Category Archives: Retail

BMGT 205: Assignment 1, Amazon Fresh

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For Assignment #1, I want the class to read an article from the August 18th issue of Fast Company:

AMAZONFRESH IS JEFF BEZOS’ LAST MILE QUEST FOR TOTAL RETAIL DOMINATION

 

After reviewing the article, please take some time to answer the following questions.  Please answer them numbered, in the comments section of this blog.

1. Why is Amazon Prime so important to Amazon?  What metrics did they talk about to show this importance?

2. Do you think a Amazon Fresh will be successful?  If so, why?  If not, why?

3. Out of the 4 p’s of marketing discussed in week one, which one do you feel is the most important to Amazon Fresh’s success (Price, Product, Place, or Promotion).  Why?

4. If you were a competitor of Amazon, how would you prepare to compete against Amazon Fresh?  How would you position your experience vs. Amazon (Include which competitor you are, and how you would position against this new competition).

I look forward to a good discussion on this next week.

Chris Lovett

 

 

 

 

 

 

 

 

Marketing Research in Action: Teen Retailing

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Image Source: http://a57.foxnews.com/global.fbnstatic.com/static/managed/img/fb2/660/371/American-Eagle-Outfitters-Apparel-Retail-Store.jpg?ve=1

This week has been a very tough week for retailers focused on teen customers.  American Eagle, Abercrombie & Fitch, and Aeropostale all reported sales that disappointed Wall Street.  American Eagle gave a weak Fall Forecast, Abercrombie reported a drop in STS sales of 10% for the quarter, and Aeropostale said STS sales dropped 15% and forecast a loss for the quarter.  To read more on this report, click here.

While the 3 A’s sales were a disappointment, sales for retailers Gap (Old Navy), H&M, and Forever 21 performed well.   This situation is a very similar situation that marketing professionals face everyday.  Some thought starters as we begin this class:

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If you were a marketing research professional at American Eagle:

  • Would you be concerned about these results?
  • Internally, what kind of data would you look at to explore the situation more?  What would you be trying to find out?
  • What kind of secondary external data would you explore based on these results?  What would you be looking for?
  • How could marketing research have prevented this large of a sales drop at American Eagle?
  • If you would recommend a marketing research project to help turn things around at American Eagle, what types of things would you recommend?

Let’s Discuss before we kick off chapters 1 and 2 tomorrow.

 

Chris Lovett

 

The Future of Self-Service Banking

The ATM experience has for the most part gone unchanged since the first ATMs were introduced in the 1970’s and rolled out widely in the 1980’s and 1990’s.  While the technology inside the machines has changed as technology has improved, the experience around using the ATM has largely gone unchanged.  You wait in line behind other people, there is a lack of privacy, and you often feel rushed in completing your transaction.

IDEO, a firm centered around human design, took a look at the automated banking experience with the Spanish Bank BBVA.  The goal was to make the experience more personal, and humanized.  One thing IDEO does really well is observe current human behavior, and recommend a new way of doing things to improve the process.  Looking at current ATM customers, IDEO developed a new prototype ATM based on what they learned.

The design is centered around  core concepts:

Privacy: The ATMs have been rotated, to provide the customer with more privacy as the line for the ATM is to the side of the customer, vs directly behind them.

Simplicity: One slot for cash and receipts helps eliminate confusion.  I am guessing the checks would go in here as well.  The system also uses touch screen technology, which ties into the design elements of todays smartphone’s and tablets, so customers would feel comfortable about using the system.

Personalization: The system recognizes the user, and allows them to choose from their most common ATM transactions.  It also visually shows them on one screen the most relevent information (Accounts, balances, etc).

Tangibility: All of the transactions are visualized – with the transition of virtual and reality being very seamless.  This transition, in my opinion, would make a customer very comfortable when banking at a machine, as they could almost feel the transaction happening in real-time.

Delight: All of this combined could help create a very humanized approach to automated banking – maybe even a little entertaining.

Overall – I like the concept.  I agree it would work best in an inside environment, and may require much more of an investment for walk up ATMs outside of a branch.  Overall though, I would feel more comfortable with this type of banking experience, especially when making deposits or more complex banking transactions.

Fast Company also profiled a bank of the future in Brazil, with innovative features like the ATMs listed above and touchscreen surface tables.  It looks like the future is today.

What do you think?

Chris Lovett

What I Learned This Week: August 17

I learned a few things this week.  Look – I kept this theme going to weeks in a row.  Here are a few of the things I learned this week.

