Archive for October, 2013

Word-of-mouth marketing meets the 21st century

Here’s a RetailWire comment from a recent panel discussion about “word of mouth” marketing. The issue is whether retailers need to be more tuned into what their customers are saying about them, as technology migrates from the back fence to the smartphone. My opinion:

Assuming the integrity of reviews posted online, there is no doubt that sites like Yelp! and TripAdvisor have taken the idea of “word of mouth” to a completely different level. It’s true that the user of these sites misses the face-to-face aspect of personal conversations with friends and family, but these sites are powerful points of reference for consumers’ decision-making.

As TripAdvisor in particular evolves from a pure review site to an e-commerce site for hotel booking, it can build upon the sort of data mining and engagement models that companies like Amazon have already mastered.

Dollar stores: Winning the race to the bottom?

Here’s a brief comment from a recent RetailWire discussion about dollar stores. The question put to panelists is whether dollar stores should upgrade their store design and amenities, in order to sell more higher-margin categories like apparel vs. the commodities that they are known for. I argue that it can be done, but I question whether it’s a smart idea:

Through years of effective marketing, merchandising and store design, many retailers once considered “bottom feeders” have undergone a perception change. Discounters like Target (and even Walmart), off-pricers like TJMaxx and outlet malls have given more affluent customers “permission” to cross-shop these channels.

The question facing dollar stores is whether they are interested in these kinds of strategies, or whether they risk losing the clear brand position attracting the most value-oriented customers in the first place.

Roulston Research round table audio link

I’ve posted a link to an investor round table held on October 24th in San Francisco by Roulston Research. I was joined by Jan Rogers Kniffen, a veteran retail executive and industry consultant, for a wide-ranging discussion and outlook for the 4th quarter. I hope you enjoy it!

Why can’t more retailers execute like Amazon?

Today’s RetailWire discussion centers on brick-and-mortar retailers whose e-commerce sites struggle to execute at the level of Amazon. In particular, the simple act of shipping the right goods on a timely basis in usable condition seems to be easier said than done. Here’s my point of view, based partly on my own recent experience:

We all have similar stories about brick-and-mortar chains who simply don’t execute well on their websites. My recent example involves a large national department store chain whose struggles over the last 18 months have been well-documented. I ordered an area rug…they shipped the wrong rug…I returned the rug to a local store and reordered it…they shipped the wrong rug again…I canceled the order.

In this case, the item was shipped from a vendor, not from the company’s own distribution center, and I believe a lot of these problems occur because of the second-rate logistical management of the retailers’ “partners.” Amazon uses a lot of second-party shippers but appears to be equally scrupulous about its own execution and its suppliers’ execution. Its aggressive expansion of its own distribution network is another key advantage, compared to “omnichannel” retailers trying to cut corners.

Walgreens: Is it time to “do less better”?

Today’s RetailWire discussion focuses on a speech given by Walgreens’ longtime CEO last week. He discussed a long list of initiatives, which raised the question among BrainTrust panelists about whether the company is trying to tackle too many initiatives. Here’s my perspective:

My consulting colleagues at McMillan Doolittle would describe Al’s list of retailers as good examples of their “EST” model. In short, find something to be “best” at (cheapest, easiest, newest, and so on) and make sure you are “top of mind” here, while executing well on other aspects of your strategy.

It’s debatable whether Walgreens, or any company, can execute so many strategic initiatives at a high level at the same time. And the lack of clarity is reflected in the stores, which continue to be overassorted and hard to navigate.

Walgreens has already grown due to innovations like its drive-through pharmacy and its location strategy, but the store is now a confusing hybrid of a “health headquarters” (complete with clinic) and a neighborhood convenience store (complete with candy and cigarettes). It’s time for a clearer message.

The NRF’s rose-colored glasses

RetailWire panelists are usually careful to leave their political views out of the daily discussions, but the current government shutdown (in day eight at this writing) is a hot topic. The context for the discussion is the National Retail Federation’s forecast for a 3.9% increase in holiday sales compared to 2012. Even in an era of “business as usual,” that seems like a blue-sky number to me:

I’m cautiously optimistic that the government shutdown and debt limit fights will be resolved in the next couple of weeks, perhaps in the context of agreements about spending levels, the “medical device” tax, and so forth. So I don’t see this dragging down retail spending — however, if I’m wrong, there will be far bigger problems driven by furloughed employees, falling equity prices, and so forth.

The real question is why the NRF is projecting a 3.9% increase in the first place. This organization tends to over-forecast holiday sales every year, and all signs point to the sort of modest (2-3%) gains that we have been seeing all year.

“Ship from store”: The latest bandwagon

Today’s RetailWire discussion centers on the trend toward “ship from store.” That is, brick-and-mortar retailers using their store locations to fulfill web orders, not just selling goods to visiting shoppers. I think the trend is positive but still depends on great merchandise content, and I don’t see it as an immediate threat to the Amazon model. Here’s my point of view:

I agree that the “ship from store” concept is a leap forward for brick-and-mortar retailers, in the sense that they will be able to leverage their inventory and expenses more effectively. But customers who visit their local department or big-box store will have the same expectations about customer service standards as before — along with the ability to “touch and feel” the goods. Brick-and-mortar stores need to ensure that they do not starve customer-centered payroll while managing the logistics of turning themselves into mini-fulfillment centers.

In the meantime, Amazon still has huge competitive advantages in breadth of assortment and pricing that no single brick-and-mortar store can compete against. And it continues to develop new “store within a store” concepts to target emerging growth opportunities — so I wouldn’t lose sleep over the Amazon outlook anytime soon.