ReadThinkLearnLaugh (July 2011)

3-D Retailing

I am going to make a bold prediction here:

Retail is going to change irrevocably.

Not bold enough? How about this:

Retail is changing irrevocably.

Still not bold enough?

Retail is changing right now in ways that will blow your mind; to the extent that half of retail businesses - as you know them - won't exist in 5 years.

I exaggerate. A little.

OK, a lot. But not as much as you think.

NOTE: There are many, important and quality dowloads available for you. For your convenience, you can get those at the end of the newsletter or interspersed in the content below. Links to articles etc are not duplicated, and you should read those as you go.

The statements above are not predictions as such, but I would like to put it to you to view these as CHALLENGES.

What would your business look like if 50% of current retail formats disappeared in the next 10 years?

Morgan Stanley says a combination of high rents and massive price differences will hurt electronics, department stores, clothing and book retailers, adding that it has downgraded price targets for David Jones, Harvey Norman, Billabong and Myer. 

They expect the in-store retail sales compound annual growth rate to slow to 3.6% over the next four years, down from 5.9% over the past 10 years, and a worst-case scenario would see growth at just 2.1%.

In contrast, they expect online sales will grow 20+% a year.

If you think this is unlikely, then read this article in the New York Times (1982). It predicts changes that will be driven by the internet. I mention a few here:

• The home will double as a place of employment, with men and women conducting much of their work at the computer terminal.
  
• Home-based shopping will permit consumers to control manufacturing directly, ordering exactly what they need for ''production on demand.''
• There will be a shift away from conventional workplace and school socialization. Friends, peer groups and alliances will be determined electronically, creating classes of people based on interests and skills rather than age and social class.
• A new profession of information ''brokers'' and ''managers'' will emerge, serving as ''gatekeepers,'' monitoring politicians and corporations and selectively releasing information to interested parties.
• The ''extended family'' might be recreated if the elderly can support themselves through electronic homework, making them more desirable to have around.

It may have taken longer than they thought, but you must agree it is pretty spot on?

So the question we must ask is this what changes are imminent?

IMMINENT CHANGES

There are many societal trends which seem irreversible. For instance, a futurist is predicting the demise of many professions by 2020:

<> Shorthand secretary <> Switchboard operator <> Receptionist <> Bookbinder <> Printer <> Typist <> Supermarket cashier <> Photo processor <> Video store owner. (Read the full list of 48 dying professions.)

Your homework is to consider how these dying professions have parallels in the business world. (E.g. does 'No Typesetter' mean no Printed Books?)

I won't go into Gen Y, Z and whatever comes next. The ageing population. The global village. The list goes on.

The obvious, current retail/ economic trends that are likely to continue are:

1. More pervasive, faster internet access. (In Australia the National Broadband Network is being rolled out.)
2. The mobile phone is ubiquitous. (Over 100% penetration in Australia, and smart phones at over 50%. No source available.) 3G and 4G technology is the norm.
3. Growing eCommerce channels and options.
4. Costs are being driven down. (The establishment of EPC (Electronic Product Codes) will improve efficencies in the physical supply chain. This report published by the Global Commerce Initiative makes for very interesting reading.)
5. Consumption patterns are currently 'value orientated' and likely to remain that way. This report by McKinsey (winning in Value Driven World) is excellent and thought provoking.
6. Finally, technology has become an enabler for the social nature of people. Social Media (as we know it) is just one, current manifestation of that. 

Grant Arnott wrote on his blog recently:

Mobile and social are the big buzzwords in US retailing, but still relatively few are fully leveraging the channels. One thing is certain beyond a doubt – the customers depth of understanding in using mobile and social as tools of empowerment far outstrips the retailers’ general understanding of how to market these channels effectively.

Consulting firm PSFK released this trend report in 2010. It is over 80 slides, so you may want to come back to it. But check out slide 4 (key learnings) & 5 (key trends) for now.

[Click on the 'expand' arrows in the bottom right for a full-screen view.]

PSFK presents Future of Retail report

View more presentations from PSFK

UNDERSTANDING RETAIL STRATEGY

(This is the 'LEARN' section of ReadThinkLearnLaugh)

It may seem pretty basic to some, and somewhat academic to others. Either way it is important that we understand the fundamentals of business strategy development.

The Ansoff Matrix simply captures the four basic approaches. I use the following image to teach this to MBAs - so this is important stuff; and don't be fooled by the fact that it is ancient. (Think of it as a 'Classic.')

As you can see from the diagram, there are essentially on FOUR options when it comes to selecting retail strategy.

As a retail entrepreneur, that is it!

Many people complicate the discussions and the decisions around strategy - when it is in practice quite simple. The truth is that most businesses try to reinvent the wheel when it comes to strategy, when the path is well signposted.

