Target to delist Kindle, fed-up ‘show-rooming’ for online...

Target, the US mass market discounter, communicated the decision to stores last week, and underlines growing antagonism between Amazon and bricks ‘n mortar retailers, which are threatened by the online retailer’s aggressive discounting, entry into new merchandise categories and attractive shipping service.
Target reported last November that the Kindle was the best-selling tablet in its stores on the day after the Thanksgiving holiday, typically the busiest shopping day of the year.
Target has in the past complained about the practice of “show-rooming”, a growing habit by shoppers to view a product in-store and then buy it from an online seller.
Apart from threatening the stability of routes to market for a number of key non-food categories, this move raises an important issue re the relationship between suppliers and specialist retailers.

Specialist shops viability
Essentially, as you know, the purpose of specialist shops in categories such as toys, bookselling, consumer-electronics and home entertainment is to meet a fundamental consumer-shopper need to physically experience the product. When specialists’ retail prices are so out of line with alternative formats, it is inevitable that having ‘pressed the buttons’ on a piece of electronic equipment in a specialist outlet, the shopper will invariably make a purchase online at a significant discount. There is no legal way of ensuring fulfilment of the sale by the specialist retailer unless via a price differential that is so low that purchasing elsewhere is not worth the trouble.

Even the mass retailers are under pressure from Amazon 
It has to be expected that as bricks ‘n mortar specialist shops cannot compete with online providers they need help in optimising their business model. The major multiples have reached market dominance by taking state-of-art retailing to new highs, in effect becoming expert shopkeepers.  In fact, these major multiple retailers have set global standards in state-of-art retailing that have redefined shop-keeping, and these standards need to be met by specialist retailers in order to survive.

Role of the supplier in helping the survival of specialist retailers
In practice, suppliers need to be retail business consultants to specialist and independent shops, helping them to adapt state-of-art retailing techniques and practices to their operations.  However, as the cost of this level of service would rarely be covered by the size of the resulting order, suppliers need to change their approach to calculating the profitability of some customer types. Because specialist and sometimes independent customers are ‘educating’ the consumer and ‘show-rooming’ the product, they are in fact performing an advertising function for the brand. They therefore need compensation by way of additional margin and help in becoming more effective shopkeepers.

Budgeting tip to help specialist retailers
Should we not therefore charge say 50% of the cost of servicing them to the advertising budget, and continue to call if the remaining cost is covered by size of average order?
Otherwise find a new way of show-rooming your brand and re-engaging the consumer….

Meanwhile, have a long, experiential weekend, from the NamNews Team! 

Argos: the writing is on the wall-chart…?

Home Retail Group's shares were down 13% yesterday, partly because of uncertainty about its ability to revive the current Argos model, combined with a decision to forgo the payment of a final dividend, and especially a fall of 9% in like-for-like sales at Argos….

As you know, investors rely on a combination of rise in share price and dividend in order to compare alternative investments. Faced with a two-thirds fall in share price, a company would normally offer a generous dividend to compensate and retain  shareholders.
But not when the company has already used available capital of £150m to buy back its shares, all to no avail…..

The Guardian’s Nils Pratley gives a number of reasons for Home Retail to be cautious in 2010-2011: the group's return on capital had fallen for three years in a row, along with operating profits, as had Argos' like-for-like sales, and a chart that says it all....

Future of the catalogue-showroom format?
Another Guardian article quotes retail analyst Nick Bubb as saying that the catalogue-showroom format had "died a painful death" everywhere else in the world barring the UK. "In the US, the discount stores such as Walmart and the online giants like Amazon destroyed long ago the convenience and range advantage of the catalogue showroom. Is it only a matter of time before the same pressures prevail in the UK?"

It is obvious that Argos is in trouble because of its categories moving online, and increasing competition from other “click and collect” services. Faced with this scenario, it would be logical to radically cut the capital base ( i.e. close 50%+ of the stores). Instead the company plan to close but 10 stores in the coming year.

On balance, Argos needs to radically reform its business model, and suppliers with a heavy dependence on the company  need to conduct several what-ifs on possible options for their categories in these unprecedented times, fairly quickly…

Buyer-seller corruption, a potential hot-potato for all?

Yesterday’s court case involving large-scale corrupt payments to a potato buyer raises important issues for suppliers and retailers. Given the potential impact on share prices of both parties, coupled with ever stringent corporate and government monitoring in these unprecedented times, it is surprising that anyone is nowadays prepared to take the risk of being a party to corrupt inducements to buy. In other words, it needs just one person with a conscience, or a grievance, to lift the lid….

