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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If It’s Not Strategic, It Isn’t Shopper Marketing

Shopper Marketing StrategyThere has recently been a huge amount of debate recently as to whether shopper marketing is strategic or tactical, especially following Mike Anthony’s post on whether shoppers are consumers or not.  The major fact of the matter is that shopper marketing has been mis-defined for too long. Without a clear view of what shopper marketing is – the debate on what it does will rage. So just what is Shopper Marketing?

Shopper Marketing is marketing. 

Marketing in its many classical definitions boiled down to a simple proposition: identify a target customer, define that target customer’s behavior and figure out a way to change the targets’ behavior to the benefit of your brand.  As consumer goods marketing has evolved, the customer has come to mean different things and in its most common interpretation, the customer is generally seen to be the consumer – the person who uses the product. Over time a second definition of the customer has also arisen: the retailer. Most consumer marketers accept that unless they can secure distribution for a product, via a retail outlet, they can’t efficiently monetize consumer demand.

The Importance of the Shopper

So why all the fuss about the shopper? Mike’s recent blog explains this brilliantly. Consumers and shoppers behave differently (even when they are the same person). When we consume something we are responding to a need or a desire that arises on a certain occasion. Assuming that an appropriate product is available to us, our experience of consumption will re-affirm those needs and desires – driving a cycle of consumer behavior. This cycle of behavior explains why we brush our teeth at least twice a day and how we create a preference for a brand of toothpaste.

Shopping is different; we recognize a gap in the consumption cycle when a product is no longer available to meet our needs and desires on a specific occasion. So we set out to close that gap. At this point we start thinking about the constraints we have in time, money or attitude and we select an outlet that we believe might service our demand within those constraints. Inside the shop, we seek out a product within an outlet and we choose something that best meets our perceived requirements within our constraints. This explains why, even if we prefer a certain brand of toothpaste, we might often buy something else in a particular situation. Shoppers behave differently, and they should be treated as a different and additional customer.

To Change Behaviors, Think Of The Shopper

‘Clearly the consumer and the shopper represent different targets, so if we want to change these behaviors, we need a different approach: The things that influence a mom to buy a product for her kids are different to the things that make her kids want it in the first place.

Shopper Marketing embraces this and accepts that if you want to make a consumer use a product, you have to get someone to buy it. Shopper Marketing is the process of creating and executing a marketing mix to change purchase behavior in order to drive the consumption of a brand.

 Is Shopper Marketing Strategic or Tactical?

Why the debate about whether this is strategic or tactical? Well most of the ‘shopper marketing’ we see is the marketing mix that gets implemented in shops. In fact there are a lot of misguided people out there who have decided that all Shopper Marketing  is nothing more than stuff you implement in stores. This is daft. It’s like saying that an advert is great consumer marketing. The advert is the tactical expression of a marketing mix that has been designed to influence a target consumer’s behavior. The marketing process that got to the creation of the advert is recognized as being strategic. So is also the marketing process of establishing exactly the right target shopper whose behavior needs to change to drive consumption.

It’s fine to recognize great Shopper Marketing tactics when you see them in-store, but to presume that they are not playing a role in a strategic process is short-sighted. The fact is that marketing is changing. The boys and girls who are driving this change have recognized that a long-term strategy for growth needs to build consumer demand AND change shopper behavior to service this.

I think this is where the battle lines are drawn. Those businesses that think this is all terribly tactical will see an increase in the expenditure with little or no return in growth or market share. Those that recognize shopper marketing as a strategic pillar are already reaping the rewards of increased efficiency and better results. You have a choice in how you want to play this, for those seeking to build a strategy, feel free to contact us at engage!

Shopper Marketing Revolution or Evolution?

Shopper Revolution or EvolutionI blogged a couple of weeks ago about whether shopper marketing meant the end of category management. With thanks to POPAI this turned out to be one of the widest read posts I’d ever written. I was also excited by the level of comment it provoked. Some wholeheartedly rejected the idea that that Shopper marketing was anything more that the logical evolution from category management, whilst others passionately argued that the two were separate and that shopper marketing was an entirely new discipline.

