Surviving the Retail Store Apocalypse

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http://www.forbes.com/sites/mckinsey/2012/05/22/seven-strategies-to-beat-the-retail-store-apocalypse/

Just the other day I was stuck in traffic on my way home from work, and decided to stop at the mall to wait it out. Upon entry, I realized that it was the first time I had stepped into a mall in at least a full year. Apparently, I was not the only one who switched almost exclusively to online shopping, as most of the mall was empty. As I began my research into this sudden shift, I discovered that the US is not the only country that has embraced the mass offerings of online retail over the traditional brick and mortar shopping experience.
Why is it that most have now shunned brick and mortar for online retailing? Is there any way for stores to maintain with the surge of e-commerce and discount retail sites, (generally offering comparable goods at considerable discounts)?

 

Empty Mall in Rhode Island
Empty Mall in Rhode Island

 

McKinsey recently detailed marketing strategies to excel at multichannel sales, skills they believe global retailers must maintain to stay afloat:
1. “Be the Authority” – By representing the best of a given product area, a retailer can subtly take a consumers side and be seen as a consumer advocate. Providing expert reviews and recommendations across all channels, including highly trained sales staff and rich engaging online content, all help increase brand loyalty.
2. “Use that Data” – With the increasing availability of data, marketers can target micro-segments in individual consumers’ patterns of purchase behavior. This enables a stronger relationship with customers, and allows retailers to cater to specific needs, utilizing limited retail space to the best of its ability.
3. “Re-Imagine the Retail Store” – Retailers must re-conceptualize the role played by their stores, turning them into more of a service hub integral to easing common online shopping issues. Clean lines, eye catching store fronts, and a limited product selection are also key to increased retail traffic.

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Apple store, Fifth Ave., NY

4. “Make it Personal” – The personal touch that is lost through e-commerce can be regained through offers such as personal shoppers across multiple channels. Neiman Marcus is currently looking to enhance their service legacy with an app that IDs customers entering the store and prompts staff to engage based on purchase history.
5. “Partner Up” – Cross retailer loyalty programs, could help create a multi-category loyalty experience, such as what Amazon has done with their Prime service.
6. “Be Unique” – To break the commodity perception, international retailers must develop unique offerings. Exclusive lines of merchandise, particularly with celebrity partnerships, have proven to be fruitful again and again.

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7. “Be First” – International retailers should focus on emerging markets where their competitors don’t have a foothold. They recommend China, India and even Africa in particular because of the rapid growing middle class, and wide access to technology.
Multichannel retailers need to focus first on nailing the digital shopping experience, as modern day consumers expect such. However, the ability to additionally turn physical stores into profit centers will prove a brand’s prosperity, at least for the time being.

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Marketing to Travelers Around the World

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http://www.marketingmag.com.au/blogs/making-the-most-of-travel-retail-57089/#.VCzBBSldWwA

When it comes to retail marketing, there are only three main areas that people most often think of: domestic, international, and online. However, an area that seems to be a strong niche for interesting products as well as necessity products is travel retail. Travel retail is a very specified area as, in most cases, it only allows marketers a short amount of time to catch the customer’s eye. Customers are on the go, coming or going to their next destination and often don’t have time to look into complex ad campaigns.

Travel retail, specifically in airports, has taken the route of attracting customers with simple and bold marketing tactics. Brand names are largely displayed in a highly visible way, to be seen from many angles and distances. Another way to attract on-the-go travelers is to use stimulating or exciting graphics that create thought and interest. These cause shoppers to want to learn more about the brand and explore what those images are representing.

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Retail in general is a sector that is rapidly changing and evolving. Travel retail is therefore an even trickier market to conquer as it is also highly specialized without much control over the customers they are presented with. Some will be coming home or from the location of the airport, while others are traveling from all over the world.

Airports are structured in a way that promotes easy flow of people. There is a constant movement of passengers arriving and departing. This allows for a high volume of potential impressions that can be made daily from just one location. The retail environment in airports is a compact one and sometimes stores are simply small kiosks. This is much different environment than most retailers are used to. Everything displayed must count, as space is limited.

