Is There A Future For Electronic Goods Retailing? Some Of My Thoughts

I recently read an article about the good health of Best Buy's Stocks. Surprisingly, even though the competition with online retailer becomes tougher and tougher, Best Buy succeded in delivering promising results. The question that this article ask, and the same that I ask to @tbayart , was if brick and mortard electronic goods retailer still have a future. 

Indeed, in this specific field, the competition of the Internet is very important. Most of the traditional store chains are not able to compete with prices, and the showrooming hype makes it even worse. The margin rates are historically low, and the price competition with online retailers which don't have the real estate cost makes it even tougher!

Some people even believe that traditionnal retailers are condamned to shut down eventually. Actually, I do not really agree with this version.

I may look like a trailblazer, but I have envision what is going on right now almost ten years ago: the show rooming trend. But at this time, I did not picture it as a bad thing, but actually a great opportunity to improve customer relationship, and the added value of the retailer. Here is sort of what I saw:

• Stores would have very low stocks as people would tend more to buy goods to be delivered home.
• There would be no cash desks, people would buy with cards and have automatic cash desks, which would lower the cost of cashing in.
• There would be fewer products, to simplify customers' choices, but they would be presented in a manner that customers would be able to test them.

Of course, my vision now would have changed a little bit. Because the world has evolved a lot (at this time I could not see how mobile devices would change the world, nor what the competition landscape would have been), and also because I gained experience and expertise about retailing and marketing.

But I still believe there is a lot of room for brick & mortar retailers. And the main reason is that those kind of products requires a long decision making process, a high implication due to the cost, and a great knowledge of the products due to their complexities.

So I still believe there is room to develop a profitable business modell, which would actually be based on the showrooming trend which most of experts blame.

• Maybe there would be less stores, and further from downtown: Maybe like Ikea with a big surface, which would help to show out the products.
• Maybe there would be no stocks, or actually like ikea, on the opposite, there would be no warehouses the stocks being in the store.
• People would buy on their sell phone their products, which would lower the cash desk cost.
• Maybe there would be lower inventory (I believe that the market becoming mature, the product ranges start to be cut, which is a good thing), which will lower the cost of inventory.

I may not have all the information needed to develop the whole concept, but trust me, there is room.

Apple's Low Cost Strategy To Enter Emerging Markets

Apple launched yesterday its new Iphone range, composed by 2 devices: One enhanced version, with a better processor, and new features, and one low cost, which is sort of the same than the previous version.

I believe there are two goals in the fact that Apple launch a low cost device:

1. Being able to compete on the second hand market: Apple can propose an old version new at a good price. Now that the smartphone markets become mature, the second hand market starts to count in the overal smartphone market, therefore there is room for growth on it. This is what Renault made in the car market by launching the low cost brand Dacia, with a certain success.
2. Being able to compete in the emerging markets, where smartphone prices tends to be lower. This is the reason why its competitors excell, and take some market shares to Apple.

This is the second point I would like to discuss. Indeed, emering markets are very important for global companies as it is where growth is. The goal in this market is to set a presence that will secure a big market share, if possible a leading position, in order to generate long term profitability once the market matures.

But Apple have a dilemma: Indeed, even though they are not a luxury brand, they have a luxury branding strategy. And by trying to have an accessible price, they may alter this strategy. I believe they must have struggled with this move. And probably this is the reason why they have picked a targeted price of 500$ which is actually very close to the standard price of 600$.

But Apple must be able to get competitive in terms of pricing in order to generate new customers. Because if they don't they may not be able to compete soon with the other manufacturers like Samsung.

What do you think about it?

Category Management Series: Considering Inventory As An Asset (Inspired by The Ikea Edge)

One new post in the category management series, linked to my reading of Anders Dahlvig book. Ikea has based its success on low pricing. But more than buying cheaper than the competition, one of the key component of this low price strategy is the mastery of supply chain and inventory. 

Most of retailers consider inventory as a liability. Indeed, a high inventory leads to decreasing the cash flow. Cash flow is important in the retail business. A positive cashflow, allowed by buying products with 30 to 60 days to a supplier and selling the merchandises in 5 to 10 days, allow the retailer to invest in opening new stores or new activities. Owning a high inventory is therefore considered as a bargain.

