Wednesday, May 28, 2014

Why There Are Still Interests To Invest In Mature Market

I wanted to discuss this topic on this blog after I was chatting with one of my supplier about why they should invest in the French market.  Indeed, he was arguing that European markets, as they are mature, are not a priority for the investments of its company, as the growth is now in the emerging markets.

This is to me a cliché. Indeed, sales growth settles for sure in emerging markets, were a large number of people experience a high growth of salary and lifestyle. And hence, as you start from the bottom, there is a lot of room for growth. And a lot of big companies have invested a lot in those countries, with success.

I am not going to hide the fact that indeed a lot of US and European companies have been able to meet their growth target thanks to their investments in emerging countries. But as the time go buy, we have seen that investing in the emerging market, even though still a priority, is as important as investing in mature market.

A company needs to be able to compete in a mature market
Hence, how could a company not be able to compete in a mature market if it wants to stay in the long run? Earning fast marketshares surfing on the economical growth of India or China is an easy game, especially because this growth most of the time has been financed with the money from mature market. But once the market is mature, and growth harder to get, then you need to be able to make profit out of it.

And competing in a mature market requires for sure large investment.

Mature market is often where innovation comes from 
In mature market, you need to have concrete and real innovation. You can't fake it as your competition puts a lot of money down inR&D. It is once you are able to innovate in a mature market that you will be able to set presence abroad.
Most of the time, emerging markets are reached with low cost versions of the European products. It is what was made for instance by l'Oréal in India, where they sold to beging one portion shampoo bottles to allow people to buy from time to time shampoo.

Mature markets are reliable
Mature market don't experience much roller coaster, which can be the case in emerging markets. Companies' status (leaders, challengers, premium niche) are challenged on a daily basis as new competition can show up at any time.
Also as we have seen this year, a lot of large European and US companies have delivered delivered deceiving figures due to currency changes. Mature markets don't have floating currencies as emerging market does. It has been the case of most of European retailer such as Carrefour, DIA or Casino.

Emerging market will become less and less attractive
Emerging markets growth are slowing down, competition becomes tougher, wages are going up: Emerging markets are going soon to reach a plateau where they will need to change their modells to keep up with the pace. And as they are loosing competitivity, then old markets start to be attractive.

It all comes back to the first point, a company need to be able to compete in a mature market. Because I believe that at the end of the day, this is what really matter: having a reliable profitable business.

What do you think about it?

Thursday, May 22, 2014

What If Electricity Was Becoming Free?

Obviously the title of this post has probably triggered your imagination, or at least your attention. It seems to be an impossible thought nowadays, while we still have not find a solution to stop using fossil energy, meanwhile gas and oil gas are still growing at a steady pace. 

As the Ukranian crisis is still unfolding we can see how it is vital for countries to get energy. Jeremy Rifkin, an expert forecaster has envisioned a new industrial revolution where fossil energy would have disappeared, and where we would have found renewable sources to replace it. This revolution would make electricity almost free as the cost will dive dramatically.

Seems unrealistic? Actually, this very interesting article of Le Nouvel Economiste explains why and how it could be possible

First of all, every industrial revolution have been possible thanks to a new energy source. The first one was possible thanks to the steam machine. The second one has been based on fossil sources.

Secondly, the rise of countries like India, China and Brasil, and their growing need of energy sources to produce more will very soon create high tensions on the energy market, which will speed up the need for new sources in mass. 

Also, what make new industrial revolutions is not only the arrival of a new source of energy, but its convergence with new communication media. Nowadays, we already have the new media, but we are still craving for a new energy source that will allow this economic boom.

What the author envision is a new way to consider renewable energy. What is great with renewable energy (wind, solar...) is that on the opposite of fossil energy is accessible anywhere at a low cost, whereas you need to dig deep to get gas for example. That means that instead of having huge plants regrouped in one place, you may have renewable source close to the place where it will be used, which will lower the cost of both exploiting and transporting. 

