The mind boggles...
... is not what you think
I have had an A-HA moment…
The reason why so many industries/ professions are in trouble is not because of changing technology. The industries/professions that are struggling to reinvent themselves are the ones that were structured to achieve profit and prominence AGAINST human nature.
All that has happened now is that technology has ENABLED consumers/users to wrestle back the power and force the change in that industry/profession to REVERT to the natural state.
In practice what happened is that industries built business models where the source of revenue was separated from the actual value sought by the consumer.
Let’s consider three examples:
1. Journalism/ Newspapers: everything free online
People want to know what they want to know. People don’t like to be bullshitted. People don’t want to be used and treated as eyeballs.
Newspapers have traditionally used journalism (relevant, true) to attract, but made their money by exposing the reader to other things where they (the industry) can make money.
The revenue source has no relationship with the consumer value.
People still want all those things like truth, information etc. And now they can get it mostly directly from each other. Technology allows them to curate and filter based on what they have always wanted.
The original opportunity for this sector remains in real journalism that is worth paying for. (The economics may be different, but that is the only sustainable response to the fundamental human need.)
2. Education: access to information and knowledge universal and free
Dropping out of college has become a badge of honour amongst entrepreneurs.
Academic institutions are considered out of date and most curricula are both irrelevant to the context of the current market, and irrelevant to the learner’s specific needs.
People can now find online all information they need to do anything and even better, someone who will help them and train them often for free or for a fraction of university costs. People will learn what they need to and may be motivated by an intrinsic desire or by force of circumstance and don’t typically see the value of being taught within an institution.
People want to learn what they are interested in learning when they want to do so, AND the test of relevance and competence is the real world, not a classroom quiz or exam.
Most people will recognise that familiar refrain: I went to university to get a piece of paper. What they wanted was the ‘accreditation’ or certification of their ability, not lecture hours.
The revenue source has no relationship with the consumer value.
Universities are losing their monopoly gradually at present, but in 10 or so years they will start approaching a tipping point towards complete oblivion – unless they can pivot.
Some professions (law/medicine etc.) are artificially maintaining a closed shop with the assistance of governments, as are the governments themselves by mandating secondary education within their system. Not for long.
The original opportunity for this sector remains in objective assessment of knowledge and skills.
Marketing/ Retail: unlimited choice, instant determination of true value
This profession has thrived in the past because it controlled so many elements of the offer that it dictated all terms in the relationship with the consumer. This has led to a sales orientation. Even Theodore Levitt’s seminal insight in 1963 did not change that because the so-called marketing orientation was simply a re-phrasing of the activities that existed in order to sell more stuff.
Consumers don’t want to be sold to.
They don’t want you to sell them by ‘serving’ them. They don’t want you to sell them with a USP.
ANYTHING you do that will help you sell stuff has always been resented, but now technology has provided them with an alternative that is easy, cheap and powerful.
The remaining opportunity for this sector remains in finding ways to help the consumer to buy.
What consumers/users want is to buy stuff that,,.
Your challenge is to complete that sentence with YOUR product/service.
It is a completely different mindset to selling stuff. You must become a meaningful part of the customers’ lives without ending up like the annoying uncle at the family BBQ who wants to sell insurance to everyone.
The recipe for any industry being challenged by the transformative effects of online/ e-commerce and the connected world is pretty simple.
Find out what it is that consumers really want (and wanted all along) and attach value to that and charge for that value fairly.
Oh, wait. That isn't a recipe. It is just marketing.
Customer Acquisition, Retention & Engagement by turning your Organisational IP into Marketing IQ.
I was interested to know from retailers on the frontline where they were at with their eCommerce integration. My personal experience was that it was generally woeful, but I wanted to ask a broader group of people. Recently we conducted a survey in conjunction with eReady Partners and the findings were quite interesting.
We found that whilst e-Commerce is already having a measurable impact on 91% of Australian SMEs, only 54% have developed their own online business to the point where they can process an online transaction; with 46% of this group acknowledging that they still lagged behind their more e-Savvy competitors.
Already almost all (91% of respondents) reported that e-Commerce is already having an impact on their traditional business.
Of the respondents who were already generating online sales, almost half believe their online business lagged behind their competitors.
The vast majority (73% of those who are active) are spending less than $2,000 per month promoting their online business. (We believe that, despite the common misconception that it is ‘cheaper’ to run an online store, the reality is that there are many types of expenses that traditional retailers would not have considered before embarking on the journey.)
To summarise the findings:
Almost every retailer is affected, only half have started to do something about it an almost all of those are not doing enough.
(Participants will receive a copy of the findings via email if they opted in to do so. Others who are interested can get a copy from eReady Partners.)
