Heads-O-R(e)tail

Microsoft Retail Store?

noreply@blogger.com (Pratik Jagad) — Tue, 17 Feb 2009 19:36:00 +0000

Hmm...Microsoft recently announced its intent to open retail stores. The blogosphere is drawing comparision to an Apple store where customers get exposure to Apple products and the essential Apple "experience". What I am wondering about (and many others are too) is the merchandise itself. Now unlike Apple, MS doesnt really manufacture PCs. So is it going to be X-Box, Zune etc and potentially a tie-up with an OEM without a significant retail presence? (Dell?). How would other partners (HP, Sony etc) react? Found some images online of how the store would look like? If I didnt know it was a model of an MS Retail concept store, I would have almost thought it is some kind of upgraded Best Buy!!!...I am waiting to see what is MS's retail strategy.

My 99 cents

noreply@blogger.com (Pratik Jagad) — Mon, 16 Feb 2009 20:08:00 +0000

Growing up in India in the early part of my life, I was used to seeing rounded prices. Coming to US however was a shift of sorts where everything was priced ending in .99 or .95. Being a creature of habit, I would always round it up to the next dollar value. So I used to wonder what is the point of this exercise. Why would you want your customers to take the additional trouble of trying to figure the real price. Turns out I am in a minority. Recently read an article on reveries.com that aroused my curiosity on this kind of pricing. There is an area of marketing called "Psychological Pricing". An interesting research quoted on the wikipedia site goes - "Kenneth Wisniewski and Robert Blattberg at the University of Chicago's Center for Research in Marketing showed that when the price of margarine was lowered from 89 cents to 71 cents, sales volume increased a mere 65%, but when it was lowered from 89 to 69 cents, sales volume increased by 222%"

Some common reason cited for this kind of pricing,

Consumers ignore the least significant digits rather than do the proper rounding. Even though the cents are seen and not totally ignored, they may subconsciously be partially ignored. Some suggest that this effect may be enhanced when the cents are printed smaller.
Fractional prices suggest to consumers that goods are marked at the lowest possible price.
Now that consumers are used to psychological prices, other prices look odd.
When items are listed in a way that is segregated into price bands (such as an online real estate search), price ending is used to keep an item in a lower band, to be seen by more potential purchasers.

My additional 1 cent - I think what you un-round (meaning changing .00 to .99) to may depend on the least used denomination of the currency in the society. For instance, I dont think in India something could be priced Rs 99.99. If the cashier has to tender change back he wont be able to give Rs. 0.01 (i.e. 1 paisa) back cause I have never seen one being used!!!! I guess the best I can see is Rs 99 instead of Rs 100. Ofcourse this may be changing as cash gets used less often and is replaced with credit cards.

Sunny Image

noreply@blogger.com (Pratik Jagad) — Mon, 18 Aug 2008 21:17:00 +0000

It not uncommon these days to see more and more retailers providing "green" options in their stores. With surging energy prices and surging importance that consumers are giving to how eco friendly are the stores they shop from, more and more retailers are jumping on to make more of their offerings "green". The not so new inclusion in this wave has been using more and more renewable energy in running the store. Installing solar panels is one such measure as reported by this recent article (subscription maybe required) in NY Times. Some very interesting points in the article are

If Wal-Mart eventually covered the roofs of all its Sam’s Club and Wal-Mart locations with solar panels, figures from the company show that the resulting solar acreage would roughly equal the size of Manhattan, an island of 23 square miles - Wow that can change the look of suburbia...imagine all the stores with black tinted tops gleaming in sunlight. Jokes apart, I wonder how much %age of electricity consumption of the store can it actually take care of. Is this more of an image thing or there is a long run bottomline benefit involved.
The current rush apparently is driven by a government deadline at the end of the year to get renewable energy tax credits. As stated by one of the people interview in the article - “Every project that starts development has to be finished by Dec. 31 or you lose tax equity advantage, and nobody’s willing to take that risk,” said George Waidelich, vice president for energy operations at Safeway. “You’re talking about millions of dollars.”
One thing that comes across as a little contradictory is the rise in the price of solar panels with greater demand. This might indicate a lag in solar technology manufacturing ramp up.
And finally a basic difference between us and our friends across the pool - "American retailers are following the lead of stores in Europe, which are much further along. Store-roof projects are so numerous in parts of Germany that they can be spotted in satellite photos. Government subsidies there, however, have lasted for years."

