Hunting For Retail Innovation In Barcelona

Hunting-for-Retail-Innovation-in-Barcelona-image

I recently returned from a relatively rare business trip to Barcelona, Spain. Excited to be back in the market after a few years, I persuaded my client to take me on a tour of nearby stores. Predictably, of course Carrefour was on the list of stores we would go to, but so were Eroski’s Spanish subsidiary Caprabo and Spain’s own Mercadona. I was particularly keen to understand whether Spain’s economic woes had provoked any major retail innovations, and here’s what I found:

Discounters don’t have to be ‘cheap’

Think about hard discounters like Aldi and Lidl and immediately images of down-market stores, stocked with no-name brands and slim pickings in fresh foods come to mind. Not so in Mercadona, Spain’s home-grown answer to Germany’s upstarts.  Mercadona is no competitor to Whole Foods BUT a lot of thought has gone into the in-store environment and there is a clear focus on quality (sorry no photos here – I was under strict instructions!). This is most obvious in fresh foods, but interestingly also in home and personal care, where the chain has invested heavily in building own-label products that perform ‘better’ than the branded alternative. I’ told that to drive this, promoters work in stores to discuss the benefits of Mercadona’s range with shoppers directly. Indeed even my die-hard foodie guide told me he was happy to buy floor cleaner and laundry powder here, whilst spending the savings on high quality organic produce at the local market. This interests me as stores like Mercadona are creating an interesting new trend to split purchases across channels, which leads shoppers to cherry pick prices on more commoditized categories, whilst seeking out higher end offers for life’s little luxuries.


Online in-store 

Caprabos Wine Section

Spain has its fair share of online operators and these are increasingly popular in larger cities, but what grabbed my attention in Caprabo’s well-stocked wine section was this booth next to the main wine aisle.

Here shoppers are able to order wines that aren’t available in-store for delivery or pick-up. You can search by origin and variety on a well-structured touch-screen interface. We’ve seen this before in department stores like the UK’s Debenhams, but this is a relatively rare example of a grocery store exploiting the broad range it offers online in a small community store.

Price, price, price

Spain’s cash-strapped housewives are well served with discounted offers and like all the other markets I visit, retailers compete hard on price. It’ll be no surprise that Carrefour’s sole distinguishing mark is its price offer, at least if judged by the store I visited. But I did notice two particular differences in the way the Spanish affiliate communicates price, which contrast messaging in my neighborhood. The first was the use of a very clear messaging in the power aisle, where bright panels advertise buy two, get second at half price.

Carrefour Price Offer

The second was a VAT-free rebate on over 1000 non-foods lines.

Carrefour Price Offer 2

Both offers and their communication are not really new, but they do illustrate that the retailer has grasped that a sea of yellow labels does not good communication make. The clear -50% panels are clean, easy to comprehend and offer more compelling reasons to stop.

Capitalizing on changes at retail

I guess I would have been more excited if I’d have come away with some really new ideas from my trip (as well as a stock of Serrano Ham!) but I do think that the above reflects some global trends in grocery retailing, and for the manufacturer provokes three potential actions:

  1. Understand the changing roles of channels – if more shoppers are likely to split purchases, then different channels will play increasingly divergent roles for your brands – understanding these will help position your products more effectively in the future.
  2. Combine online and offline to extend the available range – many shoppers complain about lack of in-store availability; as grocers increasingly integrate online and offline, the opportunity to make wider ranges available in-store becomes more viable, even in the smallest outlets.
  3. Understand the role of price communication – much research suggests that shoppers respond more to the message of price than to the price itself. So, using clearer and more compelling price messages may deliver higher promotional off take. This is important as 70% of promotions lose money, mostly because they don’t create sufficient off take to deliver a payback. If better price communication is the secret then it’s time to embrace this.

Get in touch if you’d like to share your thoughts on retail innovations, or if you need advice on how to capitalize on the changes your retail customers are making.

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How To Ruin A Brand

If, like me, you’ve been following the backlash against comments by Abercrombie and Fitch’s CEO Mike Jeffries, you’ll have seen how in today’s connected world that bad PR can have a huge impact on a brand. I have to admit that I have little sympathy for Mr. Jeffries and no affinity to the A&F brand at all but I do think that anyone who wants to learn exactly how to ruin a brand can learn a lot from what has happened.

