Touch Screens: Innovation or Distraction?

electronic-superhighway-namjunepaikOur visual language continues to evolve faster than our spoken or written word. That evolution sits at the confluence of disruptive everything; from the viability of broadcast media to the science of visual merchandising. It also circumscribes a generational shift in how and where we access information.

If our screen owning habits are changing, how has that affected our screen watching habits in retail and other places outside our home? Ten years ago, our measurement data suggested that a television-based image attracted twice the number of eyeballs as a static paper-based image. Remember the video walls in stores and shopping malls that were some weird commercial rendition of a Nam Jung Paik art installation? It was brilliant the first, and maybe also the second time you saw it, but eye-straining thereafter.

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Luxury Retail: Turning Affluent Austerity into Retail Prosperity

lux_retailI got a call earlier this month from a freelance reporter who follows my beat – research on the affluent consumers and the luxury market. As she walked through the Time Warner Center on Columbus Circle on her way to the subway at midday, she found the halls and high-end boutiques unexpectedly empty. The only store seeming to do any business was Whole Foods. She wanted to know, “What’s up?”

I shared a similar experience visiting the Tysons Galleria, in McLean, Virginia, located in one of the nation’s highest-income counties. Walking through the mall on a weeknight, there was a remarkable lack of customers. The most active shop in the whole place that evening was the Starbucks café. [Read more...]

Small Retailers Face Huge Technology Gap

Restaurant ownerTalk about proof points. In the April issue of The Robin Report, Gary Kearns from MasterCard wrote about the level of technology needed for retailers to create and maintain one-to-one relationships with consumers. “Few retailers today have the sophistication, systems and savvy to create a mutually rewarding relationship with [key consumers],” he wrote. A new MasterCard survey illustrates that point and details a huge capabilities gap between large and small retailers. That gap must be addressed if smaller retailers will have a chance to compete in a data-rich world.

The survey comes from MasterCard’s Global Insights team and is detailed in its recent Merchant Scope report. MasterCard conducted qualitative and quantitative interviews in Canada, Germany, South Africa and Brazil to identify the attitudes, opportunities and obstacles that are driving small business technology use.

The 90/20 eCommerce Equation

While most of the findings varied by vertical and country, a few numbers jumped out. The first: Nearly 90 percent of small to mid-sized merchants have an online presence, but only 20 percent have an eCommerce website. They lack the technology to accept payments online. That is a significant number, regardless of how big your store count or balance sheet.

It’s significant because the concept of financial inclusion is not limited to certain consumer groups in developing economies. Inclusion is about retailers, too. The retailer who cannot sell online is missing opportunities for themselves, but is also underserving consumers. Mega-retailing has had its share of consumer advantages in terms of price and service. But the overall health of retailing also depends on smaller regional chains, local favorite boutiques and rural multi-purpose stores.

Part of the responsibility falls on the data and payment technology communities. Small merchants need their help in understanding and meeting the evolving expectations of more informed and digitally connected consumers. These expectations center on convenience, an innovative shopping experience and personalized customer support. In the current data-driven retail environment, the consumer shopping experience starts long before entering a store, and includes the ability for the merchant to be present in different devices and channels. Advances in technology – including payments – have often presented an opportunity for small businesses to level the playing field. But, as consumers take advantage of mobile technology and real-time information, businesses of all sizes find themselves needing to create an “always on,” omnichannel presence or mobile app offering instantaneous rewards that attract new and repeat customers.

Barriers to Technology Adoption

The second set of numbers that jumped out from the study concerned barriers. The two clearest barriers to adopting technology, according to the report, were cost (46 percent) and know-how (31 percent). Here, small merchants need to prioritize resources for marketing. When examining what can be spent on digital marketing, they need to address key questions to help determine if an investment is worth it. Is this the key to improv-ing the customer experience? Do you understand how to use sales data to effectively build marketing propositions? Are you losing out on sales because you are not sure how to identify your best customers? What can you invest in now to make this pay off and run your business better?