Streaming audio is finally being noticed:* I have been a fan of streaming audio for awhile now, and it is finally getting noticed as a viable media alternative to TV and traditional radio.  Advertisers are finally starting to take notice, and I expect this planning season for media to be very interested in services like Pandora, Spotify, and to some extent, iHeartradio.  Here is why:

  • It’s not just online.  It’s a truly mobile and audio solution.  You can advertise on Pandora using traditional audio ads during drive times when customers are streaming to their cars, target with online ads during the workday, and mobile in between.  While most social companies are struggling with monetizing mobile (Facebook, etc) Pandora and it’s peers are grounded and are delivering mobile solutions today.
  • It’s on Demand: Sometimes, I am in a Leonard Cohen mood.  Other times, it’s 2-Pac.  You never know.  I could never download enough cd’s for my random tastes, and streaming music helps me get my fix.  Traditional radio = push.  Streaming = pull.  I am in charge, and I and many others like it.
  • It’s in your car.  Any car with Bluetooth streaming audio can stream Pandora or Spotify wirelessly.  It’s genius.  And some cars like Toyota and Ford are building it right into the cars, making accessing the service easy at any age.
  • It’s local.  No – it’s really local.  Using the GPS in most smartphone’s, services like Pandora can target in a much smaller area.  Below is an example of a local ad served up on my ride.  This will redefine local targeting.

* Disclosure: I am a stockholder in Pandora Media.

I work for a great company: We have total visibility at my organization, with access to regular updates from our CMO, who has an ability to speak to each of us 1:1, even in a crowded room.  She has the ability get everybody excited about change, and realize change is necessary at every level in today’s marketing environment to be successful.  I love working where I do, and I think that we are in the begining stages of becoming a world class marketing organization.  Led by marketing at every level.

At any time, you may be asked a question in a meeting, and expected to know the answer: This happened to me this week, and while I gave an ok answer, I did not give a great answer.  This is just a reminder to me – never settle, and always be ready.  An ok answer is not okay, when you are doing great work.

The company I used to work at had a very passionate CEO.  Sometime’s he would walk the halls, and ask questions about the business.  I used to prepare a cheat sheet every morning, just in case he asked.  I knew what sales were in every market, every week, every day.  He never asked.  However, I don’t regret preparing, because it made me understand our business at every level.  This week I wasn’t.  It will not happen again.  I don’t accept ok answers from myself.

And lastly, Kohl’s is ridiculous.  And everybody loves it: Kohl’s implements a pricing strategy where they over deliver on savings.  I went back to school shopping for my kids, and spend $202 – yet my “total” savings, with coupons and deals was $325!  Now – when you spend $200 on kids gear, you don’t feel so hot.  When you leave and realize you saved $325 – you just feel giddy – like you are a genius.  I thought, I saved $325!  I pretty much robbed that joint!

Thing is – I did not save $325.  Koh’s has their pricing strategy baked into margins, so they over deliver.  It’s a really genius approach, and one that is working for Kohl’s, as they continue to grow and gain value while other retailers struggle.  These people, and millions of people, are feeling pretty solid about their Kohl’s savings too!

That’s what I learned this week.  Some good stuff, and I will continue to learn more each week.

Chris Lovett

Innovative Company: Birchbox

I think one trait of successful marketing pro’s is they are alway’s on the lookout for innovative ideas, inside or outside of their industry.  When I worked in retail, I would shop a different competitor’s store each week.  My theory is simple – you don’t know what you don’t know.  I think good ideas can be generated from any industry, and it is important to look outside of our current ones at times to generate the best ideas.

So let’s take a look at Birchbox.  Birchbox is a startup launched in 2010 by two business women who went to Harvard.  The premise of Birchbox is to send members a box of the latest samples of beauty items like perfume, nail polish, makeup, and other items for a fee of $10 per month.  Subscribers get to try the latest in beauty products, to see what they like, without having to commit to a large size, and something they may not like.  In 2012, the last time Birchbox released sales numbers, they had over 100,000 subscribers.  That number alone would generate about 12 Million in annual revenue.  So successful, that they recently launched a mens line up.  Although, because they have a very engaged audience, those companies that are placing samples in the boxes are probably paying to get their samples to their audiences as well.  Overall, it’s a really cool concept, and I actually joined the waiting list for a Christmas gift for my wife.  What makes Birchbox a success, and worth looking at for inspiration?

Loyalty: Their subscribers are extremely loyal, and in turn use word of mouth marketing to get their friends and family to sign up for the service.  And these woman talk about it – a lot.   Getting their Birchbox is like an event each month, and Birchbox is armed with thousands of fans who use social media to talk about what is in their Birchbox.