The Story So Far

How To Ruin A Brand | AbercrombieFor those who have missed the story, here’s what has happened. Back in 2006 Jeffries gave a rare interview to Salon Magazine. In the interview Mr. Jeffries explained A&F’s target market by saying “Candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong.” Jeffries’ pursuit of the ‘in crowd’ has led to the company eschewing the larger woman (they don’t make large sizes) and apparently recruiting only those considered to be ‘good looking’. The current furor stems from the re-emergence of these comments in a new book co-written by Robin Lewis, called “The New Rules of Retail”. And this has caused chaos!

Amidst a barrage of complaints, pickets outside US stores and a YouTube video imploring viewers to make A&F the fashion brand of the homeless, sales have declined 17% and stocks are off by 8%. In the middle of the maelstrom of bad publicity, Jeffries issued a qualified apology on A&F’s Facebook page suggesting his comments had been taken out of context. This prompted one reader to comment “How can ‘we don’t like fat people working in our stores or wearing our clothes’ be taken out of context? Seems pretty clear to me,” and another to write “Your CEO is an idiot”.

Three marketing lessons from Abercrombie & Fitch

Beyond the very obvious “Don’t let your CEO dis potential consumers”, there are three very powerful marketing lessons to be learned from what has happened in recent weeks:

  1. If you want to limit your sales, limit your target market – Consumer brands grow by encouraging existing consumers to use the more of the brand more often or by attracting new consumers. Mike Jeffries defends his “exclusionary” marketing strategy by claiming it is legitimate to target a specific segment in order to avoid becoming “vanilla”. But here’s the thing: A&F’s growth in the last few years is due in no small part to the fact that it is an aspirational brand. New consumers have sought out A&F clothes because they want to be associated with “the cool kids”.
    By refusing to sell XL and XXL women’s sizes, the company already excludes nearly two thirds of the US market; by suggesting that if you are ‘not cool’ you can’t wear the brand, the market is limited further. This leaves a tiny proportion of the potential market: those who are slim enough and cool enough to wear the brand. Unfortunately, I suspect that a proportion of these people will now not choose A&F for fear of being labeled a bully, so all that will be left will be skinny people who don’t care what others think about them. This is not a great platform for growth.
  2. Bad news travels really fast – Like United Airlines before it, I’m sure that the marketing team at A&F has been taken aback by how far and how fast the negative publicity has travelled. Whilst controversy is no stranger to this team, even they were probably not prepared for a global hate campaign exploding in their laps. Many brands have been encouraged to embrace ‘social’ and ‘market digitally’ seeking greater numbers of likes and shares as if these were more important than sales and profits. What we learn here is that this is a double-edged sword. Too many brands treat social channels as a one-way street and very few are effectively managing the opportunity to learn more about attitudes, behaviors and how to influence these
  3. Manage bad press effectively – A&F’s response on Facebook is risible – they continue to post images of new products and little preppy questions like “If your friends could only describe you in one word, what would it be?” as if they are ignoring the barrage of negative comments that they receive in response (in answer to the question above, one user writes “Fat. Which means I won’t get anything from your store”). Mr. Jeffries’ response to why sales are off has been to blame poor stock availability which has created further negative comment. There’s little doubt that Mr. Jeffries’ days at A&F are numbered, but it will take years for his successor to overcome the issues he or she inherits. What current and potential consumers will need to hear from A&F is how they have changed and what they are doing to make amends, not that the brand will carry on regardless.

Really effective marketers today are able to define a target market that is likely to grow rather than decline; they engage that target market by creating an experience that resonates with and re-enforces consumers’ needs and desires and they manage their brand with care and integrity. It appears that Mr. Jeffries is not one of these marketers and those of us who are can only look on in despair. If you have examples of how to get it right that you’d like to share, please feel free to post them here!

The Future Of Grocery Shopping


Ten years ago, if you had a shop selling books, airline tickets, music and video and consumer electronics, you probably weren’t too bothered by e-commerce. Sales on the internet were a marginal thing; there was little evidence to suggest the mass market was going online. Today if you still own a shop in these areas you are either highly specialized or going out of business. Nobody can argue that, in these categories, online shopping has not radically changed the retail landscape. Today this is far from being true in grocery retail. So should CPG marketers worry that the future of grocery shopping might be radically different to what we have become accustomed to today?

 Is this the future of grocery shopping?

Today online grocery retail is marginal

Not a lot of people buy food and packaged groceries online today. Estimates suggest that in the US ‘non-traditional’ channels account for between 3 and 5%, in Australia maybe 5% and in most of Asia, less that 3%. So today internet sales are still a marginal thing – like they were 10 years ago for book retailers.