The implications are profound:
1. You are behind: Traditional retail is allowing pure-play eCommerce retailers to stake their claim on these new gold fields, which they are doing at rapid pace. Of course, those pure-plays then integrate backwards and start opening in physical locations to create the omni-channel experience.
2. eCommerce is not a trend (as I said last week) here on Inside Retailing.
This raises the question about what to do and here is a simple action plan to get you started:
It is a constant learning process, because the technology is changing. Attend seminars, subscribe to blogs, subscribe to newsletters, engage consultants, ask your coach and buy books. However it is you learn, target these topics even if you feel uncomfortable about it now. (eReady Partners is scheduling quarterly updates that many will find useful.)
Start taking small steps – and here are the first 5 for you.
1. It is a constant learning process, because the technology is changing. Attend seminars, subscribe to blogs, subscribe to newsletters, engage consultants, ask your coach and buy books. However it is you learn, target these topics even if you feel uncomfortable about it now. (eReady Partners is scheduling quarterly updates that many will find useful.)
2. Start your Twitter account. You don’t have to say anything, just listen and learn.
3. Stake your claim on the social media sites and platforms to ensure you own your brand/ domain name as soon as possible. This includes at the very least: Facebook, Instagram, Pinterest, Vine, Tumblr, your blogging CMS and Youtube. (Here is Wikipedia’s list of top social media sites.) You can use NameChk, to see if your username/ brand name is available on most sites in a single glance. You may not use all these sites immediately, but at least you own your real estate.
4. Get your Google house in order, including claiming ‘authorship’ on Google for your blog, your Google Analytics account and so forth. (Having a free GMAIL account is very useful around the net and I use one to subscribe to newsletters instead of my business email. Google is SUPERB at keeping spam at bay, and it is much safer to use that email for (what could be) dodgy website subscriptions.
5. Make sure you have a simple, static website at the very least. Put your ‘SHOP’ button on it too even if you don’t have an online shop. Give customers a ‘coming soon, give me your email to be advised when we launch’, message and TRACK the number of clicks. (That is a basic way of testing interest in your offer.)
All of this should be done by Friday (except #1 which is ongoing). If not, I will come to haunt you…
GANADOR: Don’t out-sell your competitors, out-teach them & you r clients will love you for it.
This is the stuff failure is made of.
Myth #1: An online business is cheap to run.
In our survey (findings to be published here next week) we found three quarters of retailers who are already trading online are spending less than $2,000 per month promoting their online business. When you want to stake a claim online, your marketing spend is also the rent you pay.
An online business is not cheap. It has low barriers to entry and low(-ish) CAPEX to get started; but that does not make it cheap.
The bigger you want the business to grow the more you have to spend. The amount of money you spend is proportional to the amount of money you make. There are a few exceptions for very early adopters or innovators, but let’s face it that won’t be your business.
If you only want to dip your toe in the water, you can’t surf the wave.
Myth #2: All you need is a website and off you go.
Launching a website is like selling cold drinks from your caravan in the Outback. Everybody may want one – if they could find you.
The estimate is that there are close to a million eCommerce sites in the US alone. If you consider that this would include sites like Amazon and eBay and so forth which suck up a huge proportion of online spend, then you get the idea that the online world is a really big mall and your shop is going to be down a side entry near the toilets. (Amazon is estimated to account for over 20% of eCommerce sales.)
Setting up the website is the easiest part. If you are struggling through this process right now, you may find it disheartening to think that it will only get tougher. But it very much is like raising kids.
You may think giving birth is the hard part, but it only gets harder.
Myth #3: My key to success is to replicate my offline business into an online version
I have called omni-channel a pipe dream, for the very reason that most retailers want to simply replicate their business online.
You may have a successful boutique in Terrigal, St Kilda or Cottesloe where you sell a great range of designer labels at a good price with great service. You may THINK you are successful because of that, but that is not the full story.
The truth is you are successful because you are the only boutique selling that range at that price in that suburb.
The problem is when you go online, all three of you (and a thousand others) will be selling the same stuff at the same prices, and your location does not matter any more.
MOST independents survive/prosper because their location is their only Point of Difference – which is the one thing the internet makes redundant.
Myth #4: An online business is easy money – you make money while you sleep.
It’s a business (unless you treat it as a hobby) and any business takes hard work. If there was easy money to be made, there would be a million people ahead of you in the queue.
You DO make money while you sleep, but the business also NEVER sleeps. While you are sleeping you may be making money, but you are also receiving complaints, running out of stock, having traffic issues etc.
You must create a business model that is capable of dealing with a 24/7 cycle, and it really isn’t easy. (Re-read this post on the Digital Jungle and study the graphic to get a sense of the complexity.)
Myth #5: I won’t be affected by online retail.
This one is not so much a myth is wishful thinking,
Morgan Stanley estimates that eCommerce sales will double to more than one TRILLION dollars by 2016. And it won’t stop growing either.