They sell surprises: Imagine an ordinary business telling you you would get a box of something, for $10 a month.  They would not tell you want you get – you just pay – and you get something each month.  That’s basically what Birchbox does – they handpick samples, and part of the excitement for women is getting that brown box each month, and discovering what is inside.  It is a business model that would most likely fail in most industries, but Birchbox has figured out a way to sell surprises – with customers really having no idea of what is in it for them.  I have talked to friends, and they say the excitement they feel when they see a Birchbox in their work mailbox is almost like euphoria, with a few describing it as a special treat they earn each month.

They are grounded in social media: Birchbox is highly engaged in social media, from Facebook (180K fans) to Twitter (50K follows), and engages on Pinterest and YouTube as well.  As a company helping women discover fashion and beauty trends, they are highly engaged and enthused with their following, engaging in conversations and providing tips and not just sales pitches.  It is refreshing, and a reason the company has done so well.  Sometimes being on social media is not just about getting the most fans, but building an army of advocates that sell your brand for you.

It’s customized: Subscribers fill out a questionnaire when they sign up, detailing out preferences and skin type.  So each subscriber gets a unique package that feels like it is just for them.  It seems like part of the excitement – knowing you are getting something that was created just for you.

e-commerce is built in from the ground up: The samples link to a full e-commerce site, where subscribers can buy full size versions of the products they like most.  It is a great way for the companies that give samples to reach a highly engaged audience, with easy access to their products.  And they can be sure there will be satisfaction as they have already tried it.

More background on Birchbox below.


So – tell me – have you tried Birchbox?  What do you love about it?

Chris

Thoughts on Brand Segmentation and Data

There used to be a simple way for a company to target different segments, and that was to create a brand that was customized to the preferences of each segment.  I think a great example of this is Gap, Inc. three core brands developed specifically for their customer segments:

Gap: This is the core brand, and targets the widest variety of segments for Gap.  The other two brands were developed to help reach other segments that Gap could not reach in one store.  So they created a few other brands.

Banana Republic: This brand is targeted to the young urban professional.  Probably without kids, and most likely very healthy, because I never met a pair of BR pants I could fit into.  The price point is higher, but the designs are much sharper.  The target here is clearly a more affluent customer.

Old Navy: This brand is clearly targeted to folks with a lower income, due to their lower price points.  It is also family friendly, with more kid choices.  This brand has thrived in the recessionary environment, giving Gap a secure revenue source even in difficult times.

Gap also has a few other brands with specific targets, Piperlime, a brand focused on style and trend, and Atheta, a brand focused on the active crowd, sort of a Lululemon competitor.  

Developing multiple brands to target specific segments is an expensive proposition for most.  It requires separate stores, separate brands, and separate advertising budgets.  While it can be done successfully, it probably won’t be cheap.  And a lot of companies are doing this, and doing it well.

Another approach is leveraging your internal data to market to customers on a 1:1 level, without redefining the brand experience overall.  It requires a robust CRM system to identify targets, and a delivery system to reach those targets at a personal level, through direct marketing or in store experience.

A recent article in the New York Times showed how retailers like Safeway and Kroger are using their customer data to target customers to the point of different customers paying a different price, based on their segment and past shopping behavior.  The article explains how one customer could pay one price for the same product another customer pays a higher price for, all in effort to get them to buy more or “build the basket.”

Retailers have been recieving robust data for years, but have been slow to use it to their advantage.  Kroger, one of the few grocery retailers reporting positive STS sales, reports in the article that customized direct mail coupons, with a redemption rate of up to 70% (The article notes this is a high result.  I would like to report – this is a HUGE UNHEARD OF RESULT) is directly driving higher sales and more loyal customers.

I agree with this approach, and think there is a huge upside opportunity when a brand presents offers that speak directly to their target market.  A key approach is building a program that is automated, leveraging data to deploy customized offers targeted to various segments through direct mail, email, and even inside the store.  Capturing data is easy.  Using data to create a customized, ongoing marketing program that drives sales, repeat visits, and higher transactions is the hard part – but worthwhile if you can do it.

Data.  It’s what’s for dinner, if you can find it, leverage it, and deploy it.

Chris Lovett

The Rise of the Urban Store

For years retailers raced to suburbia, opening mega stores in shopping centers next to bedroom communities.  Super Walmart, Target, Costco.  For years they have gotten bigger and bigger, with a belief that the more they offered, the more they will sell.  They call it the “one trip” effect, or convenience model.  It made sense for a different customer base.

I hate big stores.  I avoid them like the plague.  A Super Walmart to me feels like an aircraft hanger.  I have shopped there a few times – the prices were good.  But I like shopping with my kids, and shopping at a Super Walmart or Target with kids is near impossible.  The most annoying thing in a Walmart is buying burgers and dogs in the summer and then having to walk about a half mile for charcoal in the lawn and garden department.