Whether you believe that grocery retail will stay offline or not, an un-arguable fact is that the likes of Walmart and Tesco are working hard to figure out how to create a great online offer and create a more enticing in-store offer. But despite all their efforts, progress has been slow.

Imagine my surprise then to find a great example of where I think grocery retail is going in Kuala Lumpur, Malaysia. My colleagues in KL recently took me to Ben’s Independent Grocer (BIG) in the Publika shopping mall.

BIG – A picture of the future

BIG is not so much a grocery store as a foodie’s theme park. The store presents an interesting case of what is likely to become the norm in leading stores globally. Here are four things I believe we are likely to see happening:

Focus on fresh 

Focus on freshWhat BIG does really well is to draw shoppers into large and diverse fresh offer with great merchandising, lighting and signage. Fresh food will become more important in the future because the physical experience of handling choosing and learning about fresh product is difficult to duplicate online. A strong fresh offer will give shoppers a reason for visiting real stores.

Focus on specialties

Focus on specialtiesAt BIG you can get things that aren’t generally available in the mass market or that aren’t necessarily practical to buy online – like organic baby products. Sure some concerned and very organized mums will take the time and effort to seek out these products. But most mum’s live in the real-world where they have to the juggle the needs of a family, a work life and a social life – stores that can bring the latest specialty products to these shoppers win kudos and make a trip all the more worthwhile.

Focus on giving more

Focus On Giving moreAt BIG you can buy a great range of booze – but here the added value is in the experience of buying – not just the act of doing so. Nothing that’s on offer in Ben’s could not be bought online in the future, but there’s something about a carefully curated range, set in a different and comfortable environment with a specialist on hand to advise, that makes visiting this liquor store just a little bit more fun than browsing online.

Packaged groceries are for service

Packaged Goods Are A ServiceThere’s plenty of CPG product available at BIG and much is pretty well done but it’s for service only – not the prime purpose of the store. BIG is trading on the experience you get from buying fresh food and specialties, not trying to differentiate itself on a range of packaged groceries that can be bought just as easily elsewhere.

Is this the future of grocery shopping?

There’s no way of telling whether BIG will be a successful retailer in the long-term, certainly it’s long on high-priced stock and short on deep-pocketed shoppers. BUT there’s a lot to be learnt here about where multi-channel grocery retailing could end up.

The biggest implication for me of this is the role that real stores might play for the CPG industry. If CPG products become more marginalized in the store, brands will have to fight harder to make an impact both off-line and online. This is going to take some deeper thinking about the role that physical stores should play and the relationships brands need to create with shoppers and retail customers in the future. This is not a ‘sales problem’ – it’s a total marketing problem that requires marketers and sales people to work together to come up with new ways of engaging with consumers, shopper and retailers.

Here are some practical steps to take now:

  1. Research the roles physical stores currently play and the propensity of your shoppers to use online channels
  2. Learn more about those shoppers who already buy products online via CRM or digital analytics platforms.
  3. Learn more about what draws shoppers back to stores regularly.

If you’ve already taken these steps and can share what’s been learnt or if you’ve found other great examples of really engaging grocery environments – please do post them here!

Do Retailers Dictate Your Brand Strategy?

I bet reading this question most CPG marketers will immediately respond with a chorus of “Hell no, I determine my own brand strategy!”. But before you get too excited, let’s just think about the facts: For most, if not all, consumer goods companies, retail expenditure is the number one cost after cost of goods. In many cases 60% of A&P budgets now go “below-the-line”. Most companies struggle to contain a widening gap between gross and net sales.  In many markets, getting a listing in key retailers is essential to ensure the success of a brand.

cart-horse

With all this in mind it’s credible to believe that for most marketers, retailers have a major influence on brand strategy. For some the power equation is so strong that retailers really do dictate brand strategy. Take for instance the role of Watson’s in China – many personal care brands, on wanting to enter the market, have chosen to offer Watson’s exclusive rights to distribute the product. Think a little about the power of Coles and Woolworths in Australia, where between them they account for over 80% of the sales of many CPG brands. Even in the US – a marginally  less concentrated market is it inconceivable that, without the support of Walmart, many CPG brands could be successful. In all these cases, the power some retailers wield borders on strategic control over the brand.

Is this a bad thing? Surely retailers know best how to sell brands to shoppers and their council is important? Herb Sorensen, thinks differently. In a conversation we had with Herb whilst writing “The Shopper Marketing Revolution”, he told us:

“The fact of the matter is, many brands are laboring under the illusion that retailers have a clue in terms of what they’re doing in managing the shopping process, and they don’t, and it’s a serious problem.”