Text Analytics

noreply@blogger.com (Pratik Jagad) — Thu, 06 Mar 2008 02:58:00 +0000

I have been reading and researching about Analytics lately (although I agree its already one of the high focus areas in retail) and stumbled upon something interesting related to analyzing customer comments/feedback using Text Analytics. Text Analytics is essentially searching for keywords to identify customer trends. As the article explains - "For instance, if one person in 100 mentioned something, it would be missed. But if in 100,000 responses, 1% of people say the same thing, it could be noticed as important, like a new trend that's developing or something wrong with a product that's just starting to surface." This technique is being used to identify emerging trends through customer interactions on social networks, blogs and a number of other online forums. Also as the article cites a means of finding whether a particular strategy is working or not - "Starwood, for instance, in another Anderson text-analytics study of frequent-traveler website Flyer Talk, discovered that its guests discussed beds and showers more favorably than other hotels, while competitor Hilton's guests more often discussed food and health clubs positively. That validated the "tens of millions" spent on new beds in Starwood hotels"

Retail of Elections

noreply@blogger.com (Pratik Jagad) — Fri, 08 Feb 2008 17:38:00 +0000

I am back after a long break and holiday season is long gone and its election primary season. As the economy tip-toes on a thin line with recession looming large, the country (US in this case) is few steps away from electing its new president. But before that it is walking through a very interesting yard of primaries for nominating a presidential candidate with both the parties (GOP and Dems). I came across a very interesting article by David Brooks of the NY Times on a Retail consultants perspective of the Democratic nominee race (i.e. Hillary v/s Obama). Essentially the consultant (Dr. Retail) compares the candidates with 2 distinct grocery store profiles i.e. the Safeways of the world equated to Hillary and the Whole Foods of the world equated to Obama. One is commodity based and the other is aspirational based. Ofcourse its too simplistic but for all the retail enthusiasts out there just another view through their prism!!!!

Check it out yourself

noreply@blogger.com (Pratik Jagad) — Sun, 09 Dec 2007 19:25:00 +0000

A month or so back I had put a post on how Whole Foods is using a different approach to minimize check out times in its Manhattan stores. What I had noticed about Whole Foods was that they did not have any self checkout aisles. To me self check out is a very convinient option as I am very conscious about how many bags I use to fill my groceries. Often baggers at full service aisle, double bag and dont optimize the number of bags they use. But what I have often noted is that often a lot of customers get stuck with a bad label or produce item without PLU etc. That always use to make me wonder what is the benefit of this system. A full service aisle will help you checkout faster with experienced clerks entering and scanning your ticket items. The only explanation I could come up was perhaps the labor savings offset the investment. Turns out that self checkouts (SCO) isnt perceived any longer as a technology that helps you save some dollars but more of a customer habit. A very interesting article by Retail System Research's Nikki Baird talks about her experience at a user conference on self check outs. Some very interesting observations made by Nikki are summarized below,

"...many of their customers are already trained on using self-checkout, and so are coming to expect that SCO is part of the shopping experience – at least for groceries. To these retailers, SCO is a customer service play required to keep up with larger chain competitors. They view it as a customer service benefit, increasing the amount of choice a consumer has over how they go about buying their groceries"
"Consumers expect all of the same services at SCO as at any other register ". This is cited through an example of cash back transactions on debit cards. This is very convinient for a consumer as he doesnt have to take the trouble of stopping by an ATM. A lot of retailers dont provide this facility at self-checkout thereby affecting the customer convinience
"There needs to be enough space within the “pod” of self-checkout stations so that carts can maneuver – not less than seven feet and more like eight". This is an interesting observation and more important in a self checkout scenario since all the material handling is done by the customer. Now this reminds me of this neigbourhood grocery store who had their SCOs facing the entry/exit doors. Well you'd think that is convinient but during winter time I saw many a troubled customers as every time someone stepped into the store a cold breeze would sweep the SCO sending shivers through potentially loyal customers!!!

India Retail contd...

noreply@blogger.com (Pratik Jagad) — Tue, 27 Nov 2007 20:55:00 +0000

I had a chance to listen to a webinar on an India Retail tour done by a Retail Forward analyst (Subscription maybe required). It was a very interesting approach where the analyst went to 4 major metro cities (Mumbai, Delhi, Chennai and Bangalore) and took a tour of some of the major stores in apparel, grocery and general merchandise specialities. It was more of study by observation then really looking at major statistics but regardless there were some interesting numbers thrown. Some key highlights

India is among the 6 fastest growing retail markets with a CAGR of 10.4 % for non-auto retail.
The more interesting part is that 96 - 97% of the retail sector is unorganized with over 12 million small mom and pop retailers. There is one exception to this - apparel, where the organized sector penetration is about 20%
About 65% of the retail sector comprises of grocery. The spoliage rate is extremely high for produce going upto 35% of the total inventory.
World over the real estate cost component comprises about 3 - 6 % while in India it is in the range of 7 - 27 % (!!!!) of the total operating costs.