But rather than that, Ikea believes that Inventory is an asset. Having a high inventory allows your store to minimize the stock out situations, and then maximizes your sales. Low inventory leads to low stock in store, and hence you miss some sales. Ikea's main goal remain the sales.

Here is an example of how low inventory management has a bad impact on sales and the overal performance of one retailer: Most of retailers deliver its results at the end of the fiscal year, on december, 31st. Hence, most retailers tend to order as less as possible, to get as low stocks as possible. But the end of the year is a very important time of the year for a retailer, a period where retailers make most of their sales. By giving too much importance to low inventory, one retailer may miss some important sales.

Also, one more thing: Instead of trying to pay its supplier as far as possible, Ikea would rather pay their supplier on time. Indeed, paying suppliers far allows the retailer to play with its positive cashflow. But Ikea think differently: By paying its supplier on time, the supplier has less financing issues with its cashflow, which allows Ikea to gets better buying conditions, and then lower the cost of its inventory (because they get better conditions).

I believe it is a very unique way to consider inventory, but what I like about this philosophy is to always prefer stock availability than low stocks, because sales must always be the main and primarly goal of one retailer.

The Ikea Edge: The Best Gears Don't Make The Best Cars

I wanted to share with you in my series about Anders Dahlvig's book his thought about management and team work. It has been based on a quote of Russel Ackoff, a trailblazer in management sciences.

Let's imagine you gather all the best cars in the world in one single room. Then you pick the best gears of each modells: The best engine, the best wheel, the best breaks... In the end, you get all what you need in order to build a car, with all the pieces you need. The question is: If you put it all together, would you have the best car in the world? Would you at least have a car that would move forward? Maybe not. The fact that each part works well individually does not mean that it would work all together. Success comes from the ability to work together. That is what makes the best car.

I believe it is very important to understand this part. I am totally agree with this quote. How many times a pro sport team build up dream teams on the paper but those teams never work together.

One example that comes up in my mind is the Lakers team of the 2000s with O'Neal, Bryant, Payton, Malone. All of these guys were all of famers, and despite a really will to work together, that did not happen the way they wanted and they failed in the finals.

Human interactions are key in business, with partners (suppliers, clients, investors), but also with employees, wether they work directly together or not. Great lessons, and great story to tell.

Category Management Series: Managing The Product Range And Its Consequences Inspired By The Ikea Edge From Anders Dahlvig

The first blog post I wanted to share about my reading of Anders Dahlvig's book The Ikea edge is actually linked to category management. Indeed, as a category manager, we are responsible of the listing and unlisting of products, and therefore, we need to master the width of one product range.

Most of the time, category manager tends to look after the largest product range. Indeed, owning the largest listing allows your category to become a leader in its trade: The more you have products, the more customers will consider your category as performing. Also, the larger the product range, the larger the sales, as you cover the most customer needs.

But as a category manager, it is also important to always understand what impact having a large range also implies:

• High inventory,
• Larger stores to show out your range
• High wadges due to the manutention cost to put products on shelves.

Ikea is for sure the definition of a hard discounter, or a low cost company as you like. Anders Dahlvig's philosophy is: while choosing between a large product range and supply chain/ operationnal efficiency, Ikea will always choose operationnal efficiency.

As Dahlvig says, Ikea has a target of 2 500 products in its listing. Ikea, thanks to its concept and the attraction of its store, could sell almost anything, and has a lot of great products that supplier show them all the time. But because of their eagerness to get high efficiency on the operationnal point of view, they always keep their 2 500 products threshold. Keeping a short product range allows Ikea to keep low prices because they master their retailing costs.

Should you apply this rule to any kind of retail? Of course not! Amazon's goal is to get as much products as they can, because their business modell is much different than a hard discounter. But when thinking about category management, it is important to always keep in mind the cost of one new product in the range is.

In the Category Management Series:

Category management series: The Pricing

Category management series: Category Management & CRM

Category management series: The First Moment of Truth

Book Review: Anders Dahlvig The Ikea Edge

I have juste finished reading the excellent book of Anders Dahlvig about Ikea's success story. Anders Dahlvig has been the CEO of Ikea for 10 years, between 1999 and 2009, but more than that has spent about his whole career at Ikea, working in different business units of the group. Hence, rather than telling the story of how Ikea has grown, Anders Dahlvig analyzes what makes Ikea a remarkable success story.