Now let’s look at the ability to generate customer data. Here the capability of small merchants also needs to be improved. The Merchant Scope report shows that merchants find point-of-sale (POS) devices in large measure work as a transaction terminal. Half of the respondents globally indicated satisfaction with the payments acceptance experience. Nevertheless, MasterCard’s research indicates that the data passing through POS systems are under-utilized. They are leveraged for the authorization of transactions, but not as a potential window into insights on their customers. Today’s consumers are increasingly driven to shop by intelligent offers – perceived value over price and customized messaging. Consumers don’t just want to receive discounts; they want to be offered discounts on the products they care about. Developing ways to collect and use consumer purchase behavior data, in line with prevailing data laws, to offer them the things they really need depends on effectively utilizing the data flowing through the POS.

Regardless of the merchant’s size and geography, the most cited challenges (on average 41 percent of merchant respondents) revolve around identifying new customers. More than 32 percent cited Internet marketing and promotion, and 28 percent cited offering loyalty benefits to customers. Today, as more and more data is generated about customers’ shopping behaviors and preferences, there’s an opportunity to use that data to tail customer experiences, working with existing laws on data usage. Smaller merchants are starting to see the challenge and look for competitive solutions.

Leveling the Playing Field

Improving this situation requires a mind shift. Consider technology in the context of how it is integrated. Buildings blocks like eCommerce and effective new digital marketing will be greatly improved when technology is integrated. The sales data that comes through a well-developed eCommerce and invent-ory system is the fuel for developing strategies of product promotion and how to offer customers the goods and services they want most.

The rise of the mega-retailer has changed everything about the competitive environment for merchants of all sizes. Large, vertically integrated merchants have revolutionized supply-chain and inventory management, taking technology in those areas to a level that enables them to cut pricing and improve the customer experience. They have exploded across continents, with technology channels creating the “omnichannel” reality of global shopping. According to information published by the National Retail Federation, the top 250 retailers control $4.3 trillion in revenue; 63 percent of them are global. They have leveraged their scale and technology resources to present customers with a unitary, integrated shopping experience that inexorably is moving to an individually customized marketing model. That model has effectively upended the traditional merchant/consumer relationship, empowering the consumer to the point where customer experience and online agility are increasingly important as growth drivers for top global online retailers.

When it comes to leveraging technology, the picture for the mega-retailer is much clearer. But for small and medium-sized merchants, it’s still murky. The ability of large, often global merchants to dominate retailing creates an arena where small to medium-sized merchants may feel they cannot compete. The ability of large merchants to integrate technology both on the macro level outlined above, as well as in-store, presents a daunting competitive environment for small and midsized merchants.

The gap in technology resources between global retailers and smaller-scale merchants is glaring, and can be closed with the coordination and participation of banks, governments, and technology providers, as well as merchants. The downside of not addressing these gaps is that smaller retailers will fall further behind in becoming better engines for economic growth. The upside is huge.

Q/A with William P. Lauder

William_Lauder-1We sat down with William P. Lauder, Chairman of The Estée Lauder Companies, the $10 billion global beauty juggernaut, and talked about the evolving retail landscape, the importance of knowing your consumer and the opportunities and challenges of globalization.

Robin: William, we’re living in what we believe is the biggest transformation of the industry in the history of retailing, and therefore in wholesaling and branding as well. Some CEOs are saying it feels like the Wild West. Others feel like they are living in the chaos of technology that is far ahead of our capabilities to totally understand and use it.

And here is The Estée Lauder Companies, the undisputed leader in their space, right in the middle of it all. You served as CEO from 2004-2009, when you transitioned to your current role as Executive Chairman. During these ten years, the business has nearly doubled. So, I know you’re really smart, but is there also a bit of luck working here as well?

William: When I first joined this company in 1986, I perceived that my mission was to gain the experience to do what we needed to help the company be at the forefront of prestige aspirational beauty around the world. In 1996, more than half of our business was in North America. Now more than half our business is outside of North America. Emerging markets like China and Russia were very important, and we had a low share of market in those countries as well as in Europe, the UK and elsewhere. So, we saw a greater global opportunity where the pie was expanding, as opposed to our huge share of the US pie, which was static. [Read more...]

