Category Archives: Retail

The real price of discount retailing

With markets as tough as they are it’s not surprising that more businesses than ever are weighing up whether to adopt a short-term tactical approach or hang tough with the longer-term strategic thing.  Retailers are right at the centre of this dilemma and you only have to glance at your local high street or shopping mall to see the choice that many have made.  Stores with perpetual sales or cut-price offers have become a feature of the retail landscape in pretty well every country around the world.

Even though they know that the path to instant gratification has an inevitable pay-off, cake today is becoming an irresistable proposition for idea and cash-strapped marketers, who can only be aiming to be somewhere else when the bill arrives.  So, what is the price of this kind of short-termism?

In this context there are two types of retailer – those who sell branded goods and those whose offer comprises mainly own brand.  The first group can be further divided into premium and mass-market.  The premium retailers, by and large, are chasing margin with high prices.  They are usually the last to have to make the short-term/long-term choice because their clientele are well-heeled and unfamiliar with the financial reality most of us live with.  On the other, far more popular side of the street, mass-market sellers of branded product are “champions of the consumer”.  We rely on them to negotiate with manufacturers on our behalf to deliver the branded products we all hanker after at advantageous prices.

The own brand retailers come from a different direction.  The value of their proposition is entirely their own making.  Customers recognise own-branders as an authority in the things they sell and trust them to use their knowledge and experience  to produce great value product of their own.  Retailers like this that come to mind would be Ikea and Marks and Spencer.

Now consider for a moment discount promotions as a concept.  Again, you could say they come in two kinds.  The first is the seasonal event that we have come to expect.  This is legitimate.  We understand that these promotions are the retailer’s way of clearing slow-moving stock or ends of lines and as long as it remains occasional it and the retailer will retain credibility.

The other kind of discount promotions are those run by struggling retailers to generate sort-term business.  These usually achieve their immediate objective.  The problems arise with repetition.  You must have heard people dismissing retailers as “the place with the sale on all the time”.  The perpetual sale isn’t credible, so let’s not kid ourselves that consumers are buying this line.  If a product appears to always be reduced to 99p then that’s all its worth to the consumer and no amount of double pricing is going to convince them otherwise.  We’ve all witnessed the Pierre Cardin brand get pulped in markets around the world.  Once a respectable, desirable brand, constant deep discounting has reduced it to a bargain basement brand.  Nobody pays full-price for a Pierre Cardin suit because we all know that it will be 70% off next week!

So, when do you start heading into the mire of perpetual discounts?  The answer is the minute you abandon the accepted seasonal event norm.  Then its just a matter of how far you venture in this direction and how quickly you get back to firm ground that determines whether your business is irreversibly damaged.  Discounting is like a drug habit.  Initially the hit is rewarding – you make a load of cash quickly, but as you stick with it your dependency increases and the reward diminishes.  You lie awake at night racking your brains for new superlatives to up the anti in your advertising, margin disappears and eventually your turnover will too.

Your hard-won brand community will dwindle.  We wear the products we buy and carry branded shopping bags with pride as badges of belonging.  Where’s the cudos in belonging to to the cheap shop community?  Customers will feel betrayed.  The brand that you have devalued to junk had defined their status.  Now you’ve pulled the plug.  Your authority disappears over night and whatever you say to try to re-establish value in your offer is futile.  You are just a cheapskate discounter and there’s no way back!

If your regular customers don’t abandon you they’ll do something even worse –   they’ll only turn up for the deals that you make no money on and the only new customers you can expect are all broke like you.  When The Full Effect Company went into one well-know organisation a few years back, we discovered that a third of their customers were actually costing them money because they only bought the bargains with little or no margin.  There was no spoon-full of sugar to help the medicine go down in this case, we just had to loose 30% of their customer base.  However, there are few shareholders who would stomach this kind of treatment unless, as we did, you manage to get back on track very quickly.  We replaced those customers with new, profitable ones within twelve months and met the company’s growth targets.

So, before you launch your umpteenth BoGoF this year give some thought to where this road is leading.  You may not be planning to be around when this chicken comes home to roost, but there aren’t that many juicy retail marketing jobs around, so you might want to think again.