You can choose to be part of it, as long as you are realistic and smart about how you go about tackling the opportunity.
Next week we will share the findings AND give you simple action plan that you can follow to get started.
Ganador: Helping you help your clients.
Everywhere you turn, a website wants your email. Even if you are just passing by, those shitty, annoying pop-up signups hover in your face actually preventing you from accessing the internet (that website at least) without parting with an email address.
I know it is easy enough to provide a dummy email address that you never check, but still, it goes against the spirit of the internet.
When you are prepared to register, you land n an awful Autoresponder email series that annoys the shit out of you BEFORE you have even downloaded the promised whitepaper that that you thought you were interested in.
And then of course, despite all the advice from the newly minted gurus of content marketing, the alleged ‘content’ turns out to be nothing more than a soft sales pitch.
And all this insincerity SHOWS.
Not so long ago, an agency (I am looking at YOU Hothouse) promoted a FREE Customer Experience Design Workshop. Being in that business myself, I thought it is a good opportunity to check in and listen and learn.
A few things to note:
· The target audience is larger companies. (Read ‘prospects’.) I found this out when I placed a follow-up call.
· I am sure they could perceive me as a competitor or maybe even a freeloader. (And they would be wrong – at least in the first instance.)
· And I grant them the right to select who they want to have at their events (including not having me) – that is what a free market means.
But that same freedom allows me to call them on it, so here goes:
1. If you are preaching ‘customer experience’ but you don’t respond to the registration to confirm the attendance (as promised) then I am not sure I am going to learn from you.
2. If you are genuine about sharing content, then you must be able to deal with even if a competitor attends. If you knew anything about the world, you’d know that there are no secrets and IP has gone the path of petticoats and betamax.
3. But it is not all bad news. At least it was easy to unsubscribe to the email list – not like some douchebrands out there.
The main lessons to be learned are this:
· When you try to be anything other than what you authentically are, you will fail. (If you try to be funny, you never are. If you have to try to stay focussed, you probably aren’t. If you have to try and enjoy something you probably aren’t. If you have to try and make something viral, you probably won’t. If you have to try to sell without appearing to sell, you probably won’t.)
· Everyone can spot a fake. And I mean EVERYONE!
· Content Marketing may have been a good idea at a time when no one did it, but when everyone does it, the overload reaches spamming proportions. Maybe you want your brand to be equated with a spam folder but I certainly won’t.
LOOKING TO THE FUTURE
I used to create newsletters, sending them out religiously every month. Open rates (according to Constant Contact) was that open rates were well above industry averages, but still only in the high 30%s. I NEVER – in 6 years – got any business from them – even though they were pretty good, or at least informative and interesting. Here is the last one I did in Jan 2013. I realised my folly. Even though I never tried to sell anything, one would expect to get some kind of flow-on effect.
The only responses I did get, was, once a year, when I put out a Pro Bono post offering our services for free to first comers. (Our way of ‘putting back’ into the industry.) We always have a few people put their hands up and we gave willingly as promised with no expectation of anything in return. (Which is a good thing, because those expectations would have been cruelly dashed.)
Content is dying because, even though my content was good, there is obviously better content. There is ALWAYS better content and with so much of it around, nothing but the very best will get accessed. Even then, it better be free. And even if it is free, there are increasingly lower returns on it.
And we all know what happens when return on investment drop, right?
Besides, I think there is enough content to last us several lifetimes, and judging by what I am reading at the moment, there is very little new stuff – the ‘mash up disease’ has spread to all content.
Maybe we will figure out soon enough that even the internet is not about content, but about people. And if you want me to help your business, it will cost money. Because I am, as the pretty girl said on TV, worth it.
Instead of reading the proverbial 1000 words, spend the same amount of time thinking about this picture.
From this thinking, I hope you will conclude the following.
- There is a natural line of progression for the evolution of advertising.
- This natural progression has one benefit (engagement) but the price is very high (deception).
- This natural progression is actually taking us further away from the real Holy Grail.
My philosophy about advertising has always been that the harder you have to advertise, the more problems you have with your product and your brand.
Advertising is nothing more than the commercial entity attempting to control the natural message. It is a bit like fuel injection in a car. It is true that it makes the car faster and more economical, but the advantage lasts only until the competition catches up.
The stock response by my esteemed marketing colleagues has been to develop ever more deceptive ways of advertising. Consumers recognise that and advertisements are actually actively resisted because it is recognised as (a) an unwanted attempt to influence and (b) a low risk way for consumers to reduce the noise we are exposed to.
As we speak, content marketing is the buzzword du jour.
I honestly believe it is killing the internet. Or at the very least it is doing to the internet what spam did to email – and consumers will find ever-increasing sophisticated ways to ‘put up the firewalls’ to deal with the deluge of ‘content’.
