy what is sold there.
  2. The commercial areas should provide its customers with a clear meaning, which becomes its main axis. They must express it with authenticity, personality, determination and charm. There are great opportunities for locations that implement this premise, such as the Boquería market in Barcelona, the San Miguel market in Madrid or the Borough Market in London, among others.

When the shop is small, the area is relevant. In the Medieval Ages, the offer concentration attracted demand.

References:

  1. www.neweconomics.org—clone-town-britain
  2. See the previous bubble. “Puentes de autopista, de lianas o pasarelas. El sentido del ‘multicanalismo’ en retail” (in English: “Highways, lianas or footbridges. The meaning of  ‘multichannel‘ retailing”), in  Código 84, nr. 159 (December 2011), p. 106-108.

_______________

Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

nº 161
March 2012

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BUSINESS AND HUMANISM: AN AMAZING COCKTAIL. Interpretation of the iFil shop

16 March 2012 · No Comments

Ifil’s strategy. Selling ​​the pleasure of creating something with one’s own hands.

__________

A young woman went on stage on October 27th, 2011. She was dressed for the occasion: in the wool sweater she herself had knitted. On that day, she was awarded a prize that certified her commercial establishment had been voted the most outstanding in the 2011 edition of the “Barcelona Best Shop Award”. Her name? Sílvia López, who together with her associate, Carmen Garcia Mor, runs iFil (i-Thread in English), a business specialised in knitted fashion garments.

At that time, I was part of the jury and can confirm that among us, there was no place for doubt: IFil represented a business model in retail with a very special connotation and sensitiveness. Hence, our absolute unanimity.

There’s something about iFil…

IFil is a shop whose sole purpose is to teach its customers to knit their own textile garments, by offering them everything they need to do so. IFil actually sells the pleasure of creating something with your own hands.

If we only scratch the surface, the shop is no more than a mere example of a specialised enterprise, a kind of business that works well for big cities, but that would certainly go bust if set up in smaller geographic areas.
However, a specialised shop is that which knows a lot about a very definite product category, it is a shop with a trade. This means three things: (1) a narrow assortment (with few categories), (2) but a deep one (it has a remarkable number of items to choose from), and (3) addressed to different customer segments.
This third point doesn’t usually come up in related literature, but it is of vital importance for the sustainability of a specialised business. If the targeted customers aren’t multisegment, the company sales become very limited because they stem from a narrow assortment.

In this case, the segments range from people who never before had touched a knitting needle or who once knew how to but gave up, to those who are enthusiastic practitioners. The challenge for both business partners was to show people how knitting could be easy, fun and fast! Indeed, they have a good command of marketing: they talk about “showing”, which involves much more than just “doing”.

About beginnings

Sílvia and Carmen, the girls with an everlasting smile, share a fondness for design and fashion… and perhaps because of this, they choose to be absolutely unconventional.

Sílvia studied textile design in Paris and learned about the commercial aspect of art. She then worked in a renown online sales company, that offered promotional products, but in the job she missed the possibility to create something with her own hands.
Carmen is an industrial designer, whose grandmother not only taught her how to knit, but also passed on this passion to her.
Both artists met about three years ago and discovered they shared their motivation and values: Why should the road to fashion be paved with impulse consumerism and not with open hearts? On October 23rd 2010, they opened iFil.
Sílvia and Carmen aren’t interested in making their customers discover or recapture the knitting excitement, but rather the excitement of creating their own presents or wearing their creations. This statement contains both humanity and a deep marketing vision (the whole point is not to manufacture a product, yet to enjoy your own production later).

Their business plan paid lots of attention to the details. Take the name, for instance. It includes two elements: “I” (as in me) and “fil” (thread, in Catalan). Moreover, the latter also sounds like “feel” in English, so an English speaker would understand: I-Feel.

The secret to iFil

The founders do not want to be a mere shop of woollen goods, but a non-commercialised area, where customers can learn about knitting in an easy, fun and fast way. The two designers offer examples and ideas for all skill levels, and have prepared very simple and visual instructions for every garment.

The shop is easily read. For starters, one can perceive a central “avenue”, with its sides nearly covered in full by identical and annexed modular pieces of furniture. These structures deserve special attention. Each one of them exhibits a garment as a model, hung from above and placed in the centre, with two possible wool types with which to knit it on either side, as well as the available colour patterns. Underneath, it displays an assortment of balls of yarn, ready for purchase once the customers have made their choice. In a way, the modular structure facilitates the purchase decision: similarly to a waterfall, the customers become excited by a model, enhance their experience through their senses (material textures, colours…), up to the point where they select the items they will buy according to availability. To sum up: customers are taken by the hand from an initial emotion to an easy decision.
Altogether, this exhibition model allows for an interesting psychological sequence: the model-garment guides the clients, helps them reflect on their options, and then finally picture themselves with the future sweater they will make. From the minimisation of risks to the gratifying customisation of results.
One of the key aspects to the business is the pattern that people receive when purchasing the material to knit the garment. In fact, this is the maximum expression of the businesswomen’s will to encourage the hobby. It is indeed a differential way of providing support to customers, inasmuch as it demands an effort in know how and implementation.
Lastly, I would like to highlight another of their business strengths: one main supplier, Katia, a Spanish company that bases its products on good quality and commitment. There are renown retail companies that succeed due to a back office strategy more than to what the public can actually see. That is, iFil suppliers -more than business partners- become accomplices and travel companions.