Beyond the above numbers, some interesting observations were made by the analyst on what Indian retail does right. I am listing a few that I could note down

India seems to offer a very high degree of development in visual merchandising. Right from the street fruit and flower vendor to the bigger departmental store, there is a big emphasis on making the merchandise visually appealing. Shopping is viewed as a family outing and retailers tend to make their store fronts as attractive for them as possible
In addition to the visual appeal of the merchandise, smaller retailers seem to be very good at space utilization. Perhaps the higher than average cost component that the real estate has in the cost component is responsible for this. The report cites the example of a local panwallah (betel leaf vendor) shop where colorful merchandise is hung vertically to make as much use of space and at the same time display it to the potential customer
There are some stores which are somewhere midway between organized and unorganized retail. Saravana stores in Chennai is cited as an example. This store targets lower to middle class customers with multiple levels selling apparel, consumer goods etc. Its unorganized aspect is its high reliance on manual labor to process orders where one associate packs, other provides a counter receipt, another is a runner who takes the ticket merchandise to the front desk for customer to claim. Its organized aspect is the fact that they have cut all middlemen and directly buy from the producers. Their model is low margin and high volume.
From a branding perspective there is a trend of Indo-Western fusion. This is seen all the way from apparel to foreign fast food restaurants adapting a more local flavor and providing wider vegetarian options.

How India shops

noreply@blogger.com (Pratik Jagad) — Mon, 26 Nov 2007 00:36:00 +0000

A special report was published by Mckinsey Quarterly on the retail climate in emerging economies (Brazil, India and China). An article here talks about the apparel buying behaviour in India. I probably already mentioned before that more than 95% of the Indian retail sector is unorganized. Apparel however has a slightly larger component in the organized sector. Some of the key findings from the report,

"nearly 40 percent of the mass-market Indian shoppers surveyed said that their most important shopping occasions revolved around special events, such as weddings and annual religious festivals—a figure dramatically higher than the one for shoppers in the other emerging markets"
"greater extent than elsewhere, shopping is a family activity in India: nearly 70 percent of its shoppers always go to stores with family, and 74 percent—more than twice the average of Brazil, China, and Russia—view shopping as the best way to spend time with family." - this I think is unique. In most developed economies, shopping during annual holidays is seen more of a stressful activity while in India it seems like an activity for family fun.
And this one is the most unusual - "India is unusual in that the market for men’s apparel is larger than the women’s market, where traditional Indian apparel still dominates". Somehow growing up in India I never noticed this. I always thought the women in the household has many more clothes/accessories. I would definitely like to see the numbers around this.

One interesting thing about the report is that they have surveyed only women to study the purchasing habits citing that - "women in many markets not only decide what clothes to buy for themselves but also influence clothing purchases for their children and husbands". I wonder what the basis for that assumption is but on a lighter note I was reminded of this ad from childhood while I was growing up in India. It centers around this quintessentially Indian family woman who is justifying why she chooses a specific detergent for her family. Its in Hindi and unfortunately without sub-titles but was one of the early TV ads on detergents and the ad agency looks like had the same idea in mind - that women make the key buying decisions in an Indian household.

Day after Black Friday

noreply@blogger.com (Pratik Jagad) — Sat, 24 Nov 2007 21:30:00 +0000

As reports trickle in about the performance of various retailers about their performance on Black Friday some interesting finds through anecdotal findings and expert opinion where reported in this article on WSJ. Some key takeways,

"Based on early feedback, Friday's results likely matched expectations for flat customer traffic but small growth in sales" - It will be interesting to see if this is just an effect of retailers being cautious on how much to discount by resulting in the average ticket sales to go up a little.

As per one of the Accenture experts cited in the report - "It looks like retailers are hoping to make up margin dollars on the higher-margin items while pushing smaller products at deep discounts" - Sounds contradictory to me considering that the big lines on the electronic item shops was for big ticket high margin items like HD TV and Notebook computers

"Some retailers highlighted cheaper merchandise in their ads this year, giving cautious spenders more of a reason to show up. Best Buy, for example, devoted the front of its advertising circular to products such as a Dynex 32-inch LCD HDTV, discounted to $449.99 from $749.99. Last year, Best Buy's ad for Black Friday gave more prominent billing to TVs that cost $1,000 and more." - This is a no brainer. I think retailers would have had to do this to attract more traffic.

