Bryan Pearson's Blog, page 16

Wal-Mart’s Employment Deployment And 6 Ways To Curb Retail Turnover

If the closest distance between two people is a smile, as the pianist Victor Borge once suggested, then wouldn’t a smile be the shortest path to a sale?

Many retailers are beginning to believe so, apparently. Several major chains, including Wal-Mart, Lowe’s and J.C. Penney, are redirecting their spending to accommodate the customer experience. In what can be considered a throwback to traditional retail values, they are redirecting their money from store numbers and operations to the staff that deals directly with their shoppers.

The move is clearly designed to improve sales (Wal-Mart has previously invested $2.7 billion in employee incentives). However, these efforts are also likely designed to boost recruitment and retention during an economic upswing that presents more employee competition.

At the root of this challenge is employee turnover. The number of unemployed Americans per job opening in September 2016 ranked at nearly its lowest since the start of 2001 — 1.4, according to Employee Benefit Adviser, citing the Bureau of Labor Statistics.

Put in a way Borge might have said it: Retailers, in their fight for good talent, are trying to create more customer-facing harmony.

(Photo by Joe Raedle/Getty Images)

$3,400 Per Employee

And harmony may be just the thing to improve retention, and expenses. Rivalry for good talent can get costly. Consider these stats:

The price of replacing a worker who makes less than $30,000 a year is about 16% of that salary, according to the think tank Center for American Progress, cited by Bloomberg.
With the average U.S. retail employee making just more than $21,000, that shakes out to $3,400 per employee, according to the same story (citing Bureau of Labor Statistics).
The average turnover rate in retail was 5% a month in 2015, Bloomberg reports.

If 1 million of Wal-Mart’s 1.5 million U.S. associates are non-management, such turnover would translate to $170 million a month — if Wal-Mart pays the average rate.

“Better Align Store Staffing”

Wal-Mart implemented efforts to stem such potential loss with its $2.7 billion incentive plan to improve employee productivity and customer satisfaction. This effort, which includes pay raises, resulted in $200 million in second-quarter bonuses.

More recently, The Wall Street Journal reported Wal-Mart is preparing to cut nearly 1,000 corporate jobs, many in human resources. In September, it eliminated nearly 7,000 back-office positions in its stores.

All of this implies the money invested in customer-facing employees is being siphoned out of other work areas, to the tune of billions of dollars. But Wal-Mart is not alone.

Lowe’s Home Improvement also is reducing head count in order to reinvest in customer-facing workers, according to the Charlotte Business Journal. On Jan. 17, the company told staff it would cut 2,400 positions.

“The changes will better align store staffing with customer demand, shift resources from back-of-the-store activities to customer-facing ones, and enhance our efficiency and productivity,” CEO Robert Niblock wrote in an email to staff.

Similarly, department store chain J.C. Penney is shuttering stores in an effort to invest in locations that make better brand sense. As CEO Marvin Ellison put it to analysts: “It’s a simple question: If we have a location that I wouldn’t want my children to work at, or wouldn’t want my wife to shop at, then we’re going to invest capital and ask if it fits the brand standard.”

Which gets to the heart of the challenge for retailers: Offering a place where talented, creative people want to work.

Why Turnover Is So High

Location of course is only part of it. Several factors, from bureaucracy to intellectual stimulation to (yes) a smile, direct an employee’s path. Following are six reasons turnover is so high.

1. Poor training: Standard training usually includes the predictable checklist: how to use equipment, basic processes and the employee handbook. These tools focus on the employer’s needs, not the customer’s. Training should also include a thorough understanding of product selection and use as well as customer preferences.

2. Lack of autonomy: This is reinforced in training. If employees are given the tools to better understand customer behavior and how it evolves, they will feel more confident in their service choices. This is empowerment, and it’s an awesome characteristic to see in an employee.

3. Dearth of technology: Technology supports autonomy when it provides employees with knowledge. Home Depot, for example, has provided its employees with in-store mobile devices so they can easily locate products and provide information to customers.

4. It’s boring: Working the aisle may not be a laugh riot every minute, so the onus is on employers to provide proper stimulation. Engaged workers will be motivated by intellectual challenges as well as rewards. Those who are not might be in a job that fails to align with their talents.

5. Poor alignment: Some people were born to sell; some were born to stock shelves or create beautiful displays. While it’s good practice to ensure each worker is familiar with all tasks, it’s a mistake to force them out of their comfort zones. Retailers can implement employee surveys to recognize the unique talent of each worker, or simply ask.

6. Uncomfortable fit: Sometimes, the person and the brand just don’t make good bedfellows. Even Zappos.com, known for its excellent work environment, recognizes not all who complete its training will be a good fit. So it offers all its new call-center workers $3,000 to leave the company. That’s one happy way to eliminate a potential unhappy situation.

If practiced, each should lengthen the distance between hiring and quitting dates, and that should be something to smile about.

This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

National Retail Federation Influencer On 6 Things Retail Is Doing Right (And Wrong)

Ask global retail consultant Wendy Liebmann to name the retail industry’s person of the year, and she’ll say it’s the one holding the credit card.

Retail is shifting to a shopper-based model, the way she sees it. And those merchants that cling to the retail-based model of operations and efficiencies not only fail to view their stores from the eyes of their customers; they risk not seeing any customers at all.

“The reality is when people have so many places to shop, retailers cannot afford to just look at themselves in the mirror,” said Liebmann, founder and CEO of WSL Strategic Retail, a global retail consultancy. “They really have to build their proposition around: ‘What does that person who buys from me want from me?’”