The subtle touch

The interior design is so simple and clear, it could be considered minimalistic… but it isn’t! Its expression is subtle, intuitive, charming and anthropologically feminine.

Over the lateral modular structures, one can admire strips of cloth surrounding their perimeter. These, joined together, look like a very long scarf with poetic thoughts, revealed in words or by means of evocative pictures. One certainly notices the passion for this hobby-trade in every detail.
The premises don’t only contain products, but also a seemingly endless amount of services for the customers, such as a special day to get advise, or a wide range of activities like the the weekend monographic and the Express Workshop, where customers learn the basics of knitting for free. The artists not only undertake these activities in the shop, but also strive to spread this hobby in city squares.
At the end of the process, all the garments are given a label that reads: “100% made by me”, thus fostering the self esteem of the knitter.
Not only Catalan and Spanish are spoken in the shop, but English too. All three coexist in a friendly atmosphere. The business partners use any of these languages in their warm, empathic and pleasant manner. Their smiles help as much as the techniques they teach.
The result of all these efforts is the founding of a community of knitting lovers, who meet either in the shop or interact through facebook and the blog.
Thanks to the award, Sílvia and Carmen have achieved more visibility. By way of example, the following video.

As a consequence, the main source of new customers is mouth to ear, the most reliable way to make a business grow.

Values above all

The shop is a meeting point for those who value knitting. It is abuzz with social activity, especially in the evenings.

“What you do with your own hands isn’t only special because it empowers you, but also because you feel the magic of handmade work, you live the present moment. By doing so, you relax and are moved just by thinking about the person you are going to give this garment to once it’s finished. If it’s not perfect in the end, no worries: life has its flaws, too!” exclaims Sílvia.

The businesswomen -and artists- believe in creativity, simplicity, imagination, calmness and love. And so they declare it publicly in their shop.

Facing challenges

Not everything is perfect. The avalanche of customers doesn’t leave much time to organise the entry of the shop, the area that establishments usually take most care of. For example, at the entrance there is a blackboard with uncountable activities written in chalk, however not all of them updated as the owners can’t always manage to do so.

On the other hand, the challenge of seasonality is another key point, in that it leads to a larger profitability. The business partners tackle this area by proposing suitable materials for those warmer months, together with very creative activities. But above all, they rely on their website to sell to people living in other coordinates.

In a nutshell

Retailing based in humanity provides an irresistible magnetism for customers, which is craved -but not achieved- by the strictly commercial chains, no matter the amount of advertising they invest in.

When you add a spotless corporate management, which includes the non-visible part of the trade, to a humanistically-focused enterprise, the outcome is an outstanding business model in retail.
_______________

Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

nº 160
February 2012

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HIGHWAY, LIANAS OR PEDESTRIAN BRIDGES. The meaning of “multichannel” retailing

17 January 2012 · No Comments

Customers are increasingly frequently using their telephones to connect to the Internet within shops themselves, to obtain more information. (Image: Aina Albi / Artchandising)

ABSTRACT

More than “multichannel retailing”, think about giving customers more options and making things easier for them, whilst maintaining the brand experience.

__________

Ahead of my talk on innovation at the World Retail Congress (Berlin, September 2011), I had the chance to see the subjects that aroused most interest at the largest world retail industry conference. The topic that attracted most managers was “multichannel retailing”.

The use of the Internet is already a reality. A growing number of individuals make purchases online and therefore companies also to think about accessing the public directly via the Internet besides doing it via physical stores. 37% of Spanish Internet users who shop online prefer to buy from companies that also have physical stores (Nielsen Co).

What is it all about

This sales strategy, usually often referred to as “multichannel retailing” is in reality, a multimethod retail sales strategy.

We are not simply talking about the addition of sales through computers, because – the scope is far wider: catalogues (don’t forget about of them yet!), smartphones (via Internet web or specific applications), telephone sales, TV infomercials, visits from sales representatives, multi-brand stores, single-brand stores, Horeca, multi-brand websites (vente-privee , letsbonus, privalia, etc.), places to pick up orders, vending machines, factory stores (such as the famous shop of the González Byass winery), etc.

In all these methods there are three elements: the money, the information that the customer requires in order to ponder and take his decision (product description, price, etc.), and thirdly the dispatch of the purchased goods, in other words the logistic flow.

What is interesting is that these three flows can either be realized out using the same method or being spread amongst several. In Korea, Tesco recently launched a kind of ‘virtual supermarket’, located on underground station platforms. (Whilst waiting for their train on the platform) , passengers can do some of their shopping by scanning the codes of the items they want to buy using their smartphone and then ordering on the train.

On the other hand, customers are increasing frequently using their telephones within the shops and connecting them to the internet to obtain more information.

Pros and cons

When a customer wants to buy a service or a product, they are far more likely to make the purchase if it is made easier for them; for example more options to buy or to get information.

It is important to remember that increasing convenience is a great way of increasing sales, even in a grim economic climate. For example, in Catalonia in 1995, the sales of theatre tickets rose by 59% after it became possible to buy them by phone.

There is statistical proof that, in general, if customers have more access methods, the turnover, the number of hard customers, the number of purchases per customer and the loyalty of those who make their purchases using the different media increases. (1) (2)

However, the side effects are far from negligible. There may be conflict between the types of business customers, the retail prices may vary, and the organisational complexity may increase.

