Tag Archives: Retail

if organic growth fails… BUY!

Now that Sobey’s parent (Empire) has bought FarmBoy, it’s time to re-review some of the main reasons for acquisitions:

  1. Cheaper to buy than build- and removes one strong competitor too!
  2. Buys existing brand equity, store traffic pattern, loyalty
  3. Immediacy– sales generated the day you sign the check (now that’s fast incremental sales!!!)
  4. Less risk, Less work: signing a check for a proven successful business does indeed reduce the risk you might learn it’s not that easy to hire/redeploy a sufficiently skilled team, and then build it from scratch

Loblaws nicely integrated Shoppers locations and their Optimum team into its operations stable and T&T without losing some of those acquisition’s best assets or people. Canadian Tire is a master of wise acquisitions. The Empire-FarmBoys news is well covered here, though it’s too early to say whether it will be seen a wise buy in the long term:

http://www.canadiangrocer.com/top-stories/headlines/empire-deal-to-fuel-aggressive-farm-boy-expansion-83027

alas we must also mention some of the risks of acquisitions:

Overpaying for an asset: sometimes there are liabilities unaccounted for in the books (ask pet giant Mars about their purchase of destined-for-lawsuits Greenies!); sometimes the valuation seems mighty inflated (eg Chipotle?); sometimes there are bidding wars that push a price above rational levels when Executives are desperate to be seen to ‘win’ (just as any one has seen happen at a live auction:  Disney-Comcast-Sky, anyone?).

Messing up the execution: WalMart and Target both bought existing Canadian-based retail chains – and, after extensive location analysis & store remodeling, both launched. Only one of the two remains in business today: hint:  it’s NOT the one that messed up their launch execution.

Messing up the corporate culture analysis: Well executed efforts include TD buying Canada Trust and tapping into some of their best executives, brand icons, etc. And a certain (Cincinnati?) CPG firm although noted for ‘gutting’ the staff at virtually every acquisition target, then replacing them with their own staff, is actually pretty adept at doing this well.  But there are many examples of inept people management eg when merging vastly different cultures:

  • HP= Sales; Compaq = Engineering/Tech Expertise;
  • I suspect Amazon-WholeFoods cannot be a comfortable fit;
  • Scotiabank (Canada’s least tech savvy bank) buying tech innovator Tangerine???
  • 3G Capital bought Tim Hortons- soon after, Tims’ Oakville office staff were gutted, spending on community charities was cut, food/beverage staffing was ‘cost optimized’ – and now franchisee rebellion is in the air

Messing Up the Brand: no matter how hard P&G tries, it just can’t stop… being P&G! Safe, strategic, sound— but never edgy, irreverent or fun.  They bought Clairol’s Herbal Essence haircare (riding a share peak based on the success of irreverent positioning & saucy “Orgasmic” ad campaign) but evidently they just couldn’t un-P&G themselves; the next few years we TV viewers witnessed some of the most awkward, cringe-inducing, ham-fisted ads ever aired. Just about as sexy, saucy & irreverent as the iconic couple in Grant Wood’s American Gothic.

Doubling Down at the expense of other opportunities: this ‘Opportunity Cost’ drawback is imo the least visible flaw in making an acquisition, since it can take years (or decades!) to see the ‘true cost’ of a huge acquisition. When Kimberly-Clark bought Scott Paper in 1995, good or bad, it lifted their share in current categories but cost them the capital for any major further acquisitions or forays into new business for decades. Tissue & diapers aren’t hot ‘unit growth’ categories in Western economies; KC’s current CEO could legitimately blame their low-growth reality on the unimaginative –  but safe!- 1995 Exec team who depleted the WarChest for decades to come by doubling down on ‘current category share’. Same argument for HP- by now, they might have become an IBM or a Google or an Oracle- but the buyout of Compaq in 2001, inflated their short term share in PC’s/ Laptops, yet cost them the chance to be serious about paying attention and resources to new categories.

Steven

TrumpTradeTirade means a $ is no longer a $…

This month/week/day/minute in #Tariffs– a subject historically characterized by rational thought, measured policy, business + govt in harmony (if biased by corporate lobbyists, union & farm groups etc); the #TrumpEffect = replace that w threats, false facts, seat-of-your pants “Policy”.

Implication: Businesses must learn to predict the unpredictable, rationally deal w the irrational. Dollar stores’ options are limited by their name/ positioning. Your cost structure is no longer your own- and the P (‘Political’) in PESTL-C external factors (those a business does NOT control) has taken on huge impact.

Tariffs, quotas, trade restrictions, sanctions, embargos have long been a government tool to protect public safety (non Tata Nano’s here pls, nor Chinese pet food laced w plastics or children’s toys made w toxins,…), ecological protection ( a bit late in the case of for Emerald Ash, Zebra Mussels, etc ) national security**, domestic manufacturing & farming.