DENIS CHARLET/AFP/Getty Images

She provided a familiar example — the placement of milk at the supermarket. By tradition, it sits in the fa

rthest corner of the store so shoppers are forced to pass through several product-laden aisles. “The last thing the mother wants to do with two kids, one screaming, is walk to the back of the store,” said Liebmann, who was named one of the five retail influencers of 2017 by the National Retail Federation.

Fortunately for that mother, there are other options. She can quickly grab milk at the gas station or drugstore. Translation: Retailers can no longer get away with the model upon which they built their empires.

Those Who Put Shoppers First Win

Headlines about store closings and operational changes make this evident. In many ways, what will separate the retail victors from the others comes down to a few key practices. Liebmann categorizes them under three activities retailers are doing right, and three they are still doing wrong.

3 Things Retailers Are Doing Right Today

Putting away the operational mirror: Retailers that stop examining their own needs and instead view their business through the lens of their shoppers will pull ahead, Liebmann said. They do so by determining how their retail proposition is meeting the needs of the shopper, rather than how it fulfills their own operational needs. In short: They think about the shopper’s life first and foremost, and then apply that to the operational model.

Removing the seams: This means connecting with shoppers in every way shoppers want. The known term is omnichannel, and it requires a great deal of agility. Good retailers cater to the consumer, whether she wants to visit the store, shop online or order first and pick up curbside. “If you don’t allow her to shop at 11 o’clock at night when the kids have gone to bed, that can be the point at which she chooses another merchant,” Liebmann said. “Before there were all these choices, this didn’t matter. The power was in the hands of the retailers and the brands.”

Investing in people: A key to retail success is ensuring the best-suited staff is appointed for each customer touch point — physically, by chat or online. “That personal connection … that’s the hidden juice that makes [retail brands] really successful,” Liebmann said. For example, Costco supports the notion that even in a big-box store with cement floors, the power of personal interactions resonates, from the way the shelves are stocked to checkout.

3 Things Retailers Are (Still) Doing Wrong

Store-ied history: Many retailers still make the mistake of thinking retail is a real estate game, when new stores are no longer necessary for growth. The fact is there are too many stores, as The Limited made clear by recently announcing it would shutter all 250 locations and operate online only. “I remember when we were talking about the ‘Gapification’ of America,” Liebmann said. “All of a sudden it was like the commodification of retail. Obviously digital is a great way to reach people without having to open more real estate.”

Placing efficiency above necessity: While retail does require efficient operations, merchants should not focus solely on being efficient operators. “If all I’m doing is saying my [profit and loss statement] is about putting the merchandise where it is most efficient for me so it can be restocked and rehung, and having so many registers open or so many staff [members] on the floor at some times of the day because it is more efficient to me, then I lose today,” she said. Thanksgiving Day sales are a good example, because they don’t actually address an expressed customer need.

Not breathing humanity into digital: Online interactions should be as human as those that occur in the store. Unfortunately, Liebmann said, some retailers still think they can get digital right with far too few people. But why? Online employees are still expected to answer questions and fulfill orders. She pointed to the Zappos.com model of giving its staff the training and freedom necessary to talk to customers as long as needed. In return, it gets a lot of unconditional loyalty. “You are investing in happiness, but really you are investing in the people you have,” she said.

And when it comes down to what shoppers really want in these post-recession years, it is happiness, Liebmann said.

“We’re seeing this very different kind of yearning — for stability, less stress, greater well-being,” she said. “The competitive environment has changed. It’s not just about the other guy selling things against you; it’s about the other guy selling this set of values.”

This article originally appeared in Forbes . Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.

The $5 Bonus: The Effective Psychology Behind Costco’s Membership Fee

Basic math may indicate that Costco has 225 million good reasons to increase its annual membership fee. In truth, shoppers of Costco may have more to gain, since those fees go toward lowering its prices. The behavioral economics behind Costco’s successful membership model.

Photo: Scott McIntyre/Bloomberg

Costco sells chicken coops. For $380, I can buy a duplex chicken coop at Costco that would set me back $394 on Amazon.

The best part is Costco’s annual membership fee is lower than the price of Amazon Prime. But what if that fee went up, as Costco hinted at in a recent call with analysts? The answer relies on Costco’s clever operational strategy, through which the fees support its lower prices.

And Costco counts lots of fees — about 34 million individual members pay $55 a year, and 10.6 million business members pay $110. If it raises its fee by a mere $5 per membership (some project business memberships could go up $10), then Costco has at least $225 million to gain from the increase.

Those fees go straight to the bottom line, which sounds lucrative. But the real story behind Costco’s success is its operating model and commitment to understanding how behavioral economics, or simple psychology, influence its members to buy more.

This works especially well for Costco because its annual fees, which generated $2.65 billion in fiscal 2016, are directed toward reducing price. And Costco is fanatical about how it approaches this distinguishing element. As Richard Galanti, Costco’s chief financial officer, explained to analysts: “We’re going to invest in loyalty and growth while it’s raining on everybody as it relates to higher levels of deflation.”

The extent of shoppers’ gains therefore depends on a separate basic equation: how much they shop at Costco.

Benefits of Fee-dom

Here are some data points that further illustrate why memberships are so important to Costco:

Costco posted a fiscal 2016 net income of $2.35 billion, slightly below its membership fee total.


Yet the fee has not been a barrier to entry. Costco operates 103.2 million square feet of retail floor space. That compares with nearly 240 million square feet at Target (further emphasizing Costco’s store scarcity). Yet Costco’s annual sales exceeded those of Target. In Target’s most recent fiscal year (ended Jan. 30, 2016), it posted $73.8 billion, compared with Costco’s $116 billion. Sam’s Club, meanwhile, posted annual revenue of $57 billion on a total square footage of 87.6 million (also as of Jan. 31, 2016).

