Archive for November, 2009

Black Friday Results: You Can’t Take Traffic to the Bank

Saturday, November 28th, 2009

Almost every news item surrounding this year’s Black Friday shopping ritual focused purely on store traffic and consumer turnout. The media was consumed with stories of which retailers had the biggest line-ups of overnight campers. News-wires were humming with up-to-the-minute reports and video of consumers sprinting through stores to get their hands on blow-out bargains. Details of price-cuts on everything from apparel to electronics dominated the press.  Even Canadian retailers got into the fray to keep domestic consumers and their now strong Canadian dollar above the forty-ninth parallel.

Meanwhile, retail analysts waited with bated breath for the results to be tallied so they could diagnose the general health of the retail sector. Sort of like a capitalistic version of Groundhog Day, with entire retail industry anxiously awaiting the consumers’ ascent from their hole. All that seemed to matter was that top-line sales numbers were better – even marginally – than last year.

What I found most disturbing was that in all the commentary surrounding Black Friday there was barely a mention of profit. Amidst all the talk of slashed prices and crowd-control, no one seemed the least bit interested if retailers would actually make more profit this year than last. Isn’t that kind of important? Isn’t the true health of a business measured by its profitability?

The fact is that the mathematics of discounting can be frightening. Assuming your costs don’t change, simply reducing price puts you in a position where your volume has to increase exponentially to make up the shortfall in profit. For example, a mere twenty percent discount on an item that has a forty percent  profit margin, represents a decrease in gross profit of fifty percent. Put simply, to earn the same profit, the retailer would now have to sell twice as much! I don’t know of any retailers who reported selling twice as much this Black Friday as they did last year.

The whole Black Friday ordeal seems oddly indicative of many of the problems that got us into this economy in the first place – the attitude that real growth is no longer a requisite for success. Whatever boosts the share price becomes the “strategy de jour”. And the media would rather churn out easily digested hype than examine the real facts and their implications. Why let the truth get in the way of a good story?

For my part, I’ll be watching the numbers too. The ones that will interest me most, though, are all on the bottom line.

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Posted in Marketing

6 Reasons Why Twitter Makes You a Better Marketer

Wednesday, November 25th, 2009

By Doug Stephens

There are many reasons why retailers should be incorporating Twitter into their marketing mix. One important thing that no one seems to be talking about, however, is that using Twitter to market your business will make you an infinitely better marketer.

I know this may seem counter-intuitive given Twitter’s micro-blog format—which to the uninitiated appears to be nothing more than an endless stream of short information bites—but it’s precisely the abbreviated nature of Twitter that can make us better and more effective marketers.

Here’s why.

1. Clarity is Key: It doesn’t matter if you’re Al Gore or Ashton Kutcher, you get a maximum 140 characters, no more. Within that space, you need to clearly position your brand, product, or call to action. Amazingly, with some practice, this restriction can produce Zen-like clarity in your messaging. When you think about it, the best marketing messages are rarely wordy or complex. They’re clear and straight to the point. Twitter trains you to do just that.

2. Self Promotion Doesn’t Work: Blatant self-promotion has always been a bad marketing tactic but through the lens of Twitter it looks even worse. Twitter forces marketers to find ways of being important to consumers without being self-important. By promoting the needs of the consumer instead of promoting yourself, you’ll literally learn how to create a community of customers. A lesson many marketers never learn.

3. Reaction in Real Time: One of the huge problems with conventional marketing is lag-time. By the time the campaign is conceived, packaged and broadcast, we’re usually onto developing the next campaign. By the time consumer reaction begins to filter in, it’s usually too late to affect the positioning or execution of future communications. And so it goes. With Twitter, you know within hours if your message has resonated and spread. With real-time insights, you can fine tune your content to consistently connect with your followers.

4. Money Doesn’t Buy More Space: Marketers often complain that if they only had more money they could buy more attention, often resigning to being out bankrolled by their competition. With Twitter, everybody’s wallet is the same size: 140 characters. Sure, if you’re Best Buy, you can get more people in your company tweeting but that’s no guarantee of success. Look at some of the top re-tweeted Twitter users. Many are individuals and not large companies.