Boundaries

Imagine you are using your smartphone because you have to provide guidelines for a negotiation process:

-        You look at the company’s website and find interesting information.

-        You use this information to make some calculations.

-        Then you send send an e-mail to your colleague on how to negotiate.

-        Finally, you write a personal note to remind you of the approach.

You have alternately been online and offline. Let me ask you a question: were you aware of when you were online or offline?  I imagine that you simply felt it as using your smartphone.  The perceptual boundaries between online and offline are becoming blurred. Therefore, if customers using those phones do not perceive these changes, what is the point to be either a “company.com” or a “company.brick”?.

The logical thing is simply to be a company which is focused on increasing customer value. For this purpose, we must put the customer-persons in the middle and allow them to access our company, in other words our information, products/services, using a large number of “bridges”: a physical store, website, telephone application, customer service phone line, vending machines, sales representatives who visit customers, etc.

Each bridge has its pros and cons. None of them is good or bad per se, simply suitable or less suitable for a specific type of customer. One customer might use a bridge to look for information, another to make purchases and yet another to pick up the product.  For example, in Spain 29% of Internet users consult the web in order to get support in their purchasing decisions they will take when buying products or services at physical shops (Nielsen Co).

More specifically, a key variable determining the use of these methods is the type of product. For example, when it comes to furniture sales, 50% of customers use the Internet to look at products, then 62% buy their goods in a physical store, whilst 73% have it delivered to their home. (3)

Each bridge has its own specific characteristics

Due to its own individual nature, each “bridge” involves different levels of investment and cost. Normally, the public tends to accept price discrimination (charges or discounts) when using one method in preference to another. For example, if they go and collect themselves what they have bought online, they would not expect to be asked to pay transport costs.

Customers who use different methods to buy products/services (for example, purchasing Coca-Cola customers, can buy in supermarkets, in Horeca, in vending machines), buy more, improve their brand perception and do not mind so much that there are different prices (Professor Chiara Mauri, Coca-Cola research, Italy).

Moreover, the sequence in which new sales methods are launched is important, as the same Professor states in another case. For example, it is more logical to start selling in multi-brand stores and then, when the brand awareness is high, to launch single-brand stores. This sequence improves the brand image and increases its visibility.

Basically, it is a matter of putting the customers in the center and serving them no matter which sales method they choose. The customers will be happier, experiencing the brand more intensely, in a more multifaceted manner and this will increase their brand loyalty. (2)

The method that will become most important for accessing the Internet will be the smartphone, not only because more and more people now use them (smartphone searches increased by 181% in the first trimester of 2011), but because its proximity to the body makes it more convenient.

According to Google, 80% of a person’s purchases are made within a 4-km radius of their home. This fact, combined with the smartphone, is going to give rise to new, innovative, customer-centred retail business models.

In addition to this, when the convenience of a method increases, as in the case of tablets, its efficiency increases (iPad is giving UK retailers a 350% better sales conversion rate than the iPhone, according to the Just Eat chain).

However, physical stores have not become obsolete. They remain the most sensory means of expressing the brand and making people experience it; thus, if they are designed with an appropriate strategy, the result is brilliant to improve and to increase sales.

Management implications

What will become standard is not the mere co-existence of “channels”, but rather the design of an integrated system of communication-sales-logistics methods, like “bridges” between the company and the customers.

These have to be the real center. They have to feel that they are being taken into account and their brand experience (product or chain) is the same, whichever access method they decide to use at any given time.

The engine of this system will be Customer Relationship Management (CRM), because what really matters in order to increase the cash-flow is making the economic long-term value of a customer grow (lifetime customer value). The danger of obsessively focusing on average ticket amount is that the company may neglect important aspects of running a business.
Bibliography

(1)    Morschett Dirk *, Zentes Joachim, Schramm‐Klein Hanna, Cross-Channel Integration – Is it valued by Customers?  Paper at EAERCD Conference, Parma July 2011.

(2)    Corey Yulinsky, McKinsey marketing practice. Multi-channel marketing. Making “bricks and clicks” stick. 2000.

(3)    PwC UK. Pick ‘n’ Mix: Meeting the demands of the new multi-channel shopper, p.1-20. 2010.

_______________

Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

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CHRISTMAS NOUGAT: A SIZZLING SUMMER HIT! The paradox – Source of retail innovation

28 November 2011 · No Comments

Nougat shop in Sort (company photo)

ABSTRACT

Many companies could leave the crisis behind them if only they could tap customer’s imagination, since, scientifically speaking, imagination is more powerful than reality to boost sales.

__________

This Summer in Sort *, a village of 2,000 inhabitants that nestles in the Catalan Pyrenees, a shop specialized in nougats (turró), opened.

Common sense

This business initiative  lacks of common sense, which has a link to the oldest part of our brain, and where all the knowledge gathered by our tribe throughout the years, lies.  That is the way things are because experience has shown it yields the best results.

Who would eat an elaborated sweet -which is not exactly light- in the middle of the hot summer? In fact, statistics show that nougat sales are stubbornly seasonal. And after all, that is what the figures are for: to listen to them.

So who in his sane mind would open a nougat shop in a bad communicated mountain village, and in summer?

The strange beauty of the paradox

According to the New Oxford American Dictionary, a paradox is “a statement or proposition that, despite sound reasoning from acceptable premises, leads to a conclusion that seems senseless, logically unnaceptable or self-contradictory”. In other words, it breaks with common sense. Taking such risks seems foolhardy in the midst of the current financial meltdown.

