Ali's retail blog at Itim

Are we becoming Promotion Junkies!

2011-05-15T08:35:00.001-07:00

It is clear that retailers are fighting over customers. It is not surprising, because if the UK market is not showing growth, i.e. the cake is not getting bigger, retailers are having to promote to persuade customers to come to them (chase marketshare). Particularly as customers have so much choice. Never knowingly undersold is being replaced with Always knowlingly under-selling.

As one retailer said to me, the problem with retailing today is that it is not just about making sales but about making profitable sales. Profitable sales is the golden quest.

When to promote, what to promote and how much to promote? If you get these wrong, you might as well stand outside your shops and hand out cash to customers entering your store.

Sorting out good pricing and promotion strategies is the key to success. With markdowns in excess of 20% any improvement, even shaving off 1% of that is worth its weight in gold.

Doing smarter promotions is the key here. They do not have to be about a discount. In fact promotions that are not about discounts are better.

Targeting is also critical. Knowing your customer segments and sending them targeted vouchers (or voucher codes) is a good idea.

Nurturing not overwhelming customers is what is needed.

Remember that old adage, price says more about you than anything else will. It is the most important brand statement you can make. Dont devalue it.....

Will IT departments be the next focus for cost reductions?

2011-02-20T08:34:00.001-08:00

2011 looks set to be another challenging year for retailers.

There’s no doubt that with increases in commodity prices, the fall in sterling, increases in labour costs, and the VAT rise, pressure will be on margins.

Retailers will be looking for ways to reduce costs. Will IT departments be the next target for cost reductions?

IT departments in the client-server world were required for the management of networks, servers, integration of disparate systems, office applications etc, which has all been labour intensive. It is a very fiddly business.

Will the move to browser based, Internet centred applications reduce the requirements for large scale IT departments? A recent set of case studies have shown that based In this world, a ten store retailer could be reaping the benefits of an end-to-end system for the ‘equivalent’ cost of one IT person, a twenty store retailer for the cost of two IT people, and a fifty store retailer for the equivalent cost of three IT staff.

This includes all software, hardware, maintenance, IT operations and 1st, 2nd and 3rd line support costs. You can call this IT on demand, managed services, outsourcing or Saas, but whatever you want to call it, the bottom line is that the case studies show that IT costs will be about 50% lower.

It is also clear that implementation of such systems is easier and faster, so the idea that you need to spend money on IT to get benefits elsewhere is no longer true, the benefits may be within the IT department itself.

So is the IT department as we have known it going to be re-engineered itself? In a cloud driven world, certainly it is hard to see the need for large IT departments going forward. Of course such challenges also create opportunities. Maybe the IT department instead of managing systems, will transform itself into helping businesses use their systems and information more effectively.

21st Century Retailing

2010-07-23T09:31:00.000-07:00

The 21st Century is here. Yes I know that statement is obvious, however, as a retailer have you really considered its full impact on your organisation? You’re competing in a world where the phrase ‘multi-channel’ became irrelevant five years ago – retail is multi-channel! You’re marketing to a consumer base that is probably more technologically advanced than your IT department and more price savvy than your grandparents were during the depression. You might think that you’re an early adopter of certain technologies and best practices but have you really considered what it actually means to compete effectively in this new, dynamic retail landscape where not only you but the customer is living with uncertainty?
The 21st Century is redefining the traditional retail pillars of Price, Product, Service and Customer. In this article we’d like to offer you our views on the subtle - and not so subtle - changes in definition of each of these pillars and hopefully provide you with some food for thought on how we believe you now need to look at each.

Product

Multi-channel - or ‘Retail’ as we would like to redefine it - combined with easier global sourcing offers retailers a huge opportunity to extend their range. Two issues arise here. Firstly, an extended range means increased supply chain complexity and, secondly, you need to ensure that in extending your range you remain true to your brand values. The grocers offer some prime examples here in terms of how far you can stretch a brand yet remain true to and deliver on what it represents as you enter new territories both in terms of geographies and competitive ventures. Take for example the “Tesco Finest” range. The introduction of this range has seen huge increases in market share for the grocery giant and given the retailer the opportunity to compete within a new set of demographics.

Service

Now more than ever retailers have the opportunity to compete on service. For over 30 years we have voiced the words but not lived up to their meaning that “our people matter”. In the 21st Century, if we are not careful, this chicken could really come home to roost. When it comes to your brand, your people are the strongest or the weakest link in the chain. If “value” is the watch word, it can only be delivered through the services provided by your people. How are you going to make human contact count? Whether it is in store, in your call centres or in the DC’s, your brand experience has to have a human face or it will be reduced to a price proposition.

Price

Last year’s recession saw a rush to value (otherwise known as bottom price) by many retailers. Whilst it would appear that the discounters ruled, on the whole the luxury brands and top-end retailers sustained healthy profit margins. So what does this tell us? In the 21st Century, pricing is taking on a new significance. As prices become more visible, you are being forced to define the value proposition your brand represents through the products and services you offer in line with the prices you offer. There needs to be a clear connection between your price proposition and your brand and you need to stay true to it – no matter what channel you choose to go to market through.

Customer

We read a blog recently calling on retailers to adopt an “Office of the Customer”. We couldn’t agree more. Retailers work in an incredibly siloed environment but must not forget that there is not one part of their business that does not affect or touch the customer in one way or another. In the 21st Century, customer demographics are increasingly blurred and customers’ wants and needs are continuously changing. For the retailer this implies increasingly high and continuous levels of customer engagement and a flexible and agile business that can quickly respond to change.