Herb’s point of view reflects a reality that many retailers are less effective at managing marketing than they are at managing money. Many manufacturers are anaware that retailers are first-and-foremost financial animals. The financial imperative for a retailer is not, as many manufacturers believe, to drive growth for their category, but instead it is to deliver returns on capital employed. It’s worth bearing in mind too that most retailers are really good at this, more so than their suppliers in the main.

This central financial imperative is delivered only by consistently enhancing margins, reducing inventory and driving growth – and only the last of these three has anything to do with marketing at a category level. This underlying drive is a constant source of frustration for marketers who come up with “great plans for retail engagement” only to have them knocked back because the retailer will always place her financial objectives ahead of anything else.

Driving brand strategy through retail

It’s time for marketers to become much more proactive in their attitude to retail. Retailers and marketers do share a common interest – increasing shopper loyalty. Granted for the marketer this is to the brand and for the retailer to the store. But, when marketers can demonstrate that their activities can improve retailer’s financial performance, they can lead the strategic agenda. To achieve this will require:

  1. An in-depth understanding of which shoppers are important
  2. A clear view of where shoppers can really be influenced to buy
  3. A definition of which retail channels are really important.
  4. Effective prioritization of retailers that leads to investments being made in customers that can deliver results.

Who gets the Shopper Marketers’ ‘Best Retailer’ award?

best retailer award certificateI’m often struck, when visiting consumer goods companies, by the number of awards on display and I’m most drawn to those given by retailers for being the “best supplier”. It’s funny though that I’ve yet to come across “best retailer” awards given by their suppliers. I thought it might be fun to think about this from a shopper marketing perspective. I think that the following four criteria could be used by Shopper marketers in judging who would win their Best Retailer award .

1) Ability to attract the right shoppers – From a shopper marketing perspective, retailers that draw a brand’s target shoppers are really valuable. A retailer that is able to capture the precise groups that you might target, is one with whom you really should work. If that retailer can capture these groups in large volumes then they are definitely worth a vote. Applying a five-point scale; retailers with higher shares of target groups should get higher score (4 or 5) than those with small concentrations (2 or 3) or no target shoppers at all (1).

2)  Ability to influence shoppers in the store – the whole point of marketing to shoppers is to influence purchase behavior so that brand consumption can be increased.  If a retail environment has no power to influence shopping behavior then arguably it’s less valuable than one which does. Think about it, inert environments which shoppers skate through on auto pilot might be great for re-enforcing habits but they are potentially far less valuable than stores and web-sites that have the power to create new habits. I appreciate that scoring this might be relative to what you actually want for your brand – for instance you might want to fix habits if you have a high market share to maintain, but most brands these days are looking for growth, which means they need to change a shopper’s behavior. Score retailers who have a high potential to create the behavior you need either 4 or 5 and those who have little or no impact on your target shoppers’ behavior 1 or 2.

3) Willingness to test new (good) ideas – In this case though the onus is on the marketer to ensure new ideas are good ideas. Good ideas for retailers are ones that deliver both commercial results in the short-term and support their strategies in the long-term. I think awards should go to retailers who are happy to embrace good new ideas and give them a try to see what happens. For instance, I think 7-Eleven should get kudos for taking in new lines and trying them, if only for three weeks, likewise I think online retailers who work with brands to try a shift in tactics and measure the outcomes should be valued. Conversely, those retailers who wait for someone else to prove an idea, or worse simply ignore a good idea even when it has been proven should be shunned. High points (4 or 5) go to those retailers who are prepared to try ideas and measure the results even if the conditions attached seem tough.

4)  Ability to execute quickly and consistently – one of the things I like so much about convenience stores is the consistency they deliver. I appreciate 7-Eleven might be expensive to deal with but in most markets, if they agree to a change, it gets delivered across all stores. This has got to be prized by shopper marketers. Retailers who can consistently deliver quickly are more likely to create behavioral change across a wide range of target shoppers, and therefore can deliver great results quickly. Give 4 or 5 points to those players who deliver and conversely score those with patchy, poor and inconsistent delivery in-store 1 or 2.

Using these criteria to judge retailers gives some useful insights:

16-20 Points – “Award winners” –  these retailers get things done and influence a broad number of target shoppers – work with these guys more in the future.

12-16 Points – “Runners-up” – getting things done with these types is harder and or it’s tough to influence a broad shopper base. These should be a shopper marketer’s second priority.