This book has really inspired me as a retail professionnal. Indeed, Ikea has great ideas on how to run a retail business, and some of them are quite different from how retailers usually think. This book has so many great ideas, that I decided to make a series of posts instead of one, in order to analyze the favorite parts I have from the books.

Why you should read this book:

• The Story of Ikea: Even though it is not the sole purpose of the book, you learn a lot of details on the key dates, but also how and why Ikea grew the way it did.
• The retail strategy: there are great ideas that retail businessmen should read carefully, in order to understand very specific parts of Ikea's success. I will write couple of notes about them.
• The management style: Beyond retail parts, Ikea has a management styles that have thrived throughout the years. It could be very inspiring.
• Understanding how to settle in new markets: Dahlvig tells us about how happened the launch of new business units in new markets. It is important to know for companies that wants to go abroad.

The Recency Theory

I was going through my saved favorite tweets on my account @schriver and I found this article about the "recency theory".  

Maybe the term "theory" may be too much about this concept but I believe it is interesting: In order to be efficient in your advertizing, it is important to focus on the time when your customers may most likely be making their decision.

For example, it is no use to have a commercial about a pizza at 9 am, because people will tend to forget about the commercial once lunch times come. Instead, having the right mobile coupon ringing around 11:30 AM will have a high change to trigger the sale.

In nowadays society, we are all overwhelmed with advertizing overload. Basically everything and anything is an advertizing medium: TV, websites, radio, smartphones, billboards, newspaper you read... It implies people can't keep in mind for long a commercial, and therefore, they must be able to make a decision out of it quickly.

Thanks to new technologies, it is now easier to communicate with one customer when he is in his decision making process. It is very important to be efficient in this timing in order to get customers' responses rate high.

Some Thoughts About Facebook Graph Search

Earlier this summer Facebook launched on a larger scale its new search engine called Graph Search. Search Engine is a very strategic tool in the online advertizing business. Indeed, most of the advertizing revenues Google get is from its search engine activities. And as Facebook owns a large number of users, it is important they leverage this base in order to get revenues. This is the reason why they have launched their own branded search engine.

I believe it was very important for Facebook to own their search engine. After having seen the Bing experience with Yahoo, I am convinced it is better to own the search engine in order to maximize revenue. Now, you also need to have a powerful and efficient search engine, especially while comparing to Google excellent system. 

Facebook took an innovative approach, trying to focus on its main strength, the social links its users have with each others. That is the reason why Graph Search has been designed that way.

The problem is that a lot of people raised the confidentiality issues that Graph Search will bring on the table. I understand that issue, but once again, Facebook also need to leverage the data it has in order to improve its users experience. I believe that people using Facebook are now well aware of the confidentiality problems that may occur.

I have not really used Facebook Search yet, so it is difficult for me to talk a lot about it. But I really wonder if people will actually use Graph Search a lot. 

What do you think about it?

  

Category Management Series: The Pricing

One of the key elements of a category management strategy is the pricing aspect of it. The topic is very large, because there are almost as many price strategy that there are companies...

There are different key aspects though to take into consideration in order to set a pricing. These aspects are not ranked! Because once again, depending of the global strategy of a company you may use one component more than the other:

• Companies costs and margins: Obviously, if you are running a business, it is not for free, and you need to earn money. Therefore it is important to understand how much money you will spend once selling one product, in order to have a price that will secure you some profits.
• Competition: Of course, you will always been in a competitive environment. Maybe you are the "Apple" of your sector, or with very innovative products, you will always need to find products that have the same usage that may be an indirect competition.
• The facial value of your product/service: Customers may have an idea of how much money they may put in your products. This facial value may come from the money you allow your customer to save, or the time you will save, or the comfort you will provide. It is important to see how much money your customer is eager to spend on your products.

For a retailer, and most companies with wide product ranges, there is also a very key component of the pricing strategy: The equalization. The equalization process comes directly from the important competition you have in the retail business. Therefore, your pricing strategy is one of the key reasons why your customer will choose your store rather than another. Your equalization process obviously needs to get customers perception that you are cheap, but also needs to take care of the three aspects of the pricing above. 