It is clear to me that content marketing is not the answer because no matter how you disguise it, the intention of the content marketer is always to extract a sale, no matter how unobtrusively they believe it is and how much they believe they are simply providing content for content’s sake. ULTIMATELY there is a catch and there is a call to action – even if it is simply a reminder to the consumer (of content) to contact you if there are any enquiries.
There is an answer.
That answer is ironically not to have NO advertising but to make everything an advertisement. This is the foundation of–iCommerce (Immersive Commerce).
Yes I coined a term for it, although it has been used before in slightly different contexts. The key point to note here is that the [i] refers to a verb (an action word) relating to the consumer. Unlike terms like fCommerce or sCommerce or mCommerce, the first letter does not reference a platform or anything that the advertiser does.
And this shift in perspective is indicative of the fundamentally different philosophy that underpins iCommerce. In fact I would argue that it is a case of marketing returning to its real roots of giving the customer what they want.
Traditionally advertising has always been about capturing the eyeballs as they pass through. The challenge has been to make it more effective and a science has developed around the creation of ad – from colour theory to placement; simply to do everything possible to capture the eyeball that is not really there for the advertisement but for something else.
With iCommerce the philosophy is that if you have to create a funnel you have failed.
I know I am not being completely clear about what iCommerce exactly is – but that is because I am hoping to work with a client on developing this up as a viable and, if I say so myself, a game-changing way of doing business in this brave new world.
Showrooming appears to be on the mind of most retailers. For those without a multi-channel it is a big problem, but even those with multiple channels, there are practical difficulties (such as price harmonisation, as explained here.)
Zendesk published a survey (a summary and exposition here) and found amongst other things that:
Showrooming is alive and well. 67% of online shoppers have made purchases in the past six months that have involved multiple channels, e.g., visited a store, looked at a catalogue, or called the retailer before purchasing online.
A much better approach was by Ryan Healy, asking how showrooming can be used to your advantage. (Read the comments for ideas.)
Showrooming must not be defended against, and actually must not even be turned to advantage. It is now just a plain and simple fact of life.
At the core of the solution is the mobile phone. But it is not about the technology. Mobile phones simply represent a more convenient way to use a telephone and computer and a camera etc. Customers have ALWAYS wanted convenience and this will not change in our lifetimes.
Paul Wallbank wrote a piece on ‘delighting the customer being the new normal’. It would be easy to gloss over this sentiment and think that this has always been the case. But ‘customer delight’ is significantly removed from customer relations, customer service or customer satisfaction. To delight a customer requires the delivery of an experience that is an order of magnitude better and different to what is currently considered ‘normal’.
In fact that same Zendesk survey points out that only 7% are "extremely satisfied" that brands provide a seamless, integrated, and consistent customer service experience across channels.
That leaves a lot of room for improvement. But the fact that hardly anyone is doing this right is also a massive opportunity for those who do so first.
The question everyone asks of course is …HOW?
Unfortunately the answer to that is not simple and neither is there one answer for every retailer. It really does depend on the retail proposition, the format, the market and your infrastructure. The solution will involve technology, which suggests you may have to consider your affinity with technology, your pain threshold, your tolerance for ambiguity and the depth of your pockets.
In the meantime, there is another universal truth about customers. (Convenience is the other as mentioned earlier.) This truth is that customers always have and always will seek VALUE.
They don’t buy on price. (That is NOT primarily what showrooming is all about in most categories.) If you knew how to create and sell value in your store, showrooming is a secondary factor in the customer’s decision making process.
The only category of product where it is mostly about price, is when a consumer has to make a grudge purchase (e.g. fuel) and few readers here would be in that space.
Learn to offer value and make it convenient. That is the foundation (not the solution) for delighting customers. Without a foundation, the retail proposition is rarely sustainable, and whatever solution you devise to embrace showrooming, it is more likely to work as intended.
Ganador: For smarter and more productive people in the 21st century economy.
This is what it would like.
But it aint gonna happen for a VERY long time.
In addition to these examples there are specific technological advances – particularly in mobile and in the payments space which are not covered here. (The bold phrases highlight the underlying eCommerce trend as I see it.)
- C-Wonder is setting the benchmark in customer experience. (Read my write-up here.)
- Barneys is doing things with shoppable video ( Read my write up and comparison with David Jones here.) The videos expire as products are sold out, so google the topic to get a fresh crop of videos.
- Hointer is a start-up that uses in-store robots. (Watch YouTube Video here). Just to make the point that eCommerce is not just internet.
- Adidas shows off their Virtual Wall – a few steps up from the supermarket on the train station.
- You could integrate with OpenSky and use the power of social networks.
- In the case of Mulu, (watch video here) you can be beaten or you can join them.
- Of course, there is the local Shoes of Prey, who has taken personalisation to a whole new level; but there are others too – like Juicy Canvas.