The lines between those ‘legit’ reasons for trade barriers can be fuzzy; Canada’s Massey Commission started protecting Canada’s broadcast content to build national unity/ bonds, yet ended up being a de-facto trade barrier stalling a cultural invasion long enough to nurture what became a globally competitive Canadian Content (ie CanCon) industry in comedy, stage entertainment, music, …

To use the ‘national security’ trump  card & slam your #1 trading partner with seat-of-your-pants tariffs on Aluminum & Steel for passenger automobiles – in an industry already thoroughly integrated continent-wide, is not only a betrayal of the spirit of NAFTA, it’s harmful to a North American auto sector that must compete against autos from Germany, Japan, Brazil,  Korea.

Mr Orange has a more viable argument against Canada’s dairy industry; an effective lobbying group has stalled a tide of cheap US dairy imports, securing for Canadian dairy farmers more stable incomes than earned by sibling pork / beef producers. US milk producers need not meet our less well known ‘behind the curtain’ standards of practise for milk, making ours safer & more nutritious. wrt a ‘Public Safety’ argument, should a nation protect …..Mothers Milk? imo yes, you might argue that ‘s pretty fundamental.

On this side of the border: If you were the Dollarama #retail chain, what would you do? You might assume most of their store goods come from India or China, but many are shipped from the USA.

http://business.financialpost.com/news/retail-marketing/dollaramas-first-quarter-profit-rises-7-3-to-101-6-million-on-higher-sales

What if you’re Gildan, Roots, Canada Goose? Will your textile items next get the tariff attention of Mr Orange? Canadian labour costs may be higher than those of the USA – and Higher Cost of Goods nations are rarely see new tariffs by an importing nation – but we’re in uncharted waters. There is no rational reason for what Mr Orange is doing to global trade and diplomatic relations.

Also at risk: infrastructure contract bidders: Bombardier (transit cars), Aecon, SNC Lavalin,… Boeing-bought American politicians got POTUS to whack Bombardier with a ludicrous 292% penalty on its C-Series passenger jet; though eventually overturned by a red-faced court (yes; we DO need an objective ‘dispute resolution mechanism; in trade deals!), don’t expevct an end to the trump trade tirade any time soon.

Uncharted waters indeed.

Steven Litt

FMCG ‘old biz’ categories are- surprise! -increasingly shopped online

Omnichannel shopping. If you’re in FMCG marketing and believe that “online is a ‘future’ factor”, you’re already wayyyyyy behind, according to Nielsen.

http://www.nielsen.com/us/en/insights/news/2017/us-fmcg-trends-to-watch-in-2018.html

Amazon finds Key To Rebecca…and Rita & Jake & Jamal &…

According to updates from RetailWire, Amazon ‘Key’ delivery service aims to offer:

  • more convenience than some other models eg BufferBox, or pickup/drivethru at Loblaws- and
  • more security  protocols than some other cheap & available home delivery models- a certain Mass Merch behemoth delivering via cheapest, no secuirty cleared driver- and
  • more gegraphic reach than the market-specific icons eg Longos.

Should be interesting to check in on its acceptance and return customer rate.

Amazon to begin making in-home deliveries in 37 cities

Practical Progress: converting Eco Intent vs Action

If you view my upcoming videos or have had me as Instructor in Applied Marketing Research, you will know I warn ppl against putting too much faith in respondent survey data on topics that I refer to as Survey Sirens. One of those is ‘eco-intent’.

First- TRIVIA TEST! In what year did  a nationwide USA CPG brand first launch a national eco-responsible line extension? Was it2005? 1999? 1995?

Would you believe… 1990? John Cook, Mitch Gumma, John DePaolis, Marie Blomquist, Mike Ziemke- and  I- were on Kimberly-Clark’s brand team, with tons of logistics help to coordinate 5 manufacturing facilities to source, qualify, test, contract, QA verify and –  eventually – launch Hi-DriTM Recycled Paper Towels. It was an awesome adventure, and an awesome succcess. Consumers actually paid slightly MORE PER ROLL to do the right thing.

Until 1996.

Oh yes, the recession. When it hit, the same consumers would still claim to want to do the right thing- but they looked after the household first- and pennies were pennies! Hi-Dri Recycled retreated as mightily as it began.

The Moral: Don’t always believe Consumer Intent scores about eco-solutions. Intending is not the same as Acting. Intent does not always lead to Acting. Survey respondents may answer optimistically; it validates a more pleasing self-image. And the time gaps & psychological gaps between filling out an at-home survey, and when they see the options in store at shelf – can be vast! Lots of time for cognitive dissonance- ie to escape your own self-commitment!