In the Category Management Series: 

Category Management Series: Category Management And CRM

Category Management Series: The Client Is Not The Customer

Category Management Series: The First Moment Of Truth

Category Management series

Publicis & Ovicom Joins Forces To Create Advertizing Tycoon

I learned this morning that French advertizing company Publicis has decided to create a holding with American group Omnicom.  The group is going to be a holding with headquarters in Holland (??? Probably for taxes reasons) with operations main office in the US and France. The new holding will become the largest group of advertizing in the world.

The merger is supposed to allow both companies to save money on expenses, and also to create different synergies. Now is it a good thing?

This is a question I don't really know actually... Indeed, some clients may be reluctant to remain in an agency for example that deals with their competitor, so I believe that they may loose some clients due to that. I actually believe that maybe the new group will need to sell some of their agencies due to that reason.

Also, I believe that where the group may create the best added value is about its consulting activities, rather than their power of purchase. Media companies are struggling financially, and I don't think they are in the capacity of providing better pricing due to the fact those both companies will buy together.

Now I am very happy for Publicis. I believe that Publicis did a great job and had the good strategy for years now. They have been able to shift from traditional media to digital with success. It is always great to see a French company succeeding as much as Publicis does.

Tesco's Talking Shop Blog

I recently discovered the Tesco Talking Shop Blog thanks to an article of French magazine Linéaires. Tesco is one of the leading retailer in the world, thanks to its leadership in England and different other countries. Tesco has also been rewarded thanks to its customer centric approach, and the usage they make from their loyalty reward program data.

In this blog, top executives of the company discusses about their job, they're philosophy, and what the innovations are at Tesco. It is a great source of information in order to know what the company is at.

As a professional of retail, it is a great opportunity to understand better what makes Tesco so unique. I invite you to have a look if you have the change.

Should Businesses Experiment? thanks to @ariegoldshlager

I wanted to share with you my thoughts about an article I read on the blog of @ariegoldshlager : Why Businesses Don't Experiment. Actually, I found this article very interesting, because it is true: From my personnal experience, I believe that companies tend not to test much. Most of the time, they would rather change their whole business at once than to conduct tests.

The thing is that testing is difficult, and requires you to have clear patterns and protocol to respect, in order to have usable data at the end of the test period. Testing is not only about launching a new product and letting a few sample of people try it, it is about targeting the right sample to use, and to define right from the beginning the data that will provide you a clear answer.

As Arie points out, companies would rather have consultant letting them know what to do with their core business and take their advises for granted than taking couple of months to figure out what the decision will imply.

Now I believe that once you want to make a decision either to experiment something or to set it on a larger scale, you should think about those two things:

• Experimentation is a great way to apprehend the impact one decision will have on the different component of one business, and then you would be able to correct it, in order to provide the best service to your customers once you make it on a larger scale.
• Experimentation takes time, and in nowadays society, in tough economy and tough competition, being fast is one of the key element of success.

I may not give a clear answer to this situation, but I believe that before skipping an experimentation process, you should deeply look after it, in order to know what would imply a testing period, how to do it, and then make a decision either to experiment or not.

Walmart To Set Lockers In Store For Online Deliveries

In Store delivery is probably the biggest challenge for online business. Indeed, E-commerce is still growing, but its growth pace has slowed down a lot lately. The share of retailing made on the Internet is becoming steady, which is a good and a bad sign:

• A good sign because it shows that online business is durable and counts for an important share of the overall retailing
• A bad sign for retailing because most of the growth of retail was based on online activities.

Walmart is trying a new service in its store, allowing online customers to pick up their products in one of Walmart's stores, thanks to a locker system. Here are some pictures of Amazon's ones.

I believe that there is a great opportunity for growth for online retailer thanks to this system:

• They benefit from new delivery places. In the case of Walmart, in a highly visited place.
• They can optimize their supply chain by delivering large quantities of goods in one single place, cutting the cost of the last mile (which is very expensive).
• The system is quite cheap (even though I don't know the fees Walmart may apply to the online retailer, in the caze of Amazon's locker for instance).
• They can skip the problem of deliveries that unsatisfy a lot of online customers. Who has never had a problem of a product that never came, or late, or had to call the post office to know where the mail has been shipped... This system I believe is more secure.

Thanks to this system, I believe that Walmart.com will get more exposure, and a competitive advantage. It is a very easy way to leverage the store network available in order to get market share online.