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Its silly season in the retail food sector!

I don’t normally waste my time drawing attention to specific examples of advertising that are plain rubbish, but it seems like silly season for the UK retail food sector at the moment and I simply can’t ignore it.

The new campaign for Sizzling Pubs leaves me speechless its so ridiculous, but nowhere near as mindless as the commercial for Harvester.  What the blazes are these people trying to do?  Together, these two campaigns prove the point I was making a few weeks back that marketing is dumbing down.  These simply have to be examples of inexperienced marketing managers who lack the confidence to tell their agencies, when they present this crap, to stop having a laugh!

I can imagine the scene.  The agency guy making out that a rap, which in Harvester’s  case doesn’t rhyme or scan, is the kind of “groovy” solution that will appeal to a hip new target market and the client failing to notice that they had buried any product benefit there might have been beneath the awful treatment and not having the balls to draw him a route-map to reality.  Is the story here the diversity of the menu or is it just a case of having to come up with a commercial to disguise the fact absence of a proposition?  Whichever, it failed.

The Sizzling Pubs agency guy has clearly allowed self-love to obscure the fact that even if they can work out what the blazes is supposed to be happening the behind-the-scenes antics of the ad. business is about as enthralling to the target audience as a day watching paint dry.  Its neither funny nor interesting, but because I know how hard food retailers like these two are working to come up with a point of difference these days, its particularly galling to see what could be a genuine opportunity flushed down the toilet.  If Sizzling Pubs are successful it will definitely be despite their advertising and that’s a shame because, without breaking sweat I can think of a number of entertaining ways of getting the idea of sizzling food across.

Matalan – Sometimes, all it takes is the basics.

I’m subscribed to more on-line retailers and loyalty programmes that I can remember these days, but I never cease to be amazed at how badly these companies manage their data.  Its been years (I mean more than twenty) since I started getting my clients to build relationships with their customers by acknowledging dates like birthdays that are important to them, but I can’t remember ever receiving a birthday reward from anybody other than MoonPig and then, of course, it was someone else’s birthday they were reminding me of.

I was reassured therefore by my mother’s delight at having received a £5 shopping voucher for her birthday this week from, of all people, Matalan.  I’ve always wondered why the retailer didn’t appear to do anything much with the data they collect when they register their customers.  Especially as you are strong-armed into subscribing to their loyalty programme at your first visit to one of their stores.  It seems that having hit rock bottom in recent years the retailer has addressed issues well beyond their dowdy stores and stock.  Well done Matalan for showing UK retailers how its done!

When customer service is more about internal marketing than training

Because, unlike most other countries, when a bank holiday coincides with a weekend, we Brits nominate the nearest weekday a public holiday, today (Monday 2nd May) was Mayday bank holiday in the UK.  As a consequence, I caught “Don’t Get Done Get Dom” on daytime TV where, cheeky chappie Dominic Little champions the consumer cause.  The object of his ire this week were the retailers Currys and PC World and Dom had a mailbag full of customer service complaints that he set out to resolve with the retailers’ parent Dixons Stores Group.

Over the last few years the consumer group Which have consistently highlighted DSG’s customer service deficiencies, its surveys revealing a customer satisfaction rating of something in the region of 30%, so the state of affairs can’t be news to DSGI management.  It’s bemusing therefore that, if they have done anything at all it’s had little or no impact on the end product, which frankly appears as bad as ever.

How can it be that a big organisation like DSGI can firstly deliver such poor customer service and secondly fail to address the fact when its pointed out to them in such irrefutable fashion?  Well, it could be that it’s a strategic choice.  I’ve heard of organisations before that had made the conscious decision to set their customer service rating target low because they had calculated that the cost of raising it above that point would not be recouped.  Putting aside the many and obvious flaws in that argument, I can’t imagine that a 30% rating would be acceptable to anybody, so I have to assume that this state of affairs is rather more an accident than a plan.

The feedback Dom received from DSG management was confusing.  Their comments suggested that they view inconsistencies in customer handling skills as an inevitable consequence of their rapid pace of recruitment and accepted that limitations in training capacity would result in new employees arriving on the shop floor with limited or no training.