So it’s delightful to see savvy USA Retailers tighten that time gap & psychologcal leeway. Ahold’s Giant and Stop & Shop banners have installed powerful ‘eco-ranking’ Point-Of-Sale signage- No, sorry, even better, not ‘point of sale’, but ‘place of decision’- ie at the store shelf! Putting those eco-flags in your face, leaves you less room to wiggle out of your own commitment.

 http://www.supermarketnews.com/sustainability/turning-ethical-shoppers-buyers

Ahold- you have earned my endless respect- and let me time travel a bit back to 1990 Wisconsin, to boot! Thanks!

Steven

Online Vs Store Shopping by Generation: Assume Less!

Cool article reveals some shifts in Boomers through their offspring Generation Y. While Boomers are shopping online more, Gen Y members are increasingly shopping multiple physical stores in parts of the USA.

It’s wise not to assume too much about shoppers by age: eg avoid the trap of “old people will do/want this, and younger ppl will do/want this”; there are far better predictors of most shopper behaviours, than age.

https://www.cnbc.com/2017/09/21/retailers-dont-ditch-the-store-millennials-love-them-survey-finds.html

SL

 

How many #trends can you spot?

A fine CSA article calls your attention to several trend-worthy #retail concepts.

http://www.chainstoreage.com/article/now-trending-eight-clicks-bricks-retailers-keep-eye

Feel free to make your own notes on which particular ‘macro’ trends are driving or supporting each of these retail concepts eg CSR (charitable or community involvement), transparency, authentication, customized, artisan or locally crafted, VIP treatment, etc.

If that challenge seems like too much work (or if you’re on a NoThinkingRequired sabbatical), then maybe this article will be less taxing; just two of the above listed trends are driving this new Roots foray:

http://business.financialpost.com/news/retail-marketing/cabin-chic-new-roots-concept-will-customize-your-jacket-and-monogram-your-purse

Steven

Oslo & Steady wins the race

3 new sources of insight on #Retail trends fyi!

10 new ideas or approaches to inspire readers to try new methods, service a different kind of customer, give a new kind of retail experience

http://www.chainstoreage.com/article/americas-top-10-retail-center-experiences

An upcoming ‘call for ideas’ summit on etail-retail- virtual shopping, sponsored by WalM…

http://www.massmarketretailers.com/store-no-8-thrive-global-launch-innov8-v-commerce/

Finally, an example of how to not REACT to trends, but get ahead of them by a Canadian-based retailer that’s imo a benchmark to admire.

http://www.csnews.com/product-categories/fuels/couche-tard-ceo-talks-electric-cars-fuels-future?cc=3

C-stores by definition are positioned based on “convenience” – consider how treacherous that is!  Examples:

  • when Grocery stores opened late, they lost an advantage;
  • when weed became legally available to millions of Canadian  “glaucoma sufferers” (cough cough…) C-stores Dorito & RollingPaper sales took a ‘hit’;
  • when tobacco smoking incidence fell, C-store visits fell

Again & again, C-stores adapted: seizing new opportunities to sell throwaway cellphones & phone cards, lottery tickets, decent coffee, fresh meals, last-minute gifts & cards, and more. Couche-tard is investing to test other ways to drive shoppers to C-stores in Norway, presumably a lead market for e-vehicles.

Consider: many C-stores have traditionally been linked to (located in conjunction with) gassing up a vehicle. If consumers instead charge up their e-vehicle at home at night, what’s to become of C-stores?

Couche-tard is too smart to wait & see; the savvy retailer is getting ahead by trying & measuring different approaches. As a marketer, I applaud this! As an R&D guy, I’ve mixed feelings about a country test market. The scale is terrific, however everything is oh-so-readable… to the competition. My bet is that this move hasn’t escaped the attention of Couch-tard’s global rival, 7-Eleven. Quite possible that right now, in Irving TX and Chiyoda, Japan, note-takers are busily tuning into “Lillehammer’ on Netflix- and managers are booking tickets for a prolonged stay in Norway. They simply can’t ‘affiord’ not to know what Couche-tard is trying.

SL

Ways to Grow

You can’t beat H&M or Zara at calling the trends right & getting right items to market FAST! That’s ‘Fast Fashion’: on-trend ‘durable enough’ apparel, made with ‘adequate’ construction quality. You wear it a few months, then it’s out of style AND worn out. Defacto Disposable clothing.  A trend that’s taking a toll on other fashion retailers:

https://www.thestar.com/business/2017/07/11/abercrombies-failed-deal-sign-of-retail-industry-woes.html

What’s a fashion retailer to do to compete? Well, for one thing, not everyone wants Fast Fashion. And not everyone wants ‘adequate’ durability. There are segments of consumers who are less interested in being ‘leading edge’. There are others who prefer SOME items to be ‘trending’, but others to be more lasting. eg buy a few casual seasonal clothing items in latest styles, textures & colours- but buy WorkWear that will look better, longer.