- Warby Parker tackles the difficult category of Eyewear, and taps into our social zeitgeist by donating a pair to someone in need for every pair sold.
- Everlane take pricing transparency to a whole new level.
- Birchbox is a pioneer in the area of subscription commerce.
In addition of course there are the well-known concepts around flash sales, group buying etc. and neither mentioned Pinterest or Facebook (and other networks) in leveraging online sales –presuming these are well-known.
If you are thinking about embarking on this journey – a few high FIVES for you:
- These are 5 keys to your eCommerce strategy.
- And these are the 5 critical decisions you musty make about eCommerce
- Mashable covers 5 hot eCommerce trends – including good news for the little guys.
And finally, here is TRENDHUNTER’S 42 online shopping innovations.
That should keep you busy for the next week…
Ganador: Learning & Development for the 21st century retailer dealing with the 21st century consumer.
not the first to call this a digital jungle that retailers must face today: Pinterest Boards, QR Code
Walls, Daily Deals, Mobile Couponing, Pop-Up Shops, Mobile Apps, Tweet Mirror, Group
Buying, Facebook Walls, Virtual Reality, and Flash Sales.
And that is just what we are facing TODAY.
If you consider the following three trends, you may get a feel for how well you are prepared even for the near future. (Follow the links to find out more.)
- The environment around you will anticipate your every move. (World Future Society – Trend #1)
- Buying and owning things will go out of style. (World Future Society – Trend #5)
- The social pendulum (via Roy H Williams and Michael Drew) is about the swing from a ME culture to a WE culture.
It is not a matter playing a bit of catch-up by going online!
In order to understand how the consumer now shops, take the time to carefully look at this image from the Boston Consulting Group.
In a world that has already changed, and one in which change will accelerate, what is a retailer to do? How do you respond to this new ‘path-to-purchase’? (Did you note that only 3 of the 10 touch points were in-store?)
THINGS NOT TO DO
Do not go online and attempt to give the customer as much choice as possible. (This is silly in the real bricks & mortar world too.) That particular horse has bolted, unless you have extremely deep pockets or a very large ego. Already the market shares of total online transaction value are skewed in favour of one or two big players. Taobao (China’s) 79% and Rakuten (Japan) 30% and Amazon (USA) 17%. (via BCG)
Amazon lists more than 2,800 SKUs of facial moisturizer and Tabao stocks 800m products. You can’t compete with that, so don’t.
Don’t think that it does not apply to you.
Boomers are still the biggest spenders and will be for the next 10 years or so before they are overtaking by Millennials (who shop differently) but with every passing year the impact becomes greater.
If you own single shop, maybe in a small centre or a strip and you feel your business thrives on the local custom and it won’t be affected, think again. Trend #1 above will slowly change every single business, right down to the Kebab shop that relies on the 3AM trade from the night clubs will be affected.
I have written before that multi-channel is not for everyone. Look before you leap. Multi-channel retail is far removed from traditional retail. Madonna is an artist. Monet is an artist. But they are not quite the same are they?
THINGS TO DO
According to the NAB Online Retail Sales Index (all business sizes), the value of online retail sales in Australia for the year to July 2012 was $11.7 billion which is 5.3 per cent of traditional retail sales. This number is growing, and unless you have strategy, your share of the game will decrease. How far can you sales decline before you reach the tipping point of going out of business?
A bit of catch-up won’t save you, but it is a necessary start.
The Sensis e-Business report (2012) found the proportion of SMEs with a website was 62 per cent, but only 15 per cent of SMEs reported having an actual digital business strategy.
#1: HAVE A PLAN
BCG identifies the following four key challenges that must be planned for:
- The Informed, Empowered Consumer. How will you continue to attract business and build loyalty?
- Complex, Multichannel Shopping and Marketing. With the explosion of touch points and data, in what new ways will you reach shoppers most effectively and deliver the best experience?
- Shifting Real-Estate Demands. With even grocery shopping going online, what role will your stores play in the future, what will they look like, and what will drive traffic their way?
- An Evolving Supply Chain. What technologies and configurations will give you the flexibility and efficiency you’ll need for tomorrow’s demands?
To help you plan you can of course ask someone/ an organisation to assist. There is government support too:
- The Australian government has more than a dozen different digital support initiatives that can be explored.
- If you are a small business, then the site they created at Building Success: Spotlight on Small Business is a good entry point.
I will only briefly refer to the two remaining steps since it won’t matter much until you have a plan.
Put in place the processes that will deliver on your plan.
BCG also reports that two thirds of ‘transformation obstacles’ are people issues: poor communication, politics, lack of buy-in, inadequate skills etc. all play a role in putting the best laid plans to waste.
Of course it should be unnecessary to say this because it is obvious, but I will say it nonetheless:
Nothing changes unless something changes.