Go Disrupt Yourself!

Panel logosSo Says a Disruptive Seminar Panel

Please don’t take offense. “Go disrupt yourself” is not a euphemism for that other, often used R-rated suggestion. This is a serious directive for so-called disrupters themselves, as well as for all businesses operating traditional models who incorrectly believe disruption is defined only by fundamentally new models or game-changing concepts. Today’s disrupters are typically spun out of the thin air of “Siliconville,” which often define them as tech-driven and Internet enabled.

This not-so-clear concept of self-disruption was one of the major points that I filtered out of the spirited panel discussion at the recent Robin Report and Fashion Group International forum, “Disrupters vs. Disruptees.” And I believe with some elaboration, the conversation is highly instructive for both upstarts and traditional businesses.

The forum presented a panel of “Disruptive” CEO’s including Warby Parker (Neil Blumenthal), Rent the Runway (Jennifer Hyman), and Shapeways 3D printers (Peter Weijmarhausen). These new kids on the block had a robust discussion with the “Disruptee” CEOs of HSNi (Mindy Grossman) and The Ascena Retail Group (David Jaffe), whose portfolio consists of Lane Bryant, Dress Barn, Catherine’s Justice’s and Maurice’s. Paul Charron, former CEO of Liz Claiborne and Chairman of Campbell Soup was our moderator. Yours truly set the tone with an overview of the principles and perils of disruption.

2014_Retail_Disrupters_012Upon reflection, it occurs to me that since most of the au courant disruptive new business models are really just new marketing concepts made possible by the tools of technology and the Internet — they can be knocked off in a nanosecond. Both Steve Jobs and Jeff Bezos understood this from day one at Apple and Amazon. Their mantras, “the next big thing” and “get big fast,” respectively, were loud and clear marching orders for self-disruption, day in and day out. Whether breakthrough new products from Apple, or entirely new marketplaces from Amazon, implicit to their vision is to preempt copycats by becoming so big, so fast, that knock-off artists would find it nearly impossible to catch up.

Self-disruption and rapid preemptive growth require two ingredients: perpetual innovation into new product or market spaces and huge capital investments to fuel such growth. While these two legendary examples of continuing marketplace disruption are obvious by their success, it was largely due to the tenacity and audacity of their visionary leaders as “first-movers” who leveraged technology and the Internet to catapult their product and marketing ideas into dominant positions.

Many early movers later, we are now witnessing a deluge of innovative ideas (some more disruptive than others), still facilitated by technology and the Internet. In fact, many of them, including Warby Parker and Rent The Runway, were launched on the Internet.

2014_Retail_Disrupters_021The continuing challenge of all disrupters is to be the de facto, sustainable solution with new product innovation and distribution. They will need to continue to dominate market share from competitors. And the hugest threat of all is that the giant traditional companies can easily copy these upstarts and have the financial clout to steal and own the space.

With the ease of entry into this technological and Internet-based space, another challenge facing these “later movers,” so to speak, is that their fundamental value propositions are easy to copy. For Warby Parker, the model is making and selling trendy eyewear online (and now in stores) for low prices. Their charitable program donating glasses to kids in need hits spot-on with Millennials’ sense of social justice. The fundamental proposition for Rent The Runway is renting apparel, and they have found themselves in the dry cleaning business along the way to ensure that their quick turnaround rentals are guaranteed clean. In Warby Parker’s brilliantly conceived, innovative eyewear space, there are now several copycats: Classic Specs; Eyebobs; Lookmatic; Mezzmer; and Made Eyewear — offering frames, sunglasses and readers. Likewise, the world that Rent The Runway launched has some wannabes, including Lending Luxury, Girl Meets Dress (in the UKL, and Wish Want Wear.

2014_Retail_Disrupters_050It’s important to note that while these may be copies of the core value proposition of Warby Parker and Rent The Runway, they are not necessarily marketing the model and delivering it in precisely the same way. How these models are executed of course, will determine their success or failure. Nevertheless, the copycats did enter the same space pioneered by these two initial disrupters. Such is the compliment and challenge of innovators.