8-12 Points – “Also-rans” – these guys are likely to be major time-wasters – either they take forever to convince or if they are easily convinced, they have little or no influence on the shoppers you are targeting.

4- 8 Points – “Losers” – Seriously, walk away! There’s little or no point in diverting extra time and effort  to these guys  but watch out if they are your biggest customers!

I’d be happy to curate submissions for the best (and worst retailers) globally judged by these tests, feel free to cast you votes in comments below!

How Shoppers, Shopping Behaviors And Retailers Have Changed


Shopper Marketing RevolutionWhen Mike Anthony and I started writing “The Shopper Marketing Revolution” in 2009, the world was a very different place.  In our book we set out to define a new marketing model for the consumer goods industry. In 2009 we felt the need for this change had become extreme. We saw that most companies with whom we worked with were applying a classical approach to marketing their brands. This traditional model seeks to create massive awareness through traditional media and to convert this awareness into sales through extensive retail distribution. By the end of 2009, this model was under extreme stress as media had become ‘hyper-fragmented’ and retailing had become dominated by a small number of global players.

In the four years it’s taken us to complete the book the entire landscape in which consumer brands operates has changed more dramatically than we expected. The global adoption of smartphones, the ubiquity of social media and the transformation in entertainment that services like youtube.com and youku.com has provoked has, in effect, democratized media with both positive and negative effect.

Whilst it’s now possible to finely target and focus messages on key consumers it has also become increasingly difficult to define, locate and communicate to the right people; many marketers continue to make the mistake of applying a mass media model to the digital world.  As hundreds of companies clamor to reach similar market segments the cost of media overall is growing faster than ever. IBM suggests that media costs in the first decade of the century inflated at 5.5% per annum. PWC’s research indicates that in the first 5 years of this decade, cost inflation will grow at nearly 10% a year.

In 2009 the march of e-commerce had long since begun and purchasing airline tickets and hotel rooms online was common practice. In entertainment, Amazon and iTunes were already significant players but e-commerce was only just beginning to affect consumer brands. Looking back over the last four years it’s startling to reflect on what’s changed. The book-selling industry in developed economies has swung hugely online, as has the market for video and music. The list of businesses that have died in these markets includes household names like Woolworths, HMV, Tower Records, Virgin Megastores, Blockbuster Video and Borders.

In the last two years this increase in online purchase has begun to affect consumer electronics significantly. This is a global phenomenon. In China leading retailers Gome and Suning both limped through 2012 in the face of fierce competition from online and Media Markt this week announced its departure from China. This now has a significant impact of some of the largest consumer goods companies in the world (think Samsung; Panasonic, hp and Sony). It has also led to major restructuring of the trade in developed economies; the UK for example has seen the closures of Comet and Jessops in the last two months alone.

It’s clear now that the future of shopping is online, or at least a significant share of shopping will be. Whilst the impact on FMCG brands remains relatively small, shoppers all over the world are beginning to see the benefits of buying groceries online. It would be wrong, we think, to presume that what has already happened to retail in other categories could not happen in the FMCG business.

So as we look forward in 2013, when we will finally publish “The Shopper Marketing Revolution”, we see a very different world to that of 2009. The consumer goods industry is likely to go through tremendous structural upheaval in the coming years and the model we thought was important in 2009 has now become essential in 2013. In The Shopper Marketing Revolution, we introduce a five-step ‘Total Marketing’ approach which creates an integrated strategy for driving profitable growth. This approach helps marketers, sales professionals, advertising agencies and retailers to focus investment on the right consumers, shoppers and retail channels in these exciting and challenging times.

Click here if you would like to be the first to know when The Shopper Marketing Revolution launches! 

The Future Of Shopping (Part 2)

the future of shoppingIn my last post, I discussed some recent retail casualties and covered just some of the reasons WHY shopping has to change in the future if retailers of tomorrow are to survive. Today, I’m looking into WHAT I believe that we will see this happening in 2013 and the years to come

If the future of shopping is more online, more globalized and more fun what are the implications for retailers and brands? 

 

Since we are still close to beginning of the New Year here are a few of my predictions about what we will see happing in 2013 as the future becomes reality.

Grocery shopping will move online significantly:

For most manufacturers ‘online’ is still a small share of total sales. Clients in China tell me that the proportion of sales online last year varied from 3% to 12% of total sales. This is similar for retailers. 7% of UK retailer, John Lewis’ sales in 2012 were online and nearly 13% of Debenham’s sales were online. But in all cases the growth in online sale is exponential. Grocery retail has been affected at much lower levels to date – this will begin to change this year.