If eCommerce is something you want to participate in I am doing something special and fans of this blog are invited.
ONE CLICK MAY JUST CHANGE YOUR BUSINESS AND YOUR LIFE
After last week’s post on DIY Consulting, I received an email and a phone call. The issue raised was similar, and I promised the caller I would take up the challenge of this particular topic since, as the caller put it, none of the ‘commentators seemed to address the issue’.
I am not sure that I am a fan of being called a ‘commentator’ – but here goes:
1. There is NO magic bullet answer that makes the problem go away, but there are several things you can do to make it better – maybe even make it good enough.
The following strategies should be seen as the sliders on a graphic equaliser, and as such are used in conjunction with each other and any/all of the strategies will achieve harmonisation to a greater or lesser extent.
2. I have stated previously (repeatedly) that for many small business operators, multi-channel is not the answer. An online retail business is very different business with a different business model with different metrics and different strategies, requiring different skills and different tools. There is nothing wrong with wanting to have another business, but adding an ecommerce site is not the same as adding another store to your network. In particular, if you are a small business operator that relies on an unsophisticated and out-of-date database and POS, you do NOT have the wherewithal to run a successful eCommerce business. (I am assuming the brick-and-mortar store came before the online store.)
But assuming you do adopt a multi-channel strategy, and assuming you are technically and technologically competent to handle the two businesses, then one of the potential issues you must solve will be the harmonisation of prices across channels.
There are two reasons why you may NOT need price synchronisation.
- It may not matter. You may be selling different brands online or you may be selling to different audiences- and either way price discrepancies are not an issue.
- You may operate under a different brand (different URL) and it is therefore effectively a different business. There is no problem because you can’t compare (or at least the customers can’t argue about) the different prices. You may be cheaper or you may be dearer, but that is normal for different businesses to charge different prices.
If you do want to operate the online and offline businesses under the same banner, you will want prices to be comparable and harmonised.
Strategy #1> Make it harder for the customer to compare prices
Offer your product in bundles/ combinations that are not the same online and offline. (E.g. create gift packs or offer different sizes etc.)
Add value differently online and offline. (E.g. include ‘freebies’ or bonuses that are not quite the same.)
Strategy #2> Make the difference matter less
- Reduce your offline expenses to minimise the impact of the los of margin. Bigger retailers are negotiating rents, but everyone can get better at expense management and increase profits relatively easily.
- Negotiate with your suppliers. There are at least 20 things you can negotiate that is not price, but will have financial benefits.
- Increase your online prices (as much as possible) – even marginally
- Reduce your offline prices (as much as possible) – even marginally. At the very least get rid of price point proliferation and reconsider your price-point endings.
- Increase the online sales volume to make up for the loss of margin%. Presumably your online sales does not only cannibalise your existing customer base, but you are reaching new customers in new geographies. You need SEM and SEO skills to achieve this. (I am assuming your traditional offline store is already marketing effectively.)
- Increase the average sale (online and offline) to earn the GM$ to make up for the loss of GM%.
- Vertical integration (ala Zara) gives you control over the supply chain and hence control over costs and prices and the brand.
As mentioned earlier, there is no simple one-trick answer that will allow two different business models to operate in complete harmony. This reality emphasises the fact that online retail and offline retail are different businesses. That should not prevent one from working to wards the best possible outcome.
I look forward to comments and additional strategies and ideas. What are YOU doing to address this challenge?
Ganador: Architects of High Performance Businesses in the Retail Supply Chain.
This article was originally published on Inside Retailing., and never cross-posted here. It is still relevant today as it was 10 months ago.
I have previously suggested to retailers directly and spoken about it in public that retailers should adopt a multi-channel or omni-channel strategy.
I was wrong.
Lewis & Dart (2012) in the ‘New Rules of Retail’ propose “ubiquitous distribution”. The idea is that you should have your product where the customer is, and by extension that means if the customer is online, you should be online et cetera. Nice idea. Sounds reasonable – in fact the logic is flawless. The practical truth though is that ‘be everywhere’ is a pipe dream.
Read the story of the Edsel Ford motor vehicle. It was perfectly researched, it was perfectly created – in fact it was the most innovative vehicle of its time and it incorporated almost everything that people wanted in a car.
The marketing was innovative and effective (the cars were shipped to dealers wrapped up to preserve the secrecy and heighten the anticipation.) They did everything right. Yet the Edsel has gone down as one of the biggest failures in automotive history.
Being everything leads to being nothing. Trying to be everywhere will result in being nowhere. Mediocrity occupies the middle ground. The propensity to seek the middle increases in direct proportion to the size of the company. Politics, people, structure and momentum all conspire to find the solution that is the least offensive rather than the most effective.
What you should be doing instead is to find your true north.