Some interesting numbers on online sales - "Online sales hit $52.9 million on Thanksgiving, on 1.09 million orders, according to the Chase Paymentech Pulse Index, which tracks payments generated by 10 of the top 30 U.S. Web merchants as ranked by Internet Retailer magazine. Last year, online sales reached $42.3 million, and 863,880 orders were processed" - considering the fact that store traffic was flat, this may come out impressive.

Lastly my own anecdotal report on this years Black Friday. I resisted the urge to go to Best Buy but the more I looked at the Sony laptop deal, inspite of heavy lunch, I dragged my self out to a nearby Best Buy in Kennesaw, GA. Reaching there made me realize that I moved 5 hrs too late. The below picture was taken at 10 pm on Thursday (pardon the bad quality). I wasnt surprised though with the outdoor tents and the gas burners used by enthusiasts to keep them warm

Black Friday coming

noreply@blogger.com (Pratik Jagad) — Thu, 22 Nov 2007 23:59:00 +0000

Before the early morning craziness begins and lines of shoppers rampage through stores, one last look at the holiday season outlook. This one by WSJ(subscription maybe required) speaking about the cautious approach to markdowns by most retailers. It might seem like the weakening economy might propel retailers to do faster and steeper markdowns but they are using IT tools to slim their inventory and use past data to forecast demands and perform more planned markdowns - "The industry has embraced price-optimization software that looks at past sales trends to determine where to set the initial price and when to trigger markdowns. The aim is to help store managers avoid panic-driven discounting if early sales are weak". It looks like apparel is one area where steeper markdowns might be seen cites the article - "Clothing is a prime candidate for more discounting as warm fall weather has discouraged purchases. John D. Morris, a specialty retail analyst at Wachovia Capital Markets LLC who tracks sales racks at clothing stores, says there were 5% more in his latest survey than a year ago". On the other hand high end speciality retailers are bucking the markdown trend and figuring out ways to increase traffic - "The most upscale stores, whose shoppers appear to be least threatened by the slowing economy, are eschewing discounts in favor of testing ways to increase store visits.". Some of them are offering gift items for bigger purchases.

Orderly Black Friday????

noreply@blogger.com (Pratik Jagad) — Wed, 21 Nov 2007 03:03:00 +0000

Looks like all the mad rush that you encounter the morning after Thanksgiving might be handled in a much more orderly way if retailers are going to successfully implement what is described in this news brief. Best Buy and some other retailers are planning for handling the line of customers that go all around the block in an orderly way with ample hands manning the check out registers to provide a good customer experience. One of the store managers explained it as "Just like a football team, if you're running to the right, the blockers need to know which way to block," he explained. Except Best Buy's employees don't aim to block anything; rather, their goal is to orchestrate an orderly flow". One of the things which is difficult to control however is the customer desperation to get to the sweetest deals before they run out. A few years back I remember waiting outside the Best Buy store the day after Thanksgiving and they did something very sensible. There were about 20 HP laptops which were offered at deep discount deals. Half an hour before the store could be opened, the store manager walked along the line asking for who were there for the laptop deal and handed out tokens. Once the tokens were over, anyone down the line wouldnt get the deal. Otherwise you can imagine two customers pulling a laptop from two ends and the store manager tearing off his hair. What I keep wondering is what if the store published a floor plan and the deals are mapped on them. If I am looking for a flat screen TV, wouldnt if be better if I knew exactly where it was so that I dont end up coming in the way of anyone else rushing for a deal in another area? Just a thought...havent been to a crazy Friday morning since a few years. Maybe someone has already implemented this idea.