Applying simple math and breaking that down to sales per square foot (acknowledging that online sales are not factored in), it shakes out to: $308 at Target, $650 at Sam’s Club and $1,124 at Costco.

Costco’s commitment to low prices apparently draws shoppers back. Costco’s gross margin is less than 11.4% of total sales. That compares with 25.3% at Walmart, 34.4% at Amazon (fiscal 2015) and 29.5% at Target. This means it is keeping prices as low as possible even when doing so compromises near-term performance.

As Costco states in its annual report: “(We) seek to maintain what we believe is a perception among our members of our ‘pricing authority’ — consistently providing the most competitive values.” This means reducing prices to meet those of its competitors as well as “holding prices steady despite cost increases instead of passing the increases on to our members, all negatively impacting near-term gross margin as a percentage of net sales.”

A Specific Kind of Shopper

Costco’s willingness to take a hit on gross margin is evidence of its commitment to its model, which is designed to appeal to a specific kind of shopper. However, if it increases fees in 2017, Costco will need to be transparent about its intention to keep prices low.

Following are three counterintuitive ways Costco has done this so far, with success:

The Amex switch: In 2015, Costco took the risky move of ending its exclusive relationship with American Express and signed a deal with Visa, making Citigroup its only credit card provider. This may have alienated a number of members, but Costco wagered the move would attract many more. “Limiting payment options and directing all perks through a single partner is yet another way of delivering lower prices and more benefits to customers,” wrote Denise Lee Yohn in her book, “Extraordinary Experiences: What Great Retail and Restaurant Brands Do.”

The selection ceiling: Regardless of the variety of items one can purchase at Costco, from safari tours to caskets, individual product choices do not run deep. In fact, it reportedly only carries about 4,000 unique items at a time. It may offer just four toothpaste brands, while Walmart carries dozens of sizes and brands. The logic behind this limitation is simple: Studies have shown when given too much choice, consumers tend to purchase less.

The line on signs: Among the items Costco eschews in an effort to reduce costs (and therefore prices) are aisle signs that tell shoppers where products are. The upshot is shoppers tend to spend more time wandering its stores, perhaps taking in and following the delicious smells of freshly baked goods. The more time consumers spend ambling around the store, the more likely they are to spend.

That spending may be on an unexpected coffin or a chicken coop. The magic is that by paying a fee to access these items, the shopper leaves feeling a bit privileged. As long as the price is right, that’s a formula for success.

7 Under-The-Radar Retail Trends For 2017

Will men and artificial intelligence define retail in 2017? Possibly. Considering the activities in retail today, several experts shared what unexpected trends they believe will merge in 2017.

 

Photo: Shutterstock

Trends, like rainstorms, can be fairly easy to predict. You look at the current conditions on the radar screen, consider their proximity and can pretty much nail where and when the rain will fall.

This goes for retail events as well as the weather. Consumers increasingly use their mobile devices in the shopping process. They expect more personalized, relevant shopping experiences. They research online and purchase in-store. These practices and preferences have been steadily advancing, so it is easy to predict and prepare for the continuing trends.

However, it’s those events that are just under the radar, those freak storms that come from nowhere, that tend to have a more lasting effect. These under-the-radar trends are also occurring in retail, but with less notice.

So I asked the retail experts: What do you predict will be the stealth trends of 2017? From artificial intelligence to increased spending among men, they shared small but notable activities of today that will influence retail in 2017.

Following are seven under-the-radar trends provided by several retail industry experts. (Note: Responses have been edited for brevity.)

The Menaissance: “We will continue to see men take the lead in spend(ing). Already, for the first time ever, men are outspending women by 13% and early indicators predict that the menswear market will expand 8.3% next year (“The Boutique@Ogilvy 2016 Men’s Shopping Report”). That’s 1.5 times more than women’s! Expect more struggling retailers to bring menswear front and center.” — Christine Sica, retail analyst and CEO of Mox Group Strategists, Miami, Florida

Getting personal, artificially: “The savviest retailers are taking advantage of advancements in machine learning, deep analytics and artificial intelligence (AI) for a more targeted and personalized shopping experience. Customers now have longer digital footprints (shopping histories, social media profiles and interests), giving retailers easy access to offer a tailored selection of products. Brands such as The North Face and 1-800-Flowers.Com are already using AI to provide personalized recommendations.” — Emily Bezzant, head analyst at Edited, a retail analytics company with offices in New York, London and Melbourne

Co-shopping means growing carts: “Increasingly, the task of grocery shopping is being divided among various family members. Nearly 60% of households (58%, according to the Food Marketing Institute) share shopping responsibilities. For food retailers, this could mean more baskets, which is great for sales, but it introduces communications challenges. Retailers will want to examine household data, if possible through reward programs, to better identify individual shopper preferences within households.” — Cassandra Moren, industry marketing specialist at Precima, a retail analytics consultant in Toronto

Leaving home without it: “Having your phone (will be) more important than your physical wallet. With contactless cards expected to double worldwide by 2021 (ABI Research), 2017 will be the year people begin to ditch the (physical) wallet as merchants start to standardize the acceptance of contactless mobile wallets and create incentives to pay this way, downloadable directly to your device.” — Glen Robson, executive vice president, global head of systems at Verifone, San Jose, California

Small will be the next big: “(This) emerging retailing trend will reshape the retail landscape in the future. Specifically, demographic shifts — with both aging baby boomers and young millennials looking for a more personal shopping experience, as well as heightened expectations from affluent consumers — will favor the special services and products that only local small businesses can provide.” — Pam Danziger, author of “Shops That POP!” and researcher at Unity Marketing in Stevens, Pennsylvania

