Bryan Pearson's Blog, page 21

A Beautiful Find: How Two Grocers Stock Relevance Through Sustainability

The issue of sustainability in the supermarket aisle is no longer a question – it is the answer to retaining relevance among earth-conscious consumers. Here are two examples of how supermarkets are integrating green practices into the experience.

 

To make a supermarket energy-efficient today is to glimpse into the future, or to stare into the face of ugly.

Or, in the cases of two international players, both.

On one side of the Atlantic we have a futuristic supermarket by Coop Italia. In a prototype store at the Milan World’s Fair Expo, a wave of the hand would trigger details about selected fruit and vegetables on interactive display screens. Consumers, reacting to suggestions in real time, could provide Coop with the insights it would need to develop a more efficient supply chain – for smaller, less-energy-sucking stores.

“In the near future, we will be able to discover everything there is to know about the apple we are looking at: the tree it grew on, the CO² it produces, the chemical treatments it received and its journey to the supermarket shelf,” Gabriele Tubertini, Coop Italia’s chief information officer, said in a story by the National Retail Federation.

Meantime, here in North America, we have the Canadian chain Loblaw, approaching sustainability in a decidedly more low-tech way: by sparing ugly produce from the landfill. Actually, Loblaw is selling its Naturally Imperfect line of peppers, onions and mushrooms as a lower-priced alternative to cost-conscious consumers. However, the sale of ugly produce keeps it from going to waste. An estimated 26 percent of produce in the United States – billions of pounds worth – is disposed of due to supermarket cosmetic standards.

Price of Relevance: 31% More

What both efforts underscore is that the issue of sustainability in the supermarket aisle is no longer a question – it is the answer to retaining relevance among today’s green consumers. These two examples – one ugly, one futuristic – show how supermarkets can integrate earth-friendly practices into the experience.

Grocery stores are not, after all, the most energy-efficient spaces. They are large, with lots of refrigeration, lights and required cooling and heating. In fact, the supermarket industry is second only to the food service sector in energy use per square foot, and is more than twice as energy-intensive as office buildings and schools, according to the Rocky Mountain Institute.

This not only is cause for concern among the environmentally conscious, it is a drain on the bottom line. A typical grocery store spends approximately $4 per square foot on energy costs each year.

Fortunately, green practices not only save money, they can demand a higher price tag. Americans said they would spend, on average, an additional 31 percent a week on “safe and sustainable” foods that advance the well-being of the planet, according to a 2014 study by Gibbs-rrb Strategic Communications.

Almost eight in 10 consumers said food waste, from packages that are too big, is an important factor in purchase choices, and 72 percent said earth-friendly packaging is important.

Preserving Relevance

These are inspiring numbers, but integrating sustainability into the customer experience requires more than stocking the shelves with products that advance the state of our planet.

When consumers choose to spend more money for planet-friendly products, they are changing their behavior for the greater good. Those in the midst of making lifestyle changes have a sharp eye for posers, or those who are simply in it for a buck.

They will ignore the posers, at best, while connecting with brands that overtly share the same mission, in all aspects of operations.

In short, waste reduction isn’t a bolted-on marketing strategy; it is a philosophy. For supermarket operators to make it real, they have to support it in their actions as well as their merchandise. Here are a few example:

Start at home: Employees influence many supermarket decisions. Provide them with quarterly efficiency goals that are corporate-wide and encourage them to contribute to the dialogue. Also, employees and suppliers should be treated with the same respect as the planet. They do talk, remember.

Recognize neighborhood heroes: Reward programs are great platforms for community campaigns that encourage desired behavior. A loyalty app can record how often a shopper recycles or buys ugly produce, and then surprise her with rewards (perhaps a charitable donation) upon achieving goals.

Donate, quietly: The objective should be to eliminate waste, not add to noise pollution. Information boards that explain how food past its expiration date is donated to charity should serve as calls to action for customers, not ways to brag. Keep compost bins on the property – not to show off, but to share with others.

Act as you say: It goes without saying – if a supermarket wants to cater to sustainable customers, it has to invest in energy-efficient stores, from the layout to the heating and cooling.

Wegmans, for instance, has installed energy-efficient hydrogen fuel cells for its handling equipment.

Such efforts, by resonating with customers, should preserve a supermarket’s good reputation. Like a delicious piece of ugly fruit, that is a beautiful thing.

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

With ‘Friends’ Initiative, Whole Foods Tries To Put Hip, Local Spin On Stores Within Stores

The grocer’s outreach to include “Friends,” such as bike repair shops, in its new 365 stores shows the natural-foods chain understands that customers cannot be captured with lower prices alone. Is a sense of community the future of the grocery experience, or is it simply a trendier approach to capturing the non-food dollar?

 

If the descriptions are accurate, a trip through a soon-to-open 365 store by Whole Foods would be akin to strolling up the hippest areas of Main Street.

Vegan Asian noodles? Check. The latest vinyl by the Lumineers? Check. Wrist tat? Check!

This could be the case, if Whole Foods picks its friends right.

The natural-foods chain is preparing to open the first of its more affordable 365 stores and is, in describing its strategy, making it clear its potential market cannot be captured simply with lower prices.

Photo credit: Whole Foods

Whole Foods also wants to include in its 365 stores compatible merchants or “Friends,” which can range from tattoo parlors to record shops. And so the grocery world turns: Does this mean Main Street is the future of the supermarket experience, or is it simply a trendier approach to capturing the non-food dollar?

Veering from food is hardly new in the industry. Grocery chains have for years combined non-traditional services and goods in a bid to keep shoppers longer and spend more. In addition to the now-common pharmacy, coffee shop and florist, today’s shopper can find – not far from the bananas and bread – an assortment of coffee presses, decorative vases and restaurants.

We’re also seeing more of the kinds of attractions common among European hypermarchés, which offer nurseries, snack areas and cooking classes. Kroger, for example, is dedicating significant square footage to shoes and apparel in addition to its Fred Meyer Jeweler stores.

Beyond Shopping

Whole Foods, however, is getting intimate while many grocers are scaling large.