Xavier Gabriel, owner of Bruixa d’Or [Gold Witch] -a well known Spanish lottery agency- with his entrepreneurial instinct, thought things could be different.

Instead of selling ice cream and beer in Summer -something that is logical, perhaps too logical- , he thought he could boost ticket sales and at the same time extend the good time his customers have when buying lottery, by giving  them a very nice gift-coupon  to try some free nougat at his recently opened nougat shop, located 12 meters down the street.

His clients are not only French (who eat nougats all year round) but mostly Spaniards. Over 20,000 customers visited the shop this summer. When they come in, they can try seven kinds of nougat for free and wash it all down with a flask of sweet wine. Having a great time is guaranteed, and since the product is of great quality, most of the people end up buying something.

The shop is impeccably laid out and decorated, mime and good vibes are felt, and the shelves are always full. The nougats are complemented with Bruixa d’Or’s merchandise, such as witches brooms and little witches.

Three staff have been hired to run the shop (one in July, one more in August and a third one in September). They are well-paid because the shop opens seven days a week, holidays included. Gabriel takes care of his staff: “Things work when the team is smiling, motivated, well-paid and feels the business as its own”.

Before setting up the shop, Gabriel signed a deal with nougat supplier Turrons Vicens, from Agramunt, who supplies all the assortment and does the stocking.  In this sense, Turrons Vicens more than a supplier, is a business partner.

Learning, not recipes

(1) Is vital to grasp the contexts in which clients are found.

In this case, customers arrive in the Summer (not in nougat season), but they get the coupon when buying Christmas lotto (related with nougats season). In customers’ minds, buying lottery tickets, nougats and cava (Catalan “champagne”) have very strong Christmas connotations. Many companies could leave the crisis behind if only they could tap customers’ imagination, since scientifically speaking, imagination is more powerful than reality to boost sales.

(2) Every business model has a part hidden from the customer, such as the  suppliers’ policy. Instead of taking a ‘Dutch Auction’ approach with suppliers (who are forced to cut their profits to the bone), if they are treated as partners, they become allies. For example, what would Mercadona supermarket chain be without its supplier policy?

(3) Take a calculated risk when innovating. It is worth to allocate all the required budget to ensure the pilot shop fully embodies and validates the concept. If the R&D project fails, the amount lost should not threaten the company’s survival. Therefore, there should not exist the fear of failure.

Manager’s development can go through three stages:
1) Learn the rules of the game.
2) Find out how to win the game.
3) Re-invent the game.

Many who reach the second stage, move to a mental retirement.

Xavier Gabriel, is one of the enterprising souls who has reached the third stage. He has just launched his book “Nada es imposible” [Nothing is impossible] (2011, collection Alienta, 168 pp.), which sets out 111 “rules” and approaches that he uses in his entrepreneurial activities. This book is full of paradoxes.

(*): Translator’s note: ‘Sort’ also happens to mean ‘luck’ in Catalan. Add to this the fact that several highly publicised lottery-winning tickets have been sold at the Bruixa d’Or and it becomes clear why the agency draws punters from all over Spain. ‘The Gold Witch’ also uses the Internet to sell.
_______________

Lluis Martinez-Ribes

Source: Código 84, October 2011, pages 212-213 (Burbujas de Oxígeno)

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FROM THE HILL YOU CAN SENSE THE HORIZON. Umair Haque’s ideas

27 September 2011 · 3 Comments

Photo: Lluís Martínez-Ribes

(Fragment of the Berlin wall)

ABSTRACT

A product only really makes a difference if it tangibly improves people’s physical, mental or social well-being, or improves their lives economically in an enduring way.

Umai Haque

__________

How much does a kilo of the usual tea bags variety, sold in (Spanish) supermarkets, cost?

You can probably find it for around €50/k. But if you buy “Just T”, it will cost you around €90/k. Few people have heard of this brand, which is growing thanks to word-of-mouth. If you look at their website (www.lifebrands.de), you will find a company that promotes itself not only by saying that it makes innovative, high-quality products, but also by talking about clearly healthy products, honesty, social responsibility, ethics, mutual benefits, returns not based on a “get-rich-quick” attitude, its refusal to pay for entering a supply chain,to be listed in a retail chain assortment, its responsibility towards its suppliers, protection of the family and the free time of its employees, and so on.

And despite these values, it is still profitable.

Umair Haque

This company, among many others, could be an example of what Umair Haque, an author who is gaining great significance, is advocating both in his book “The New Capitalist Manifesto”, and in his online articles.  Haque, Managing Director of the Havas Media Lab, studied Economics and Neuroscience.

He talks of three phases in the market society: the industrial era, our current  knowledge society, and the wisdom society, for which he is advocating.

The industrial society

In a context where no one thought the planet’s resources were limited, the objective was clear: to obtain the maximum profit. To do so, companies usually tried to create -very efficiently- affordable products for a lot of customers. Innovation was usually focused on product enhancement. Haque calls the ideal type of company for this phase,“executors”: the ones that made things more productively. As a result, technical skills were the most sought after. The yardstick with which to check that things were going well was (and still is?) profit, and on a macroeconomic level, the GDP.