So which is it? Well, as a co-author of an upcoming Shopper Marketing book, I wear my heart on my sleeve. In our book we argue that consumer goods businesses have been challenged to respond to three distinct era’s in their development. The first was the era of the consumer-led manufacturer, when the concepts of contemporary consumer marketing were born. This era lasted from the end of the second world war until the early 80’s and was marked by the dawn of ubiquitous mass media, the creation of consumer brands and the beginning of the consumer culture.

As media fragmented, brands proliferated and retail began to concentrate, the era of the retailer began. Brands found it increasingly difficult to reach their consumers and the idea of marketing at retail came to the fore. Manufacturers created trade marketing functions and embraced category management as vehicle for engaging with retailers.

I think many in the consumer goods industry believe that we are still in this era, and I believe they are wrong. For the last few years we have seen a number of signs that the age of the retailer is fading. We have seen e-commerce put huge pressure on traditional retail models, making shopping at once more global and more personal. Concurrently channels have proliferated in almost every significant market offering more choice and convenience to shopper. Finally the dawn of democratized media (note I don’t mean “a democratic media” but rather the opportunity to access and create media in one’s palm) forces the rules of mass-market communication to change.  I believe we are now entering the age of the shopper where the purchasing power of the individual is such that developments in consumer goods are driven by neither the manufacturer nor the retailer but by a much more empowered shopper. It is in the environment that the concept of shopper marketing has been born.

This is a major change in the environment, in the words of Brian Harris, “There has probably never been in the history of consumer and shopper behavior a bigger change between one generation and the next in terms of the aspirations and the requirements of shoppers and the tools and methods they use to meet their shopping needs.” If this is an accepted fact, the consumer goods industry cannot continue to employ strategies that worked in the 60’s and 70’s, nor can it use approaches that worked in the 90’s and early this century. Hence my earlier suggestion that the traditional core of consumer goods marketing; the idea that brands succeed by creating massive awareness and converting this awareness through massive distribution; cannot survive in this new world.

An evolutionary response, one that says we can adapt and enhance our current behaviors, in my view simply won’t cut it. If the controlling factor in the environment is no longer the retailer, then looking to a retail marketing solution is likely to fail.

In my view this is the fault in arguing that shopper marketing is the ‘new category management’. What shopper marketing asserts is that consumers and shoppers are different in their behavior, so different marketing solutions must apply and that these marketing solutions do not necessarily occur in retail. So getting better ‘in retail’ is paradoxically not the only way to enhance marketing to shoppers.

I see shopper marketing as an entirely new marketing discipline that needs to be conducted in conjunction with consumer marketing and customer management. This is requires a dramatic shift in the entire paradigm of marketing itself because it requires companies to think consumer – shopper – customer. This requires the whole organization to change and those at the heart of this change don’t see this as a gentle evolution but rather a significant revolution.

Does Shopper Marketing Mean The End Of Category Management?

Category Management 8 Step ProcessWhilst researching and writing, “The Shopper Marketing Revolution” which I wrote with Mike Anthony, I got the opportunity to speak with and get to know Dr. Brian Harris. Back in 1989, Brian effectively ‘invented’ Category Management by publishing an 8-step process which has guided collaboration between retailers and consumer goods companies for the last 23 years.

I asked Brian what the advent of Shopper Marketing meant for Category Management and his response was interesting. Brian sees Shopper Marketing as the latest evolutionary step of retail marketing, which began in the 70’s with product scanning and has passed through category management, ECR and into collaborative CRM.

In our book we take a different view. We make the case that shopper marketing creates a revolution in consumer goods marketing in general. We believe that the traditional core of consumer goods marketing; the idea that brands succeed by creating massive awareness and converting this awareness through massive distribution; cannot survive in a world of democratic media and dynamic retail structures. We advocate that by expanding the focus of marketing to drive the creation of different consumption behaviors by changing purchase behaviors, marketing becomes more complete and more effective.

So is category management dead then?

Well Brian accepts that the collaborative process he originally created is perhaps a little unwieldy today but he asserts that as a core retail practice category management will continue into the future. We agree; retailers cannot and should not put aside the imperative to grow category sales and we believe shopper marketing enables suppliers to work better with retailers by sharing a common understanding of shopper behavior.

This doesn’t mean that shopper marketing is a “big retail thing” nor does it mean that we advocate “doing category management”. Far from it, but we think many practitioners risk getting hung up as the confuse shopper marketing with category management and this does need clearing up.