I don’t buy any of this.  Firstly training may be an issue, but the fundamental problem here is clearly internal marketing.  The reported problems had far more to do with the willingness of customer-facing staff to disappoint or even upset customers than it did with processes, which it seems were largely not at fault anyway because all the customer issues were resolved once Dom had escalated them.

It seems obvious to me that the focus of DSGI employees is miss-aligned.  They seem to act on the assumption that customer satisfaction was secondary to adherence to processes (which they misunderstood anyway).  Yes, training would help them get to grips with the processes, but internal marketing is the tool to set customer satisfaction as the priority.  Once that’s established, when an employee can see that they are in danger of disappointing a customer they’ll realise that the process, as they understood it, is leading them down the wrong path and put the brakes on.

I don’t accept that employees find themselves on the shop floor without first receiving training either.  Training like this doesn’t have to be process-based.  In fact, the priority should be a culture-based induction that can be undertaken by the local manager, on-line or in a classroom, depending on time and cost pressures and there are many ways in which this process can be policed.

Over the years I have devised and run numerous training and internal marketing programmes, for retailers, who have witnessed improvements despite high volume recruitment.  In fact internal marketing, linked to a clear brand model reduces employee turnover, so volume demands are usually reduced too.  The evidence of Dominic Little leads me to suspect that DSGI are making a fundamental error in thinking that training holds the solution to their problems.  My belief is that they need to take a step further back.  Their customer service issues and a number of their other problems are, I am sure, all down to the lack of a clearly defined brand model and the internal marketing programme that makes it live and the sooner they recognise that and address it the sooner they will stop finding themselves the focus of programmes like Don’t Get Done Get Dom.

Go shopping in the East End!

Not surprisingly, shopping centre development in Europe plummeted by 30%, to a 27-year low in 2010.  This much has been confirmed by new research from property consultants Cushman and Wakefield, but things are looking up … or are they…?

In cities throughout Europe the skeletons of would-be retail paradises have stood testament to the economic downturn for the past year with no visible sign of completion work, but there are stirrings once again and the same report predicts 6.9million new square feet of Gross Leasable Area by the end of 2011.

You may be asking quite where all this is likely to be.  I for one have been speculating that the optimism of some Central European cities has both been responsible for a disproportionate amount of the recent growth in GLA and left the developers concerned with the high risk of un-let retail space.  In cities like Prague the profusion of new malls that retailers’ traditional policy has compelled them to take occupation in, has left some retailers competing with their own stores only metres away from each other, but retailers are being forced to face reality and my guess is we’ll see them rationalising their estate at a cost to centre owners and managers.  I know of one new centre that has all but closed down after a couple of years of trading, simply because of this.

2011’s new square-footage looks like being further East in places like Turkey and Russia which are expected to account for as much of 40% of total European growth.  In the West, we are far more reserved.  Even though our variety of retailers in each sector is significantly higher than counties in CEE there’s a limit to how many coffee shops you can cram into one centre, a reality that is underlined by the modest 2.5million of new square-footage we’ll account for this year.

Europe is clearly dividing into two retail zones.  The easy short-term money looks like being in the East while retailers in Western markets have to get in shape for the battle to secure revenue.  Either way, there’s a challenge for retail marketers.

In the retail – e-tail war detail could be the decider.

So, HMV is in a state of meltdown yet again and with today’s profit warning following a Christmas trading period that turned out to be more of a turkey than a gift, it all looks pretty glum for this once retail icon.

In fact HMV is one of two high street retailers that I feel deserve a kick up the arse right now.  Both are frustratingly short of a few tricks that would counteract the biggest threat to their future.  The other is no-brand WH Smith, whose stores are dismal, amateur, badly lit, over stocked, over-priced and poorly staffed.  There’s an irony somewhere in the fact that HMV’s sister business Waterstone’s is the one showing WH Smith how its done.  Smiths may be in growth mode right now, but it looks like the short-term market-trader kind of success that begs questions like “So what do we do for our next trick?”.