Here in Asia I make a fairly unscientific prediction that by 2020, 20% of grocery purchases will be online. This is based on my view that roughly 40% of Asia’s FMCG sales will go through the 13 or so million local independent stores by 2020 and the rest will be split between chain retailers (who now hold in the region of 54% of FMCG sales) and online. This year we should expect WalMart’s investment in Yihaodian and Tesco’s launch of an online offer in Thailand and Malaysia to give online shopping a major boost towards this.

Big boxes will go into decline

The days of the hypermarket are numbered, even in markets where online will remain insignificant this year. People want to shop locally as time becomes more limited, this promotes an increasing shift towards local independent stores, convenience stores and supermarkets will see reduced hypermarket market shares. And as online really begins to bite, it will be the big boxes that start to suffer first. Expect major retailers to switch their focus towards smaller store formats to a greater degree this year.

Multi-channel will be the watchword for 2013

To those in the know this will see this statement as being desperately out of date but the idea of browsing in the real world and buying online will really take hold this year. Retailers who embrace this aggressively now via acquisition (note WalMart in China) and re-invention (note Debenhams in UK and Suning in China) will be more likely to grow through the changes in shopping habits.

Expect some major casualties

Some global players, especially in grocery retailing are really grappling with their offer and Carrefour in particular has been struggling with this for some years. It has consistently under-performed its peers in EBIT delivery,  is way behind in customer engagement (think loyalty programs and customer service) and in online offers. This year could see a major restructuring of Carrefour’s business especially as it moves into heavier waters in Asia where it’s failed to achieve critical mass and has had to exit key markets. I personally would not be surprised if we were to see another high profile exit this year.

Look out for new business models

There’s been a lot of hype about ‘pop-ups’, ‘virtual reality stores’, ‘magazine stores’ and the importance of show rooming. Many of these have yet to demonstrate that they can make money as well as noise. This year retailers, facing relatively grim trading environments will have to make this pay. Expect to see internet-based retailers creating showroom environments to engage untapped customer bases and expect to see retailers, particularly department stores in more traditional markets like Japan and Australia looking for opportunities to re-invent themselves online. Most interesting though will be the confluence of entertainment and retail, a good example of this is  Chefday.com launched recently in New York. We should anticipate more innovations like this in the coming year

Shopping behavior is changing dramatically and retail in general is going through a major shift. 2013 is likely to see acceleration in the rate of change and could prove to be a transformative year. For those businesses planning for the status quo this could lead to unexpected consequences and a need for major re-structuring in advance of 2014. Those who are already acting to engineer shopper solutions that embrace the changes ahead could well be smiling broadly next New Year.

So those are my predictions for 2013, what do you see as most important in your markets? I’d love to hear alternative views

The Future Of Shopping (Part 1)

the future of shoppingThis week one of my favorite retailers died. I used to love HMV! When I worked of Piccadilly Circus I spent many happy lunch hours checking out movies and music. But that was in in 1997 and the way we shop has moved on. Today my kids and I browse movies and TV shows on Netflix and Singapore’s pay-per-view Mio TV system, we sample tracks on YouTube and download what we like from iTunes.

It’s pretty clear now that HMV’s demise was predictable as entertainment shopping has moved from the high street to the super highway. HMV is the last of the big UK brands to go (after the demise of Tower Records, Virgin Megastores, Borders, Woolworths and – in the same week as HMV –  Blockbuster Video). It’s also true that HMV did too little too late to turn its offer around.

But what does this latest high-profile closure tell us about the future of shopping?

1) The future of shopping is online, or more accurately will have a significant online component. It seems impossible to imagine, now that so many have embraced online shopping, that shoppers will give up the convenience they now enjoy. It’s also pretty clear that no category will remain entirely immune – let’s just look at the history: first travel went online; then insurance and banking; then entertainment; and now then home appliances and computing, grocery shopping and fashion are all seeing a significant shift. China’s e-commerce rise  proves that this will be a global phenomenon and it’s fair to presume that emerging economies may embrace online faster than developed ones.

2) Shopping in the future will be even more globalized.