Amazon's Strategic Plan By Entering The Online Grocery Business

I read several articles on the web lately about Amazon's strategy to enter the Grocery Retail Market. I actually already wrote a blog post not so long ago about Amazon expanding their Amazon Fresh concept to new cities. Forbes.com has an interesting theory about these investment: Amazon is aiming to propose same-day delivery thanks to its ability to sell fast moving goods. Indeed, selling groceries, especially fresh products, imply Amazon to set up a supply chain allowing fresh products like fruits or meat to stay for the shortest period of time in warehouses, but also to deliver them with short notice.

Amazon is not looking for high margin rates, especially because grocery already works with razor thin ones:
“No one has cracked the nut of grocery home delivery in the U.S.,” wrotePaula Rosenblum, managing partner, RSR Research in a recent RetailWire online discussion. “The low margin nature of the business, coupled with the need for fuel-guzzling refrigerated vans and trucks, make it very hard to do — and that’s in ‘easy’ cities, which means relatively new homes, no five floor walk-ups or winding stairways.”


Mr. Heckman added, “It could also mean that delivery fees are lower, order size minimums are waived, and it certainly could mean that home delivery and in-store pick up will never pay out using traditional metrics and full allocated costs.”

Amazon has already started in France to sell fast moving goods, but mostly the pricy ones, with slow frequency of purchases: baby food and diapers for example.

What is interesting with this strategy, is that it somehow looks like a revert strategy of what hypermarkets have thrived on for years. Hypermarkets proposed non grocery products at discounted prices in order to attract foot visits for customers eager to find great deals, and then to sell food, which is where their core business were.

But now, Amazon wants to do the opposite: Attract people with grocery food, thanks to the home delivery service they can set up, in order to sell more of their core business item.

Sales representative/Store Staff are the best people for your customer relationship management effort

A very quick note to share with you this story: http://www.loyalty-ip.com/article-123-exceptional-cx-creates-brand-engagement?utm_content=buffer299e4&utm_source=buffer&utm_medium=twitter&utm_campaign=Buffer

I believe you should pay attention to it. So many times I have emphasized in this blog that the best medium of your CRM strategy is the people directly in contact with your client. This story is just a great example. Beyond the big data, beyond the technology, human contact remains special, when it is carefully handled.

Why Mobile Commerce Should Not Be Taken Individually

Very interesting article of chainstoreage.com about mobile commerce ROI. Actually, the comment sounds familliar as mobile commerce is in the very same situation than traditionnal retail once e-commerce appeared.

When E-commerce started to spring up, a lot of people thought that traditionnal retailer would have a great competitive advantage as they owned store with high traffic to propose delivery and added value to online shopping. But one of the reason why it did not work that well at first was the way retailer was seeing the online store of the company: It was stealing some business from them, and on top of that they had to deal with the dirty work: after sales service, returns of non working products, the cost of stocks when people did not come to pick up their goods.

For mobile commerce it is even more true. Mobile commerce is 100% part of a ubiquitous shopper. One shopper may use its mobile added to different kind of channels, such as traditionnal stores, a computer, or maybe even a call center. That way, to link a sale to an activity on a mobile phone is difficult. And the perception of the return on investment of mobile commerce is difficult to get. 

Mobile commerce is growing fast though represent a limited share of the overal commerce, in most industries where it exists yet. But it is important to have in mind that the mobile phone will be the ultimate tool to link all the other communication and sale channels.

Category Management Series: Category Management And CRM

Here is a new article about category management. As you all know, I am category management at DIA but also a customer relationship management expert. And a lot of times, people wonder what is the link between those two activities.

A category manager, as I say most of the time, is in charge of the 4 marketing Ps of a category (a group of product).

• Products: The category management is head of the offer of a retailer. It defines the listing of products, optimizing both customers' needs and expectations and the retailers' sales and profits.
• Price: A category manager works on the price of the products in order to have a great price perception for customers, being competitive, but also have a good mix allowing the category to contribute in terms of margins.
• Place: The category manager sets the merchandizing plan trying to influence shoppers decision.
• Promotion: The category manager tries to define the best promotion plan throughout the year, with different goals, such as marketshare gains, speeding up sales of specific products, highlighting innovations to help them to have a good start...