Boomerang

noreply@blogger.com (Pratik Jagad) — Wed, 21 Nov 2007 02:17:00 +0000

I came across this interesting article in Store Front Back Talk magazine talking about the phenomenon occuring as retailers are moving towards a coordinated selling across multiple channels. The transition is not complete and the results are far from what the article refers to as "utopian" world of multichannel retail where a store manager can look up articles browsed by customers from in-store kiosks to determine what to order. Many retailers are using emerging channels to drive customers to in store purchasing. Example are cited of Wal Mart sending out alerts of instore items available over text messaging or an upcoming store in Madison allowing customers to read user reviews of product through a bar code scan. So where does the boomerang come from...well what is boomeranging is the movement of customer first from online to get information on products, promotions etc then to the store to try out products and again to check its user ratings back online. Now why exactly is this happening? could be multiple reasons - one of them being retailers still havent figured the right IT architecture to synch up the multiple channels at play. But is IT the only challenge here? there could be more - one of which is cited by the article as - "Such true merged channel data exchange would also require political changes, with senior management ordering that walls between channel business units be either brought down or at least made ultra-porous." In an environment like retail where distinct departments like merchandising, store ops, ecommerce, logistics, marketing have to work together change management effort and its successful implementation is critical for multi-channel success. Till that time customers will keep boomeranging!!!!
On a very separate and a very conventional note, the article states that "studies show that 25-30 percent of footwear customers leave the store as the sales associate goes to the back room to retrieve the specific size footwear for the customer." Something as simple as a handheld with software functionality to check back room stock and create a task to have the desired item retrieved from the shelf by alerting a runner could work as the store associate continues to engage the customer. Even in the emergining world of cutting edge retail technology good'ole scan gun and a personable associate can go a long way.

Yet another free shipping post

noreply@blogger.com (Pratik Jagad) — Sun, 11 Nov 2007 22:21:00 +0000

Firstly to start out, I have been a little behind on posting here due to travel and holiday shopping and celebrations :-). Continuing with the holiday season discussion and how a shift has been happening in buyer behavior to shop more online, as a follow up to my previous post on free shipping, I found an interesting article on how different online retailers have determined their online free shipping strategy. All the 3 online retailers that were interviewed in this article emphasized on knowing their shipping cost structures and its effect on their margins to decide whether to offer unconditional free shipping or not. Some of the key observations cited in the article are,

How do you view your free shipping charges?: As one retailer put it, "It's simply the cost of doing business, like having a state of the art distribution center and a world-class team of highly trained sales engineers"
How do you time your free shipping offers?: Depending on the nature of your business, you can either use it to drive your holiday season volumes high or as one retailer quoted in the article put it "We concentrate our free shipping or shipping discount offers to our off-peak season which helps generate revenue during the slower summer months."
How do you estimate your free shipping chares? As one of the spokeswomen from UPS quoted in the article said "If your product falls into a larger-load category, or does not conveniently fit into a box, shipping charges can go beyond the cost of the actual product. If you do not know the dimensions of your final package, the total shipping charges can show up on your bill after the customer has already received the order, leaving you responsible for the additional charges, so it's critical to know your products shipping dimensions and weight — and use a carrier that offers a variety of shipping options"

Multipronged approach

noreply@blogger.com (Pratik Jagad) — Thu, 01 Nov 2007 13:20:00 +0000

It goes without saying the tremendous growth seen in retail online sales. However this has resulted in parallel companies (stores, website, catalog) operating within a retail organization which seem to be sometimes disconnected in their approach. Some retailers have integrated these functions to an extent in terms of look and feel. The question however is whether is that sufficient to stay competitive? I came across an article which talks about some of the best practices implemented by retailers ahead of the curve in the multi-channel world. Below are listed some of the key observations

Cost Effectiveness: Carrying the right assortment in your stores and offering wider ones in your online store can help cut down costs and at the same time provide opportunities for customers to buy the items. Penny's is cited as a good example of that "What are the secrets to Penney's success? For one, its Website offers almost three times the number of products available in the merchant's stores. This gives the company a cost-effective way to sell bigger-ticket, often slower-turning items."
Flexibility: Being able to fulfill customer demand from across channels gives the customers flexibility and the retailer the brand value of being customer centric. The article talks about some retailers using drop shipping as a means to drive that - "That kind of channel inventory flexibility requires a willingness to ship (or allow customer pick up) from different channels to make the sale and satisfy the customer. Some direct businesses are gaining significant sales with drop-shipped product. One major retailer with direct sales exceeding $200 million has 20% of its sales drop-shipped from its merchandise suppliers." From a retail systems perspective, having a common master data, inventory planning and replenishment system can help achieve this flexibility . The article mentions about the effect of inflexibility - "An inability to move or ship product from other channels to make the sale means inventory is frozen in one channel when it's needed in another. You need to aggregate or roll up inventory needed in a specified time frame ito place purchase orders and plan receipts. "
Uniformity: Often you go into a store and you dont find the same deals as you see online. Many retailers provide a loyalty program only in their stores. This approach doesnt provide the customer a uniform experience which is key to building loyalty - "Returns and customer loyalty programs should also operate across channels" and how to achieve this - "The key to cross-channel consistency is having single operational data stores and data warehouses across all channels for access to cross-channel product assortment"

