Retail Anthropology - The Science of Sales

Link: http://www.forbes.com/sites/larrydownes/2012/01/02/why-best-buy-is-going-out-of-business-gradually/

Came across this interesting article in Forbes yesterday and while you can discount the personal anecdotes I think most of the fundamental premise is sound: retail is facing a lot of challenges right now and more than ever brick and mortar stores HAVE to focus on the customer.  You're rarely going to win on price anymore - Amazon.com and other Internet retailers are killing people on price because they have lower overhead. If you don't win on customer service it's going to be very very hard to compete.

So what advantages do brick and mortar retailers like Best Buy have? Well, first and foremost, immediacy. If I have a client who needs something TODAY then Amazon doesn't help me - there's no way FedEx is getting here with the product in the next two hours. I can walk into a Best Buy and, if they have it in stock (which can be a big IF) I can walk out the door with my product right away.

Second - human contact. This one is getting tougher and tougher. Amazon comes a close second with online customer reviews but it's hard to beat a friendly, knowledgable, person who can answer your questions. Unfortunately few retailers can meet this high bar - consumer electronics in particular is a rapidly changing field with a WIDE array of products. It's almost impossible for anybody (especially somebody making $10/hour) to effectively keep up with every product on the floor. Still, a strong emphasis on customer service and a positive attitude can go a long way even in the absence of immediate knowledge. You don't have to know everything if you can find out anything.

Third - The touch factor. Somethings you just want to touch and see before you buy. It's nice to be able to try that iPad or feel the heft of that digital camera before you buy it. Unfortunately here you have to have some way to convert the customer's desire to buy into a desire to have it NOW. Otherwise what happens is the customer plays with it in your store, then goes to Amazon.com on their SmartPhone and orders it from them while walking to your exits. Luckily that kind of conversion is not too hard to do, if you try. When people buy toys people want to play. There's a curiously empty feeling associated with seeing and touching a device you want to buy but walking to the parking lot with empty hands. They don't want to wait 5 days for that new TV or iPad - they want to take it home and unbox it. But you have to be competitive on price and you have to have inventory in stock.

Ultimately retailers like Best Buy are going to have to refocus on the customer and try to play to their own strengths. Downes' point about Best Buy's customer service and their distribution and fulfillment systems is exactly right. The retail world has changed a lot in the last few years and Amazon (and other online retailers) are going to drive a stake through the brick and mortar retailers who don't upgrade their game.

Link: http://www.networkworld.com/news/2011/111011-ipad-shoppers-252990.html?source=NWWNLE_nlt_daily_pm_2011-11-11

Network World posted this article which says that shoppers who use iPads spend more than others.

On the surface that seems insightful I suppose, but it occurs to me that shoppers who have iPads have already spent an extraordinary amount of money on a tablet computer thus demonstrating that they are affluent enough, and free-spending enough, to spend more.

It's a little like saying that people who drive to the store in Porsches spend more than people who drive to the store in Toyotas. Yes, well...they apparently have more more money to spend.

That said, I absolutely believe, and have said for quite some time, that any retailer who doesn't take advantage of the proliferation of mobile devices is going to be in trouble. Already Amazon and others are leaping to deploy mobile shopping apps that allow users to scan bar codes and even look up products via image mapping (take a photo of the package and the app will try to figure out what the product is) to do product research, price matching and, critically, even online shopping.

Worst nightmare? Customer in your store picks up a product, scans the barcode with their iPhone and discovers they can buy it online 50% cheaper than you're selling it for. They place their online order (with free shipping, because they're a "Gold" member) and walk out of your store without spending a dime. Your store has just been converted into a free catalog for somebody else.

People have long said that Walmart was the greatest enemy of the Mom & Pop store. They're not. Amazon.com is.

Brick and mortar retailers, including Walmart, now have to step up their game. They have to be price competitive, AND provide a great shopping experience AND be more convenient than having UPS deliver the product right to the customer's doorstep.

You can reach Ben M. Schorr at bens@rolandschorr.com or by phone at 808-782-6306. You can follow him on Twitter @Bschorr

Am I the only one who thinks the "WOW, THAT'S A LOW PRICE!" TV ads for an office supply chain are obnoxious and irritating?  And not in the obnoxious manner that you want to show them to your friends, but in the "Fast Forward/Change the Channel" sort of way.

I'm going to suggest that it's one of those campaigns that is going to flame out in a hurry and here's why...

It's an institutional ad, not a promotional ad.  An institutional ad is the "We have low prices, next time you need office supplies come to our store" sort of ad.  A promotional ad is "This weekend only, 50% off on all copier paper!"