Crowdsourced goods: “We will see more brands actively engaging in crowdsourced products. Digital and social media have provided countless opportunities to engage with so many people at once about subjects, products and ingredients that are interesting or culturally significant. This has helped to level the playing field by democratizing access to people so now any brand, regardless of marketing or research budget, can effectively and efficiently have direct and real dialogue with its communities on a broad scale.” — Richelieu Dennis, CEO of Sundial Brands, maker of skin-, hair- and body care products, Amityville, New York

Digital marketplaces will rule: “Retailers will begin to shop just like consumers in connected B2B marketplaces, speeding up and streamlining tedious and burdensome backend processes and, ultimately, getting better products to market faster. (These) digital marketplaces will allow for adoption of more visual, collaborative and social tools in 2017.” — Sue Welch, CEO of Bamboo Rose, a digital B2B marketplace in Boston, Massachusetts

These trends may not be obvious today, but technology and consumer activities certainly hint at the potential of them becoming a reality. If they do, and retailers are prepared, they really could make it rain.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here. 

Holiday Spending To Exceed $1 Trillion — And 11 Other Surprising Data Points Of Christmas

Photo: Shutterstock

Let’s face it: As much as we like to be creative in our gift-giving, for many of us, those five golden rings will more likely be gift cards.

And it’s not for lack of creativity. Rather, it is the result of desire. The fact that lots of people prefer to receive gift cards for the holidays is among several surprising findings gleaned from various holiday consumer surveys conducted in the past few months.

The research also revealed some unexpected paths to purchase among consumers today. I scoured holiday survey results from six sources and plucked 12 noteworthy numbers  (some that contradict others) that could define this holiday season.

$1 trillion: The total expected holiday sales this year are actually expected to exceed $1 trillion. That represents a 3.6% to 4% increase over 2015. (Deloitte, “2016 Holiday Survey”)

13%: The percentage of last-minute shoppers who plan to buy their gifts at supermarkets or grocery stores. (National Retail Federation, “Holiday 2016: Consumer Survey Highlights”)

$419: The average amount U.S. adults plan to spend on holiday-related items this holiday season, (International Council of Shopping Centers (ICSC, “The 2016 ICSC Super Saturday study”)

8%: The expected increase in holiday spending among Americans in 2016, compared with 2015. (“American Express Spending & Saving Tracker”)

$244: The average total cash contribution by surveyed consumers who are donating cash to charitable causes this year. (PWC’s “2016 Holiday Outlook: It’s the Most Digital Time of the Year”)

64%: The share of Americans who purchased online, picked up in store and then also made an additional in-store purchase during Thanksgiving weekend. (ICSC “Thanksgiving/Black Friday Shopping Report”)

76%: The percentage of Americans who are using mobile devices for their holiday shopping this year. (“American Express Spending & Saving Tracker”)

42%: The percentage of consumers who said they would like to receive a gift card. (PWC’s “2016 Holiday Outlook: It’s the Most Digital Time of the Year”)

84%: The portion of consumers who plan to check Amazon.com before looking or buying elsewhere. (Accenture, “10th Annual Accenture Holiday Shopping Survey”)

25%: The projected percentage increase in annual mobile sales (PWC’s “2016 Holiday Outlook: It’s the Most Digital Time of the Year”)

72%: The share of consumers enticed by coupons or promotions to shop at a store they have not visited in the past year. (Accenture, “10th Annual Accenture Holiday Shopping Survey”)

48%: The percentage of shoppers who plan to shop after-Christmas sales in the store. (National Retail Federation, “Holiday 2016: Consumer Survey Highlights”)

All in, these numbers add up to a lot of change. However, it is change that will define retail in 2017, ideally for the better. Whether we give (or receive) gift cards, jewelry or food for the holidays, I send best wishes for a happy, healthy and — for retailers — fruitful season.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here. 

Staging An Experiential Marketing Encore, The Bloomingdale’s, Brooks Brothers Way

There’s no business like show business, and retailers are vying to get in on the act. More merchants are turning to Broadway in their ongoing play for experiential marketing. But what can retailers do for an encore?

 

Photo: Bloomingdale’s/Jacob Snavely

Apologies to Shakespeare, but if all the world’s a stage, then retail is becoming a key player, and its best line may be this: “Buy our Curtains!”

Or, depending on the brand, “Our sofas!” “Our sweaters!” Or, “Our suits!”

I’m talking about the latest act in the ongoing play for experiential marketing, which is retailers taking the stage, or areas near it. In a bid to show their wares, retailers from Bloomingdale’s to Ann Taylor are finding beneficial partnerships on Broadway, according to The Wall Street Journal.

“During this fall’s theater season, retail marketers have found new ways to weave a show’s cast or creative team into brand-related content,” the WSJ reports. “And when the stars of the cast or creative team share with their own followers, they reach beyond the 600 to 1,500 or so people in an audience.”

Indeed, Americans are likely to mention a good brand experience to an average of nine people, according to a story in Forbes. This means setting the experiential stage in a way that is relevant to a retailer’s best shoppers is critical for long-term loyalty.

However, experiential marketing is fluid, requiring constant evolution to remain relevant. Which leads to the question: If retailers take the stage today, what can they do for an encore?

Experiential Marketing In Three Acts

We can trace the earliest examples of experiential marketing to European street bazaars, where travelers gathered to sell exotic goods from around the globe. Formally, its invention is credited to adman Gary Reynolds, who in 1979 launched the concept of engagement marketing through the creation of the Miller Band Network. And so the curtain rises on experiential marketing, in three acts.