Just another manic monday?

noreply@blogger.com (Pratik Jagad) — Tue, 30 Oct 2007 13:57:00 +0000

As online retail traffic continues its upward trend with every holiday season, new business terms keep getting defined to explain the phenomenon. The latest addition to the list is "Cyber Monday". Created by the National Retail Foundation it represents the first monday after the Thanksgiving weekend when consumers return to work and spend time shopping online to make purchases for the holiday season. I came across a very interesting article on how cyber monday sales can be boosted by not just online ads but by complementing them with non online ads. The article says - "One limitation in the search space is volume. There are only as many searches as there are people multiplied by the queries they do." The publisher of the article found that - "20% of all search volume can be correlated to TV GRP volume. So, while we've always known that TV creates an interest that search can fulfill, this gives us sufficient evidence that it creates a volume of interest which can substantially move the impression needle, and therefore increase CTR and potentially CVR for your campaigns". So in a time where ad spends are progressively shifting to online media, looks like there is still some steam that can be driven off of traditional media to drive traffic to online sites.

Get it to your doorstep for free

noreply@blogger.com (Pratik Jagad) — Sun, 28 Oct 2007 20:05:00 +0000

As holiday season is getting closer and closer, and consumers are shifting more and more to buying online, a host of retailers are offering free shipping. A recent report by CNBC interviewing Shop.org president, Scott Silverman talks about how nearly 50% of the US population will make online purchases this holiday season. An interesting part is that free shipping is become very common. A random check on the websites of top retailers (Macy's, Targer, Neiman Marcus, JC Penny's) shows free shipping offers of some kind. In most cases they are conditional upon the total purchase. The shipping option is however restricted to only standard shipping. Any kind of expedited shipping will be charged. Also if the boxes are to be shipped to multiple addresses, only the delivery to one shipping address is for free. In some cases, the option of free shipping is available only if you choose to put the items in minimum possible boxes which is very intuitive since most parcel carriers charge by the box, unless you exceed their 100 wt requirements. So it seems like free shipping is no longer a promotion, its become a cost for doing business. This entails, the retailers to rethink their contracts with standard parcel carriers. Another aspect of free shipping is service level - how soon is the customer going to receive the package. Standard UPS Ground shipping can take anywhere between 5 - 7 business days. So is the customer going to buy something that he needs to gift and choose a free shipping option? One way to support a high service level and still provide free shipping is by doing what is referred to in the small package industry as zone-skipping. The idea is to identify regional parcel hubs and sort your packages by those hubs and line haul (fill a truck) it to the regional hub. Basically, you are avoiding your packages going through multiple sortation points in your parcel carrier's network. At the same time this strategy can help the retailers negotiate better rates as they are effectively doing a lot of the sortation work that the parcel carrier would have to do. Of course with more retailer joining the free shipping bandwagon, the rate negotiation advantage might tilt towards the parcel carriers.

Introducing Retail 101

noreply@blogger.com (Pratik Jagad) — Fri, 26 Oct 2007 01:22:00 +0000

As part of my effort to cover diverse areas of retail, I am planning to include a post once a week which will describe some key concept in retail using published articles or information gathered from academia. The idea behind it is that it will help better understand some of the terms which are often taken for granted in standard industry white papers and news briefs. So starting this week with the concept of Demand Forecasts . In retail there are 2 key things customer satisfaction and lesser inventory. Now if you always had full stock of every item that you had to offer, there will never be any stock outs and thereby a customer will never go back not being able to buy what he wants to. But there is a cost to it - till the time that someone buys the item, your money is locked into that item. That money could have been invested somewhere or kept in your savings account and would have earned some intrest. So what am I getting to? If you could read the minds of all your customers in terms of what they want (kind of like Mel Gibson in What Women Want) then there wouldnt be a problem. You could place orders accordingly and satisfy your customers and keep your inventory low. Sadly, very few people (or maybe no one) has that kind of clairvoyance. Thats where forecast comes into picture. So like in every relationship, as time goes by you begin to understand the other person/party better, as time goes by you gather an idea of what your customers buy, how much they buy and at what time they buy. And using this information you start predicting what they would want in the near future. That is in some way a forecast. Ofcourse its easier said than done. Several forecasting models have been created and its as much an art as a science to select the correct forecasting model. There are other factors like promotions etc. which can change your forecast. I came across a very good article in Supply and Demand Chain Executive by Atul Mandal who is a project manager with Plan4Demand a boutique consulting firm. Mr Mandal is ofcourse more experienced in forecasting and explains very well some of the underlying concepts behind choosing a forecasting model. Thats our Retail 101 for this week...stay tuned for another one next week.