It is seeking highly localized partners that would extend the shopping experience beyond actual shopping, a likely effort not only to get customers to spend more but also to visit the store more frequently. In addition to carrots and crackers, shoppers of 365 could find, potentially, representatives of a local bike shop, a seaweed hair care line or a kid-fitness program.

The critical distinguishing factor here is that these Friends will be local to each store.

“Friends of 365 are independent businesses who bring their special mojo to our 365 stores,” the website states. “Friends can be any type of business — Record shop? Tattoo parlor? Maybe! And each 365 store may have a different mix of friends. The more variety, the merrier!”

Among the qualifications of joining the Friends program: The products and services should align with the quality and values of 365; the Friends should be independent businesses; and the Friends must offer something “powerful, something new and exciting, or known and trusted, but hip and cool for sure.”

The retailer also specifies it is looking for startups as well as established brands across categories. “We’re looking for Friends with a strong offering and personality.”

13 In ’16

Enthusiasm aside, the chance of becoming a 365 Friend in 2016 is still limited.

Whole Foods has signed leases to open 13 such locations this year, according to its first-quarter report. The first, in Silver Lake, Calif., will open in May, accompanied in the following months by stores in Lake Oswego, Ore., and Bellevue, Wash.

The measured expansion gives 365 plenty of needed time to pick its Friends, whose inclusion needs to benefit the parent company as well as shoppers and community. Otherwise, it wouldn’t work.

Which directs us back to the question: Is the Friends program simply a trendier approach to capturing the non-food dollar? There is no denying it is trendy (the site’s language approaches the tragically hip), but Whole Foods has not lost its head. The Friends program is built on, and contingent upon, community, which is a crucially smart decision.

Friends selected for the program are responsible for all operations, including staffing and making the space their own, according to a fall 2015 call for candidates. Applicants were asked to submit videos, which were voted upon by the public and 365 staff. Those selected candidates were then invited to Austin, Texas, (base camp of Whole Foods) to make their pitches.

“By combining our strengths and yours — plus a whole horde of like-minded shoppers — we’ll create that all-important synergy that grows businesses,” the Friends of 365 website states. “We’ll also have a super cool [sic] hang.”

Partners With Familiar Faces

I do not know of many national chains that refer to their retail partnerships as super-cool hangs, which may be precisely what distinguishes the Friends program from other retail collaborations. It is focused, laser-like, on a particular customer – one who wants to support her community.

But when you get down to it, don’t we all? It’s aspirational.

Look, partnerships among merchants are old business. Stores-within-stores have existed for years, including J.C. Penney and Sephora, Best Buy and Samsung, Kroger and Starbucks and, recently, CVS and Target. These collaborations help expose each brand’s offerings to the other’s core customer base, and they importantly provide a revenue stream called rent.

Whole Foods’ Friends strategy, however, blends local personalities with a national, publicly traded one. More simply, it puts a familiar face on a major corporation. Few companies can do this well. Whole Foods is attempting it by creating a whole new body for the face.

Tattoo artists and sushi rollers may not realize it, or even approve, but if Whole Foods succeeds and gets some mojo from Main Street, then it may make it a darling of Wall Street.

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

Digital Sucking Sound: Email, Not Price, Is Costing Retailers Sales

Companies are failing at one of the most-used forms of customer service, emails, and it is sending their customers away. For retailers, this failure may signal a problem more serious than lost sales.

 

Dear Acme Whiz-Bang Co.,

I write to inform you that the coffee maker you sent me not only is the wrong model, but it arrived broken. Can you please send me the coffee maker I ordered and provide guidelines on how I can return this broken one without cost?

Sincerely,

Charlie Smith

Bad news, Charlie. You’ve got a one-in-three chance of never hearing back from Whiz-Bang. If you merely want acknowledgment that your email was received, your odds are even worse.

Photo credit: Walmart

Companies are failing at one of the most-used forms of service, emails, and it is sending their customers away. One in three organizations do not respond to customer service emails, according the 2016 Customer Service Benchmark report, which assessed 250 companies globally.

For shoppers, who can easily read reviews before hitting the “buy” button on most anything, this failure can be the key factor in deciding whether to make a purchase, and it can cost companies millions. However, for retailers it may signal a problem far more serious than lost sales.

Following are the key findings of the report by SuperOffice, a customer relationship management firm.

• About one-third (32 percent) of companies surveyed do not respond to customer service emails.

• Two-thirds of companies (66 percent) do not acknowledge when an email is received.

• Just 8 percent of companies follow up with customers to learn if they are satisfied with the response.

• Almost four in five companies (78 percent) are unable to answer questions on the first try.

• The average response time to a customer service request is nearly 17.5 hours.

“The research shows a majority are failing to meet customer expectations and costing millions of dollars in lost customers and unnecessary internal follow-up work,” the study states.

You’ve Got A Serious Problem

For retailers, the findings point to a weak link that should be one of their strongest assets: the potentially giant role of relatively inexpensive email as a form of engagement.

Based on the report’s findings, the causes for this communication breakdown signal a more urgent issue than a failure to communicate – they indicate that organizations are not factoring customer experience into the business model. Some companies lack the very tools necessary to effectively and quickly respond to customers.

Sure, these processes require an investment, but not having them can be more costly. Research from Salesforce.com, for example, shows that companies that use customer relationship management services can increase sales by 29 percent.

Sorry, Charlie

To understand why this is happening, let’s pick up with Charlie.

Though it was not his preference, Charlie sent his complaint to Acme Whiz-Bang through an online form because that was the only method of contact offered. When the company did not send an automated response, he sensed his message had disappeared into a cyber black hole.

The next day, having not heard back from the company, Charlie sent another web query.

Charlie’s inability to find an online email address is not uncommon. Many retailers, including Walmart and Zappos.com, direct customers who click the “email us” button to online forms, which can be cumbersome. It took me several clicks on Walmart.com to get to a product-return form. Once submitted, Walmart.com provided a reference number and a promise that a representative would be in touch within 24 hours. That email reply followed within a few hours.