However, given that the current plaintiff was arrested in 2008, with the case having now arrived in court, it could be said that parties on each side of the seller-buyer relationship harbouring any doubts re. their version of the selling-buying process have had adequate time to reflect on the implications and take appropriate action.

The distinction between gifts and bribery
If buying decisions were made solely on objective, rational criteria, a computer would probably do a better job. Instead, given that the basic offer satisfies the key objective criteria, then a host of emotional criteria/influences/needs come into play.

Emotional needs in buying 
These include needs for avoiding effort, self-esteem, (pride, self-importance, power), to imitate, to acquire money (via saving vs. making, for the company) need for possession (icing-on-cake), investigate (data), create (new), sense of duty, and especially a need for security (avoiding fear). These can include meals out, or even a bottle of whisky at Christmas.

It needs to be emphasised that such attempts to satisfy the emotional needs of a buyer are not corruption, they are merely ‘icing on the cake’ by way of celebrating a done deal, a deal which ticks all the rational, objective boxes.

Bribery defined
Bribery is quite clearly an overt inducement to the buyer to over-ride the logic of a buying decision where a supplier’s competitor is patently offering a better deal on a like-with-like basis. In other words, the supplier’s offering is equal with that of the competitor except for the additional £10k on the price to fund the bribe.

This point, the first of many, was brought out yesterday in court by the prosecution: "A peculiar feature of the corruption was that it was self-funding. [The supplier was] not paying for it, [the retailer was] paying for the corruption of their own buyer and this was achieved by overcharging [the retailer]".

Action for NAMs and KAMs
The answer for NAMs/KAM’s is always to attempt to revert to the base deal and check that it satisfies objective buying criteria (the buyer’s job needs), like-with-like, before focusing on the buyer’s emotional needs. In practice some of this process occurs simultaneously, but it remains vital that the supplier’s basic offering is defensible and transparent, always, and with 20/20 hindsight…..its the nature of the job, folks. 

Touching response-rates in improving buying appetite, twofold

In these unprecedented times, when every little helps, light touching of the other party can apparently impart a subliminal sense of caring and connection, leading to more successful social interactions, better teamwork and even shopping behaviour.

In a new study ranging from dating to restaurant tipping and following the waiter’s advice, passersby responding to surveys in a mall, and the percentage of shoppers in a supermarket who purchase food they had sampled, it would appear that suppliers and retailers are missing a trick by not building more touching opportunities into the shopping experience.

Impressing the researcher...
Given that the author Leonard Mlodinow is a theoretical physicist at the California Institute of Technology, with an appetite for statistical significance, even he was surprised to find a twofold increase in response rates following a light touch on the arm…

Not convinced?
Some scepticism is understandable. After all, some people recoil when a stranger touches them. And it is possible that some of the subjects in the studies did recoil but that their reactions were outweighed by the reactions of those who reacted positively.

'Over-touching'?
However, for those finding this blog-post an answer to a personal history of low-success social encounters, and are even tempted to experiment without further delay, it must be emphasised that these were all very subtle touches, not gropes. In fact, in studies in which the touched person was later debriefed about the experience, typically less than one-third of the subjects were even aware that they had been touched.

Apart from being an obvious pointer for Tesco in helping to warm up the shopping experience, there is surely an application in terms of supplier-retailer negotiation, both within and following a multilevel and multifunctional handshake routine…?

(Thanks to Andrew Sullivan)

Flash Sale? The New Business Mantra

Flash sales are a time-limited offer of high discounts on big ticket luxury items. The system is a win-win for both retailers and consumers: retailers can build brand loyalty and at the same time sell surplus stock within a short span of time.

How they work
The offers are ‘abrupt’ and lasts for a brief time. It is also one of the safest deal takings. In other words you have to avail the opportunity as soon as you are offered the services. Consumers normally receive online offers including even invitations in the mail/emails, for offers averaging 50% off.
In the US, online sample sale site Gilt Groupe have launched an iPad app allowing users and buyers to access  flash sales of  luxury goods on its site.

Where flash sales are headed
A report by Business Insider estimate that flash sales will be a $6bn market by 2015.
Given the uniquely large supply glut in 2007, offline retailers of all stripes were likewise incentivized to convert their own inventories to cash positions, translating to even deeper discounts and fewer brand protections for manufacturers.
Into the void stepped flash sale sites to offer companies a novel strategy to off excess inventories while simultaneously creating an illusion of exclusivity.