Less is more

noreply@blogger.com (Pratik Jagad) — Wed, 24 Oct 2007 01:10:00 +0000

I came across a very interesting white paper by Kaon Interactive on how to create a "wow" factor in the retail customer's experience. The paper begins with citing some very common obstructions to achieving this in the retail stores. A summary is given below

When too many product features or categories are available, customers find it difficult to understand and evaluate options. This results in them either choosing the cheapest product as price is something they can easily evaluate. This leads to them being dissatisfied at a later stage due to lack of features.
The space available on the shelf is insufficient to provide a informative presentation of the product assortment to the customer leading to an underinformed customer
While overcoming customers’ inconsistencies in decision making and physical space limitations are both challenges for retailers, finding the sales support to help customers make a purchase, and more importantly, make the right purchase is perhaps the retailer’s greatestconcern.

The paper talks about generating a positive emotional response in the customer while shopping - "Emotional response is also kindled when consumers better understand and appreciate the product they are about to purchase. While providing product information that details how a product is used, or clearly explains why a feature is present sounds obvious, it’sactually a rare occurrence in the retail world"

The first factor cited by the paper is corroborated in a recent presentation "Re-imageering Retail" given by Thom Blischok of Information Resources Inc. As per Mr. Blischok "84% of shoppers are fully satisfied with 23% of the merchandise at a typical store". This is also seen in terms of a trend towards "express" store formats which is expected to "grow from around 20 locations today to 4,000 by 2010"

Global Effects

noreply@blogger.com (Pratik Jagad) — Tue, 23 Oct 2007 01:56:00 +0000

Retail is probably as old as civilization itself. From the time that our ancestors bartered grains in exchange for cloth, the idea of retail has been in existance. However, the growth in globalization has led to it being governed by so many diverse factors. A large proportion of everday retail pertains to basic needs like food. I came across a very interesting article in the Boston globe on how the grocery bills are rising in the US due to a multidimensional supply-demand tug-of-war. On on side you have rising oil prices leading to increased transportation and packaging costs which are passed down to the consumers. On the other side you have growing demand for basic food commodities like oil seeds due to economic emergence of BRIC (Brazil, Russia, India and China). An interesting fact was cited in this article - "China will import almost 50 percent of the world's oilseeds within a decade, becoming the world's largest importer, according to estimates from the Organization for Economic Cooperation and Development." I wonder if another green revolution of some sort will be required to dramatically increase productivity so that the growing demand for food commodities can be satiated. At the same time efficiencies in storage and transportation might be required to curb the seeming growing spiral of increasing costs.

Crumbling Wal?

noreply@blogger.com (Pratik Jagad) — Mon, 22 Oct 2007 00:53:00 +0000

For the last decade or so the retail landscape has been dominated by the Bentonville giant. Numbers from as recent as 2004 reflect the hold it has on retail market. But like changes in every field, the one in retail also came swooping and W*M has some challenges on its plate. I came across a very good article by Paula Rosenblum of Retail Systems Research on the challenges facing the giant. Some key observations cited by Ms. Rosenblum that I found interesting were pertaining to how retailers have responded to W*M's presence - "In a post Wal-Mart world, retailers could not differentiate on operational efficiencies, or selling commodities. Wal-Mart owned that space. Retailers like Target, who made hay by selling really cool stuff cheap (or somehow making commodities seem cool), Costco who made warehouse shopping chic, and Whole Foods, who gained its customers trust by being at the forefront of eco-friendly and healthy, started knocking the ball out of the park by NOT being like Wal-Mart". The article goes on to recommend how W*M can use IT to bring back its "mojo". One very interesting part of this recommendation was the use of RFID instore to track stock movements. However given some of the technological (hardware) problems related to RFID, I am not sure how practical that is. Only the future will tell if the Wal's crumbling or the Mojo's Risin.....

Glocalization

noreply@blogger.com (Pratik Jagad) — Thu, 18 Oct 2007 12:20:00 +0000

A very interesting report on the future of Retail in 2015 was published jointly by TNS Retail Forward and Retail practice of PriceWaterhouseCoopers. The report talks about 2 distinct groups of people emerging based on the age profiles - the Baby Boomers: 65 and above who will still go for the big box retailers and the The Millenials: 35 years of age who are more environmentally conscious, technologically savy and purchase based on lifestyle. Another interesting prediction is the growing diversity in the population where more than half of the population under 25 identifying themselves as non-whites. The study talks about how "The 'one-size-fits-all' approach of the 1980s is not going to work as the population becomes more diverse and tech savvy during the next decade.'' The report talks about trend as "The best way to define this trend is through the term 'glocalization:' retailers will need to serve customers across major geographic, cultural, legislative and regulatory boundaries, all while catering to local tastes, traditions, lifestyles and economies."