The knowledge society

We are currently living in a different context: the knowledge society. It is no secret that companies that best fit in this playing field are those that know how to learn new things and implement them quickly. One of those things is knowing that it is more useful to be customer-centric than only being obsessed with the product or the store. The companies seek to be the customer’s preferred option, not only because they satisfy him/her, but they also know how to use persuasive means (for example, throughout social shopping: Groupon, Privalia, Letsbonus, etc.). Emerging with great force in companies today, apart from the usual management disciplines, are psychology (Daniel Kahnemann, 2002 Nobel Laureate in Economics, is a psychologist), neuroscience, artificial intelligence, etc.  In this scenario, it is logical to have a network of competent external experts, with a versatile relationship and variable cost in this type of society. Most innovations aim for an enhanced product, or a more comfortable way of selling it, based on the incorporation of new technologies. On the other hand, environmental awareness is present in certain customer segments, although they are not majority.

The wisdom society

This is Haque’s proposal. He advocates for what he calls a “meaningful company”, better adapted to a world context where the collective (both at an environmental and social level) is more important than short-term individual satisfaction.

If you sell a product that cost €8 for €10, there is a €2 profit. But if the damage to the environment or to society is worth more than €2, the company has not created value.

Before being consumers, customers are people. Companies should create products or services that are meaningful for them and truly improve their physical, mental, creative, social and economic well-being in a way that is sustainable for the planet, society and the future.

Rather than spending money on persuading, firms should spend it on listening, and then on being strategically creative –even ground-breaking-, innovating for customers-people, in a world that has a future.

Companies that neglect this deeply humanistic aspect in their management, will end up being ignored by customers-people who are increasingly more aware and inter-connected. Making the company more humane is not an outdated attitude, but rather a more intelligent way of understanding business. The World Economic Forum also asserted this in its 2011 report “The Consumption Dilemma”.

REFERENCES:

Umair Haque (2011): The New Capitalist Manifesto: Building a Disruptively Better Business, Havard Business Press.

World Economic Forum y Deloitte Touche Tohmatsu (2011): “The consumption dilemma. Leverage points for accelerating sustainable growth”
_______________

Lluis Martinez-Ribes

→ 3 CommentsTags: bienestar · cliente-persona · customer-people · innovación · innovation · knowledge society · neurociencia · neuroscience · social shopping · sociedad de la sabiduría · sociedad del conocimiento · sostenibilidad · sustainability · umair haque · wellness · wisdom society

WE ARE (ALMOST) BIONIC. NFC, the new way to pay for goods and services

19 July 2011 · 11 Comments

photo: blog.visa.com

ABSTRACT

NFC is an easy-to-use, intuitive technology because all it requires is a simple gesture with your mobile phone.

It increases customer comfort, because it reduces queuing time and there is no need to carry coins or waste time checking change.

__________

Count the number of plastic cards in your wallet, including credit, debit and the so-called “loyalty” cards. Would you be willing to add another card to your wallet?

Now calculate: How many centimetres away is your mobile phone from your body? Surprised? We are indeed almost bionic.

The telephone has practically become a “natural” extension of our hand, our fingers.

It is not by chance that a mobile phone is reported missing to the police after 4 hours, while a lost passport is reported missing more than a day later.

And what’s more, the phone has none of the problems of space that a wallet does. It is highly likely that with the advent of NFC, Near Field Communication, you will end up replacing it.

What is NFC?

It is an RFID technology that permits two objects in close proximity (usually not more than 4 cm apart) to identify one another and establish communication and data exchange.

One of these objects is typically a mobile phone with an NFC chip. The other may be a device in a store cash register.

How does NFC work?

When the customer goes to pay, if it is a small amount (for example, less that €20) s/he waves the phone near the reader embedded in the cash register and payment is made. If the amount is larger, the customer has to introduce his/her code and choose the credit or debit card with which to make the payment. The system then detects if this person has a “loyalty card” with the retail chain and points are automatically added.

Advantages of NFC

This is a fairly “invisible” technology with no problems adapting to it because it is easy to use and intuitive, needing just a simple gesture. And this is done precisely with the mobile phone, which you always carry with you.

NFC increases customer comfort because it reduces queuing time, and there is no need to carry coins or waste time counting your change.

This is an extremely safe technology because not only does it incorporate encryption to prevent fraud, but you cannot be charged the same amount twice, not even when you swipe the reader twice with your phone.

Why the phone?

My mobile phone is the interface that connects me to my reality, to my world. It is the bridge to my things, to what interests me and what I do. It does not identify me more than a passport, even though I identify myself more with it (and with what it contains) than with a passport. What’s more, it always has real-time connection to the Internet and, therefore, to a server.

NFC can also be used to receive offers or requested information by waving the phone near a chip embedded in a poster at a bus stop, for example. It can also be used for public transport ticketing or as a tool for access control to premises.

Its future

Several research companies point out that this technology is likely to take off in 2014 or 2015. Frost & Sullivan anticipate that the number of NFC-enabled phone users will reach 53% in 2015.

But for this to happen, all the operators (banks, cards, telephone companies, retail chains, etc.) will have to participate actively for users and retail stores to fully appreciate its usefulness.

And things are moving. Visa has already been piloting mobile payments with iPhones in Turkey, Italy, Poland and the United Kingdom. In Spain, telephone operators, Telefónica (02), Vodafone UK and Everything Everywhere (Orange and T-Mobile) have embarked on a joint venture.