A promotional ad can afford to be obnoxious - you might argue that it NEEDS to be.  Because it needs to catch your attention, right now, to get you to take specific action, right now.  And it's only going to be running for a very limited time.  After the weekend sale is over, the ads are done - it's on to the next campaign.  So a little loud, obnoxious, silly behavior can be excused (and if well-executed even admired) in a promotional ad.

But an institutional ad is different.  Institutional ads run a long, long time.  There is no specific call to action other than "If you need us, and you will, we're the ones you call."  The Geico "15 minutes could save you 15% or more" ads are a good example of that.  And if your institutional ad is annoying and obnoxious people will despise it and turn it off.  They won't be amused, they won't share it on Facebook, if they refer to it (and you) at all it will be with disdain.

Perhaps in a blog post about bad advertising choices.

Link: http://www.thestreet.com/story/10646834/1/mcdonalds-to-offer-free-wi-fi-access.html?cm_ven=GOOGLEFI

McDonald's has offered 2 hours of WiFi in its restaurants for a $2.95 charge for a while now and while I don't know how successful it's been for them now they're taking it to the next level by dropping the $2.95 charge.  But....is that really a good idea?

McDonald's CIO David Grooms says it's part of their efforts "to become a destination".  I'd argue that McDonald's is ALREADY something of a destination, but one of the fundamental components of McDonald's is not to sit around on the hard plastic chairs watching unhealthy people scarf down two more Big Macs.  It's speed.  You can get in, get predictable food that tastes o.k., spend very little money, not worry about your kids annoying the other patrons, and get out. Fast.

How much money does Microsoft really make when you buy something off the Dollar Menu?  Well...less than a dollar per item, you can be sure of that.  So how do they make money?  Volume.  "Billions and Billions Served".  You can make a lot of money, 72 cents at a time, when you serve hundreds of those items an hour.   So how does it serve McDonald's interests to have all of their tables filled with folks on laptops, already satieted with their $1 double-cheeseburger and enjoying free refills on their $1 Coke?

One key factor in restaurants is called "Turnover".  How quickly you turn the tables over - get one set of patrons fed and happy and then out of the seats so you can put a fresh set of patrons in the seats.  Nothing slows down turnover quite like giving the patrons a reason to stay in their seats longer. If that reason is because they're enjoying a cup of $4 coffee or $20 wine from your bar, then that's good for restaurants.  If that reason is because they are hanging out on Facebook for free, then that would be bad.

Various articles about this move cite McDonald's competition with Starbucks.  But there's a big difference between the two.  Starbucks revenue model is based on selling you a $7 coffee, and then tempting you with all sorts of pricey add-ons.  Look around a Starbucks sometime at all of the ways you can spend your money while you're there.  Coffee mugs, aprons, coffee makers, even CDs of the music they're playing in the restaurant; and all of them premium-priced.  What does McDonald's sell?  Fast food.  Emphasis on the FAST.

As a techie I'm glad to know there is now (or will be in January) a new destination I can pull up to in order to get my laptop online when I'm on the road.  As a business guy though it doesn't make sense to me that a business that relies upon volume to make their profits would offer a service that almost by design fills their tables with people who aren't spending more money.

We'll see how it works out, but I think it's an odd decision.

You can reach Ben M. Schorr at bens@rolandschorr.com or by phone at 808-782-6306.

Link: http://www.nytimes.com/2009/11/12/business/smallbusiness/12guide.html?pagewanted=1&_r=1&src=tw

This is really clever:

Aim at Potential Customers Only

Some guys use Facebook to find single women. Chris Meyer used it to find women who are already engaged. Mr. Meyer, a wedding photographer in Woodbury, Minn., had had little luck with traditional advertising. A full-page ad in a bridal magazine generated zero leads and a trade show yielded only four bookings, barely covering the cost of his booth. But Facebook proved a digital bonanza. Mr. Meyer aimed at women ages 22 to 28 who listed their martial status as engaged in the Minneapolis-St. Paul metropolitan area. He estimates that he has spent about $300 on Facebook ads in the last two years and has generated more than $60,000 in business. He says about three-quarters of his clients now come to him through Facebook, either from ads or recommendations from friends.

Because Facebook gathers, even encourages, this sort of status update it's trivial for him to advertise to that demographic.  That's a good example of thinking creatively about how to reach your market.  If I had anything to do with the wedding business I would have already stopped reading this post to go on Facebook and do the same thing.

Unfortunately this doesn't work as well for all businesses.  There isn't, for example, as easy a way to reach people with car problems.

-B-