Act 1 — Music: Miller Band Network was a grassroots musical marketing program designed for Reynolds’ key client, Miller Brewing Co.  His strategy centered on promoting emerging bands in local bars and clubs that served Miller beer. Over its 18 years Miller promoted 300 artists, including the Red Hot Chili Peppers and The Fabulous Thunderbirds, at 125,000 events.

Act 2 — Spotlights: By the early 2000s, small and large retailers, as well as major consumer brands, picked up on the idea of popping into popular gathering places as a method of engagement marketing. Pop-up retail took the form of traveling boutiques that rolled on the wheels of retrofitted vans, as tents at music festivals and as temporary tenants in abandoned storefronts. Recently, Warby Parker transformed a school bus into a touring eyewear shop, outfitted with leather couches and vintage books.

Act 3 — Cast: In time, for some brands, pop-up shops transformed into alternate entities. Retailers began exploring ways to meld their brand experience in complementary settings, inviting consumers to engage with their products in different, welcoming environments. Home furnishings chain West Elm is doing this by entering the hospitality business, with five West Elm hotels. The concept, scheduled for late 2018, is experiential marketing in the form of a lifestyle brand comforting us during a vacation (or business-trip).

And now, retailers are finding new experiential opportunities at the footlights of Broadway. In addition to Bloomingdale’s, which has furnished a lounge for the cast of “Dear Evan Hansen” at the Music Box Theater, Brooks Brothers has outfitted the leading men of the play “Falsettos” on opening night. Ann Taylor featured photos and video interviews with the director and star of the play “Waitress,” building on the message of women’s empowerment.

Encore! Encore!

These innovative efforts stoke the consumer’s appetite for richer, more personally relevant experiences. But there’s a rub: If the on-stage marketing effort succeeds, or even if it does not, retailers will be tasked with finding what experiential retail marketing can to do for an encore. Following are three considerations.

Wave to the audience: Before choosing an experiential model, retailers should consult a sufficient amount data, such as that gathered through a loyalty program. These insights will help a merchant anticipate the kinds of events its customers want to experience — lately. It should be noted these preferences change regularly. A few years ago shoppers weren’t looking for virtual reality in the store. Now it is becoming common — Lowe’s in late 2015 rolled out its Holoroom, a virtual design and visualization tool, and continues to refine the experience.

Nod to the orchestra: If customer data is music, then the insights derived form an orchestra. The trick for retailers is identifying experiences and settings that are relevant to shoppers while also complementary to the brand. This could mean being where its best shoppers like to go when outside the store. When Brooks Brothers outfitted the lead actors of “Falsettos,” they got in front of a key market segment while its members were engaged in something they love. Not only was the Brooks Brother line worn by admired actors, it is being relived in photos posted by theatergoers on social media.

Take a (small) bow: Not all experiential marketing efforts have to be grand gestures. Occasional short-term events, much like pop-up stores, can be tailored to a lucrative segment of a retailer’s customer base. At the mixed-use retail center Avalon, in metro Atlanta, the athletic-wear brand Athleta supports free community yoga classes, often providing signage, yoga mats and water bottles, said Liz Gillespie, vice president of marketing at North American Properties, a mixed-use retail developer. In doing this, Athleta has found an easy way to connect with consumers outside its store, while supporting activities its best shoppers love.

If retailers apply these considerations to their experiential plans, they may continue to be key players during the many stages of their target customers’ lives. If they screw up the script, however, they risk getting the hook.

Coffee On The Rocks? Starbucks Reserve Might Shake Up Industry

(AP Photo/Elise Amendola)

Here’s a thought on getting the public to pay $12 for a cup of coffee: Have the barista wear suspenders and add a bourbon-flavored swizzle stick.

I allude here to plans by Starbucks CEO Howard Schultz to launch a chain of luxury coffee bars, and how well the concept compares with another long-standing social endeavor — the corner bar. When thinking of super-premium comparisons to the high-end Starbucks Reserve Roastery brand, my mind keeps returning to the craft cocktail lounge and its respected mixologists.

I think for good reason. Americans are drinking less alcohol, yet spending more on it, because we are choosing pricier beer, wine and cocktails, according to Bloomberg. Nearly half of all wine sold (48%) now costs more than $10 a glass, and cocktail prices easily ratchet north of that.

Similarly, coffee is undergoing an innovation evolution of its own. In addition to lattes and macchiatos infused with vanilla, salted caramel or pumpkin, talented baristas give us a choice of flat whites, cold brews or nitrogen-infused coffee. And with each new idea, the price climbs. But to succeed, the in-store coffee experience should live up to the hype — and the price.

With that in mind, let’s look at Schultz’s latest coffee fancy through craft-cocktail goggles.

From Plain Joe To Gingerbread Latte

Coffee, just like beer and vodka, is at its core a commodity product. Twenty years ago, you might have been considered a fool for paying $5 for a cup of joe.

Yet Schultz, in his decades at Starbucks, has transformed the way people drink coffee and, as The Wall Street Journal observed, even socialize: “Starbucks showed Americans that coffee could be more ambitious than home-brewed Folgers.”

n this way, Schultz is following the lead of cocktail bars, which have been pretty ambitious themselves. Crafty mixologists (once called bartenders) are creating $20 cocktails with small-batch spirits, botanical infusions and chef-quality ingredients.

With his plans to pursue the Roastery concept, which began with a location in Seattle two years ago, Schultz will retire as Starbucks’ storied CEO. At the Roastery in Seattle, which refers to itself as a shrine, the coffee is roasted onsite and then brewed by Starbucks baristas carefully selected from across the country. A 12-ounce cup of coffee that involves a siphoning process costs $12.

Starbucks plans to open 20 to 30 such locations, plus as many as 1,000 similar locations, to be called Starbucks Reserve, that will not include on-site roasting.

