Friday, May 29, 2009

Would you like pantyhose with that ceiling tile? (and other retail oxymorons)

Perhaps you were taught this instructive “stick-to-your-knitting” story of some years ago. It starred an over-eager Home Depot executive who came up with the idea that millions would drop to the bottom line if only the company could see its way to introducing L’Eggs hosiery displays at checkouts in all its stores. After making his case to the top ranks of the company with a convincing argument about potential financial gain and a not-very-convincing plea for the company to use this as a response to the increasing presence of female customers, he was quickly asked to abandon the idea—of course, right after being told to abandon his seat from the meeting. The teachable moment—seized on by the chairman—was that just because you could sell it doesn’t mean you should sell it.

Apparently not everyone has heard this entrenched business lesson—including some more recent Home Depot executives, who two years ago brought about losses with a similarly ill-fated decision to sell flat-screen televisions during the holidays.

This week, Best Buy announced plans to sell patio ware—furniture, fire pits, grills and heaters. It’s their attempt to make up for lost sales in bread-and-butter categories like movies and music.

This has all the makings to be the pantyhose story of 2009. We’ll be watching this one especially closely, as this is a retailer which has done many things right.

Supermarkets used to fall prey all the time to the allure of selling higher-margin items—that turned out not to sell, like television sets.

A recent sighting of candy bars at the checkout of a garden center store struck me as a stretch, and a rather sad attempt to presumably get something back from a decline in boxwood sales.

Unexpected products in the assortment can delight customers. Urban Outfitters does serendipity masterfully. Probably until it was deemed illegal or immoral, Sears stores used to create endless Easter excitement with displays of live baby chicks…..for sale. But these examples are schtick—not fundamental assortment strategies.
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Tuesday, May 26, 2009

Prescient retail

What if there were a store that knew everything you wanted before you got there, and all of it was waiting for your arrival, ready to go?

It sounds like some parallel universe you may not have yet experienced, but it may well be in a future just up the road.

I first witnessed a stage 1 example of this kind of “no-shop shopping” at Bed Bath and Beyond, which allows customers to select and purchase merchandise in any of its stores, but then has everything ready at any other Bed Bath store anywhere in the country. It’s a service near and dear to the hearts of parents of college students, allowing them to make all the in situ summer selections of sheets, wastebaskets, pots, pans, and bath mats for the far-away dorm room or college apartment—ready and waiting for the start of the fall semester. In this example, the shopper still needs to shop a store, but is able to do so in a more leisurely way, when product availability is high, tension low, and move-in deadlines don’t loom—and simply shift the pick-up to another time and place.

A more recent entry is, a new venture from Sears Holdings Corporation, which allows customers to shop online for groceries, electronics, apparel and more, and then pick up the designated items at a My Gofer store the same day—presumably a defunct Sears or Kmart location, now re-purposed as the bridge between the online and bricks and mortar worlds. This service also offers a delivery option and guarantees product availability.

Interestingly, these hybrids acknowledge an important positive of the traditional retail experience—in one case, the customer desire to see and touch the merchandise, and in the other, the need for immediate gratification. At the same time, they both endeavor to minimize what consumers don’t want—crowded aisles, vapid sales associates, out-of-stocks, and long waits at the checkout.

Inherent in these new constructs, however, is the sad element of partly throwing in the towel on some negatives of the in-store experience, with the retailer now at least tacitly admitting it may no longer be able to heal all of thyself.
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Monday, May 18, 2009

Seduced and abandoned

In days gone by (any time before the current recession), the shopping cart was a customer’s rolling possession holder, containing all the selections that were as good as bought and paid for. With its vertical bars, the cart gave off a warning to other shoppers to keep out, contents contained within this high-security traveling metal fencing are “my stuff.” At the same time, each product placed within the cart represented the shopper’s (almost) solemn commitment to purchase—nothing would leave the cart until checkout. Sure, once in a great while you might see a vaguely embarrassed customer beg off an item at checkout—to the tsk-tsks, tut-tuts and clucking sounds of others in the queue, a chorus of muses who sensed some important cosmic code of shopping conduct had been violated. But mostly, the mighty mobile fortress simply served as the shopper’s purchase conveyance until their items could be taken out to the parking lot and put in the car.

No more. In a recent study we did for a large retail chain, upwards of 500 items were abandoned every day in each of the stores we were in, relegated to a corral of carts in the corner whose sole purpose was to house these rejected products (looking rather forlorn, anthropomorphically speaking, like abandoned puppies at a shelter). A cottage industry sprang up in the stores to sort and re-stock these “re-shops”—a thankless, never-ending task for the associates. Clearly, customers had exploded the idea that moving an item from the shelf into their cart represented any kind of implied purchase agreement.

Yesterday’s New York Times featured an article on abandonments in the online shopping world, highlighting a new web service which remarkets to those who might put an item in their electronic “cart,” but not finish the transaction. It’s an interesting approach to nudging people to re-consider, but certainly loaded with complications, not the least of which is the highly intrusive annoyance factor.

Perhaps the customer contract in bricks-and-mortar retailers will be re-initiated, and shoppers will once again follow the age-old Cafeteria Rule—take all you want and eat (buy) all you take. Or we may be witnessing something that has already changed forever—good or bad economy notwithstanding—the cart as nothing more than a carriage of considerations.
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Tuesday, May 12, 2009

Will McDonald’s drink Starbucks’ latte?

Is it any surprise McDonald’s has brewed itself boldly into the coffee business? The McDonald’s menu has evolved dramatically since its founding days in the 1950s, back when it was a simple spot to get a burger, fries and a drink. The company has adapted to shifting consumer tastes, wants, and demands, and has become a major player at breakfast, in chicken, in snacks, salads, and more. There have been a few flops along the way, but in the last six years, McDonald’s menu innovations, better service, and improved atmospherics, have pulled in new customers and boosted profits. Now, thanks largely to Starbucks, Americans now crave fancy coffee drinks, and want them for breakfast, in the afternoon, and even after dinner. It’s no surprise McDonald’s is seeking to capture all these newly evolved coffee cravers.

McDonald’s mochas, lattes, and cappuccinos have gotten positive buzz; even people who prefer Starbucks have given the McDonald’s drinks pretty high marks. And coffee drinkers who get their caffeine fix at McD’s can pocket the savings over the same drink at Starbucks. In recessionary times, that’s a powerful advantage. One survey found that 60% of consumers will trade to McDonald’s if the coffee drinks are cheaper and made faster. There’s also the convenience factor – you can grab a latte while picking up a happy meal for your kids, in a part of town Starbucks hasn’t yet hit, or on a road trip. Starbucks is fighting back against the McCafe invasion with an ad campaign focusing on quality adherence; they’re also experimenting with a breakfast value menu and one dollar coffee. However, we’re betting plenty of consumers will choose McDonald’s premium coffee along with its iconic food offerings over coffee at Starbucks accompanied by its made-off-premise bakery items and microwaved sandwiches.

On the day premium coffee at McDonald's debuted, my wife’s comment after taking her first sip: "Starbucks is in trouble."
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