Zappos.com’s form took fewer clicks to locate and was shorter. The company also posted an immediate response and reference number and followed up by email in less than 30 minutes.

Smaller merchants can make several excuses for why they fail to adequately respond to customer email queries, but among the companies reviewed in the Benchmark report, there existed one common denominator: They simply lack the processes to identify and respond to emails.

This is troubling because it points to systemic issues. True, software can perform near miracles, but if a company reaches midsize and still lacks such elemental tools, I have a hunch it is suffering foundational weaknesses that cannot be fixed with software.

Rebuilding Relations

When Acme Whiz-Bang finally followed up with Charlie by email several days later, he was no longer a loyal customer. He asked for a refund of the coffee pot but did not want another. Instead, he wiped Whiz-Bang from his list of bookmarked websites and clicked onto Amazon.

There are tactical steps the company could have taken early on to prevent this customer loss. If Whiz-Bang had at the least invested in automated-response software, the complaint would have been assigned a tracking number, similar to those assigned by Walmart or Zappos, which could be stored for future customer support.

He also might have received an email response, such as those I received from Danika at Zappos and Mary at Walmart, each of whom provided detailed steps on how to make a return (per my query). Walmart sent a second “how we doing?” email the next day requesting I take an online survey.

Those, however, are not the make-or-break elements here. The broader issue to me, as an executive who works with many retailers, is that customer experience is still not being included among the pillars that should support a company.

Three Steps To A Better Experience

Look, I get it. Growing companies regularly move their bags from horse to horse while midstream. Unforeseen events train them to focus on tackling the challenges immediately before them: merchandising, distribution, pricing, promotion, real estate, marketing, etc.

Responding to complaints feels very small compared with these bigger issues, but it is a cornerstone that, if pulled out, can cause deep cracks in the business structure. Here are four simple tips for folding customer experience into the mix early on:

Encourage enrollment: One of the easiest ways to identify a customer and anticipate her needs is to offer a beneficial membership program. It can be a loyalty program or an ambassador club – either way, it will provide the company with an identification code and email through which it can better manage the relationship. These kinds of programs also are pro-active tools that can help when a retailer has to manage product recalls or food-related issues (if a grocery store).

Mingle: I’ve heard the CEO of one of the nation’s largest grocery stores regularly shops locations, unidentified, to gauge the customer experience. The same can be done by email. Secret shoppers are old-school, but they are a reliable way to monitor the customer experience. Established early on, the practice provides a baseline against which to measure.

Commit to your channels of service: If a company cannot turn around an email in a timely manner, then it should consider other ways to engage the customer – online chats, call centers, whatever can be supported to deliver a satisfactory experience. I actually think email can be messy, given that the back-and-forth process can drag on without reaching a joint understanding of the underlying challenge or the needed directions.

These steps are not a panacea, but they can improve a growing company’s chance of survival – possibly above one-in-three.

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

Starbucks Loyalty Change Brews Anger, Filters Out Value of Experience

The shift in how members of My Starbucks Rewards earn stars may be a test of its customer loyalty, but with the program’s expanding mobile payment and other features, the change also underscores the unrecognized value of data among its members.

 

Woe to the super-brand with recognition so generous it is soon mistaken for entitlement. For Starbucks, the revelation apparently was not evident in its data.

The $16 billion coffee chain has apparently done the unforgivable and announced pending changes to the earnings structure of its rewards program – basing them on money spent rather than the number of visits. The changes take effect in April, but members are incensed now.

“Wow @Starbucks your new #StarbucksRewards isn’t very rewarding. 20 visits v 12 to unlock freebies? Time to give my @DunkinDonuts app a try.”

“Dear @Starbucks: time to say, “good-bye.” Your new #StarbucksRewards program doesn’t work for me. It is you, not me.”

“They’ve been watering down the program for a while. Don’t think customer loyalty is a priority any more.”

What I find interesting is that in voicing their outrage about the change, members reveal a preoccupation with receiving free stuff in return for their spending, but not for their data. It is a curious turn, since data is at the root of loyalty programs’ very existence and is essential to maximizing the customer experience.

Photo credit: Starbucks

The shift in how My Starbucks Rewards members earn their stars may be a test of loyalty, but with its mobile payment features fast expanding, it also underscores the unrecognized importance of data use for its members. Starbucks is building expansive methods for capturing broader insights about its most regular customers, both in its stores and outside of them. These insights are gold, yet customers are concerned about trips.

Starbucks can use this marketing opportunity to turn those expectations toward experiences, not stuff.

125, Not 12

Granted, I can sympathize with a longtime gold-level member who will now have to spend more in order to get those free drinks she might have gotten, like clockwork, every other week.

The most controversial change to the Starbucks program is not that members will earn for money spent rather than for visits (two stars for every $1 instead of one star for each purchase). The real blowback stems from the planned rise of the program’s earnings plateau.

Under the new My Starbucks, a member will have to earn 125 points before earning a free drink or other reward, rather than earn a reward after 12 visits. That breaks down to a required $62.50 in spending. A member who is a basic coffee drinker would require 21 or more visits before earning her reward.

The new program also will increase the number of stars required to reach gold level – to 300 from 30 – while eliminating its green, or welcome, tier.

Not often mentioned, however, is a new perk: Starbucks is adding monthly double-star days, so a member who buys a $3 coffee would earn 12 stars, rather than six.

Doubling Down On Data – 6 Million Mobile A Month

The anger over Starbucks’ planned change is likely the result of conditioning. Just as coupons and constant sales train consumers to expect discounts at nearly every turn, rewards programs might have accustomed shoppers to expect freebies in return for their spending – and quick.

Starbucks said that the planned program changes are based on feedback from its most frequent customers. With so many people watching, and expecting a response, the coffee maker is peering through a narrow window of opportunity to further capitalize on these customer insights.

Specifically, it can show how it is using the same customer data to deliver intangible benefits of membership, such as tailored communications, time saving and experiences. Starbucks has a sizeable community of members from which to appeal in this way, and its mobile payments strategy may be the key.