In the USA, Google Wallet is almost ready, working in alliance with Citi MasterCard. Google wants to know what information people are interested in. This can be gleaned far more from what people buy than from their web searches. This will enable Google to sell more effectively-directed advertising and also charge retail chains for providing their links.

In Sitges (Barcelona), a trial run was carried out from May to October 2010, with the collaboration of La Caixa, Telefónica, Visa, Samsung and the town council, with 1,500 customers and 500 shops. 90% used the mobile phone payment system and 60% of the transactions exceeded €20, requiring the use of their code. Customers rated their experience 8 out of 10. 90% said they will continue to use it.

Although collaboration is needed, it remains to be seen which companies will come out on top, and how the NFC “control of the waves” takes shape.

_______________

Lluis Martinez-Ribes


→ 11 CommentsTags: NFC · colas · fidelización · loyalty · mobile phone · móvil · payment system · queues · retail · service · servicio · sistema de pago · technology · tecnologías

A BEAUTIFUL PATCHWORK. Understanding Carrefour Planet (El Pinar de las Rozas)

6 July 2011 · 2 Comments

Imagen: Àngels Miralles (Creative Commons)

ABSTRACT

In launching Planet, Carrefour has introduced an innovation by “editing”, in other words creating, a new shop, through the bringing together of elements that others had already created. However, it has combined them very well, like a beautiful patchwork, which is bound to appeal to customers.

__________

15 years ago, a Carrefour manager, who was taking part in a retail programme at ESADE, invited Professor Dawson and me to visit one of its hypermarkets. In the electrical household appliance section, I commented that their sales in this area could experience double-digit growth if they changed their selling methods.  The manager replied that whilst this was probably true, he could not change things, because discount self-service was in Carrefour’s DNA.

In 2010, Carrefour presented a new retail concept, which constituted one of the greatest transformations in the hypermarket format. In Europe, its clientele was distancing itself – both the number of customers and the frequency of their visits were dropping.  Supermarkets have improved a lot, and the main specialists (FNAC, Decathlon, Sephora, Ikea, etc.) are very experienced. A drastic change was called for. And that is just what they have achieved.

The tip of the iceberg

The most enjoyable, amazing, multifaceted shopping experience that has been achieved is only the tip of the iceberg in the re-branded, revamped retail business model that Lars Olofsson, Carrefour’s CEO, has described as having four aspects: delighting customers, enhancing internal efficiency, enriching the corporate culture and creating a chain brand focused on the idea of being positive.  These objectives are designed to ensure that Carrefour is both the customers’ and the shareholders’ preferred retail firm.

The paradigms have been broken

With this new retail concept, we need to forget the traditional hypermarket format (everything under the same roof and at very low prices).

The shop becomes something like a shopping centre; a highly coordinated group of shop-in-shops.  Each of these has been decorated, furnished and provided with a range of products and services all specifically designed to suit the type of purchases customers make there.  Most of these shop-in-shops are specialised (with a wide range to take into account a very diverse public). However, the baby goods section breaks another paradigm by introducing a segmented store-within-a-store (containing virtually everything this specific segment requires).

Carrefour breaks with tradition and uses the retail method best suited to each specialised selling area: self-service, vendor-assisted sales, personal behind-the-counter sales and even vending.

The most conventional area is in the “canned and dry foods” (shelf-stable goods) section with aisles of tall shelving, self-service retailing and a discount feel, albeit with less visual pollution than usual.

The shabby look does not sell (as much)

Some analysts say that Carrefour Planet is too attractive, and that this will have a negative impact on their low-cost image. Mr Olofsson stated clearly that: just because a store has low-cost and competitive pricing, it does not have to look like a garage. Inditex and many others have proven this to be true.  This risk of the false perception of it being a pricy store is reduced further, if customers visit it frequently.

The people at the very heart

At Carrefour Planet, family shopping trips are much more fun than before. But there are other individuals that Carrefour wants to look after – their own team, in other words the staff. Carrefour’s brand values also apply to them.  “We are committed, caring and positive”. A real declaration of principles that deserves to be followed.

Action speaks louder than words

In a scenario in which gross profit margins for the sector appear crazy (food gross profit margins are sometimes higher than non-food ones), the greatest improvements have been made in the non-food sector, in other words the one in which people shop less frequently.  Despite this, the best Planet stores, such as the one we studied, have seen their figures rise by 9.9% in terms of both customer numbers and sales.

More food for thought – in the only non-specialist, segmented (baby goods zone) shop-in-shop, the increase was 73%.

The analysts, who say that pilot shops are expensive, do not understand the role they play in R+D.  Later stores will operate on a tighter budget.

The results are promising and the concept is due to be rolled out in several counties, including Spain.  Carrefour’s shares will probably rise due to the company’s new shops short-term results and especially because the brand is being strengthened.

Innovate or edit

In launching Planet, Carrefour has not reinvented the hypermarket, a format that was in dire straits in Europe. It has simply done something different, and done it better.  It has introduced an innovation by “editing”, in other words creating, a new shop, through the bringing together of elements, or business parts, that others had already created. However, it has combined them very well, like a beautiful patchwork, which is bound to appeal to customers.

_______________

Lluis Martinez-Ribes

→ 2 CommentsTags: Carrefour Planet · business model · fórmula comercial · hipermercado · innovation · innvation · modelo de negocio · retail · shop · tienda

HIERARCHY, A SERVICE. Ranking improves the shopping experience

22 June 2011 · No Comments

Image: Martínez Franch

ABSTRACT

Even though it not always has a positive connotation, to apply the idea of hierarchy to some aspects, may improve considerably the shopping experience, because it minimizes a lot of negative aspects in a shop trip.

