Paco Underhill

About Paco Underhill

Paco Underhill is the CEO and Founder of Envirosell, a behavioral research and consulting firm with 10 offices globally. Paco and Envirosell’s work has been featured in The New York Times, 20/20, National Public Radio, Smithsonian Magazine, Wall Street Journal, and other major news media. Paco is also the author of What Women Want, which was published in soft cover edition by Simon & Schuster in July 2011; Call of the Mall, a walking tour of the American shopping mall; and Why We Buy, the bestselling book about retail in history. In addition, Paco’s columns include regular features in major trade publication DDI Magazine, as well as Goldman Sachs’ in-house publication.

Lessons from Offshore

paco1Lesson #1 – Returning Turtles

“Organized retail” is the term we use to describe modern trade in the emerging market. It is an explosion that has quietly been transforming access to goods across the planet. In most emerging markets, the first intrusion of organized retail is the modern grocery store or hypermarket; however, it has stretched beyond big boxes, to specialty retail, foodservice and how malls are built.

paco2Local merchants that have ventured to the United States and Europe are behind much of that transformation. They have left home to get educated, observe and process, and then return to to reinvent. One early example is Thailand-based Lotus, an agribusiness broker that saw organized retail as a way of vertically integrating in the early 1990s. During the first Asian money crisis of 1997, Lotus sold its first attempt at retail, a grocery chain in Thailand, to Tesco and then made the decision to bet on China. In 2014, Lotus not only operates nearly 60 retail superstores in China (which sell the food products they produce), but also owns many of the shopping malls (such as Super Brand Mall in Shanghai, pictured) where their stores are lead tenants. [Read more...]

Your Local Fruit Stand is a Bellwether

IMG_0139On the corner of 7th Avenue and 12th Street in Manhattan is a fruit and vegetable cart. Others just like it are scattered across New York City. They tend to be run by hardworking immigrants willing to stand up all day and put up with whatever weather comes their way. I’ve passed this stand thousands of times as I walk to and from work. Last fall, I stopped for the first time noticing that the same blueberries and blackberries that have now become my breakfast staples were cheaper than in the grocery store down the street; the same box and brand, but 25% less.

In retrospect, it makes perfect sense since my grocery store pays more in rent than the street vendor does. It wasn’t just that the berries were cheaper; when I actually compared the other fruit and vegetable prices, everything else was too. I started buying avocados, eggplant, onions and melons. Not only was it cheaper, but it was more convenient. Yes the selection was narrow, but it met my needs. The vendor was friendly, and his name was Ali. [Read more...]

Three Dirty Little Secrets

Alexander Mcqueen London, Old Bond Street, London, W1, United Kingdom Architect:  Pentagram Alexander Mcqueen, Showroom, Pentagram, London, 2002, Overall View Of ShowroomGlobalShop, the retail design expo, had its three-day extravaganza in Las Vegas the middle of March. Like Euroshop, its continental counterpart, it is a gathering of brick-and-mortar assets: flooring and mannequin companies; fixture and signage manufacturers; point-of-purchase display companies … and more. There are receptions, cocktail parties and lunches, and lots of meetings to imbibe in adult beverages. VMSD and Design:Retail, the two trade magazines covering the industry, put aside their differences and celebrated the occasion enthusiastically. Still, however happy the gathering was, it is hard to avoid the dark clouds looming on the horizon. [Read more...]

The Meaning of Time

SONY DSCAll of us move through our lives with a clock ticking inside our heads. Even in troubled economic situations, time, rather than money, is our most important commodity. That clock tends to tick at relative degrees of loudness. You can meet a friend at Garden State Plaza Mall for the afternoon, and the clock ticks softly, a kind of shopping therapy. At the same mall another time, you want to get in and out as fast as you can. In other words, the meaning of time can change.