The internet knows no borders and even as legislators and corporations seek to limit the availability of products and services, innovators (sometimes also called criminals) are constantly finding ways to circumvent these barriers. Again I look to the entertainment industry as proof of this. Deliberately or by accident, the industry has always been stymied by limited availability. Peer-to-peer sharing was a response by high-school kids to not being able to afford to own as much music as they wanted to consume (just as home-taping was for my generation). Piracy of music and film in the developing world is most probably caused by a shortage of cinema screens and official music stores that could serve huge untapped demand. The current boom in downloading is simply the next response to limitations in content availability. In future shoppers who want global brands, major movies and access to the best insurance deals will find ways to buy them regardless of their country of origin and they’ll use the web to do this.

3) Shopping will become more interesting. Let’s face it, supermarkets are boring places. Even in emerging markets the appeal of big boxes is waning as they become a normal part of people’s lives. Globally, grocery shoppers complain about long lines, poor product availability, wasted hours and so on. Online shopping should make many of these complaints a thing of the past. Yet people still love shopping as a social experience, recent data suggests people want to go to stores to touch and feel actual products. For millions, shopping is a pastime to be enjoyed with friends and family, it’s therefore fair to predict that the relatively mundane act of paying for goods may become divorced from the relatively pleasurable act of shopping for goods. It’s likely to that in future the opportunity to experience products and services through retail spaces as well as online and in virtual reality environments will stimulate innovation in these environments that will simply make shopping much more fun.

With so much changing in the world of shopping, the shape of retail is likely to change dramatically in the coming years. I believe that we will see these major structural changes starting to have a real impact in 2013. In my next post, I’ll share how I believe this is going to affect retailers in the coming year.

2012 – The end of retail as we know it?

the end of retail as we know it?

So if you are reading this, the world hasn’t yet come to an end. The end of the Mayan calendar hasn’t yet heralded Armageddon and yet another doomsday prophecy has hopefully been put to rest.

Since the world has not come to an end, I’ve been thinking about other prophecies that have been made in 2012. One such prophecy is that offline retail is dying. I most recently heard this from Piers Fawkes during the “2013 Trends Predictions via @PSFK” Hangout when he was heard to say “The big story is that retail is dead”

Really? Dead? Let’s see.

Plenty of developments in 2012 might suggest that traditional offline retailing is in crises. Over the last decade online retail has led to the decline and closure of traditional stores in travel, music and video and in 2011 in book selling. 2012 saw the consumer appliance retail sector rocked by competition from online. In the UK, Comet filed for bankruptcy and in China, the country’s largest retailer, Suning announced its existing business model of focusing just in consumer appliances was no longer sustainable. Around the world electronics retailers struggled with what to do about “show rooming” (where shoppers use a physical environment to check out a product before buying online) and the concept of multi-channel retailing (the strategy of creating coherent links between physical and virtual environments as a way to secure greater loyalty) became common parlance in the industry.

In the US, 2012 saw the biggest daily sales online in history with Cyber Monday delivering US$1.25 billion. But the real online story was in China where TaoBao’s singles’ day promotion on 11/11 set the world record for online sales in one day at US3.06 billion through one portal, nearly three times as much. In China we also saw the greatest evidence that the next battleground between bricks and clicks will be in Grocery retail as global behemoth Walmart acquired online retailer Yihoadian. When retailers like Walmart start acquiring in this space, we should take this as a clear sign that grocery retail is about to change.

Indeed grocery retailing has changed in other ways during 2012. Speaking at the Asia Shopper Marketing & Insights 2012 conference early in the year Anson Dichaves of Nielsen suggested that Hypermarkets are in decline with fewer trips being made less often in Asia. He also signaled that the more proximate offers of conveniences stores and local supermarkets were gaining ground. A major casualty of the this was Carrefour who completed their exit from South East Asia. With their offer struggling in China too, it may be a matter of time before Carrefour, that once claimed that it was the most global retailer in the world, might be again constrained to markets closer to home.

Certainly 2012 did not see any major expansionary steps by the big global grocery retailers, but with fashion players like Zara and H&M continuing their global march it’s hard to say retail globalization has stopped.

So do all the changes in 2012 really indicate the death of retail?

Like the Mayan’s prediction, this is probably a false prophecy. Extrapolating Nielsen’s data on “Asia Pacific Shopper Trends” in 2011, there may be more than 60 million shops across the world. These employ a vast workforce – a report in the Economist showed Walmart to be the number 3 employer in the world. Deloitte’s “Global Powers of Retail, 2012” report showed that the top 250 retailers have grown faster than their major manufacturing partners over the last four years. It also showed that the top 10 retailers have nearly doubled in size in a decade.