Consumer Behavior

noreply@blogger.com (Pratik Jagad) — Tue, 16 Oct 2007 16:22:00 +0000

Continuing from my last post on "Active Design", an interesting article appeared in the NY Times on how more and more marketers are using consumer behavior rather than consumer perceptions obtained through market studies and then figuring out what fits their profile the best. Behavior based marketing is taking a step further and looking at what the consumer actually buys and identifying correlations to design the product offerings. In other words, if you know how your consumers "Acts" then you can design for her to act and offer her what she acts for. The article talks about the role of new media in helping identify consumer behavior and also market product offerings identified through an understanding of consumer behavior - "The ability of new media to monitor what consumers are doing — like keeping track of which Web sites they visit — is fueling the interest in behavioral targeting"

Active Design

noreply@blogger.com (Pratik Jagad) — Mon, 15 Oct 2007 20:01:00 +0000

Retail consumers are a changing bunch and its very important for a retailer to stay on top of what her choices are and how to make her "Act" on those choices. A very interesting article by Jonathan Dodd of G2 Worldwide published in the Hub Magazine delves into the idea of "Active Design".

The Need: Mr. Dodd says that experience based shopping can no longer be restricted to the high end retailers like Printemps, Slefridges etc. "....in a world where virtually every product category is suffering from brand proliferation and time-pressured shoppers are being enticed by ever more sophisticated retail offerings, effective design has to do more. It must work for the benefit of the shopper as well as the retailer and brand owner. It has to sell actively." An interesting statistic provided in the article states "According to POPAI, supermarket shoppers are exposed to 1.6 pieces of instore material every second. And yet less than one in five is noticed"

In the article, Mr Dodd enunciates some basic principles of "Active Design" through the example of Apple stores and says that the same idea can apply to supermarket stores which carry a much wider assortment.

Green is in

noreply@blogger.com (Pratik Jagad) — Sun, 14 Oct 2007 17:14:00 +0000

This month a lot of industry magazines seem to be focusing on the emergence of green trends in retail. Chain Store Age had a green theme for its October issue where it discussed several trends emergining in green retailing. A few interesting findings from the perspectives section

Cost of Going Green: An interesting excerpt on cost of going green - "Despite popular notions to the contrary, it does not cost more to build an environmentally conscious facility than a traditional building, according to a recent report by Davis Langdon, a San Francisco-based consulting business that helps architects and building owners manage construction costs.Green building, however, does require a different mind-set, advised Langdon. Sustainable features are too often tacked onto a project as an afterthought, making them appear as an added cost that can be easily cut.“Until design teams understand that green design is not additive, it will be difficult to overcome the notion that green costs more, especially in an era of rapid cost escalation,” according to the Davis Langdon report, “Cost of Green Revisited,” which studied 221 new construction projects." With the fuel prices rising by the day, the recovery even for an added investment into greener technology might be fast
Young Generation's Perspective: The young generation seems to be spilt into half when it comes to retail preferences based on whether the retailer has green/environmentally friendly policies and infrastructure. An excerpt from a recent survey "According to the latest Maritz Poll, “Environmentally Friendly Retail Marketing—All Hype or Consumer Preference?,” Gen-Y shoppers (defined as being between the ages of 18 and 30 for the purposes of this survey) are split down the middle on influence of retailers’ environmental policies on their spending habits.Of the 1,062 Gen-Y shoppers surveyed, less than half (46%) said they would shop at a retailer more if the retailer were to go green. The research also revealed:Fifty-four percent said green doesn’t influence their buying decisions;Nearly half (47%) said they would pay more for environmentally friendly services, products and brands"

As green trend continues due to changing customer opinion and lifestyle, sooner or later going green might become a necessary criteria rather than just a differentiation strategy. Like technology trends, it might have its own leaders, followers and laggards but an eventual adaptation might become a reality - probably sooner than later.

Smart Cart - Post Script

noreply@blogger.com (Pratik Jagad) — Fri, 12 Oct 2007 18:01:00 +0000

As a follow up on my earlier post on Smart Cart, I found an interesting take on it featured on the Store Front Back Talk website in reference to its feasibility/useability in the US market.