Compare the two – On the brightest day a visit to WH Smith can make you feel like ending it all.  A bit like a church hall jumble sale, the mess of books, school equipment, magazines and sweets(?) and lord knows what else, trying hard to be all things to all people and succeed in being nothing much to anybody.    Waterstones, on the other hand, with their founder back at the helm, have single-mindedly established their authority in a sector where authority is everything.  These days Waterstones are ticking all the boxes, with knowledgable and intelligent staff and meaningfully stocked shelves (no pick n’ mix sweets in grubby pots here).  They have even mastered the trick of using their High Street presence to establish the authority they need to succeed on-line and with a million plus e-book downloads under their belt I have no doubt that both clicks and mortar numbers will follow.

Like Waterstones, WH Smith and HMV have both encountered the Internet challenge, but while WH Smith firstly buried its head in the sand, hoped it would go away, then muffed the response, HMV, like Waterstones, are focussing on doing things in-store that only in-store can do and using on-line as a sort-of take-away format – well almost.  And that’s the rub.  They aren’t getting down to the detail quite as I would have hoped.

For one thing, despite the live music elements they have added, they haven’t really mastered the brand community thing and they are missing some of the small practical things could make doing business with them easier and more fun.  Take for instance the art of the demo.  A focus of all record stores in the past and certainly a useful community building tool today.  Remember the Saturdays (That’s the day of the week not the band!) spent in the listening booth at your local record store listening to Friday’s releases and deciding what to spend this week’s pocket-money on?

When vinyl went out of the door, so it seems did the listening booth – replaced, admittedly by HMVs listening posts, which were fine, but then … silence!  Sure, they’ll play a CD in the store if you can get close enough to the check-out for your request to be heard, but it’s not the same as sharing a set of headphones with your mates in a sweaty booth.

Maybe they think they have that one covered with their in-store radio (Is it live? – I’m not sure), but they kinda’ come out of that looking like the guy who invented 6-Up – just a natz short of success – not enough interaction, which they could have built-in even with an AsLive solution.  They also miss the same trick on-line because, except for a few albums like Jessie J’s latest which features her brilliant Price Tag video, you can’t listen to even samples of selected tracks before you buy.  In the store they make great play (excuse the pun) of introducing new acts with short, on-shelf biogs, but if you can’t listen to the music, you have to risk £10 to buy the album blind (or is it deaf?) which, when we are all being austere, is a non-starter really.

To WH Smith I say, before turn yourself into a Moroccan bazaar, I suggest you don’t copy Woolies, because we all know where that gets you, pop across to Wilkinson instead and see how multi-category retailing is done cheerfully and tastefully (and with staff that you’d consider striking up a conversation with).  Oh and switch the lights on.  Reading in bad light is bad for anybody’s eyes.   HMV on the other hand need to write a thousand times “retail is detail”.  Put yourself in your customer’s shoes, get the little things right, tackle these and I’m sure you’ll find your days will be brighter.

The wonder of Wilko

In what appears to be an increasingly grey and mundane landscape the occasional ray of sunshine is more than welcome.  My personal shining star right now is the retailer Wilkinson who seem to have suddenly awoken to become everything that Woolworth failed to be.  They are even doing it in the very shop units in which Woolies crashed and burned.

It’s hard to fault the new look Wilko.  Great new logo that manages to be both contemporary and friendly in equal measure, stores that despite their stack-it-high-sell-it-cheap approach to merchandising still appear orderly and inviting and whether it’s just my local branch or common throughout the chain, the staff are friendlier, and more helpful than those in many premium stores.

Their array of categories offer the diversity that Woolworth failed to cope with and rationalised away long before their eventual demise.  Wilko’s homewares sit better in the store than those of Matalan or TK Max and partner with decorating products more comfortably that Homebase.

Wilkinson, remarkably, was top of mind for me when buying a few stationery items today, even though in Newbury High Street, WH Smith are directly opposite (But I always think of Smiths as a venue for a wrist-slashing anyway!).  I bought de-icer from there a few weeks ago in preference to Halfords, and a few homewares items that I could have picked up from Tesco, had I been so inclined.  Admittedly there is a chasm between the old Wilko stores and the new smart format, but with a roll-out planned I’m sure it won’t be long before everyone will be able to experience the wonder of Wilko!  Even their web experience is good.  Frankly, I can’t see how they would fail.