My mother was relieved when a 7-Eleven opened a location close to our suburban home in the 1950s. The idea of buying milk for a young family any time of day was a godsend, even if she did have reservations about both the price and quality. Ask a Millennial today where they buy milk, and you get an eclectic list; the drug store, the grocery store, the convenience store, the mass merchant, even the office product superstore sometimes stocks milk. In parts of Europe, you can even buy milk at roadside vending machines. [Read more...]

Field Notes on the New Face of Affluence, the Migration of Wealth and Changing Cityscapes

Paco-Final-imageThe most frightening story of 2013 that reverberated across the retail world was the terrorist assault on the Westgate Mall in Nairobi, Kenya. More than 70 people were killed. One of the key premises that have driven the expansion of shopping malls and the growth of organized retail across the world has been safety. Malls provide a secure, climate-controlled and clean environment, and for both old and new money consumers. In emerging markets like Kenya, it is a leap from the 19th to the 21st Century in one self-contained property. The mall has a suite of interchangeable parts, from brands to food courts, which makes it as close to a global vocabulary as you get. Where it gets different is security.

In Brazil, some mall security services are linked to boxing schools. The guards are well dressed, but have scar tissue around their eyes. In malls in India, your trunk is inspected and the undercarriage examined with a mirror. In Israel and Turkey you pass through a metal detector, like Checkpoint Charlie at the airport. By comparison, North America mall security is window dressing. [Read more...]

Darkness at Dawn

iStock_000012485261SmallThe closer you get to the Equator, the more dawn and dusk become switches rather than transitions. It’s dark, it’s light.

I’ve learned as a global traveler to keep the curtains open at night, my goal to be in bed shortly after sundown and up at first light. Recently, I had a corner room at a hotel with floor-to-ceiling windows on two sides. The view of Paulista and the rest of São Paulo turned on a little before six; the cell phone towers, the park below and the high-rise buildings looked like uneven stubble on the contours of a Brazilian chin.

I was picked up at 7:00 AM by my colleague, the CEO of a publicly traded shopping mall company, in his Land Rover and we headed across town to the private airport to catch our turbo-propped Sky Master. We were headed for Brasilia. The traffic was heavy, and as we inched our way around a traffic circle, I lowered the window on the passenger’s side to stick my hand out and help get us to the outside lane. The driver gasped and I realized the window was almost two inches thick. Bulletproof. I struggled to get the window back up. The stupid Yankee had comprised the moving security perimeter. It took two security guards at the airport to tease the window back to its original position. [Read more...]

Musings on Who’s Really Addressing the Aging

Robin_Report_Sep2013_stock3America’s Care Providers

My mother died two weeks ago at age 90. She had been diagnosed with Dementia 10 years ago. Her slide into darkness was heartbreaking. Even at the end, part of her remembered who she was; an alpha female with a long history of public service and 50 years of marriage to a successful diplomat and Cold War warrior. When my father, her husband, died of leukemia in 1999, he had been in full command of his faculties. We suspected he planned his death as carefully as he negotiated treaties. It was so different from witnessing my mother over the last months clinging to life in the face of discomfort and confusion. Aging doesn’t always look like the brochures for retirement homes or annuities.

My mother had felt abandoned by her husband’s death. I gather this is an emotion that is not uncommon in a close marriage. She moved from the family compound to a new condo, and the decline started. She totaled her car and was found to have both an expired license and lapsed car registration. The local Baptist minister was driving the car she hit, and thanks to small town ecumenicalism, she was forgiven. But we took away her car keys. The next nine years were difficult. In our family, like so many American families, the burden of elder care fell on my sister. I was just the supporting cast. My sister often described herself as being inside a care provider sandwich – with our mother and her own teenagers as the slices of bread. [Read more...]