Brewing A $100 Million Idea

The cost to build these locations will reflect the $12 price for siphoned coffee. Some analysts estimate Starbucks will invest about $100 million a year building the stores. Selling enough coffee to cover that cost will be a challenge, unless Starbucks intends for its traditional stores to help cover the bill.

A yet bigger challenge may be distinguishing the fare at the two chains. Regular Starbucks already has a pretty sophisticated and complex menu. As Credit Suisse analyst Jason West put it to The Wall Street Journal: “If you’re going to throw on top of that another level of premiumization and innovation and add an espresso bar, this could make things more challenging.”

Schultz has said the in-store experience at the Roastery will entice computer-bound consumers, who spend a lot of time shopping online, to leave their homes. To this point I can’t help but ask: Have you been to a Starbucks lately? I’d estimate 90% of the people there are staring into glowing screens.

Perhaps Schultz is also trying to graduate regular Starbucks visitors to a more sophisticated coffee experience. That experience includes a view of the entire roasting operation, a well-stocked coffee library and access to brews derived from the best beans Starbucks can muster (less than 1% of its beans qualify).

Justification? Maturing Coffee Market

The market is certainly maturing into the Schultz vision. Younger consumers are more open to experimenting with new coffee beverages or preparation methods, according to the National Coffee Blog. Roughly half of all consumers ages 18 to 39, when asked where they drank coffee the day before, said it was away from home.

It’s little wonder specialty coffee sales are increasing by 20% a year.

Still, the gap between a $5 cup and a $12 cup is wide. To maintain its target customer base, the Roastery will have to transport them to a new café plane — an opulent environment that can be justified as a personal indulgence. That justification is achieved by stimulating the senses in purely emotional ways. To refer to the craft cocktail comparison, it’s the equivalent of taking a well-deserved break in a soothing environment, or celebrating an occasion with friends.

And let’s face it: There’s a snob aspect to it as well. Anyone who pays $12 for a cup of coffee ostensibly appreciates the difference, and therefore can enjoy being different.

Considering the number of people willing to wait seven minutes in line for a $5 blended coffee drink, and not even stay, getting them to pay twice as much may not be so hard to achieve, if the customers are made to feel special. For this reason, the weight of the Roastery’s success rests largely on the entire experience.

The location’s atmosphere — the way it makes its visitors feel — must justify the higher price tag. Just like Starbucks reinvented coffee from the traditional doughnut chain to a living room break, the transition from current Starbucks to the Roastery concept must come with an equally enticing change to the experience. This is crucial to reconditioning consumers to accept $10 latte breaks. Coffee, like craft spirits, could become mysterious and magical.

If Schultz can achieve this, and get the experience just right, a $12 cup of java might not sound so nutty in five or so years. Bring on the swizzle sticks.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here. 

Making Self-Checkout Work: Learning From Albertsons

By removing more self-service checkout lanes at its stores, Albertsons raises the question of whether self-service is worth the cost – in dollars and in customer service. A look at whether shrink trumps convenience, and if employee interaction leads to improved loyalty and sales.

 

AP Photo/Rick Bowmer

Here’s a comment you’ll never hear from a cashier as you’re unloading your bananas and frozen pizza: “Unexpected item found in the bagging area.”

It’s a comment I’d prefer to never hear again, as it indicates one of the more frustrating aspects of the self-checkout lane. If I had to put a price on it, I’d say this sort of hang-up could cost a supermarket one bag of groceries. That’s pretty much what I’d be willing to let go of rather than wait to sort out the “unexpected item” mystery.

Yet it is no mystery why so many retailers have adopted self-checkout. Theoretically. It’s faster, requires fewer workers (or frees existing workers to do other tasks) and, in the long run, saves money.

But does it save money? And is it good customer service? Albertsons recently raised these questions with the announcement that it would remove more self-service checkout lanes from its stores, a strategy it launched several years ago.

Albertsons has said, since it first began eliminating self-checkout lanes in 2011, that it wanted to encourage more human contact with its employees. But the service question is hard to answer without first examining the cost question;  one brings the other into play. So let’s examine both, starting with the perceived cost savings of self-checkout.

4% Shrinkage

A key concern about self-checkout is that it allows for a higher degree of theft. One recent study indicates not only this, but also that self-checkout may encourage theft.

The international study examined 12 million shopping trips over two years. Of them, 1 million trips were audited, accounting for 6 million items, according to The New York Times. The study found that 850,000 of those items had never been scanned, accounting for 4% of the total value of merchandise.

With traditional supermarkets recording an average profit margin of 1% to 2%, that 4% in sales shrink, or loss, can easily offset any gains made by freeing up workers.

What’s less clear is whether these items were intentionally not scanned. A separate report cited on the online news site Vocativ quotes a UK survey from 2014 that reveals nearly 20% of shoppers said they stole items at self-checkout. However, roughly 60% of these said they did it because they couldn’t get an item to scan.

“It’s possible a lot of customers are lifting out of sheer frustration,” stated Vocativ. “And sneaking an item into your bag rather than waiting for the bleep of recognition from the scanner means, if nothing else, that you’ll get out of there and on with your life.”

All of which points to a need for better service, either within the self-checkout lanes or through speedier traditional checkout areas.

Beep With A Smile

Albertsons chose to pull its self-checkout lanes in 2011 to encourage more rapport between customers and employees.

“We just want the opportunity to talk to customers more,” Albertsons spokeswoman Christine Wilcox said at the time. “That’s the driving motivation.”