Mobile By the Millions

Starbucks is processing more than 6 million transactions a month on its Mobile Order & Pay app, the digital order-ahead service it launched in mid-2015. Overall, the My Starbucks Rewards program counts north of 11 million members, up 23 percent from a year ago, company executives told analysts in a January conference call.

That’s a lot of habit-forming. Starbucks customers need to be program members to use Mobile Order & Pay and mobile payment, so once they are in, they may tend to spend more, and it is likely hard to break that highly convenient routine. (Non-members can still sign up and use the app but do not have access to mobile pay features.)

To further establish its relevance among members, Starbucks is in the process of extending Mobile Order & Pay, company executives said in the conference call. It is looking into a delivery option for customers – pilots are underway in Seattle and New York. It also is investing in technology to better personalize offers to its loyalty program members.

Thanks A Latte

The onus is now on Starbucks to communicate these benefits. If the chain can turn pumpkin into a national hot-drink phenomenon, I imagine it can handle that. But being in the loyalty-marketing game, here are some of my suggestions that any company could use:

Put time on your side: The single most important gift Starbucks gives its members, through its Mobile Order & Pay feature, is time. Time is the most-valued luxury few of us have, and Starbucks is giving it away for free, with every order. That is time to give the wife an extra hug, pack an extra note in the kids’ lunch boxes or get a jump on that morning deadline.

Use choice words: Mobile apps often mean first choice. A Starbucks customer can review the offerings at the nearest store on her app, reserve what she wants and pick it up before it runs out. Starbucks can, in fact, use prior purchase data to alert regular customers if a frequent purchase is running low.  She can get the last vanilla bean scone, while the guy who has been waiting 10 minutes in line will watch it walk out the door.

Have a little bird tell them: News reports have focused on My Starbucks members who feel jilted by its planned changes. Starbucks should appeal to social media followers who are defending its change and brand to explain these non-cash benefits and spread the word.

Lastly, Starbucks should dial back any references to customer demand for the change. The customers it needs to win over aren’t hearing it. They want the response to which they feel entitled.

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

As CVS Converts Target Pharmacies, Data Is Key To Health

As CVS/pharmacy enters the thick of converting 1,700 Target pharmacies and clinics to its own brand, it has made it evident that its reward program, ExtraCare, will play an important role. This shift, if aided by Target’s own purchase insight, will demonstrate the power of data as a profit accelerator. 

 

If CVS Health is as dedicated to the fitness of its brand as the wellness of its customers, it will ensure that the target of its latest expansion plan is on insights as much as real estate.

Photo credit: Target

CVS’s $1.9 billion deal to acquire Target’s 1,700 pharmacy locations is now entering the thick of its conversion stage, and with it a compelling case study of maintaining customer relevance is playing out.

Key to the plan’s long-term success is how both retailers use their customer data throughout the process. CVS Health, which is transitioning Target pharmacies and clinics to its own store-within-store brand, has made it evident that its reward program, ExtraCare, will play a signature role. This shift, if aided by Target’s own purchase insights, will emphasize the power of data as a profit accelerator.

In 2015, for example, the more than 70 million-member ExtraCare program generated roughly $4 billion in customer savings, Larry Merlo, CEO of CVS, told analysts in a fourth-quarter earnings call. “We continue to see ExtraCare as a source of growth as we leverage customer data to create even more relevant and personalized communications.”

Further, the 9,655-store retailer is earmarking more of its investment toward ExtraCare, rather than promotional circulars. “I think the big thing we’ve been focused on and continue to focus on is being smart about where we invest our margin dollars, so you can see us continue to downplay our circulars,” Helena Foulkes, president of CVS/pharmacy, told analysts in the same call.

1,672 Opportunities – To Start

The addition of Target’s pharmacies not only delivers incremental sales through the added locations, it expands CVS’s growth avenues in the health field, a central focus of the merchant. This opportunity bodes well for Target, too – CVS processes prescriptions for more than 75 million plan members, according to its annual report. That could translate to a significant increase in the number of Target product sales.

Further, the Target deal includes 79 clinics that will be rebranded as CVS MinuteClinics, which are staffed by nurses and medical assistants who diagnose and treat minor health conditions. CVS operates 1,135 MinuteClinics, including the Target locations, and plans to open as many as 20 new clinics in Target stores within the next three years.

Additionally, a CVS Pharmacy will be included in all new Target stores that offer pharmacy services.

The expansion, the company explains in its annual report, is viewed as an investment in the core business, designed to step up growth in part by increasing patient access, which translates to additional customers.

The Path To Medicinals

These customers will journey through Target stores and many of the products, medicinal and otherwise, they might need. The potential of such incremental sales gains is crucial for both retailers as there is no profit-sharing arrangement between them, according to Target’s most recent quarterly report. CVS will pay rent, however, starting at $20 million to $25 million in the first year.

Indeed, the heads of both companies have said they are confident the retailers can maintain distinct identities. Target will get to focus on its core business of food, apparel and home goods, while CVS capitalizes on its pharmaceutical expertise. (The two retailers did enter into an agreement that permits them to jointly develop a small-format store.)

The extent to which they will share data is unclear, but they should. I had written before that the success of the partnerships would hinge, largely, on how data factors in to the deal. For example, among the opportunities of data sharing is the ability to compare notes on the performance of products both chains carry in-store, and use those insights to better engage the customers most important to each brand’s strategy.

Both retailers are encouraging Target pharmacy customers to use the CVS ExtraCare program as the Target Pharmacy loyalty program was discontinued.

“Converting Target Guests”

Target’s own purchase insights, if combined with CVS’s, would provide both retailers a more complete understanding of their customer preferences, needs and patterns, and therefore enable both to better serve and reap the benefits via purchases.

Target’s reward program is implemented through its REDCard, which accounted for 12 percent of total sales in the first three quarters of 2015 (the most recent figure available). That is up from 11.2 percent in the same period in 2014.

CVS has already successfully converted a handful of pilot stores and expects the process to ramp up throughout this quarter and next, with all store conversions completed by the end of summer. As each store is rebranded as a CVS Pharmacy, the retailer will launch its other core offerings, including the ExtraCare Pharmacy Rewards and its digital tools, Merlo told analysts in the Feb. 9 conference call.