5. Twitter Models Real Life: Twitter is a great real-time representation of the sheer amount of marketing traffic consumers are subjected to every day. Therefore, it’s the ultimate testing ground for your message and your ability to connect to consumers. If you can break through the noise on Twitter, you can do it anywhere!

6. Twitter Makes You Smarter: Twitter is a proverbial fountain of information! Used wisely, you can vastly improve your knowledge and expertise as a professional. You’ll be amazed at the competitive advantage that this new level of insight can create.

If your a Tweeter and can add to our list of reasons to use Twitter, leave us a comment!

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Posted in Marketing, social media

Is The Home Depot Selling the Farm… One Parking Lot at a Time?

Wednesday, November 18th, 2009

By Doug Stephens

You know business is tough when you have to sell off parts of your parking lot to make your revenue numbers.  However, news out of Atlanta suggests that’s exactly what home improvement giant, The Home Depot intends to do. Saddled with too much asphalt and too few customers, the one-time retail juggernaut is seeking buyers in retail and food service to set up shop on its tarmac – of which it owns approximately 89 percent.

According to Home Depot’s Vice President of Real Estate Mike LeFerle, the company has identified unused portions of parking lots at hundreds of its stores in the U.S. and Canada. They will be looking to sell to complementary businesses that target a similar customer base. Parcels are said to be approximately half an acre or more.

The question being asked by some industry experts is “Shouldn’t Home Depot be focusing energy on filling those parking lots with customers instead of selling them off? Others see the move as a smart use of capital that will give the chain the short-term cash it desperately needs, given the decline in its store business.

In my opinion, both views miss the big underlying issue. The implications of this move speak volumes about the long term future of The Home Depot  – and all big box formats- as a business model. Here’s why.

When Home Depot built these stores, they constructed parking lots to mathematically accommodate peak store traffic levels – it’s a pretty exact science. The size of the parking lot is directly proportionate to sales expectations. With that in mind, you don’t cut the size of your parking lot by acres at a time, in response to short-term market downturns. Permanently reducing the size of the lot is a clear admission that the store will never again achieve the peak level of traffic it was built to accommodate. That’s important because this could be the first time that Home Depot has ever definitively signaled that they’re current store model can’t be supported in the long run.

But it makes perfect sense. Not only are Baby Boomers on the down-size, many have been beaten up financially. Secondly, in the cold light of recovery, the excess consumption of the last twenty years seems to be giving way to a more sober and responsible attitude toward spending in general. Lastly – and this is the showstopper – the boomers’ closest demographic cohort, Gen X is significantly smaller as a generation – some estimate as much as fifteen percent smaller. In other words, even if Gen X spent like drunks, they likely couldn’t reach the post-crisis spending levels of the Baby Boomers.

So, while selling off unwanted parking lot space may offer short-term cash, it doesn’t really constitute a long term strategy to deal with what are shaping up to be some substantial long term issues.The real question is, once you’ve sold off all your unproductive parking lot space, what’s next?

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Posted in The Future, Trends

The Future of Retail Is NOW

Wednesday, November 11th, 2009

By Doug Stephens

In 1998 Wired published an article authored by the now famous Nicholas Negroponte, called The Future of Retail. I recently re-read it to determine how many of the prognostications have actually been realized these eleven years later.

In general it was a vision of consumers, empowered by online shopping options, banding together to systematically sidestep retailers and deal directly with manufacturers and online wholesalers. He suggested that we’d be having so many things delivered to our door that special refrigerated containers would be required outside our homes to hold numerous daily deliveries, including groceries. Negroponte suggested that if retailers were to survive this online onslaught, they would not only have to deliver products but also ensure an outstanding store experience. Even Wal Mart, he noted, would have to raise their game.

Negroponte was almost completely accurate in his forecast. There was only one problem: he was a decade early.

In Negroponte’s defense, in 1998 few could have predicted that North American consumers would continue on what proved to be a twenty-year spending spree fueled by an unprecedented decline in the personal savings rate. In fact, from 1985 to 2008, the rate of personal savings went from its 20 year average of approximately ten percent to less than zero percent. We were buying with absolute abandon and we were doing it with money we didn’t have.

We were increasingly empowered by the internet to make intelligent and responsible purchase decisions but were too busy buying things to bother. We were high on consumption.