__________

There are few words in the occidental world that rise more suspicion than “hierarchy”. However, from a neurological point of view, we are human beings that not only accept hierarchy, but also, in some way, need it.

Essentially, hierarchy is an organized whole, “something” that is perceived as a non-chaotic structure. In some way, an example of no hierarchy could be a typical teenager bedroom.

The concept is useful for a purchasing process.

To decide your own track

In an interview on an exhibition of Caixaforum (April 20, Barcelona), the prestigious architect Rogers declared that order is essential in every space, and it manifests in what he calls the scale, a group of areas that must be organized one inside another. In other words, hierarchy.

Although he wasn’t talking specifically about retailing, to create a pleasant feeling during the shopping experience, it is essential that the shop (including the parking area) can be understood in a split second after we arrive, the areas are detected and the importance the company gives to some of them is understood. Just like we do in a restaurant: we get visual hold of the space as soon as we get in.

A disorganised shop sells less (a 5% minimum) because it makes it more difficult to perceive the products, it distracts, it tires and reduces the effectiveness of the communication.

The corridors must have hierarchy, so no one will feel disoriented. The “big avenue” must be more relevant than the second level corridors. This way the “navigation” through the shop may be more intuitive.

Signage can be a very good help. Not only colours with a meaning, but also according to topics and area’s hierarchy. However the best signage is the one that is not needed. Something like the best shoes: you don’t think about them when walking, because they are not too tight.

An excess of signage doesn’t communicate better and even overwhelms people. Can you imagine that someone is next to you when you go shopping and doesn’t stop saying “I recommend you this product”?  People would say: “Stop nagging me!”

To understand the range of products

Sorting products out in the shop (specifically, the semantic structure of the assortment) aims to turn the range of products into an excellent way of communication, according to consecutive hierarchised criteria.

What kind of organising criteria should be found: the ones the public expects or maybe a new one? If the company wants to improve, logically the hierarchy should be the usual one –well executed-.  But if it wants to be innovative, some changes may be introduced, providing that the whole shopping route is an understood and appealing tale; a story where the customer would be the main character.

In museums (a kind of retail) the traditional organising criteria were chronology, schools and pictorial styles, etc. Usually they may be boring because they sort pictures out using those too obvious criteria. The Tate Modern was the first one to organize the artworks by topics. El Prado, in Madrid, achieved great emotions when they decided to face in the same room Las Meninas from Velazquez with the same name artwork from Picasso.

A display of products without any perception of organising hierarchy creates confusion and loses sales.

Cutting down is profitable

There is no doubt that improving the shopping experience is effective. A lot of times it is achieved by introducing positive things, but there is also another way: cutting down the inconveniences and efforts.

Hierarchy not only provides a reduction in doubts, but also achieves the feeling of controlling your own shopping process.

_______________

Lluis Martinez-Ribes

→ No CommentsTags: Picasso · ausencia de jerarquía · comunicación · comunication · desorden · emociones · emotions · experiencia de compra · hierarchy · jerarquizar · jerarquía · mess · no hierarchy · orden · profundidad de surtido · ranking · service · servicio · señalética · shopping experience · signage · venta · visita a la tienda · zona de parking

PERKS? DON’T ANNOY ME.

25 May 2011 · No Comments

Image: Lluís Martínez-Ribes

ABSTRACT

If companies make it easier for the customer to find a solution, not only do they reinforce customer loyalty, they also improve the perception of the service, reduce their costs and lose fewer customers.

__________

“Shopping experience” gets over 50 million hits on Google. So it is clearly not a new concept.

In the past, I have explained how shoppers’ behaviour can be changed by managing the specific meaning shopping experience may provide.  It is possible to stimulate the customers’ purchases, acting on their perceptions, for example by reducing their price sensitivity.

Thus, right from the start, the emphasis many managers place on increasing the average sales per ticket might seem reasonable. They can do this either by using “aggressive” media (for example, multiplying the number of “stoppers”) or by playing Shakira’s Waka Waka at full blast.

High-pressure sales?

However, one of the main drivers of a retail firm is customer loyalty. These companies do not make their profit from the gross margin of a transaction, however large that may be. Instead, their economic sustainability is a result of customer loyalty.  It makes more sense for a company to make its main priority to ensure its customers come back.

In hard times, it is not too important if customers buy less, as long as they remain faithful to the same shop.

Thus, it is a highly strategic move to manage the shopping experience, in order to ensure customers loyalty. The main way companies achieve this is by increasing the pleasant aspects of a customer’s shopping experience.

This is done for instance through videos, shop windows with animated elements, unique scents, backlit signs with LEDs, touchscreens, etc.  There is no end to the number of resources used to delight customers.

Reducing annoyance creates loyalty

A study by Dixon, Freeman and Toman (1) reaches the conclusion that simply satisfying its customers’ needs or exceeding their customer-service expectations does not make them more loyal.

Nevertheless, if companies make it easier for the customer to find a solution (2), not only do they reinforce customer loyalty, they also improve the perception of the service, reduce their costs and lose fewer customers.

If they can shop easily, without having to make a great deal of effort, many customers do not notice the absence of incentives on offer in the shop.

This route, reducing annoyance and effort, is very beneficial for both customers and companies.