Find the real essence of your proposition and focus on delivering that. Your proposition may be amenable to online and offline channels.
If you have the money and other resources to pursue that option, then you should. But these are separate businesses. An online and offline retail business is different in every conceivable way. If you want an online version of your business, set it up as an independent business. Make it small, agile and focussed on one thing. Protect it from the legacy business. Delineate the responsibilities. Err in favour of the upstart.
Encourage cooperation where possible between these divisions – it would be silly not to leverage the brand equity (if it is there) or the combined buying power. But if either party feels compromised buy forced cooperation, they are free to go elsewhere.
You don’t have to be an omni-channel business though. Of course you will be forfeiting that potential sales volume – but that’s no different (in principle) to forfeiting the sales that would come from not opening a store in another suburb.
To be clear, that does not mean that you should not use technology to create your retail proposition. Technology is an amazingly efficient enabler and making the most of it is just smart business practice. And using technology includes allowing customers to find you, compare you or even pay via online methods for shopping in your store.
You could choose instead to focus on being the best physical retailer there is.
Every major sports match is broadcast on TV, but true fans still rock up at the stadium for a good match.
Your challenge is to turn spectators (who come to your store) into fans that will keep coming even when there is an alternative – and live with the fact that some of them will also watch TV instead some of the time.
This means you should make your store the only place where customers will get XYZ. (The challenge is defining what XYZ is – your proposition – and it is not just your product offer.)
· Sony Walkman did not become the iPod
· Encyclopaedia Britannica did not become Wikipedia
· Borders did not become Amazon
· Pickles Auctions did not become Grays Online.
And for the same reasons David Jones (for instance) won’t become The Iconic and Harvey Norman won’t become Kogan.
That does not mean that these blue chip retailers couldn’t use their free cash flow and profits to invest in future growth opportunities – including online businesses. But trying to become something that you are not will only lead to a lack of focus, comprised strategy and eventual failure.
Nordstrom is one obvious example of a traditional retailer who has made a success of multi-channel.
However, there are a number of key facts to remember before an attempt to hold them as example to copy.
They have a culture that is perfectly conducive to this strategy: “Great customer service is a focus on the things that customers value over the item they are buying, so figure out what customers value.”
They are catalogue company first (and retailer second) and back in 1994 the Nordstrom catalogue team built the website and started selling shoes.
In Jamie Nordstrom’s own words: “They were a young nimble team inside a larger organization and could move rapidly on this fast growing opportunity. The web operated independently with different merchandise. Jamie Nordstrom also reports that the hardest part wasn’t integrating disparate systems, it was integrating the teams.
A frequent and common concern was the question, “who gets credit for the sale?” The team overcame this by prioritising the customer.
The message was “we can’t make decisions based on instore versus online cart. We’ll figure it out later.” (See point about culture earlier.) And finally, Jamie Nordstrom is adamant that multi-channel did not solve customer problems.
The goal was to get store and online experience right so Nordstrom set out to create the “Apple Store experience” and leveraged technology to evolve the experience.
Today, all stores have iPads with 80 per cent to 85 per cent of the functionality of the register. The expectation is that by February of 2013 the functionality will surpass that of the cash registers. More instore stylists were hired and the Innovation Lab was created to leverage technology to complement the instore experience. (See my point about using technology in the retail environment – which is not the same as multi-channel.)
Apple is the second example of a business that will no doubt be held up as an example of multi-channel success. Again, there are many salient factors to consider.
Apple is not a retailer. It is a technology company that went into retail (initially) as a branding exercise to give their customers the Apple experience. It had (has) very deep pockets and could create a retail store without the usual resource constraints that most retailers would face.
It is vertically integrated and controls its supply chain from start to finish – including charging whatever it likes. (A luxury few other retailers have.)
It controls who (else) sells its products and has managed to artificially limit supply and availability and force consumers through the gate of its choosing.
It is a global powerhouse brand with fanatical fans.
Any business that thinks copying Apple’s strategy is possible without consideration of these differences should go right ahead.
I look forward to reading about that joyride.
Trying to copy the successes of the few without careful consideration of their unique success factors is a recipe of disaster.
I am not suggesting a traditional retailer cannot have a successful e-commerce operation, and I am definitely not saying that technology should not be fully embraced, including getting customers to your store and building relationships with them.
I am suggesting that it is not a prerequisite for future success and that e-tailing should be treated just like any other investment opportunity.
For every business who has made a success of multi-channel, there are probably hundreds of failures you never hear about it Just because… guru-consensus is on the side of ‘multi-channel’ does not make it the right strategy for your business.
Just because… everyone seems to be doing it, doesn’t make it right for you.
Just because… your physical store is not performing, creating a virtual store is not necessarily the solution.
Make your own mind up.
David Jones launched their efforts at shoppable video. - their first effort as far as I know.