Shapeways, while not the creator of 3D printing technology (earliest versions launched in the 1980s), they also face a different challenge. Shapeways 3D printing is on an industrial scale (unlike MakerBot home 3D printing) and is still in pursuit of a scaled-up market to serve. They are ahead of their time in the sense that the potential of 3D printing to disintermediate the accessories business, for example, is still nascent.

A major point to be made is that the three Disrupter panelists are faced with the almost daily challenge of stealing market share in their categories and sustaining growth. They must also understand the concept of self-disruption as envisioned by two of the most powerful disrupters of our time: Jobs and Bezos. They must be relentless in churning out the “next big thing” and to “get big fast” (now more difficult among a sea of knock-offs). Each of these young CEOs seem determined to do so.

2014_Retail_Disrupters_059Have We Over-Glamorized Marketing 101?

Now step back for a second and reflect on these business concepts. Are today’s winning principles any different than they have ever been? You innovate and come up with a new product or service or retail concept that targets a segment of consumers who need or want your offering and the way in which you provide it. You then brand the business and invest heavily in marketing it for growth. And you keep innovating new ideas into your model to continually add value to keep your existing customer loyal and to entice new customers.

Today the only difference and change from the past are the full-on advancements of technology, the Internet, and the all-enabling smartphone. However, they are simply tools to achieve a greater understanding of, and connection with, consumers and provide more efficient and effective marketing and distribution. These tools are only as useful as the human minds that envision their optimal capabilities for their specific business models: Jobs, Bezos and hopefully our three Disrupter panelists leading the perpetual stream of new upstarts.

So are the Traditional Giant Brands and Retailers “Chopped Liver?”

In closing, I’m sorry to have to break it to many of these young upstarts that while they may be disruptive in the way they are using the new tools, those same tools are available to the 800- pound gorilla brands and retailers that are already big, some in fact, enormous. And as traditional retailers wake up one morning to understand how to use those same tools, they won’t be disrupters, they will be serial destructors.

And of course our other two panelists were anything but “chopped liver,” comfortably reinventing self-disruption, perfecting and maximizing the use of the technology and Internet tools, and reframing their business models. HSNi and the Ascena Retail Group are both multi-billion dollar businesses that got huge over time and are now envisioning how to get bigger faster by seamlessly integrating their enormously complex business models with the Internet and all of the advanced operating and information technologies available. And guess what? They don’t have to lurch from one round of funding to another.

Talk about self-disruption. Mindy Grossman commented: “In the past eight years we have disrupted our business model at least four times. We created a culture where risk-taking is encouraged and failing fast is encouraged too.” HSNi has an advanced innovation group tasked with finding the next big thing., They disrupt the status quo and innovate reflecting changes in consumer behavior, tasked with primarily raising whatever bar necessary to provide a boundary-less shopping experience, wherever, whenever and however the consumer wants it.

David Jaffe, with about 4000 stores under five nameplates, is also using the new tools to seamlessly integrate the omnichannel concept and to provide shopping interchangeability both online and off. He closed by saying: “We believe the convenience and sociability of shopping gives us a head start over the Internet startups.”

Indeed, there is great truth in that statement as Warby Parker, Rent The Runway and many other e-commerce startups are now opening physical stores. Apple, of course, understood the synergy long ago.

So, the great news for all of commerce is the tsunami of young entrepreneurs who understand how to use the new technologies and the Internet to create disruptive and innovative ways to engage and delight consumers and to integrate operational systems to more efficiently and effectively market and distribute their value.

The challenge and tough news for these entrepreneurs is three-fold: first, self-disrupt with a continual innovation process; second, build a management and operational infrastructure for sustainable growth; and, finally, invest heavily to “get big fast.”

A final ironic twist may very well be that while the young upstarts, as well as Amazon, Apple and others disrupt the market with innovative ways to use the new tools, the world of billion dollar legacy brands and big retailers may end up being the real copycats. And if I were Warby Parker, I would not want Luxottica as a copycat. If I were Amazon, I would not want Walmart knocking me off.

It could all end badly, more like a knock-out.

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...]

Fashion or Fitness – What’s a Portfolio Manager To Do?