Despite that, often the efforts customers have to exert are not detected, because they are considered to be “normal”: queues, too much choice, unintelligible information, products that cannot be found, inappropriate opening times, sales assistants who cannot answer customers’ questions, etc.

Once all the problems that customers come up against have been identified, the company may look for ways of solving them.

New indicators

Moreover, it would be a good idea to use a type of indicators that could provide information on the company’s capacity to create loyalty.

For example, the percentage of time spent in the shop that customers feel annoyed or have to exert a great deal of effort.

Or the same percentage including pre-shop and post-shop time.

This customer-centric approach may inspire the design of innovative retail business models.

(1) Dixon, M.; Freeman, K.; Toman, N. (2010): Stop trying to delight your customers, Harvard Business Review, July-August 2010, p. 116-122.

(2) See more in: www.martinez-ribes.com in the article: “Para vender más desde mañana mismo. Lo que realmente compra el cliente”.

_______________

Lluis Martinez-Ribes

Source: Distribución Actualidad, the spanish retail magazine
(nº 425, may 2011)



→ No CommentsTags: average sales · backlit · business model · costs · escaparate · experiencia de compra · gastos · indicadores · indicators · lealtad · loyalty · modelo de negocio · pantallas táctiles · retail · service · servicio · señalética · shop · shop windows · shopping experience · ticket medio · tienda · touchscreens

SPORTS RETAILNG REDUCES POLLUTION.
Retail lessons from sports clubs

29 April 2011 · No Comments


Image: Josep María Martínez

ABSTRACT

There is no reason for suporting Real Madrid or Barcelona or Ceuta. Indeed, there are emotions and shared social values.

Without them, a sports club has no future as a business model that hinges on implicit aspects in common sense.

Although it may seem strange, that’s totally applicable to the marketing of any company in retail.

__________

“The referee’s whistle is the only thing capable of stopping traffic in Barcelona,” declares Xavier Querol, a researcher at the Institute of Environmental Diagnosis (Idaea-CSIC). Car emissions dropped sharply around 9 pm on March 6th, 2007, just before the start of the exciting Champions match between Barcelona and Liverpool.

40% of football clubs’ income stems directly from this type of consumer behaviour, while teams in the Spanish BBVA League only earn 33% of their income from ticket sales.

Despite the industry’s importance, however, their general economic results are very poor, including some in a critical situation.

Sports clubs’ retail marketing strategies

The marketing aim is – to succeed, in becoming the preferred option in a sustained way, all the while being profitable. It is not just about advertising or promotions.

Continued preference translates into sustained cash flow. For top competition sports club management, the sustainability of this cash flow has been demonstrated to be directly related to the sports teams’ performance. Over the long term, the latter is determined by the quality of a club’s players and trainers. As such, being able to have the economic power to be able to hire the best ends up being a key factor for their success.

It’s a bit like the fish biting its own tail: if there is a chronic lack of titles, that team’s supporters will flounder and, in the end, so will its sponsors, leading to insufficient income with which to sign on great players who will contribute to the club earning more victories.

The aim is not to win titles every year, but to ensure that there isn’t a chronic lack of titles. A bad season doesn’t imply a serious problem so long as that sports club shares certain human or social values with its supporters. Without these values, a sports club has no future because it is a business model, which hinges on implicit elements and commonly shared feelings.

There is no specific reason why people support Real Madrid, Barça or Ceuta. What there is are shared emotions and social values. Barça’s slogan Más que un club (“More than just a club”) offers a glimpse of this. The same can be said for Atlético de Madrid’s (Atleti) famous ads, a team which succeeded in not losing any of its supporters when it fell to the second division.

Industry concentration

The current situation in the first division is no different to that occurring in other industries: a special type of de facto oligopoly. The Pareto Principle is also valid here: the top two Spanish clubs concentrate 53% of all income, and 25% of the income in Europe as a whole is channelled to only 20 clubs.

What is different compared to other industries is that this small number of very powerful clubs needs others to be able to compete. Without matches against these adversaries, they cannot demonstrate their superiority. A league is like an ecological system, similar to that occurring in nature.

That notwithstanding, there is greater unpredictability in sports retailing. In fact, teams train all week long, while their actual “production time” tends to represent only 90 minutes per week. The ratio between the time a club has to “demonstrate its power” versus the time to prepare, implies great risks in terms of guaranteeing results for its supporters.

Are we talking about football or about retail sector?

Don’t the growing concentration of protagonists, the sector’s poor economic results and the fight for sustained preference sound familiar?

Perhaps a lesson that can be learnt from sport teams is that the enormous power they have regarding customer preferences is based on sharing strong emotions and human values with their supporters.

References

www.lavanguardia.es/vida/20110312/54125164753/gol-a-la-contaminacion-del-aire-en-la-ciudad.html

Havas Media: www.slideshare.net/dolivo/foro-futbol-espaol-marcas-y-negocio

Gay de Liébana, J.M., Futbol español: Marcas y negocio. Univ de Barcelona.

_______________

Lluis Martinez-Ribes

Source: Distribución Actualidad, the spanish retail magazine
(nº 424, april 2011)


→ No CommentsTags: Comportamiento de los clientes · business model · consumer behaviour · customer behaviour · emociones · emotions · marketing deportivo · modelo de negocio · preferencia sostenida · retail marketing · shared values · sport marketing · sports · sustained preference · valores compartidos