Pick your square and GO>>>

The category of retail strategy that I am advocating here is that of 'FORMAT DEVELOPMENT'.

If you want to survive & prosper as a retailer, you must completely re-think and re-design your retail format.

• It is not about adding new products.
• It is not about sexing up the look with a new fitout.
• It is not about improving service.

It is about changing your business model.

Here is a GREAT example of Format Development.

CREATING RETAIL STRATEGY

I am coining the term 3-D Retailing here. Allow me to explain.

• First Dimension

Fundamentally retail is/was transactional. A customer exchanges money for goods or services. Success requires that you stock the right product at the right time and place and price. It is pretty simple. Your competition is clearly identified on this same dimension. As a retailer, all that is required is that you push your message out to market and convince them of the benefits.

I term all the elements of this first dimension the 'RETAIL PROPOSITION'. I have written two blog posts about it - start here. If you are seriously interested in this topic, I recommend that you get the Jump the Curve eBook.

• Second Dimension

For a long time consultants and good operators have acknowledged that it is hard to sustain a competitve advantage at the transactional dimension. 'Customer Service' became the new battle ground.

With customer service I refer to things like all the add-ons (delivery, wrapping) through to pleasant human interactions (courtesy, responsiveness.)

Have you ever wondered if there was ONE SECRET to customer service? There is: Read this article on HBR.

• Third Dimension

This is the new battle ground. Of course, both the first and second dimensions of retailing remain valid. It is just that a good offer and good service are now considered cost of doing business. Consumers demand/expect a great value offer accompanied by great customer service. These are givens.

But if you want to operate/compete in an environment where online is a serious option, then you have to build out the third dimension of retailing: THE EXPERIENCE.

This is more than customer service. It is a new way of shopping. 

I wrote this document in Nov 1999, proposing an approach that shopping centre landlords should be approach eCommerce. The bulk of those arguments STILL hold true.

I say this not to brag about how insightlful I am, but to point out that many of these changes are obvious - and have been for some time. 

Retail Experience is more than Retail Theatre

Jon Bird wrote up a piece on Urban Outfitters. It is what he terms retail theatre. And whilst I agree with what Jon writes about that particular retailer, I do think that it qualifies only partially as an 'experience'.

This article, also by Jon Bird, describes an something more akin to the notion of retail experience I want to explore.

In my mind there is a difference between 'theatre' and 'experience' - and whilst I am being arbitrary here, it is an important distinction.

'Theatre' is entertainment ('shoppertainment') - and I am after more than that.

An experience INVOLVES the customer - it is interactive and engaging on an intimately personal level.

Watching 'Getaway' on TV is entertaining, going on the holiday is the experience.

Creating an experience is not about sexy visual merchandising.

A store that really delivers an experience is Jay Kos. Read this article and follow the link to their website.

Two commentators have written interesting articles that explains how retail may play our in the future.

Doug Stephens used the phrase the 'store as media' (not sure if he coined it) but it is a phrase that resonates with what we have been saying for some time. This article by Doug touches on many of the same points I make here.

Michael Fox runs an online business Shoes of Prey) and wrote this article in SMH depicting a future retail scenario.

If you haven't done so yet, watch the presentation by PSFK above and you will be impressed by the innovation that is already happening.

IMPLEMENTING RETAIL STRATEGY

In order to respond to these changes, you need to create your own 3D retail strategy.

• STEP 1

Watch this video. It is a short excerpt from Rocky (the movie). I don't add it just for fun, I add it because it exemplifies the primary requirement for coping with change: resilience in attitude.

• STEP 2

Think about the macro implications of these trends. (Before you think narrowly about your business, think broadly about society and the economy.) APPLY those thoughts to YOUR business:

If real-world retailing (bricks-and-mortar) were vastly reduced in types and numbers, what would the shopping experience look like?

• STEP 3

Make sure you have the first two dimensions nailed.

I have to assume that you have the basic proposition in place. (Supported by the right business model.)

A good 'offer' is a given. The same goes for good customer service. It is self-evident that many retailers still struggle with this. (We all do, actually.)

But in a hyper-connected, instant, always-on world, great service is now also cost-of-entry. How do you compare against these examples of best practice on Customer Service?

Example #1: Zappos PAYS people to quit. Watch this video on HBR to understand why.

Example #2: APPLE has learned something about retail in the last 10 years. Read this article on macrumors.com - that summarises their approach.

The Wall Street Journal has captured Apple's approach to Retail very well in the article. I will quote one little piece:

Apple lays its "steps of service" out in the acronym APPLE, according to a 2007 employee training manual reviewed by The Wall Street Journal that is still in use.

"Approach customers with a personalized warm welcome," "Probe politely to understand all the customer's needs," "Present a solution for the customer to take home today," "Listen for and resolve any issues or concerns," and "End with a fond farewell and an invitation to return."