First things first, let’s be clear that shoppers shop everywhere and not just in organized supermarket chains. If you really want to create a complete picture of how best to market your brands to consumers and shoppers you have to consider all the environments people shop in from small independent retailers, c2c portals, e-commerce sites and hypermarkets, to name but a few. Category management by contrast is only fully applied by a small group of very well organized (generally grocery) retailers.

Further, category management is a choice, not a business imperative, for most manufacturers. This choice has some significant advantages but comes at a stiff price to. Category management can be an extremely effective way of securing retail implementation from retailers who have a synchronous shopper profile with a brand, but the category management process can be costly and if the chosen retail partner is not effective at implementation this cost can be wasted. Shopper marketing helps make this choice work more effectively.

Companies who want to work really well with their customers using category management today have to start with a clear understanding of which consumers they are targeting and what they want them to do. Knowing this enables them to target shoppers and shopper behavior more clearly and helps define which channels they should prioritize. This makes selecting a retail partner easier and further creates clarity of the outcomes that will work best in retail environments.

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!

Is Shopper Research The Only Option?

Is Shopper Research The Only OptionRecently, I’ve been spending a lot of time talking to marketing teams about how they can use shopper insight. On a number of occasions, I’ve been asked “doesn’t that mean that we’ll have to do loads of shopper research?” The answer to this question lies in the “shopper fitness” of the company. Some companies are like professional athletes when it comes to shopper insight – they have heaps of well-structured data which is used create clear strategies and plans and they work on it daily to hone their skills. Others don’t. We all know that to perform build muscle, you need spend a lot of time in the gym. The same is true with developing shopper marketing muscle – you have to work with and develop broad data sets to become really effective.

But just like novice athletes, getting going can seem daunting. And as with all things, taking the right first steps builds a foundation. Here’s a few tips that might help:

  1. Recognize you probably already do some shopper research: The start point for most shopper insights is often an understanding of what is bought where and in what quantities. So measures of retail sales are simple and accessible measures of shopper behavior. If you are buying data from Nielsen, GFK or similar providers, you are already buying data about shopping behavior (and importantly not about ‘consuming behavior’). Homescan™ type data gives you an idea of who is buying what, how often and where. If you are able to analyze data from retailers, a further level of detail is possible. All of this is ‘shopper research’ you are already doing. 
  2. You could be learning more about shoppers without spending money: Every single week, brands make subtle changes to how they are presented in retail. These changes have impacts on shopping behavior that are measurable. If these activities were evaluated carefully two things would happen: companies would learn what has a positive and negative effect on shopping behavior and they would save money by not repeating activities that have negative or neutral activities. We often meet people who avoid evaluating activities because they believe they don’t have enough data and yet, ironically, by evaluating activities one creates a massive amount of data.
  3. Don’t spend any money on research until you know what you want to know: Shopper research can be really disappointing. It’s quite common to hear that a whole load of work has been done and nothing has been learnt. Most often though the reason for this is because the questions asked are low value. If you want to drive consumption of a brand, shoppers will need to change their behavior to fill gaps in consumption so questions like “Who would buy product for our target consumer or consumption occasion? What stops them from buying? Where could we influence them to buy? AND, What would make them buy in those places?” would all help drive sales and consumption. Before you start a research program it’s wise to be super clear on the consumption occasions the brand needs to deliver upon and define what’s missing from your existing understanding.
  4. Remember you might be wrong: A lot of business decisions are based on beliefs. Research tests the validity of assumptions and therefore challenges belief. What research does not do is lie (unless it’s extraordinarily misconceived). So a well-researched hypothesis which shows that beliefs are wrong should never be ignored. So this poses a challenge to most businesses which is that if they are not prepared to act on the insight they get from research, it’s not really worth spending the money on research. After all as Mike Anthony often says, “you can be wrong for free”.

If your business is on the brink of beefing up its shopper marketing muscle right now, taking the following steps will get things going: First do an audit of the data you already have and define what this data tells you about consumers and shoppers; then identify the data that could easily be sourced that might fill in the gaps and start gathering that (for example data you can get from evaluating activities, voxpops you could run, in-store observations, customer interviews and so on); finally establish what you really need to know and build some research hypotheses to test. Overall you will find this is much effective way to start than jumping straight ill-conceived research programs.

It would be great to hear some success stories from anyone who tried other approaches.

 

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