The areas I would love to have your feedback on are:

1. International expansion
2. Customer engagement
3. Localisation
4. Value add services
5. The role of scientific forecasting (or not)
6. Deals & promotions
7. Strategic pricing

If you think I have missed anything out or would like to share your views on what 21st century retailing means then please add to my thoughts.

Are You Making Human Contact Count

2010-04-24T10:26:00.000-07:00

Once upon a time, retailers stood next to their barrows arranging their merchandise while warmly greeting and humorously haggling with their customers.
Periodically they would ask a close family member to replenish what was selling while they would vocally promote the continually refreshed assortment and attempt to move the slower moving stock- always casting a wary eye on their competitors. They had an intimate relationship with their markets.

It was a place to chat, to joke, to share smiles and gossip, and the shopkeeper and the customer liked it that way.

The move towards centralized decision-making over the past 50 years has punished both retailers and customers: it traded effectiveness for efficiency. As decisions gradually migrated from stores to the head office, the number (and skills) of people in stores was reduced - and so was the amount they were paid. The result has been that store staff turnover increased, the quality and training of people diminished and service levels dropped dramatically.

Today, customer service and “clienteling” have almost vanished.

Stores are no longer customer sanctuaries but product warehouses.

Chain retailers inadvertently created a self-defeating, self-fulfilling prophecy: they made themselves more vulnerable to non-store retailing. Less friendliness, less information and less service accompanied by higher prices are hardly a convincing purchase argument!

By reducing themselves to high cost service-less product “vending machines” they have made themselves vulnerable to non-store purchase alternatives where price is the only meaningful differentiator.

What is the point of having staff in stores:
• If they treat customers as if they are intruders?
• If the customer has to search the store for assistance?
• If their only purpose is to collect a payment?
• If they do not add value for a customer but add a premium to product prices?

Price differentials cannot be justified by the cost of “worthless” personnel and store overhead.

The disadvantage of the on-line retailer, which is the lack of human contact as part of the shopping experience, is no longer a disadvantage when it is duplicated at the store level through lack of service, expertise and motivation.

It is tragic that people believe it’s more pleasant and convenient to shop on-line rather than in stores. As a result, in-store retailers have lost market share and margins because they have had to launch bigger and bigger promotions to lure customers back into their shops.

Unfortunately, many consumers are so disappointed by their experience of in-store retail shopping that they prefer the lack of human contact on the internet to the in-store treatment they receive!

You can only deliver the human contact that your customers want through your staff.

So is in not time that you start making human contact count

Should retailers formally move to Differential Pricing?

2010-01-12T06:15:00.000-08:00

If I ask most retailers do you believe that a product should have a different price in a London store as opposed to a store in Sheffield, the answer is invariably no. Retailers believe it is part of their brand promise that the product will have the same price whichever store you buy it from.

My question in this is why? Why is that important?

Could you not turn around to customers and say openly and honestly, look the rents are higher in London, staff costs are higher and distribution costs are higher, so prices have to be higher?
More importantly if I was a shopper in Sheffield, would I not want to know why the prices are not cheaper, particularly as consumers have lower incomes in Sheffield than in London.
Would it be an advantage to a retailer if they could use differential pricing? It would certainly allow margin and stock optimisation to a level that is not possible today.

Differential pricing has taken hold in Spain and Portugal, but not elsewhere in Europe, are they the vanguard of things to come or are they just different? Are UK retailers doing differential pricing but just up front about it with their customers?

We know retailers will offer the same product under different “fascias” at different prices.

What about consumers? The likes of Easyjet are certainly preparing us for differential pricing (of a slightly different form) with a vengeance. We all go onto the Internet and notice that prices for a product are different. So we realise that prices are not always the same? There are plenty of price comparison sites.

So is the retail consumer not ready for differential pricing?

Give us your views.

Is the iPhone the new retail loyalty card?

2009-11-22T06:16:00.000-08:00

As mobile phones continue to evolve into personal computers, more and more interaction with people will migrate onto these devices.

Just take the iPhone, using the browser on the phone is really easy, because you can zoom in to the relevant section. The vast majority of iPhone applications allow you to do a lot more in the way of interaction. There are apps like Opentable that allow you to find restaurants in your vicinity that have availability and then book tables, you can book railway tickets on it, you can look up stock prices and do trades from it and even scan barcodes and check online retail prices with RedLaser’s new app.

What is more the iPhone will soon loose its uniqueness. Google’s new Android phones will have similar capabilities. Nokia with their use of Symbian, Windows Mobile and other mobile operating systems will provide similar capabilities. So the volume of applications for mobile phones will increase.

It is clear that the trend set by Apple will grow into Tsunami.

Every person using a mobile phone will have a unique identifier, globally. If retailers could have access to that unique identifier, they have a universal platform for communicating with every person, through their phone.
It is very feasible today and I have seen demonstrations of a mobile phone becoming a loyalty card.

Imagine, when you buy a product at a retailer, they scan the phone Id, and that purchase is attributed to you. The retailer can send you your loyalty points based on your purchases to your phone. You can then redeem those points in-store or online.

The retailers could do a lot more. They can send you your receipts, individual communications, promotional vouchers, new product information all directly to your phone.

What I really like, is that the phone will allow you to communicate to the retailers anonymously until such time as you want to reveal your full identity. So it is the ideal mechanism for permission-based marketing.

So do you believe the mobile will become a new loyalty card? Let us know what you think?