“We’ll begin adding marketing elements as geographies convert, all with the goal of converting Target guests who currently don’t use the pharmacy,” he said.

The strength of those marketing elements will increase in proportion to the extent of how the two merchants share their customer insights. In marketing, we identify four key behavioral patterns that would enable a clean capture of such knowledge:

Customer place: Literally the geographic location of the customer, showing where she lives and works, including commutes and other activities.

Customer life stage: This area signifies life events or points in time that indicate present or future behavior, such as a new home purchase or small children.

Personal interests: The shopper’s activities, hobbies, recreational pursuits and even values are represented here. If she buys new workout clothes at Target, for example, she might also want over-the-counter vitamin supplements or energy boosters.

Customer culture: Often this category refers to any activities that group people together, such as ethnicities, causes, age or even sports teams.

If Target and CVS can share insights at this level, their business deal will likely lead not only to a robust relationship, but a longer-lasting one.

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

With Amazon Stores, Data Can Be A Best Seller For Shoppers

While a recent report that Amazon.com plans to open hundreds of stores may have been exaggerated, the possibility of such an expansion underscores Amazon’s secret weapon – its massive data warehouse. Here’s what shoppers can expect.

 

I have yet to find a customer review about Amazon.com’s data capabilities on one of its millions of web pages, but if it were to open as many stores as has been recently reported, those insights would certainly be stocking its shelves.

The world’s largest online retailer was rumored to have plans to build as many as 400 locations, if the CEO of mall operator General Growth Properties, Inc. was to be believed. The executive soon after backpedaled on his comment, but whether the recent statement is true, such a strategy should not catch us by surprise. Amazon has already dabbled in physical retail and has one of the best data sets in the industry to inform a store expansion plan.

Yet Amazon’s approach to brick-and-mortar – it opened its first full-service store in Seattle in 2015 – is rather conservative, particularly when compared with much smaller and younger online merchants. Warby Parker, Birchbox and Rent the Runway have all opened shops within the past year.

Unlike these retailers, Amazon has focused on building and leveraging its data warehouse over many years, so it alone is probably worth more than the actual merchandise of its rivals’ warehouses. With an active user base of roughly 250 million worldwide, and hundreds of millions of products to sell, its massive reservoir of online purchase data could establish the foundation for hundreds of stores.

Amazon@Test

Amazon@Purdue store at Purdue University. Photo credit: Businesswire

So why is Amazon so slow to more aggressively break ground? After all, one factor that makes the digital-to-physical model so compelling is that no matter what we sell consumers, a large majority remain steadfast in their desire to shop in brick-and-mortar locations. In fact, 85% of consumers say they prefer to shop in physical stores.

One answer may be that Amazon, with an estimated $107 billion in 2015 sales, does not necessarily need a major physical presence.

However, a few hundred stores might come in handy. They could, for example, support Amazon’s digital business by acting as small warehouses for home delivery in urban areas, while also providing a new layer of consumer behavior data. Again, Amazon is already testing some physical formats; they just aren’t all full-service stores.

The retailer opened its first brick-and-mortar location in Seattle in the fall of 2015, following the opening of an experimental order pickup and drop-off location near Purdue University. The university store, called Amazon@Purdue, likely served as a test of the brick-and-mortar waters. Amazon has since opened several other near-college pickup stores, including in  Cincinnati, Berkeley, Calif., and Amherst, Mass.

Book Learnin’

Some may believe that by opening physical stores, Amazon might cannibalize its online outlet. I hardly see how that is possible. No single store would be able to offer the vast selection of its website. It’s a store, not Dr. Who’s TARDIS.

That said, however, what retailer if not Amazon is better suited to make the store assortment fit each independent market? The data pool it can tap into to make in-store product decisions and to shape the customer experience has to be about as good as it could get.

Amazon understands what customers in specific geographic trade areas have been ordering for years, across millions of titles and products. Rather than stock the store with 5,000 individual items and then do the interpretive dance of what works and what doesn’t, it has the wealth of product diversity to shape its merchandising decisions.

In a way, it is like personalization on the basis of neighborhoods. That is the future of retail, and just as Amazon ushered in a new retail reality by building the first truly megalithic online store decades ago, perhaps it will use the information it has since gathered to reverse-engineer what the physical store experience should and could be.

Call me crazy, but while many retailers are trying to figure out how to shape this kind of retail variability at scale, Amazon could be the first to really pull it off physically and economically.

Amazon In Store: What To Look For

Personally, as a consumer, I am curious to see what the physical Amazon experience would be. Should Amazon open a store near you, this is what shoppers should expect:

A “me”-tail store: Reliable customer insights should lead to tailored product assortments. All that data should be on display in the form of a product assortment that is relevant while also anticipating needs. The shopper, upon entering, should think, “Hey, Amazon gets me.”

Humanized experience: since Amazon knows what customers have purchased online, it can use that history to customize its ongoing suggestions online and also to direct the shopper to items that may interest her in the store.  Opt-in mobile apps would be an incredible tool here – it can then make nuanced adjustments as needed, balancing the store to meet personal experience.

One-to-one offers: amazon can extend special offers that blend online and in-store activities. It can, for example, alert a shopper to soon-to-arrive products that may appeal to her based on previous activities, so she can per-order it for store pick-up and write a review.

Lastly, the shoppers could offer Amazon their feedback, gigabytes of it, so that it can further personalize the experience. Amazon’s data centers may be massive, but few things matter as much in the physical environment as the human touch.

The options are endless – and exciting.

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

Return Policy Makeover: How Best Buy, Sephora, Zappos Transform A Common Transaction

­­­­­­­­­­­­­­­­­Research shows easy return policies lead to more purchases, but also to other surprising shopper behaviors. Instead of lenient return policies, retailers can establish approaches that include the many features of their brand experience, from online shipping options to loyalty programs.

 

The logic of it makes perfect sense; it is, in fact, a lot like dating. If I have the option to test or experience something before committing to it, then I am more likely to take a chance on it.