Contrary to what some commentators may say, Apple 'merely' delivers great service - it is not quite at the experiential level. Yet.

• STEP 4

Re-format your new 3D retail experience. Design a unique, engaging in-store consumer experience. The million dollar question is how you do that - and it is beyond the scope of a humble newsletter to provide all the answers.

There are few people who can boast many, actual examples of 'having done it'. In our business, we do it almost 'surreptitiously' because we are rarely commissioned to explicitly help re-create a new experience - because it is not yet an evident requirement. (But the time is coming...)

Few clients are brave enough to break what appears to kinda be working...

Ganador does it by infusing our training, our analysis, our consulting - every client interaction - with a new lexicon. And we slowly introduce new ideas and new practices that equip them for the future.

We did this exercise for a small chain of hair salons, with mixed success because eventually they lacked the ticker to break the mold. The example that I will describe below is hypothetical.

NOTE: This is not an imperative for every single business, right now. Recently we advised a small fast food operator in a food court NOT to even entertain the idea of 'social media'. They simply did not have the resources or the skills to succeed at it.

Ganador has developed a methodology to pull apart a business and stick it back together again; only then will it become a new business. Our methodology is a systematic approach - that delivers innovative outcomes. It looks something like this.

 The trick is of course the quality fo the thinking that goes into completing those 42 blank boxes.

If you truly want to create a new retail experience, the primary requirement is letting go of all your beliefs in how things 'are' and how things 'have always been.'

  

EXAMPLE OF A RETAIL EXPERIENCE

Everyone has been to a family restaurant, so I thought that might be a good example.

The OLD way (two-dimensional)

• You arrive a few minutes early, but they have the table ready anyway.
• The waiter acknowledges you, greets you, introduces himself and takes you to your table where they hand you your menu
• The waiter comes around within a few minutes to take orders
• They even suggest a few specials and make a recommendation for the wine
• They place the order at the kitchen and return with water & crockery
• They bring the food out and serve it the proper way.
• Everyone gets the meal they ordered, and it is presented well and it tastes exactly how you expected.
• During the course of the meal there are a few 'table checks' and they top up the wine/ water.
• They bring the desert menu, take the order and serve the desert in good time.
• The waiter is alert and you catch their eye easily and you signal for the bill.
• Your credit card is approved and you leave a healthy tip.
• You are greeted when you depart.

The NEW way (three dimensional)

• You arrive at the restaurant and you are greeted by name by the host.
• He accompanies you to the foyer where other guests are mingling.
• The host enquires about your last business trip and compliments your companion on her earrings.
• As the host introduces you to a few other guests, the sommelier brings you a pre-dinner drink (based on knowledge of your preferences. But it is a new flavour, and they share a few titbits about the new process/grape/brand whilst serving you.
• One of the hosts is telling a story to a few people gathered around her, and you join the half-circle to watch the 'performance'.
• A few minutes later the door to kitchen opens and the host invites everyone in. There are long bench tables arranged around the kitchen island, which is manned by 8 chefs.
• The lighting changes and the head chef introduces the crew. Each of the four long tables will be serving different range of dishes based on your recorded preference. You had indicated 'seafood' and your companion take your seat at that table.
• Your seafood chef greets you by name (they had the seating plan indicated on their side of the table, and they have learned something about every customer.)
• He then proceeds to run through the menu planned for the night.
• As they start the preparations, they engage you in conversation, telling you what they are doing giving some tips as they go.
• The courses are placed in front of you by your chef throughout the night.
• When you are ready to leave, you simply get up and excuse yourself.
• The chef comes around and gives you a hug and your companion a kiss on both cheeks.
• They insist you take the half bottle of wine with you as you leave.
• At the door, the doorman opens the door to the waiting taxi.
• At the end of the month, your credit card is charged the usual monthly membership fee.

Whilst you may argue that you would not like the 'new' restaurant experience, that is not quite the point. This is just one example aimed at people who do this for the food experience. I am sure you can imagine a few other 'themes' or experiential outcomes that would suit your tastes better - and if there us a market for it, some restauranteer will cater for it.

The point of this exercise is to imagine how a 'traditional' concept might be transformed in an experience. You may think a restaurant is an easy option, but the same can be done for a travel agent, a hair dresser or a shoe shop - quite easily.

Dreaming up the experience is the easy part.

Translating it into a physical experience (staff, systems, procedures etc.) is the hard part.

And of course doing so at a profit is harder still.

Ben Lee is known (especially to Aussies). A short interview with him reveals the secret to success:

PERMISSION IS NOT REQUIRED> Hear him say it in the first minute.

IN SUMMARY

Retailers who want to be relevant in 5-10 years time must formulate a cohesive, timely response to the pressures of change. 