Albertsons is not alone. CVS Health, Ikea and Big Y Foods have also removed self-checkout terminals due to customer service and other concerns, reports CardFellow.com. According to a survey by NCR Corp., which supplies many of these terminals, 43% of consumers who used self-checkout lanes still wanted an attendant to be available to help resolve issues.

And for good reason. While roughly 75% of surveyed shoppers deemed self-checkout lanes as a time saver, according to Consumer Reports, the experience brings its irritations. Among them: 30% of survey respondents complained the systems did not work properly; 27% got peeved because the shopper ahead of him or her took too long.

Then there is the real threat of lost loyalty. Reduced interactions with a store employee could easily result in an eroded sense of personal connection with the retailer or brand. This gets to emotion. Without it, it’s much easier to move one’s business elsewhere.

But given that shoppers have the choice of self-checkout or a staffed lane, is this a good argument? Some may say yes, when the addition of self-checkouts results in a notable reduction in staffed aisles, essentially forcing shoppers to ring up their own items.

So, as Albertsons and others have chosen, self-checkout has been checked out.

Checking Out, Checking In

But this does not mean self-checkout has been completely rung out. There is plenty of promise in the technology; it’s just a matter of working out the kinks and finessing it.

Among the recommendations are monitors, which make clear to shoppers they are being watched. Self-service aisles with “public-view monitors” positioned at eye-level or above the machines have recorded higher sales, which is evidence of less theft, according to The New York Times.

Other technologies, both old and new, have attempted to take the checkout process away from the checkout aisle. With the recently announced Amazon Go app, for example, users could scan their smartphone upon entering an Amazon convenience store store and then simply pick up what they want and leave. Their purchases are automatically charged to their Amazon accounts. The project is in private beta testing in Seattle and scheduled to open to the public in early 2017.

Self-checkout may transition toward this, or toward a combo pack of smart carts, mobile phones and RFID technology — if retailers can figure out how to reduce the risk of shrink at a reasonable cost and in a way that engages the consumer meaningfully. They might be able to do this with extra discounts, extra value in the form of loyalty points, or just plain efficiency.

In the meantime, I honestly think the single best approach for a retailer is to add a human touch to the technology. Train employees to well understand the system, and its foibles, and position workers at both ends of the stations; enough to handily resolve potential problems. Importantly, these workers should clearly look like they are there to help, not to catch thieves.

This way, when a shopper learns an unexpected item has been found in the bagging area, a nearby employee can locate and pull the stray banana away. Maybe they can even have a good laugh about it.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here. 

Retail Clicks Beating Bricks — 4 Ways To Recover

Several retailers including Wal-Mart, Macy’s and Target posted quarterly earnings recently, and the results show that even when beating Wall Street estimates, brick-and-mortar stores are still seeing declines due to online competition.

 

AP Photo/Matt Dunham

Like swimsuits marked 70% off in October, third-quarter retail sales were a little short when it came to physical presence, yet long in revealing the problem spots for major retailers.

Among those spots are online sales, which will evidently play a larger role in determining how well retailers perform through the holidays. The earnings reports of several major merchants showed that even when beating Wall Street estimates, brick-and-mortar stores are seeing declines due to online competition.

Wal-Mart, Nordstrom, Target and Macy’s are among the chains that reported their online sales outperformed receipts at brick-and-mortar stores. Among result highlights:

• Wal-Mart Inc., which acquired Jet.com in September, posted a 6% increase on global online sales. Sales at stores open at least a year, or same-store sales, rose 1.2%, an eyelash short of the forecast of 1.3%.
• Upscale department store chain Nordstrom reported sales at Nordstrom.com rose 20.1%. Same-store sales rose 2.4%, boosted by the chain’s annual Anniversary Sale. (Combined second- and third-quarter sales rose 0.4%.)
• Target’s same-store sales dipped 0.2%, while digital sales grew 26%. Target has been focused on spurring e-commerce sales specifically to better compete against Amazon.com, according to reports.
• Macy’s said same-store sales fell 3.3%, below expectations. While the chain does not specify online performance, Macy’s said sales at com and Bloomingdales.com grew in the double digits, according to Internet Retailer.
• Same-store sales at Kohl’s declined 1.7% during the quarter, slightly better than expected, according to Seeking Alpha. The value-priced department store chain plans to open a fifth distribution center dedicated to online orders.

4 Ways Online Can Lift In-Store

While the total sum of online sales may be small compared with in-store revenue for many retailers, the consistent difference in numbers spells out a trend. And canny retailers are taking advantage of the online attention, using their digital showrooms as portals to the store.

Here are four ways retailers are using or can use their online presence to direct shoppers into their stores.

Buy online, pick up in-store: Several retailers, including Macy’s, Kohl’s, J.C. Penney and Nordstrom, now offer an option to buy online and pick up the item in-store. Nordstrom’s “BOPIS” feature invites shoppers to choose a location and place an order. Within an hour, it will send a confirmation. The customer can then pick up the purchase at the chosen location. This is among the most straightforward ways to get a shopper into the store. If the sales associate pulls a couple accessories that complement the purchase (socks to go with a pair of shoes, or a necklace to brighten a dress), they could add incremental sales.

Make them winners: Retailers can promote online contests that require the winner to pick up the prize in-store. A social media sharing contest, or submission of photos wearing the retailer’s clothing in creative ways, are among the kinds of competition that could be considered in this instance. Or, to maximize the shopper turnout, the retailer can host an online drawing that rewards a select number of entrants with shopping sprees. Chances are each shopper will spend slightly more than the prize amount. And the added bonus: Winners could be encouraged to share their experience online, with the promise of reward points or a coupon.