Of course, a lot of new technologies need to be found to store and produce this renewable source. Also, we need to invest in those new technologies once it will appear. But it will dramatically lower the price of energy, the same way the Internet lowered the price of access to information. It will obviously also have a great positive impact on the environment, and solve a lot of the problems of pollution we have nowadays.

As a result, whereas energy accessibility remains nowadays one of the biggest conflict issue, the access to information and network will soon become even more problematic as a result. 

I believe that his idea is genius, and it seems pretty possible this will happen. Now that you have read this article I am sure you will follow with another look what renewable energy will become, and how it may change the world.

Monday, May 19, 2014

#scops2014 : Compte rendu de la soirée

Malheureusement je n'ai pas pu cette année me rendre à la soirée des SCOPS 2014, organisée par le master distribution et relation client de l'université Paris Dauphine. Néanmoins, j'ai eu plusieurs échos de personnes qui étaient présentes pour cette événement, et il semblerait qu'une nouvelle fois, ce fut un très grand succès. 

La cérémonie est tenue depuis 3 ans au siège du MEDEF, dans une très belle salle, mais qui comporte selon mois 2 grands inconvénients:
  1. Il n'y a pas d'endroits assez grand pour faire dans des conditions convenables un cocktail à la fin de de l'événement
  2. Parce qu'il n'y a pas de réseau dans la salle où se passe l'événement! Cela fait 2 ans de suite que j'essaie de faire du live tweet, sans possibilité. Ce aui est dommage, surtout que le master est clairement moderne dans son approche.
En tout cas, la salle est bien plus grande que la salle historique de Dauphine Raymond Aaron, ce qui permet de pouvoir réunir un grand nombre de professionnels des métiers de la distribution, du marketing, de la communication et de la relation client.

Je vous laisse la présentation de la cérémonie, afin que vous puissiez apprécier l'excellent travail des étudiants du master.

En tout cas, je peux vous assurer que je serai là l'année prochaine!

Friday, May 16, 2014 Case Study: When Customers really take the power

Nutella is one of the most powerfull brand I know. It is quite often taken as an example on how strong branding can leverage high revenues. Despite some contreversy, especially linked to the use of palm oil in its recipe, people still love Nutella. Actually, Nutella is known for its vast group of fans, making it a great topic for tribe and social marketing guru.

Nevertheless, an article caught my attention about a recent story. is a website created by fans of the product in 2007, which were working on creating a Nutella Day to celebrate the product. In 2014, Ferrero, the producer of Nutella, decided to shut down the website, for no official reasons. My guess is that Ferrero wanted to take over the control of this popular website which became with the time a reference about their product. 

But social media and the Internet in overall has changed the game. When you have such a popular brand, it is nearly impossible to control how people use your brand for either positive messages (which was the case for or negative (which is the case for activists against palm oil).

What is funny is that Nutella has such a high asset with its group of fans hooked to its product, but because of old corporate reflex they tried what they could to stop it to gain control.

What do you think about it?

Thursday, May 15, 2014

Some Great Insights About The Drive Business In France

For those of you who are not French, and that don't really follow the French retail business, there is a massive trend that showed up about 5 years ago which is shaking the world of grocery retailing: Drive through grocery shopping.

People shop online, selecting their products and pay, then they collect their food right in their truck at the drive warehouse nearby. Most of the past 5 years market growth have been otbained thanks to this new retail channel.

Olivier Dauvers is a French Expert in retailing, and has been investigating these new operations for the longest time. He recently published a blog post (in French) about what are the questions people ask him the most about the drives. He is actually right now in the US to see how American retailers are adapting the concept there. 