A category manager has always in mind what are the priority of its company, in terms of sales and profitability. But it is also linked to customers' choices and needs. A category manager needs to analyze sales, new customer trends, market data... It needs to know what the customers need.

Hence, the category manager relies a lot on customer data, in order to make decisions. I believe that category managers may not leverage a 100% the full potential of CRM, in terms of knowing customers, being more efficient in its promotions and so on. But thanks to new technologies, especially mobile ones, it will become easier and easier to do so. New tools exist in order to interract more with them, to help them in their every day life, and these are the next challenges of the trade.

This is what I am trying to do as a category manager: 

• Always try to know more about customers decision making process
• Analyzing new trends, new usage of the products

This article is part of the category management series. Here are the other articles:

Category Management series

Category Management: The First Moment of Truth

Category Management: When The Client Is Not The Customer

Category Management Series: The Client Is Not The Customer

It is something important in terms of category management because it is one of the main difficulty of category management. In the retail business, suppliers provide products for customers, but need to go through a client, the retailer, in order to do so.

Hence, the supplier needs to take care of two peoples' expectation:

1. The customer: They need to define a product that will match their needs, will be better than the competition, and will have an affordable price.
2. The retailer: They need to propose high level of sales, good profit, low inventory, among other issues.

Of course, the goal of category management , both for the category management staff of the supplier and retailer, is to respond to both people. The difficulty is when there is one of both that is not fullfilled. Seth Godin recently wrote a blog post about the difference between the client and the customer. I believe he explains well the difference.

It is always better when the client is the end user (the customer) of one product, because it ease the customer relationship management process. Hence, one supplier (or provider as Seth is writting) needs to have two specific approach for the same purpose: selling a product to an end customer.

Let's not forget also that the supplier (or provider) do not always define products matching customers' needs. Sometimes (quite often actually) they launch new products to increase the profitability of a production unit: I acquired a new plant that do plastic tubes, I am going to put my best products in plastic tubes. I bought a brand recently, I am going to get my flagship product with the flavor of this new brand...

I believe that category management is efficient when it starts from customer needs. Of course, both the supplier and retailer may have industrial or economic interests, but in order to make long term decision, and analyzing all the different economical aspects of the decision, they should focus on how the category development may benefit the end consumer.

This article is part of the category management series. Here are the two previous articles:

Category Management series

Category Management: The First Moment of Truth

How Walmart Became The N°1 Retailer On Facebook

Walmart is of course the world laster retailer, especially due to its dominant position in its domestic market. Over the time, Walmart has been able to grow a base of 30 million fans on Facebook. French professional magazine LSA recently posted an article on the reasons why Walmart succeeded in its digital strategy.

Using Images and Video Media: 85 % of the content generated by Walmart's page is either videos or images. 

What kind of content?

• 45% of posts are about products, depending on the seasons.
• 17% is buzz contents, viral videos, that have nothing in common with the company's retail activities.
• 15% are tips on how to use products, or to better consume.
• 13% are interractions with fans, mostly through polls.
• 10% are about ethical causes, such as recycling, donations.

Here is a sum up of Walmart's strategy

Amazon's Strategic Move Into Grocery Business

Amazon  has been mastering E-commerce since it started its business. Amazon has set its reputation on cultural products, books, CDs and video games among others. As the time went by, Amazon expanded to new fields, and now is able to sell clothing, and even groceries.

According to a very interesting article of the CNBC website, Amazon has major plans for its grocery activities.

For five years, Amazon has been testing Amazon fresh in Seattle, and now plans for 2014 to open its concept in 20 new urban zones. Among one of the main reasons Amazon is betting on Amazon fresh, is to be able to offer to its customers delivery the same day of the order. 

Grocery E-commerce has raised a lot of questions. Indeed, there are very few companies in the world that have been able to develop a profitable business modell out of it. The most efficient and profitable way is for sure what exists now in france, drive through supermarkets.

But Amazon has for sure a lot of strength to succeed:

• A great knowledge of E-commerce website, with the ability to upsell for example.
• The excellence of their supply chain, which will help them to lower the cost of the last mile delivery
• A great data base of customers to leverage, and to convert to Amazon Fresh.
• Amazon already own top of the line warehouses, which means they don't need to invest much more to store the groceries.