Amazon’s flash sales
Amazon has launched a US private sale website for designer clothes, with members-only shopping and time-limited “flash” sales with discounts of up to 60%.
They opened the site called MyHabit.com last year, competing with start-ups including Gilt Groupe and Rue La La that have won well-off young female customers with their brief sales and urgent marketing.
Amazon promised a rolling series of cut-price deals – available for 72 hours each – from more than 800 brands.

Achica - an online breakthrough
Achica, the members-only home and luxury lifestyle UK website, defied the retail gloom after the fledgling company reported strong sales growth as it expands in continental Europe.
With the homeware sector being one of the hardest-hit areas on the high street as people delay refurbishment projects and trim spending on non-essential items, Achica has bucked this trend by focusing on offering premium homeware goods such as Anglepoise lamps and Le Creuset kitchenware at discounts of up to 70% via “flash” sales, typically lasting for 48 hours.

Apart from obvious opportunities in categories at the upper end of the market, how about suppliers anticipating the spread of flash sales into other categories, and pre-empting the competition, proactively…? 

A euro parable: the couple with a joint account

Increasing the bank-leverage of a pre-nuptial joint account by adding extra family members and strict rules of compliance can benefit all, at first…... Adding a joint credit-card guaranteed by richer family members can appear to provide a short term solution to personal financial ‘mis-behaviour’ of those family members who in return promise to mend their ways via unsustainable cut-backs…
Attempts to eject problem members can cause the bank to threaten closure of the entire joint-account, resulting in core-members having to re-mortgage to prevent collapse… If you really want to understand how close the euro is to collapse, read this fascinating parable on the FT site. 
In other words, whether you are buying or selling, you owe yourself a couple of ‘what-ifs’ on the unmentionable, while others hope something will turn up, whilst awaiting an announcement from Brussels…
Meanwhile, have a real-world weekend, from the NamNews Team!

Complex mobile-payments tools a big turnoff for mobile-shoppers?

Anyone who has experienced Amazon’s 1-click shopping soon becomes increasingly frustrated at the constant ‘repetition’ of lengthy account creation procedures on less sophisticated sites, akin to standing in a shop queue and not being allowed to go to the cashier without giving up your email address and setting up a password.

Lost opportunities
New research indicates that the total amount of revenue currently being lost by users exiting at the checkout stage as a result of an inefficient purchasing process is £2.4 billion – £470 million, thus removing the ‘impulse’ of buying on impulse…according to a survey carried out on 18,000 mobile shoppers for Mobile Money Network.

Mobile-payment not a discrete channel  
MMN believe that mobile-payment is not a discrete channel and used properly, it is an enabler to improve sales conversion in all channels. Their ‘Simply-tap’ drives improved sales conversion for retailers by putting an instant mobile checkout anywhere a retailer has a communication with a customer.

Time for retailers to source centralised shopper-information to simplify the checkout process, safely? 

Or will major retailers see an opportunity to gain competitive advantage by simplifying (a la Amazon) their own process by converting all 'attempts-to-purchase' including impulse, while others await the adoption of a common, safe and fast buying-process....?  

The future is now, for you and the customer

Today’s Guest KamBlogger, Jeremy Blain, Managing Director of Cegos Asia Pacific, explains how to get started, fast…

Globalisation, mobilisation, consolidation, collaboration, communities, technology, social networks, the Cloud – a lot happening in the world of business today, a lot more jargon to contend with,  and a lot of it enabled by whizzy new technologies and applications.

The new workforce

Just consider….in less than 4 years half of the Global workforce will be made up of Generation Y, and in less than 8 years Gen Z will be in the workplace. They will expect to work, communicate and learn in very different ways. These are the people who are comfortable with technology and its uses. These people may be your customers and colleagues.  It is up to the rest of us to stay in the game and get savvy, quickly.

Entry level jargon

So if you don’t know your Twitter from your Tumblr, your Pinterest from your Storify, your Gowalla from your Foursquare, your Doodle from your GroupMe, your elearning from your immersive simulation and if you are not yet married in Second Life or have some kind of Avatar……you may need to consider it!

Essential catch-up action, fast 

To get you started there are a couple of short white papers* on new technologies to help you learn, and how to get the best out of social networks. There’s always trusty old Google to pop some of these names into. Go on, grab a coffee and explore.

You never know what you might find……or what might find you…

* See Jeremy’s free white papers:

-   Learning through social and informal networks 2011

-   The rise of virtual learning 2011

Jeremy Blain (jeremy.blain@cegos.com.sg)