Photo credit: Best Buy

I speak here, however, of shoes and electronics, not of potential spouses. Return policies are to shoppers what the Dating Game is to finding love, complete with an element of romance. Sure, you might find that those yellow boots are not so flattering, or that you cannot afford that tablet. Fortunately, the retailer usually understands and gives the shopper the option to return them – within certain guidelines.

These guidelines also form the key findings of a study performed by researchers at the University of Texas at Dallas. Essentially, they found that more lenient return policies (like dating more) result in increased purchases, but they also lead to more returns.

This is not all the study revealed, however. It also showed that specific features of the policy, such as if it has a long deadline, could reduce chances of returns. Put another way, the method to shaping a consumer’s brand relationship via a return policy may have more to do with the policy’s nuances than its absolute leniency. Instead of relying on easygoing guidelines, retailers could better benefit from policies that incorporate the features of their specific brand experiences, from online shipping options to loyalty programs.

As one of the research authors, Ryan Freling, put it: “You want to look at the different dimensions of a return policy, because you may be able to manipulate the policy to achieve your goals.”

1 in 10 Buy, 1 in 10 Return

For many consumers, however, shopping can be less like the Dating Game and more like Tinder.

Nearly 90 percent of shoppers leave stores empty-handed because they could not find what they want, according to a study of 1,000 consumers by TimeTrade, a customer experience service provider. Retailers fill their stores with beautiful displays, music, trained associates and, often, deep-discount signs in order to transform that necklace from a passing fancy to a purchase.

Many of those purchases work out well, but not all, and the costs can be exacting. One-third of online purchases are returned – that’s billions of dollars in unwanted buys – according to Kurt Salmon. Of in-store purchases, 8 to 9 percent are brought back, largely because the retailer has created a merchandising environment that encourages incremental sales.

In short, all of that merchandising romance has caused the retailer to wake up with a very unwelcome problem.

Complicating matters is just how crucial a role return policies now play in the overall retail experience: 59 percent of shoppers said return policies make or break their opinions of retailers during the crucial holiday season, according to research by LoyaltyOne.

From Returns To Key-Turns

The challenge for retailers, then, is maintaining the romance of the shopping trip while tempering its influence on unsuitable choices.

Return policies need to be part of the retail experience; they have become as essential a factor in building a loyal customer as product quality and reliable service. To optimize that policy to the benefit of both the shopper and the merchant, retailers can rely in part on their loyalty programs. Below, I list four ways they can do this, which we can call turning points:

Turn time into money: The University of Texas study found that given a longer return deadline, consumers are less likely to bring purchases back because they become more attached to them. Retailers can capitalize on this “endowment effect” by offering their loyalty members, as a featured perk, additional time to return their purchases. Best Buy, for example, gives its My Best Buy Elite Plus members an additional 15 days to return items – 45 days compared with 30 days for its Elite members

Turn down the fee: Many online merchants, such as Zappos.com, famously offer free returns on purchases. Some traditional retailers including Macy’s and Nordstrom, which have tested same-day delivery, could essentially do the same if the service paid off. If free online returns were a benefit of a rewards program, the customer would more likely feel she is getting special service in return for her membership, and this could encourage more freedom in spending.

Turn it into a learning opportunity: When consumers return purchases, they present retailers with the opportunity to know more about them. In addition to refunding money, the retailer can ask the consumer to take a few minutes to fill out a short online survey that explains the reason for the return, while including one or two key questions that help the retailer understand why the consumer made the purchase to begin with.

Turn the process on its ear: Whether the consumer makes a purchase or not, the goal for all parties involved should be that she leaves the store feeling happy. Rather than focusing on making a sale, retailers can use their data to ensure it is the right sale. Sephora’s Beauty Insider program, for example, gives members plenty of free samples, a practice that enables more educated product commitments.

The right return policy could represent the beginning of many beautiful relationships. But even if not, it beats having the customer leave the store empty-handed or bring home an unwanted conquest.

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

Data Depend-ents: How REI, Harley-Davidson And Starbucks Win Trust With Relevance

The ways in which consumers share their data has expanded dramatically over recent years, thanks to a proliferation of smartphones and the technologies they enable. Yet new Pew Research findings reveal continued demand for limitations on data use. How Starbucks SBUX -0.47%, Harley-Davidson and REI nail the territory between relevant and creepy.

 

Imagine being in the grocery store. You approach the Tide detergent. Your smartphone buzzes. There’s a coupon, special to you: $1 off Tide.

Are you happy? Chagrined? To many consumers the answer is, “That depends.”

This is the key takeaway of a recent survey by the Pew Research Center that attempts to gauge consumer attitudes about sharing personal data versus maintaining privacy.

“These findings show how people’s decisions are often context-specific and contingent,” the report states. “A phrase that summarizes their attitudes is, ‘It depends.’ ”

Turns out, this ambiguity has been fairly consistent for a number of years. We conducted a similar study in 2012 following the release of my book “The Loyalty Leap,” the results of which showed that consumers were willing to share data in some cases, for certain benefits, yet most did not trust companies with their data.

However, much has changed since then. The ways in which consumers share their personal information has expanded dramatically, thanks to a proliferation of smartphones and the technologies – such as iBeacon tracking – they enable. Shoppers want these expanding options, but they still demand limitations on how their data is collected and used.

Beacon technology allows retailers to physically track customer’s in real time. Source: Google/Eddystone

For retailers, this expectation gives rise to a disarmingly simple rule: Be relevant, not creepy. This task is achievable – but success hinges on surgical execution.

Hitting A Moving Target

Relevance is not the same thing for all people, however, and therein lies the rub: Retailers could gain a better idea of what is relevant to their shoppers if they had the insights. Some customers, however, are wary of sharing more data because they don’t think it is being used to benefit them.

According to the Pew study, 47 percent of respondents felt it was OK for retailers to track their shopping habits through loyalty programs if that meant getting relevant promotions and discounts. Thirty-two percent found this unacceptable, while 20 percent said, “It depends.”