Here are some of the great insights he provides:
  • He forecasts that drive retail may count for about 10 to 20% marketshare once it will be mature
  • There are two different business modell: one based on in store picking (an employee go into a brick&mortar store to pick up the delivery right on the shelves) or a real drive (a warehouse only selling online, where everything is conditionned to save space and time).
  • The real business modell in the long term remain real drives, as it is the most cost efficient concept. Hence, once in a store pick up scheme an employee treat at best 85 products per hour, in a real drive, it will get 200 products... Of course, the real drive has thought everything through to save time in where the products are located to minimize the walking and roaming of the personnel.
Here is how the operating account of a drive works:
Gross margin: 25%
Wages: 9 to 11%
Investment: 3 to 4 %
Electricity and others: 1,5 to 2,5%
Advertising: 1%
Taxes: 1%
Banking fees: 0.5%
EBIT: 3 to 7%

You need to compare this data to the standard EBIT of a grocery retailer: 2 to 3% on average. Hence a well operated drive could be very profitable.

A third business model may soon be launched: A wharehouse which would prepare the deliveries, then send it to the point of sales. It would lower the cost of preparation and benefit from the point of sales to generate traffic and accessibility 

Monday, May 12, 2014

Some Thoughts On My New Approach With LinkedIn

For those of you who know me well, I have always been a high user of LinkedIn, and a fervent fan. I have found a lot of my previous jobs thanks to it, and as the service evolved (in a great way by the way), I have been able to keep in touch with a lot of my professionnal contacts, I have been able to look for job positions, to create the group of my master degree at Paris Dauphine, etc...

The service have been great, and at some point, once I started to have over 100 connections, I started to slow down with accepting people as most of the people wanting to get in contact with I did not know. I started to think: How can you keep in touch with over 100 people? Or if you keep in touch, how can you have possibly a strong relationship with that many people?

As the time went by, I started to get in contact with more and more people, and in fact, without even noticing it, I have over 400 people in my network... 

This is in fact a real blessing. That means that I have the opportunity to know and contact quickly a vast number of people that I would have never been able to keep up with, from different activities: finance, marketing, sales, international business, entrepreneurs...

Hence, I go more and more often on LinkedIn, especially to get information in the news feed they have. I am really amazed by the quality LinkedIn has been able to develop over the time. 

I really believe that they have changed the way people are approaching their career, and foremost, the way they are connecting with people.

You are doing a great job guys.

Saturday, May 10, 2014

Where Does Ecommerce Stand In The Global Commerce World?

E-commerce is at a very interesting stage of its life. It has been about 20 years that Amazon has been founded by Jeff Bezos, and no one should question how big it became.

Depending on the activity related (music, electronic devices, groceries, traveling...), the E-commerce had sometimes a huge impact on the brick&mortar business. Let's take the most obvious example: Cultural goods such as music/video retailing business
  • Some activities have been discontinued, like the DVD rental business, with the end of Blockbuster.
  • Some activites are going in limbo like Barnes & Nobles
  • Some activites have lower to their minimum levels, such as what Walmart or Carrefour in France does, proposing the minimum of range.
But now that E-commerce is entering into a phase of maturation, with lower growth rate, and actually basing its growth with multi channel strategies (opening drive through and in store pick ups for example), will the Internet business replace brick & mortar business? Will it become the leading retail channel? Will it remain the main source of sales growth?

I read an interesting article about this issue that I wanted to share with you. It shows the marketshare E-commerce owns of the whole Retail business in the US in 2013.

The chart shows clearly how important the E-commerce is growing, at a steady pace, but it also shows that traditionnal retailing remains the main show.

I also participated in a conference last year at Paris Dauphine that was leading to the very same remark. What is important, is to understand what will be in the next 10 years the share of e-commerce. I believe it will still grow at a steady pace, but it won't exceed maybe 10% (which remains a lot, as it may double in ten years). What will be interesting to see, is that obviously this growth will impact the way brick&mortar companies operate, and to see what kind of adjustment they will make.

I am jumping to the conclusion: There is room for growth in the brick&mortar world. What needs to be found is how you can create added value thanks to the contact and relationship you may create once in a point of sales.