What it meant for retailers was a twenty-year “get-out-of-jail free” card. Most didn’t have to begreat to be successful. Despite consumer protests about the decline of personal service, big box retail flourished. Regardless of known human rights issues among certain retailers, we willingly funded their growth. Even if we got gouged on price every so often, it wasn’t going to stand between us and the goods we wanted!

Post-crash consumerism

That was then and it seems that this could be the now that Negroponte envisioned over a decade ago. As post-meltdown consumers, we are spending less and foregoing (for the moment at least) what we cannot legitimately afford. When we do spend, we want the best value for our money. This means validating product performance claims, comparing retailers, shopping on-line and using the full power of social networks to pre-shop products and services -doing all the things the internet enables us to do.
In other words, we not only have the information to make the best buying decision but we can no longer afford not to use it.

The day of reckoning

For retailers it all adds up to an important day of reckoning. Even Wal Mart, who recently announced its store improvement program, Project Impact, clearly acknowledges that the consumer expects more… much more than they’ve been delivering. Starbucks too is retrenching, offering new products at lower price points while re-establishing service levels. High-end retailers are taking their products to online by-invitation-only sale websites in an effort to coax consumers back.

For some store brands this will be a great opportunity to shine. For others, it could be lights-out. One thing is certain, it sure won’t be business as usual.

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Posted in The Future

Apple Lends A Little Magic to Disney

Wednesday, November 4th, 2009

By Doug Stephens

Walt Disney Company announced earlier this month that in an effort to reverse the ill fortunes of its 340 U.S and European retail stores they would be undergoing a transformation. What was perhaps even more interesting was the fact that they enlisted the help of Apple’s prophetic leader and Disney board member Steve Jobs. Jobs was reportedly brought into the project over a year ago to lend vision and design sense to a concept that Disney is now calling Imagination Park.

While Jobs certainly didn’t do the heavy lifting on the project, he’s credited with urging Disney to “dream bigger”. Rather than simply renovating their stores, he opened Apple’s retail playbook for Disney to study, transferring many of the mechanics of Apple stores over to the new Disney concept. Not surprisingly, his influence yielded a decidedly experiential direction for the new store concept.

While we mere mortals could never dream of engaging the help of someone like Steve Jobs, there are some valuable lessons that we can take from this. Lessons that are transferable to any size of retail operation.

1. Product knowledge isn’t everything: If Steve Jobs can’t name all seven dwarfs it doesn’t matter. What he clearly understands is experiential retailing and that’s what Disney’s relying on to breathe life into its stores. The world really doesn’t need another Mickey Mouse t-shirt but it certainly needs new and exciting retail experiences. So, don’t get hung up on product. Always be on the lookout for great ideas and innovations outside your own product category.

2. Even great companies get stuck: You’d assume that if anyone could stage a store experience it would be Disney, but even they needed outside coaching. Don’t feel bad if you hit the odd creative rut in your business and don’t be afraid to ask for help. Call in people you respect from a wide range of professional and personal backgrounds and keep an open mind. You may not agree with everything they have to say, but you might also pick up an idea that transforms your business.

3. Experiences are tough to copy: Whether it’s a Tinkerbell tiara or snow tires, your product can be knocked off or substituted. Experiences on the other hand, are not only difficult to replicate, they allow you to command a premium for that very same product or service. Choosing what to sell is the easy part — designing the experience through which you sell it is where the true payoff lies.

4. Retail Should Be Fun: If kids don’t have fun in a Disney store it’s conspicuous, but shouldn’t we look at all retail the same way? Why shouldn’t I have fun in my local shoe store too? The truth is, most shopping is merely tolerable but in a world where consumers can get whatever they want without leaving the house, we need to bring the joy back to shopping! Find a way to make your store fun.

5. Innovate in downturns: In tough economic conditions, most businesses put a moratorium on progress and innovation. This is precisely why smart businesses don’t. Such times are not only opportunities to open up competitive distance, but your innovations stand a better chance of being noticed in a quieter market. I’m not suggesting you break the bank but don’t stand still.Who knows…perhaps by applying these lessons to our own businesses, we can all dream a little bigger.

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Posted in Store Experience

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