A Secret (Sensual) Garden

tropicalFor more than 40 years, I’ve been making the pilgrimage to the greenhouses on the campus of Wellesley College. Named for the eminent Horticulturist Margaret Ferguson, the 16 interconnected greenhouses contain some 1500 different types of plants. The Brooklyn and Bronx Botanical Gardens may be bigger in size, but they cannot match the solitude and accessibility of this facility. It is as fast and inexpensive a world tour of nature as you can pack into 7200 square feet. As a troubled teenager in Massachusetts, I’d visit the “tropics” on a cold winter afternoon and experience the rich smells of my youth spent living in Asia. It was as close to the sentiments of The Mamas & the Papas in California Dreaming as I could get.

The greenhouses, then and now, contain rare collections of caudiciforms, mangroves, floating aquatics and my favorite, carnivorous plants. The Desert, Tropic, Hydrophytes and Fern greenhouses are distinctly different climate zones where the look, scent, feel and touch are as sensual and distinctive as any environment I’ve ever experienced. Each is a temple to the synergy of contemplation and botany. [Read more...]

Caracas Lost Dreams

The Robin ReportI noted more than a few binoculars focused this morning on the military airfield outside my Caracas hotel. It’s likely they were searching the ground for evidence of the military coup I heard whispers about last night in the hotel bar; but who knows in Caracas. Even the journalist interviewing me this morning made reference to the challenges of living in a Communist country; Venezuela is in midst of crisis. The recently botched election recalls the passionate controversy of George Bush’s results in Florida in 2004, except it’s unimaginably worse.

In 2013, I can’t think of a well-grounded leftist intellectual that can defend actualization of the Karl Marx syndrome we witnessed in the 20th Century. Russia, the former Soviet Republics, and Eastern Europe have all moved on. By most gauges, shedding this ideology has brought improvement and positive change. Poland grew faster last year than any other nation in Europe, which in the midst of our recession may not be saying much, but still says a lot. Of the three Asian remnants of Communist ideology, China and Vietnam have cherry-picked through Das Kapital and added doses of Confucian and Keynesian economics to craft some semblance of prosperity. North Korea has abandoned all logical thought; the only question is how much of the rest of the world they intend to take with them when they go.

Yet dear reader, this is a newsletter about retail, so here is our thread. In my trip to the supermarket in Caracas this afternoon, there was no coffee of any variety on the shelf, and the reek of rotting meat was stomach turning. People wait in long disorganized lines for basic food supplies. We are witness to the tragedy of governmental pricing control for food; Venezuela has gone from an exporter of food to an importer over the course of its Chavezian transformation. Today, much of its basic food needs are imported from the United States.

My economist colleagues predict that global food prices will increase country by country by 10% to 20% over the next year. While the precise number is anyone’s guess, it’s a fact that food costs are increasing by at least twice the rate that global wages increase. How are we going to continue to feed ourselves?

The answer, in part, rests in the world of retail where for almost 30 years we have watched a concerted effort to engineer both value and fair profits from the supply chain. From growing, to trucking, to minimizing waste and mechanizing the modern warehouse, the degree to which the increased costs of basic food commodities have been passed on to the consumer have been limited for us living in First World nations. Thank Walmart, Tesco and Auchan; but also thank the farmers markets, the slow food movement, and the advent of local community-supported agriculture (CSA) organizations.

At both ends of the First World retail spectrum, we are watching innovation and reinvention driven by competition and local entrepreneurship. At best, we ask government to get out of the way. We’d rather have the local farmers market manager certify a farmer’s products than the FDA, although we need to embrace both in the flawed, but preferable, world of Capitalism.

Journalists keep asking me –- whether it’s here or in Shanghai —how are we going to feed ourselves in the next five years, both from the standpoint of cost and safety? My answer is always the same: Price controls are not the answer, but organized retail can, and will, do its part. The process takes time, but it does work. The places that will feel the most pain over the five years are those where global organized retail is not playing a transformational role in a local economy. India is a prime example. Open markets provide incentive and examples for local merchant organizations to do it often better and faster. They provide farmers with stable prices, drastically cut down on spoilage, and most importantly, help get their offerings on dinner tables everywhere while making a profit.