Or grocery shopping, but then having to walk another mile or two to get to the HBC aisle to get the soap you need.  I get it Walmart – some guy told you to put the soap next to the pharmacy because it made sense 20 years ago.  Maybe it did make sense 20 years ago.  But if the majority of your traffic is buying groceries, go ahead and take a look at putting a few items where people are.  I think you will be surprised.

I know some people love them, but I feel the trend of the big store is coming to an end.

Target recently opened a new Urban Concept in LA.  The store is smaller and focuses on the household basics.  The target is urban dwellers and commuters, with a focus on essentials and items they can carry on the bus with them.

Walmart also opened up a new Neighborhood Market in California this week.  California has been a testing ground since 2007 When Tesco entered the US Market with their Fresh and Easy Concept.  All of these retailers are testing their offerings, but one thing is constant – the stores are smaller.  While I think these stores are a little ahead of their time for the east coast, I also believe they are the future of retail.  Offer the customer what they want, at a location that is so insanely convenient, they will have no choice to shop there.  It’s pretty simple actually.

I welcome these smaller stores with open arms.  I look at it as a little less area for my kids to break something or get lost.  Except Costco.  I will keep my Costco just the way it is thank you.

Chris

Here Come the Millennials

There has been talk for some time about the emerging millennial generation, and how they are impacting the marketing and retail environment.  I recently came across a great research report that outlines the market potential of millennials: Trouble in Aisle 5.  While many companies have been waiting for this demographic to emerge, there is data to support it is finally happening.

While the report focuses on grocery shopping – this report also clearly shows companies that are focused on this generation now are probably going to reap the rewards in the future.  While many millennials are just starting their careers, many companies and brands have not fully realized the economic potential from this group to date.  However, some key stats are going to change this very soon.

Why the chart above is significant: research has shown that median incomes for households 25+ jump 60% to $45,000 from $28,000.  In 2010, there were 5.5% of millennials in the age bracket of 25+.  By 2020 – that number will increase to about 20%.  Having a population increase in size of over 15% in 8 years, while also growing incomes around 60% is a huge shift companies cannot ignore.  Those who are capturing this demographic now are probably already being rewarded, and will be rewarded even more so in the future.

The report outlines some key trends for Millennials:

  • Millennials are less loyal to specific brands/retailers: it appears they buy what they want, when they want, wherever they want: Building loyalty now will be key to sustained growth in the future
  • Millennials appear much more focused on lowest price rather than brand loyalty, but at the same time are much more willing to pay for specific attributes: If not a price leader, focus on positioning and perceived value
  •  Millennials place high value on convenience in shopping for food: If convenience is a key selling point of your product or service, highlight it often
  •  Higher income and education levels, driven by the emergence of the YEMMie (Young, Educated, Millennial Mother)
  •  Brands do matter more for top-earning millennials — these just might not be their parents’ brands: If your brands are showing declining sales and low acceptance by millennials, it may be time to re-position your brand

These trends were also highlighted in a recent NPR Report.

Good insight for the project’s this semester!

Chris

Emerging Trend: Pop Up Retailers

It looks like an emerging trend for retailers is the pop up retail store.  What is a pop up store?  It is a temporary, low cost store that a retailer can open very quickly, and target areas with temporary population growth or demand.  There is much less cost in the form of Cap Ex (Capital Expenditures), and the stores are often retrofitted into a current space.

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Whole Foods is the latest retailer to test this trend when they opened up their first pop up store in the Hamptons in Early July.  I think this trend has a lot of opportunity for retailers, as a way to increase revenue while reducing costs.  If you look at the Whole Foods store example, the store has access to a very affluent customer base, with little in fixed costs.  Since this location is a summer vacation destination but empties out in the Fall and Winter, Whole Foods does not have to absorb the losses of slower sales months, which in retail, is very common.  Whole Foods could effectively turn seasonal retail sales it’s head, by making sure they are always where their customers are.

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As marketing professionals, we are trained to target where the most of our potential customers are through targeted media, interactive, and social channels.  This trend is a natural progression for retailers to better access their customers where they are, without taking on the high costs of buying land and building stores.  The opportunity goes beyond food – any retailer could do this effectively with a sound strategy.

Retailers should watch this trend very closely.  If effective, Whole Foods could open pop up stores on college campuses in the Fall, and others in key vacation destinations like the Outer Banks in the summer.      It is definitly a trend to watch for all retailers defending their market share or looking for an alternative way to grow sales.  The only challenge I potentially see is labor – I would venture to guess finding part-time help in the Hamptons might be a challenge due to the affluent demographic profile.

Chris