Crate & Barrel’s Ultimate Wedding Contest invites couples to send in their best engagement photos and stories, which are posted on Crate & Barrel’s Facebook pages. Those who gain the most likes win a $500 undisclosed wedding prize. Operators of similar contests could reinforce the in-store connection by inviting entrants to shoot selfies in the actual stores, possibly near items on their registries.

Place exclusives on shelf: Retailers can use their online stores to promote exclusive, limited-time products available only at brick-and-mortar locations. Macy’s and Target, which excel at exclusive designer relationships, could leverage these partnerships to introduce new items that may complement online selections, but are available only at the store. Ikea does this well. While it offers many products online, a good deal of its attractive furnishings, such as its popular VOLFGANG dining room chair, can be purchased only in its stores.

As we head through the fiscal fourth quarter and toward the holidays, efforts like these could help retailers boost in-store activity in tandem with online sales and heightened brand awareness. These efforts also could help merchants to identify those problem spots that are somehow disrupting sales.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here. 

Thanksgiving Challenge: 3 Ways Grocers Can Compete Against Meal Kits

The rapid emergence of pre-prepped meal kits may culminate at the Thanksgiving table, as at least a dozen such services now offer complete holiday meals. The most reliable way for supermarkets to compete is by providing made-to-order experiences.

 

Photo: Epicurious/Linda Pugliese

At few other times of the year do supermarkets play a greater role in the American household than in the days before Thanksgiving. This year, as stores stock freezers with turkeys and bakery shelves with pies, they should reflect on exactly what that role is becoming.

Many competitors, after all, are venturing for the grocery dollar. Among them, and gaining steam, are home-delivery meal kits.

The meal-kit market, started in 2012, will generate approximately $1.5 billion in U.S. sales in 2016, according to market research publisher Packaged Facts. This rapid emergence may culminate at the Thanksgiving table, as at least a dozen such services offer complete holiday meals.

True, $1.5 billion is a small percentage of the $800 billion supermarket industry. However, grocers are fighting for market share on many fronts that a few years ago were not considered a serious threat. Dollar stores, gas stations and pharmacies are expanding their food aisles to meet specific consumer needs. The food wallet, like the last pumpkin pie, is divided among more and more takers.

As supermarkets vie for the post-turkey dollar, they have just a few options. They can offer their own meal kits, which some grocery chains including Giant Eagle are exploring. Or they can develop reasons for the shopper to visit their stores that extend beyond picking up groceries.

Grocery Visits Down

Consumers are finding reasons to shop elsewhere.

The average number of weekly trips to a grocery store declined to 1.6 in 2016 from 2.2 in 2005, according to the Food Marketing Institute’s 2016 U.S. Grocery Shopping Trends report. Less than half of consumers (49%) see the supermarket as their primary outlet for groceries. In 2005, the figure was 67%.

Meal-kit sales, meanwhile, are expected to double to $3 billion in the next few years, according to the Packaged Facts report.

“Marketers are aiming for — and finding — a ‘sweet spot’ with consumers who do not have the time, inclination, or know-how to shop for individual ingredients, navigate a recipe, and cook from scratch, yet do not want to eat yet another heat-and-eat prepared meal, order takeout food, or dine out,” the report states.

Also, and importantly, meal-kit marketers position their service as a fun activity to do with others, bringing family or friends together. They’ve transformed the blasé act of meal preparation into a more joyful experience.

Belly Up To The Bar

Bringing joy to the supermarket aisle is a bigger challenge. Supermarkets are already tasked with making the shopping trip convenient, easy, affordable and friendly. In terms of function, it gets the job done. But it does not deliver a true feeling of community or family.

Many supermarkets have recognized this and are addressing it. The new Whole Foods 365 store concept, which invites local small-business operators to set up shop in the aisles, comes to mind.

Here are three others ways supermarkets are serving up community experiences that draw people into their stores and, importantly, keep them there longer.

Tables by the aisles: Some supermarkets, often higher-end chains, have offered dine-in services for years. Now more mainstream chains are exploring in-store dining to recapture wandering food dollars. In 2015, the amount Americans spent at restaurants overtook what they spent at grocery stores. In 2016, that figure rose to roughly $55 billion, according to the business news site Quartz. The Texas supermarket chain H-E-B operates restaurants at a number of its stores. Its Table 57 sells beer as well as barbecue by an award-winning Houston chef. Live music, happy hour and a kids’ play area are all part of the mix.

Bottling the experience: In some markets, consumers are making weekly dates at the neighborhood supermarket bar, where cocktails precede the cart. In California, the high-end Gelson’s chain plans to add six bars in 2017, according to The Wall Street Journal. Whole Foods, which operates beer halls and wine bars, invites shoppers at nearly 350 stores to carry their drinks while rolling the aisles. And Mariano’s, operated by Kroger, has wine bars with live piano music. Of course, the addition of a bar area in an existing store will require a transition of real estate. Supermarket operators could look at other service areas, such as florist shops, to see if the return on investment is better in a rocks glass.

Teaching a lesson: Cooking classes and demonstrations are a natural for the grocery experience, but downward dog lessons? Apparently so. In New Jersey, a ShopRite store operates a fitness studio that offers yoga, Zumba and other classes. On the weekends, a cosmetologist visits. These options not only lure shoppers into the store at times they might not otherwise visit, but also can create new revenue streams if the supermarket charges a small fee for each class. Alternately, a grocer can offer entry into such classes as a free perk for membership in a rewards program.

The services supermarkets offer can extend to almost anything that complements the area consumer’s lifestyle. Supermarkets can offer spa treatments, knife sharpening and even drawing classes (plenty of still life material in the produce section). The determining factors involve space, investment and the role the store wants to play in its market.

As Thanksgiving fades and the holidays approach, that role will become a larger factor of success.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.