Some of you will read about A&F and wonder if they can cut staffing, cut promotion spending, possibly reduce their footprint, etc. Cost cutting is an option- one that keeps the ‘chainsaw’ firms & ‘transition Exec’s quite flush.

imo cost cutting is rarely adequate over the long term. Growth is.

the firm I’m with  http://www.spitfireglobal.com  prefers growth over cutting & hacking. Retail brands might do worse than consider their situation, resources & risk tolerance (‘fit factors’) for some ‘classic’ paths to growth via NewUsers &/or NewUses?

1. sell online.

2. umbrella several generation-specific sub-brands eg A&F for GenX; Hollister for GenY.

3. Product expansion (American Eagle into undergarments; Starbucks serving alcoholic beverages in prime ‘night life’ locations);

4. Control Label &/or Brand Exclusives (Caution: this approach is contractually tough & raises Competition Act (legal) risks!);

5. Sign an on-trend Spokesperson (Burberry w Emma Watson);

6. all-out chain-wide repositioning (new targets for J Crew, Old Spice, Harley Davidson and, more recently, McDonald’s and Axe);

7. ‘Place’/ Geographic Expansion (Buick to China, Caplansky’s Deli to food trucks, Lego & Fashion brands to Flash retail).

8 Offer Services -eg Petsmart makes good money and generates more store visits (& loyalty?) by offering pet grooming & boarding (although Sears’ expansion into Home Reno Services ages ago was poorly overseen & less than a stellar success)

9. Rethink the Business Model- retailers who followed the ‘paradigm’ to own costly real estate are reassessing. eg Banks & Department stores are leveraging REIT’s and/or (aghast!) selling off ‘essential’ downtown corners. WestElm & other upscale Retail brands are plying their brand in the CONDO market.

imo the ‘secret sauce’ is savvy objective Situation Assessment that lets a consultant recommend the right option or the right blend of these. eg Lululemon expanded its product line to Women’s ‘day-wear’ items for use outside yoga studios- it worked. They also started to target Men’s apparel- imo the verdict remains out on that.

Can A&F be saved? Despite their past unfortunate management comments & weak PR efforts? The competition is tough. Very tough. Segment leaders Zara and H&M are adept @ acquiring right items @ right time @ right cost ie predict the trends, then getting product to market fast!

One path to growth I’d NOT recommend, is to try to mimic that strategy and hit’em head on. A&F needs to be smarter than that.

SL

 

Loyalty and Data – decisions galore!

As one of the oddballs who worked in both the ‘product’ and ‘service’ sectors on both sides of the USA-Canada border, I’ve seen many loyalty programs arrive, and others go bust. Researching what consumers want from their loyalty programs may seem easy (compelling savings rate, relevant incentives to redeem, VIP treatment, respect, easy visible point status, instantly redeemable, few ‘conditions’ or delays to redeem, etc).

Believe it or not- loyalty program design is actually fun! What’s not ‘fun’? Running one! ie if you think running a loyalty program is easy, think again!

These are LOYALTY programs- every move you make is visible to your most valuable players (MVP’s); a misstep is costly- a lesson that some Loyalty ‘experts’ seem reluctant to accept (Air Miles?). In fact, running a loyalty program is so daunting that Canada’s largest grocer, Loblaws resisted implementing one (decades after Metro, Sobeys and Safeway all had one), until their I.T. system had been upgraded and they had access to lessons learned on recently acquired (and admirably run) SDM Optimum program. Better to not launch at all, than launch badly and ruin the brand’s  relationship with MVP’s. Props for the patience and maturity to take that path on that timeline!

And now Nordstrom’s is launching a Visa-based loyalty card.

Nordstrom launches Canadian credit card with loyalty rewards

Why not start their own loyalty program, on their own? Because that would be costly in terms of resource and risk, especially…

  1. Infrastructure complexity & costs
  2. Data security responsibilities/ liability

Well, okay, so now it seems obvious that every firm should just partner up with AirMiles, or Visa or Mastercard or Amex, right? Right?

Well now consider what the downsides of a ‘private label’ loyalty arrangement might be:

  1. you don’t own the data – for modeling, or other analysis (you’re always requesting the data)
  2. you probably won’t get ‘full picture’ data (how they shop/behave across categories, payment methods, channels)
  3. you don’t control ways to access consumers

That’s a sobering list of drawbacks to going the Private Label route, as Nordstrom’s seems to have done.

Can’t really have it all, can you? But then again, decades of experience with loyalty programs teaches us that ‘easy’ doesn’t describe loyalty management, nor the decisions that accompany loyalty management programs. Tread with care!

-and a Financial Post  follow up on Loyalty Cards just a day later:

Canadians just can’t seem to quit loyalty cards, despite all of the data breaches and PR headaches

Steven Litt