Earlier this year new data from POPAI claimed that more purchase decisions that ever are made in retail stores, fully 76% of the decisions appear to be made in actual shops. And very recently online retailers like Bonobos.com and Yihoadian have created their own showrooms for shoppers to have a offline experience of their online offer. So to declare this industry ‘dead’ is naïve, but to deny the facts that indicate retail is changing dramatically is equally wrong-headed.

There should be no doubt that in the next year, online will pick up greater pace and we should probably expect further casualties in offline electronics retail. It’s likely that grocery retail will be the next sector to feel the effects of e-tail and this will probably start to have significant impacts on sales in 2013. Whilst this will be truer in key western markets, the huge success of China’s online retailers in 2012 is likely to drive the expansion of internet shopping in Asia in 2013.

In all probability, physical stores will be forced to innovate more in 2013 to keep shoppers engaged, and whilst this has been an imperative in the west over the last few years, it will start to impact on developing economies very soon. This will mean that retailers will seek more creative input from manufacturers and demand greater support for in-store initiatives too.

So 2013 is likely to be a year of challenge for manufacturers serving the retail industry. As shopping behaviors change, brands will have to be more aware of the way their shoppers engage within and across channels. Manufactures will need clearer retail channel strategies, based on a better understanding of which shopper segments to prioritize. These strategies will also depend on more granular channel segmentations, if anything 2012 should signal the end of ‘modern trade’ and ‘general trade’ thinking. Finally these strategies will need to specify creative ways of getting shoppers to buy regardless of whether they are online or in stores.

Featured image: Flickr – Kim-Bodia

Christmas Wish: Better Trade Terms Next Year

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Mr. W. Thorpe
Acme Inc.
909 Neverland Road
Hopewell, USA

2nd December 2012

Christmas Wish: Better Trade Terms Next Year

Dear Santa,

I have one Christmas wish: that my trade terms with leading retailers would work better for me. I’d like to feel that I’m investing in my retail partners and not subsidizing them. I wish that the money we spent could be focused on activities that really drive sales rather than buying more of the same activities that seem to deliver little or nothing. And Santa, above all, I wish that when I invest in in retail, I would actually get what I pay for 100% of the time rather than just 80% of the time.

Hopefully  yours,

Billy Thorpe

Sales Director (Acme Inc.)

 

37523

 
Mr. S. Claus
1 Northridge
North Pole
 

3rd December 3, 2012

RE: Christmas Wish: Better Trade Terms Next Year – The Gift Of Conditionality

Dear Billy,

Thank you for your Christmas wish, which was rushed to me by one of my elves. Here at the North Pole we work all year long to grant the wishes of little boys and little girls at this special time of the year. I know that many of their mummies and daddies are also busy at this time of the year trying to meet the demands of their major customers.

We know that many people like you, Billy, have spent the last few months working hard on business plans and presentations, laying out all the wonderful things you have in-store for retailers in the coming year. We also know that about now, many of you will be busy negotiating your trade terms. So this year we’ve decided to give you all an early Christmas gift. We call it the gift of “Conditionality”.

“Conditionality” helps you to get what you want from your trade terms, it makes trade terms performance-based and it changes ‘Trade Spend’ into ‘Trade Investment’.

Here’s how it works:  you decide, based on your target shoppers’ behavior, what you wish for in the store, then you make that wish a condition of the money you pay to retailers.

Let’s say for instance that your shoppers buy to a plan and will shop elsewhere when products are out-of-shelf, then wish for availability. Ask for commitments to minimum order quantities, shelf inventory and shelf space in exchange for financial support. Or pay an incentive in return for compliance to plan-o-grams in-store.

If your target shoppers might switch from a competitor they understood more of the benefits you offer then wish for communication. Tie retail terms to the execution of signage, in-store activations, compelling shelf layouts or the use of mobile technologies.

And if, like many brands at this time of the year, having your product in the pantry will lead to greater consumption, wish for more effective offers. Make payments to retailers conditional of execution, off-take, redemptions by target shoppers and focus investment on key consumption occasions.

The gift of conditionality works for everyone: shoppers get what they want in store; retailers get focused investment and you get real returns. All you have to do to give this gift is to make your wish list before you negotiate with your retail partners and exchange what you want for what they want.

Don’t wait ‘til Christmas to enjoy this gift though Billy, you can benefit right now, just remember to say “If you invest in me, then I’ll invest in you!”

A very Merry Christmas to all…

Santa Claus

P.S. Do remember to wait until you’ve got what has been agreed before you pay your trade partners!