Marie-Blog-image_Rd.1Apparel is considered a discretionary purchase. Really? Most would agree we have little choice as to whether or not we purchase and wear clothing, and it’s considered ‘de rigueur’ in most social settings. The array of apparel choices is truly mind-numbing and drives a $1.7 trillion global market. Options span the most basic Gildan Activewear cotton t-shirt sold by the gross to vendors for silk-screening early in the supply chain, to non-branded apparel at Walmart, to national and specialty retail brands, all the way to the rarified luxury world of a Chanel tweed jacket priced at $10,000. There is something for everyone.

Branded apparel companies (both wholesalers and specialty retailers) such as Ralph Lauren, PVH (Calvin Klein, Tommy Hilfiger, Lacoste et al.), JCrew, and Gap differentiate themselves in the market by appealing to targeted consumer segments based on age, lifestyle, and income, as well as their interpretations of prevailing fashion trends for their demographic segment. Therein lies the rub! Fashion is fleeting and supply chains are inconsistent. Balancing the tightrope of enough fashion to be relevant, while not too trendy to incur speedy obsolescence, is the fashion merchant’s Gordian knot. Imagine doing this for two to four seasons a year! [Read more...]

Angela Ahrendts – An Apple Disruptor or One-Off Burberry Rock Star?

AhrendtsI believe former Burberry CEO, Angela Ahrendts, did in fact disrupt the traditional department store model, specifically through her seamless and spectacular integration of the Internet and technology. Indeed, when one steps into Burberry’s London flagship, it’s like stepping into a technological extravaganza, taking “high-tech, high-touch” to another level, empowering consumers and providing an awesome shopping experience. And upon entering and shopping the website, one has an identical experience, however without the 3-D physical sensation. Burberry’s website states its mission as “seamlessly blurring physical and digital worlds.” Lauded on both sides of the pond as some kind of rock star, Ahrendts caught the attention of Apple CEO Tim Cook, who lured her to head up Apple’s retail business.

Now, everybody is wondering what she’s going to be doing in her new role. And that’s no small question as she sits in the enchanted land of “the next big thing.” Apple already disrupted the world of retailing when it launched its stores under Steve Jobs in 2001. Currently, with over 400 stores worldwide, it’s still the most productive retail space in the world, in all of history, averaging over $5000 per square foot. So the first question one might ask is: why on earth would Apple want to disrupt such incredible performance? Secondly, if that is what is expected of Ms. Ahrendts, how would she disrupt it? [Read more...]

Moneyball for Retail

YG_moneyball_FINAL imageThere’s a new way to grow profits and hit it out of the park with consumers, employees and shareholders. It’s “Moneyball for Retail” – finding market inefficiencies to gain a competitive advantage.

In Major League Baseball, team owners want to win games. In retail, executives want to grow sales and profits. Both want to achieve these goals without breaking the bank, and the best-managed franchises in each have one fundamental principle in common: identify, develop, and reward the right players.

Whether baseball teams are winning or not, their ongoing costs continue to escalate. To keep the franchise operating at a high level, management needs to be aware that the most expensive players aren’t always the best fit for the team. The same holds for retail stores: operational costs are escalating regardless of store success, and executives need to schedule the right people in the right places to generate profits with the fewest additional costs.

And just as iconic baseball dynasties have come and gone, so have seemingly invincible retail giants. The survivors are the ones that continue to win. [Read more...]

Who Are the HENRYs and Why Are They Important to You?

Pam charts Rd2After a lot of retailer nail biting this past December, the Department of Commerce has reported the numbers and, all in all, the sales year didn’t turn out as badly as expected. So while we sigh with relief, nobody reading the news or talking with consumers is delusional enough to think that retail is out of the woods yet. Consumers remain extremely cautious about spending; the average US household’s income is currently $71,274, down more than $4,500 from its high in 2006 of $75,810. The reality of this extended post-recession period is that the American middle class has lost much of its spending power, leaving retailers that have traditionally targeted this customer holding the bag and needing to find new consumer segments for growth.