When I arrived at Simón Bolívar International, I was expecting a sturdy intelligence officer with a serious face to meet me at passport control. I did not expect the smiling young woman with braces that giggled when I presented my thick, well-worn passport. She greeted me warmly after a long flight, stamped my passport and let me pass, welcoming me to her country. She deserves better.

The Green Marketing Act

cell phone sales_greenYou got rid of the landline three years ago because two-thirds of your calls were from telemarketers. Then you downgraded your cable service wondering why you were paying so much for so little. Now you watch stuff on your Tablet and laptop more and more. And when the price of a New York Times went up to $2.50, you decided to read news online from a wider variety of sources, and like it decidedly better.

Today, you live a new kind of life than you did five years ago. You have several e-mail addresses so that you can filter the spam. The snail mail is more than 90% junk so you’ve even stopped opening it; the envelope gets a glance and often gets chucked. When you drive, it’s commercial-free Satellite Radio since traditional ads, with their crazy voices and incoherent offerings, drive you crazy. You loved Marc Gobé’s film, This Space Available, downgrading billboards, and outdoor media in general, to visual pollutant status. You take a pleasure in buying the store’s house brand, not because you have to, but because the ‘superiority’ of branded products is something you seriously question. We watch commercials at the Super Bowl and Oscars for the entertainment value and once in a while on YouTube; the rest of the time you conspire to avoid them. [Read more...]

African Sun

Beach umbrella against blue morning skyMy consulting practice takes me all over the world. Through my travels, I have the unique opportunity to be a student of human nature and behavior – especially when it comes to the retail marketplace. Recently I visited South Africa. This story is my observation of an emerging DIY trend, framed by a vivid childhood memory. For me, the past is prelude, especially in a key attitudinal shift with your most important customers, women.

Where It All Began

My first crush was on Mrs. Donahue who lived next door. She could not have been more different than my mother. She had short, curly black hair, painted her nails in bright colors, and never seemed to be without red lipstick and perfume. I remember her in sleeveless blouses and tight pedal pushers. There was nothing about her that wasn’t unambiguously female in the 1960s, but she was far from helpless. Mrs. Donahue was a dedicated hands-on DIY’er. She always seemed to be painting a room and ceiling, refinishing a bureau, or planting flowerbeds. Looking up at her on a ladder with a paint roller in her hand is an image I carry with me to this day, more than a half a century later. While my father had his wood shop and power tools and slavishly constructed furniture that even as a small child, I recognized as amateurish and ugly, Mrs. Donahue made things beautiful easily, often with a smudge on her cheek and a smile. [Read more...]

Sam & Sandy

Sam is Palestinian with family in Ramallah. He has lived in the USA for more than 25 years. He and his cousin run a small convenience store on West Fourth Street in the middle of New York’s increasingly tony West Village. It has almost everything—from fancy cookies, canned goods and cleaning supplies, to charcoal and stomach remedies. For 15 years, I’ve bought newspapers, juice, quarts of milk and an occasional BLT (cooked by the Mexican counter man; after all, Sam is a good Muslim). Sam, his cousin, or younger relative, Ali, is on location from 4:00 in the morning to midnight, seven days a week. As this historic neighborhood has gentrified, the population density has declined. The brownstones that were cut up into small apartments 25 years ago have been restored into huge single-family houses for aging globetrotters, many of whom have more than one home. Sam sells coffee and sandwiches to the local residents’ workmen who are constantly upgrading the properties; and bottled drinks to the tourists coming to visit the ‘Sex in the City’ block. Street traffic may be up, but business is trending down.

Pacco_Illu-01

Immigrants have long been the back-bone of American retail entrepreneurship. Unlike Europe, there is no tradition of a merchant class; no long history of selling goods to a built-in clientele. In the new world, the willingness to invest one’s heart and soul, put in long hours, and often enlist family members to labor for nothing other than meals and clean sheets has been the price of entry. Like the family farm in the American frontier, it has been the family store for the immigrant classes in America for the last 125 years. [Read more...]