According to our 2012 research, which was revisited in 2014, similar loyalty-related expectations were prevalent. Sixty-three percent of the 2012 respondents said they would be willing to provide companies more personal information if it meant receiving relevant product and service offers. That figure rose to 67 percent in 2014. In 2012, 61 percent of the respondents said they’d share more personal information in exchange for relevant communications, a figure that rose to 62 percent in 2014.

Yet perplexingly, 78 percent of the respondents to the 2012 survey, and 67 percent to the 2014 survey, said they did not feel they received any benefit whatsoever in return for sharing their personal information.

That the figure improved indicates retailers are getting better at executing their analytics. But one figure remains troubling: In 2012, just 42 percent of consumers said they trusted companies with their personal information. In 2014, that trust figure rose to 48 percent – still far from ideal.

REI, Walgreens And Others Keep It Relevant

The Pew survey gauged consumer sentiment by presenting a few scenarios ranging from retailers tracking shopper activity to employers installing security cameras. Each scenario presented a benefit, to which survey respondents were somewhat exacting.

“The answers depended wholly on the circumstances of the offer, the levels of trust in those collecting and storing the data, and the person’s sense of what the aftermath of data-sharing might look like,” Pew states.

Put another way, retailers are trying to pin down an oscillating opinion that on one day may find a brand relevant and the next, potentially creepy. Remaining on the relevant side of the pendulum takes a nearly pitch-perfect voice, and knowing why a retailer’s customers choose it over others. What daily issues is it resolving?

There are excellent examples to follow. I’ve categorized them as follows:

Be human, and perk-y: Starbucks’ rewards program, My Starbucks, is gaining legendary status for its ability to speak to its customers in a voice so familial it is hard to tell which came first, the customer or the Starbucks. That relaxed communication, along with meaningful benefits such as early peeks at new products, builds trust. Caribou Coffee’s Perks program, meanwhile, sidesteps attempts at nailing the perfect reward by surprising its members with free drinks and other unexpected treats that are doled out randomly.

Partner to capacity: Two heads can be better than one – as long as they think in complementary ways. Retailers can limit the amount of data they need yet better understand their customers when partnering with a company that serves the same segment but in a different capacity. Harley-Davidson’s alignment with Best Western yielded Ride Rewards, a program that provides bikers key benefits toward their long-haul trips, from lodging to bike-washing stations. Everything the program offers addresses an identified need of its members, which are nearing 150,000.

Go beyond the store: One way to show shoppers that a retailer does not gather their data purely to benefit the business is by offering perks that help others. REI’s Member Benefits program charges a fee – $20 – but in return offers members bonuses that are specific to their preferences yet outside the store, such as bike and ski services and discounts on ski lift tickets. Similarly, Walgreens’ Steps With Balance program rewards members for healthy activities, not just spending money.

Technology is consistently changing the public’s perceptions of what is relevant and what is creepy, and thanks to social apps, it can turn a single misstep into a national disaster. It’s better to err on the side of caution when it comes to customer information.

A retailer’s future could depend on it.

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

Amazon Prime’s Special Offer: A Primer On Loyalty Don’ts

When Amazon celebrated its Golden Globe win by reducing annual rates for new Prime members, full-priced Prime subscribers wondered why they weren’t getting a thank you. Such conquests to acquire new customers risk turning Prime advocates into “madvocates.”

 

It takes Amazon Prime two days to deliver preferred products to its millions of members. It took about three days for it to turn some of those members into potential “madvocates.”

“Madvocates” can be very damaging to a brand.

On the weekend of Jan. 15, Amazon celebrated the Golden Globe win of its Prime network program “Mozart in the Jungle” by offering 25 percent off a one-year Amazon Prime subscription – for new members. “Unfortunately,” as BGR.com put it, “existing Prime subscribers won’t qualify for the special offer since Amazon is targeting new customers with this special deal.”

This got me, and some of Prime’s estimated 80 million subscribers, asking: Hey, why are you thanking the non-subscribers?

“Why not offer it to all of us, especially when we’ve been loyal Prime members?” one Amazon customer asked on its Facebook page.

“I totally agree,” another followed. “Why are they only rewarding new members?” To which another subscriber, named Rob, responded: “amazon sucks.”

Madvocates: An Advocate Spurned

Behold the fury of the madvocate. Few customers can be as damaging to a brand as those who feel their steadfast loyalty has been ignored, or unreciprocated.

Indeed, madvocates are more damaging to a brand than customers who never used it at all, because with their firsthand stories comes personal influence, and credibility. Almost one-third of those who have a large network of family and friends and who are likely to recommend their favorite brands are also far more prone to share information about a bad experience, according to a survey by loyalty research firm COLLOQUY.

This survey, of more than 3,000 consumers, revealed the extent to which the socially connected, digital world can altar a brand’s reputation. If your friends and family are apt to take your word on a good product or service, they are more likely to believe your criticism of a bad one.

“They Will Trample Over Your Dead Body”

Amazon is not the only company to place customer acquisition over retention, even as a short-term growth strategy. Telecommunications and cable companies have been honing this practice for years.

Nor is this the first time Amazon cut its subscription rate to attract new members. It reduced the fee to $67 in September to celebrate the Emmy nods for its series “Transparent.” As one commenter to a CNN story in September quipped:

“Phone company, cable company, Amazon – same story. You can be a loyal customer for decades but they will trample over your dead body to try to pick up a new customer. Meh, get used to it. The days where Big Companies look at you as a real human being are long over.”

The comparison should not sit well with Amazon. However it, and other retailers, can learn a few things from the telecommunication and cable industries’ conquest mentality – chiefly, that it does not earn trust.   

Telecommunications and cable companies took eight of the last 10 spots in the 2015 Temkin Customer Service Ratings and six of the last 10 in its Trust Ratings. It should not be surprising, then, that seven companies in these industries ranked at the bottom of the Temkin’s Forgiveness Ratings.

Retention Over Conquest

Amazon, meanwhile, is enjoying increased loyalty among its customer base due to the Prime service, which explains its conquest strategy.