If the middle-income customer is scarce, the logical place for retailers to look for new customers is one step up the income ladder: the affluent, which are defined as the top 20% of US households based on income which starts at around $100,000. With nearly 125 million American households in total, the affluent segment numbers just under 25 million households. In most any spending category, the affluent top 20% account for about 40% of total consumer spending, according to the Bureau of Labor Statistics Consumer Expenditure Survey. That means the absolute spending power of the affluent household is twice as big as the average middle class spend.

Of course, all affluent households aren’t created equally in spending power either, with the top 2%, or the ultra-affluents, roughly 2.5 million households (incomes starting at about $250,000) with much more discretionary income. But between the ultras and the middle-income consumer segments, there is an often overlooked group that, quoting Rodney Dangerfield, ‘gets no respect’ – the lower-income affluents or HENRYs (High Earners Not Rich Yet). These are the new mass-market affluents with incomes $100,000 to $249,999 and they number about 22.5 million households.

Tale of the Tape –The receipt tape, that is.

Every three months my company,Unity Marketing, surveys 1,200+ affluent consumers who recently purchased any high-end or luxury goods or services in 21 different categories, including home goods such as furniture and major appliances; experiential services such as travel and dining; and personal items such as fashion, jewelry, and beauty. In that survey, data is collected about those recent purchases including how much people spent. [Read more...]

Apple’s Next Big Thing: A Tesla in its Garage?

Tesla_Apple_Rev1To borrow from Ted Levitt’s thesis on “marketing myopia,” Apple is not in the digital “iDevice” business, and Tesla is not in the automobile business. They are both in the technology business; or better yet, in the technology disruption business – or, even better than that, one might say they are in the “Internet of things” business. Take your pick. But for sure, they are in the same visionary tech space. Once Tim Cook and Elon Musk realize this more expansive definition of the businesses they are in (and, I have to believe they have probably already figured this out), the scope of industries, products and services they can pursue for growth is almost limitless.

And once the realization sets in, an “aha” moment should not be far behind. I’m talking about the uber “aha” as the most ingenious acquisition of this young century: Apple acquiring Tesla. It’s significant to point out that part of Mr. Cook’s vision for Apple is his publicly stated intent to break into other product categories. The strategic logic of such an acquisition and the resulting synergy for these two technology giants is, in my opinion, obvious. [Read more...]

Globalization and Democratization Impact Fashion, Too

Chanel: Runway - Paris Fashion Week Womenswear Fall/Winter 2014-2015Just as globalization and information combined to create what Thomas Friedman aptly coined the ‘flat world,’ these transformational forces are driving the democratization of luxury. Exclusivity has been replaced with near mass availability, anywhere and anytime.  Technology and social media are potent forces in spreading the word and creating awareness that can turn into desire and demand — and ultimately sales and profits. But these new tools also undermine a core tenet of luxury: uniqueness or rareness.  When luxury becomes ubiquitous, it migrates out of an exclusive arena into the everyday, everywhere streets of fashion.  So, while opportunistic luxury brands can reap the benefits of democratization, without nimble brand management, they risk the underbelly of crass commercialism, which is guaranteed to destroy luxury’s allure.

Chanel’s Super Market

In Chanel’s fall 2014 fashion show at the Grand Palais (March 4, 2014) in Paris, Karl Lagerfeld playfully took the idea of luxury’s democratization to the extreme. Instead of transporting the viewer (those in attendance as well as the world of voyeurs watching from afar, thanks to YouTube and chanel.com) to the rarified world of haute couture, a lifestyle few women are able to participate in, Karl brought us to a world we know all too well, the big-box grocery section. He outfitted the interior of the Grand Palais into a tongue-in-cheek Chanel Super Market, replete with Chanel-branded corn flakes and dishwashing detergent. Models adorned with Chanel’s iconic pearls and tweeds wore that most democratic of footwear, sneakers. Everything in the Chanel Super Market was marked up a totally undemocratic price; in fact the signage conveyed +20%, +30%, +50%. Was Karl snickering at our mass consumption of luxury icons and the fact that Chanel has nearly doubled handbag prices in the past five years? Ha Ha — not! [Read more...]