I liked that they tried. I hope they make enough money to keep innovating. It is not really their fault that the technology is not quite up there to make it compelling and seamless for the consumer.
(Only about 2000 views at time of writing, hope this blog helps that along.)
I believe video shopping like this will be big - when the tech works for the consumer.
One thing I did not really 'get' was how they curated the products to go with possible click. E.g. when you clicked on a word or a certain image you had a different landing page but the collections appeared pretty random - but then I am not the target market so I might miss some of the subtleties.
Barney also had a go at shoppable video.
The embed code does not work on my site, so CLICK HERE to compare their efforts. In some respects it is ahead of the DJs effort. but I like that DJs did not go the proprietary route (that causes embed problems like the above) and they adopted YouTube as a more open platform.
ALSO - not sure if it my browser or because the campaign is over, but I came up with errors and I think both were too long to really work for going viral..
Fish where the fish are I say...
Some more insights & info to make you think...
Some nuggets of insight for you to digest...
Before you start reading this, cast your mind back to November 1999. That was when I wrote this. When I gave my employer back then the following piece of advice w.r.t. implementing the eCommerce strategy , they did not heed it.
Don’t patronise, don’t try to sell – allow people to buy. Build trust and guarantee confidentiality, privacy and ultimately freedom.
I wonder why?
1. Give up control
This is the first and most important shift that must be made and is probably the hardest for established, successful companies to make because it always has been such an integral part of their success until now. But it is vital.
The basis of power & wealth in previous era were first Land, then Resources from the Land, and most recently Capital. All of these resources could be controlled by and amassed by individuals. It could be controlled and taxed by Governments, and even redistributed to the poor or those in favour. In the New World where the critical resource is intellectual capital, there is absolutely and definitively NO control over it. Intelligence cannot be amassed, it cannot be controlled, censored or taxed or redistributed. The mind is the freest thing in the world. Attempts at Knowledge Management will fail dismally if it continues along its current paradigm of attempting to control information. Most current attempts at KM are nothing but glorified databases, and will remain so until its proponents learn to let go.
The Internet as a medium connects minds. It has its roots in spirit of freedom and its total freedom is what attracts people to it. Any business model that is based on the premise that it is going to control a user or a customer is bound to fail. The very existence of hackers demonstrates the evil end of this desire people have not be ruled or controlled. A business model that enables this freedom, values it and enhances it - will succeed. This may sound naïve, but the Internet is a result of people’s search for freedom and they will not give up that newly found freedom. In practice this approach merely means that one should allow a community to dictate the content and the nature of the business of that community. This is Marketing 101 – give the customer what it wants.
2. The key resource: People
It is easily verifiable that the technical skills required to run such an e-commerce venture are in very scarce supply. But they can still be bought. It is even harder to find people who understand the culture of the Net and have the business savvy to make it work both ways. Any venture that is not staffed with the right people is doomed to failure. It will require people with the heart and the guts to want to make it work. Don’t underestimate the difficulty in finding people to staff a venture like this. And not only the number of people, but also the right quality of people will hard to find because they are in world-wide demand and command salaries that are beyond its true economic value.
3. The same rules apply
The more things change the more they stay the same. People don’t and won’t change their personalities and values overnight.
On a corporate level, the same things that make businesses successful today will make them succesful in the future. Good strategy, sufficient capital, sound decision making, responsiveness to customer needs, good marketing and controlling the money are the things that make business go round now and always will.
On an individual level, customers want to be treated with respect, be able to buy the products and services they want when they want and pay a reasonable price for it. That is something that is not unique to any part of the world but a fundamental human trait. The Internet does not change the fundamentals, but indeed takes it to a new level of possibility. The Net gives people freedom to shop when they want and where they want on a scale not imagined before – a perfect opportunity that gives them complete freedom and perfect control.
4. Connect, converse, convert
The Internet is about empowerment and ‘enablement’. The Net is about communicating. Create a conversation stream with the customer – in fact all the stakeholders – and keep it going. Don’t patronise, don’t try to sell – allow people to buy. Build trust and guarantee confidentiality, privacy and ultimately freedom.
One of the biggest misnomers today is the term relationship management. It is the most patronising piece of jargon to be coined in recent times – if not ever -that I can think of. Just like relationship management may technically be the same as love, no person on the receiving end will ever confuse the two. A true relationship just is, and is not subject to ‘management’. This is a universal truth and the same applies on the Internet. Consumers want to be ‘loved’ (treated with respect for whom they are) and they do not want to be data that can be managed. Loyalty is earned – not manipulated.
This aspect is the most uniquely identifying trait of the cyberworld – not because it is new (it is in fact eternal)- but because it is now possible. It is the key to coming to grips with the new laws of doing business and failure to understand this is a guarantee for failure.