The answer is to create a true, 3-D retail experience.

We suggested a systematic, strategic and innovative approach - and outlined 4 steps to the process.

I will close with THE internet guru Nicholas Negroponte's view on the future of retail - published in 1998:

The shopping experience

What will finally save retail is the shopping experience itself. This will certainly include architecturally interesting settings with every salesperson a Cindy Crawford, a theater- or museum-like experience that makes you feel special. On the other hand, it might mean a bargain basement of sale items whose prices are hard to believe and even harder to find, a game of hunting and gathering, where buying is like catching a fish. Or it could just be a place people want to be, to see and be seen, to compensate for the virtual and OD on the real - to buy something, maybe, or maybe not.

Another kind of retail, however, is truly about to end - the type where you can't park, the checkout lines are interminable, the staff is disagreeable, and the product has always run out. Owners of such operations should be advised: The digerati don't need you any longer. And very soon everybody will be digital.

That time is NOW. Are you ready?

NEXT STEPS

ONE: Parallel to creating the 3D retail experience, it is imperative that you use/learn (new) social media channels.

• SocialMediaQuickStarter is a great place to start your journey on how you may embrace social media. (It was developed by Constant Contact - and it is structured as a series of chapters. It is simple and clear should be bookmarked.)
• This publication was issued by Facebook - Best Practice Guide on Facebook Marketing. You would think they know what they are talking about - it's well worth a scan.

TWO: Integrate online and offline in a seamless business. It is not so much about going multi-channel as it is about channel integration. This means aliging your marketing, your operations, your logistics,. your pricing etc.

This alignment will have practical implications on your operating business.

You will face many questions: Is it bar codes or QR codes? What about Wi Fi in store? What kind of people can deliver an experience? The list of challenges are endless.

And the biggest challenge is believing that the customers will still come...

Laugh

(That is always a good way to end.)

**Warning: This section is not alway PC. So, if you are easily offended - don't read on. GO HERE instead.

10 Great Status Updates to steal

1. For every problem, there is a neat, plain solution...and it is always wrong.
2. For every vision, there is an equal and opposite revision.
3. Free advice costs nothing until you act upon it.
4. Free time which unexpectedly becomes available will be wasted.
5. Freud's 23rd law: ideas endure and prosper in inverse proportion to their soundness and validity.
6. Frustration is not having anyone to blame but yourself.
7. For every action, there is a corresponding over-reaction.
8. For every action, there is an equal and opposite criticism.
9. For every action, there is an equal and opposite government program.
10. For every credibility gap there is a gullibility fill.
11. For every idiot proof system devised, a new, improved idiot will arise to overcome it.

 

SupaDupa BONUS TIME

• The 15 best ads on TV (Cannes 2011)

Here is one of my favourites. (Click the link for the rest.)

 

LET'S TALK...

You can comment on this newsletter below - that is why we have the new format. I am particularly interested to know what you consider your greatest challenge to be.

If you would like to talk seriously about your business (strategy) and how to future-proof your business... contact us via email or call me anytime (0411 030 436).

Of course, Customer Experience Design is not all that we do. You can also talk to us about:

• Custom Training Solutions
• Accredited Training (funded by Government incentives)
• Business Coaching
• eLearning
  
• Mystery Shopping
• Retail Performance Audits

Dennis & Moonyeen

PS: Just to make it easy, here are all the downloads in one easy place.

• This report published by the Global Commerce Initiative
  
• SocialMediaQuickStarter
• This publication by Facebook - Best Practice Guide on Facebook Marketing.
• The Jump the Curve eBook. (Not free.)
  
• This report by McKinsey (winning in Value Driven World).
• eCommerce Strategy for shopping centre owners: Net Success
  

PPS: If you scroll down, you can read the previous issue of RTLL - just in case you missed it.

PPPS: If someone sent you a link to this newsletter, drop your email in the box (Ganador Newsletter) just to the right of this page and get direct notice next time. We don't publish often, but when we do it is worth reading.

We never spam, rent or sell our list.

Comments

[Steve Denham]

Hi Dennis,
Your posts are alway interesting, but this is one of the best. Change is coming at us like an express train, we either get on board or get run down. We can not just step aside and hope to avoid it.

Steve

[DennisPrice]

Thanks Steve (especially in a few retail channels and 'newsagent' is one of them ;-)

[DennisPrice]

I am posting this from an email I was sent (just for the record :-))

Just wanted to thank you for this news letter. It is brilliant! Your best work and very valuable content. Inspirational even. Love the new colours, formatting and copywriting. Really well done!

[Vanessa Bagley]

What a brilliant and well constructed article. I've come back from my morning coffee break, after having read this article, with a huge amount of excitement about a great many new ideas that you have inspired.

[DennisPrice]

Thanks for the kind words...