The percentage of Amazon customers who are Prime members rose to 40 percent in 2015 from 25 percent in 2013, according to research by RBC Capital. Almost three-quarters of those members (73 percent) said they shop Amazon at least two or three times a month, compared with 22 percent of non-Prime members. Almost half of those members spend more than $800 a year.

It does not take advanced math to deduce that these numbers call for capitalizing. New-member campaigns are a logical choice, but a retailer can find ways of doing so while sharing its successes with existing costumers.

After all, there is little risk in a merchant spreading the love with its brand advocates. Three of four consumers are fine with businesses giving preferential treatment to customers who spend more money, according to 2014 research by LoyaltyOne.

Amazon does give its Prime members special deals – it recently offered them 20 percent off the preorder price of new games. But this kind of one-size-fits-all offer does not carry the attention-getting flair of exclusive recognition. Here are a few ways Amazon could generate the sense of appreciation among its advocates.

Coded events: An invitation-only sale of new items for Amazon Prime members, kind of like the exclusive sales Nordstrom offers its loyalty members, delivers preferential treatment while also serving as a vehicle for thanks. Amazon could enhance the feel of exclusivity by sending different segments of members different codes to enter the sale (for varying times of day, for example).

Service as incentive: Consumers respond well to special offers and preferential treatment, which is understood. But incentives, like the expiration dates on coupons, will have limited effect if not backed by consistently nurtured customer service. Once a retailer understands why its customers love the brand, it can shape all service and touch points to answer to those reasons.

Let them in: Retailers are nothing without their customers, so why not make them a regular part of the communication? Webinar-like events, which invite a select group of shoppers, can enable a retailer to float concepts or product ideas while making its customers an important (and valued) part of the decision process. Similarly, online social sharing communities, panels and co-development platforms engage customers to be part of the brand, and the brand to better reflect its best customers.

Sure, efforts like these take more than two or three days to take effect, but the payoff will last months and years.

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

6 Things Every Woman Wishes Retailers Knew About Her Shopping Basket

A woman’s shopping cart carries more than goods; it carries stories about her and the many influencers in her life. If retailers better understood that journey, they could ensure the correct products are there for her and prolong the tale. These six facts about a woman’s shopping basket reveal what retailers including Nordstrom, Amazon and Tesco do to address them. 

 

Put a life story on wheels, and you’ll have yourself a shopping cart. Make it a women’s shopping cart, and you’ll have something along the lines of a detective novel.

It can take gumshoe-like skills to discern just how the items in that cart fit into the woman’s life narrative. Her shopping cart is not merely a receptacle of goods; it is a reflection of who she is and of the many people in her life. Her choices tell tales not only of her day, but also of the days of her children, friends, extended family and work associates.

And while she is often happy with her cart’s contents, sometimes she does not feel good about them. And this, in particular, is where many women wish the retailers they shopped with most regularly knew them better.

Following are six common factors about a woman’s shopping cart that she wishes retailers knew about her, and what retailers can do to improve the story.

A loyalist’s basket is half-full: A supermarket’s most loyal customer typically spends only 50 percent to 70 percent of her monthly budget with that merchant, according to Precima, our global retail strategy and analytics company. Loyalty programs are essential to understanding shopper behavior in ways that can increase the basket size, and social media can assist in keeping in touch. Tesco, for example, has invested resources in its Twitter account to communicate with existing customers while also getting a cleaner read on customer needs and product requests. The one-to-one communications put a face on the company and strengthen shopper relations.

It has abandonment issues: The average shopping car abandonment rate is 68.6 percent, according to an analysis by Baymard Institute. Among the leading reasons: Unexpected costs. Occasional reminders to shoppers can help increase the changes of purchase, but a more surefire way is to do the opposite of presenting unexpected costs – offer a small percentage off the items in the basket if they are purchased by midnight, or a free product or sample as a thank you.

A mobile basket is often unhappy: Nearly nine in 10 smartphone shoppers (88 percent) said they have had a negative experience when using their phones for mobile shopping, according to a story in Forbes. Among the leading problems are navigation difficulties and inconvenient checkout. Larger buttons and fewer steps would help, and loyalty program apps can feature “one-click” purchasing options. Nordstrom’s mobile app, for example, enables users to browse products by department or brand, and the main functions (including the shopper’s “bag” or cart) are listed clearly at the bottom of the home page.

It’s filled with regret: Three of four adults make impulse purchases, according a survey by CreditCards.com, but the female impulse buyers are more likely than men to regret it – 52 percent compared with 46 percent of men. A fun campaign about preventing buyer’s remorse may remedy this proclivity (a retailer can send a thank you after a big purchase with a relevant message, “ABC Shoes, Preventing Buyer’s Remorse Since 1880”). Shoppers also might appreciate being let in on the action. Recent research shows that customers are drawn to products in the middle of a shelf, so putting up a cute note saying so much could deepen brand trust – and generate happier associations with those orange stiletto heels.

It’s not hers: Women not only influence most of the purchase decisions in a household, they actually transact most of the purchases, and many are not for her. Women also buy for husbands, kids, friends, extended family and professional associates. They are the household member considering birthday presents and hostess gifts. Merchants can look to their loyalty program data to gain a sense of a woman’s influencers as well as to identify the messaging that would engage their female shoppers. Amazon may be the best example of a retailer crunching customer search and purchase data and parlaying that into helpful product suggestions.

It does not carry what she came for: A full basket does not imply it is a complete one. An estimated 13 percent of shoppers leave a store not having found what they came for, according to Aisle411. The first step to resolving this is to have every employee ask every customer if she found everything she came for. If not, the employee should have a means of recording that item so that it can be added to inventory, and ask the shopper if she’d like to be contacted once the product is in. A handy app might be able to manage such tasks.

Lastly, retailers should ensure that every basket carries a good experience. Shopping can be a chore, so injecting a bit of surprise and delight can turn a mundane task into something memorable. Free coffee at the grocery store, an inspirational message at the point of online checkout, or simply handing out thank you mints when the customer is leaving the store (to complement the welcome when she enters) can transform one-time shoppers to lifers.

If anything, such efforts can at least ensure each shopping trip has a happy ending.

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