Being a fast paced environment, travelers are in a different mindset. Therefore, their shopping habits will have altered. While some will be in the mindset of getting to their destination with limited viewing time, others will have plenty of time and patience to delve into a whole line of products. Another challenge to marketing retail in places such as airports are the varying backgrounds of the passengers themselves. Instead of having a certain “type” of audience that is constant, travelers can come from all over the world and view advertisements differently. Travel retail is at the height of innovation and is typically stretching the limits of what type of products they have to offer.

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Once Darling of Retail Sector Sounds Wake-up Call

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http://www.bloomberg.com/news/2014-09-23/the-rise-and-fall-of-u-k-grocer-tesco-that-owned-the-world-.html

Tesco, the large UK based grocery retailer, disclosed 9/22/14 that it had overstated it’s expected half year profit by upwards of $400 million.  With that statement four senior executives have been suspended, and a blame game begins…

tesco 2

The global marketing strategy that Tesco employed 20 years ago, in a push to take it’s stores overseas through a mix of clever marketing and loyalty programs, “stood out in the corporate landscape as a fast, dynamic, innovative and market-leading company,” said Robert Gregory, global research director at Planet Retail in London.  The timing was also key, says David Arnott, principal teaching fellow in marketing & e-business at Warwick Business School, “there had been a good period of growth and people in general were happy. Tesco knew how to exploit that with clever marketing.”

However, with a constantly evolving global environment, no one can afford to remain stagnant in their marketing strategies.  Their venture into the US was considered to be misguided by then CEO Terry Leahy, and they failed to react to changes  both within consumer behaviors, and to the addition of cheaper competitors.

Enter – Phillipe Clarke in 2011, contending to the fallout of the global expansion.  Clarke closed US and Japan based stores, and focused on revamping and dropping prices at the UK stores, in an attempt to take back market share from lower priced German chains Aldi and Lidl.

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However, Tesco is said to be losing at the higher end as well, to retailers such as Waitrose and Marks & Spencer, due to extreme cost cutting.  The stores looked barren and customer service dropped, which dramatically changed consumer perception.  Clarke, recognizing cost cutting had become too extreme, put together a team spending over a billion pounds to remake stores, add products and activity centers, and focus on technology products.

A man walks past the London Stock Exchange in the City of London

However, the extra spending did nothing to help sales, and Clarke is now being replaced by Dave Lewis.  “There was certainly hubris on the part of the last management team, when it turned its focus away from being a food retailer and wanting to become Amazon,”  said Bruno Monteyne, a former Tesco executive who is now an analyst at Sanford C. Bernstein. Tesco’s share price on the London Stock Exchange, down 12% at the end of Monday’s trading day following the profit announcement, has fallen over 40% in the past year.

Lewis, starting a month early and bringing in Deloitte to streamline the transition, is intent on bringing the once titan of British corporate success back to solid footing.  Analyst Neil Saunders agrees, though adds “it will take time.”  With plummeting stock rates and attacks on both sides of the retail sector, the main question is, how much time does Tesco have?

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Battle for China

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http://finance.yahoo.com/news/apple-s-mobile-china-win-could-be-a-loser-for-samsung-155550722.html

As Apple continues to slowly raise its stock price after a year of mediocrity due to lackluster product releases, it has been injected with a new spark of life because of same the products but better.  Products such as the new iPhone 5S and 5C are intriguing to new customers of the phone as well as those who are upgrading their previous ones.  Customers are also flocking to stores looking for that new iPad Air which some of my family members have done already.  But besides the domestic US market, the global market is endless.

 

As Apple targets China due to its growing population and middle class, it hopes to partner with a company that already has a customer base and allow them to sell their product.  In recent news, Apple has announced that it will partner with China Mobile who is also the world’s largest mobile carrier.  Following the announcement, Apple’s stock price raised 0.5% alone and it also helps that China Mobile has over 700 million subscribers.  However, what does this partnership really mean for the Chinese market?

Currently, the Chinese mobile phone market is filled with many low end models as well as many android users.  Apple has struggled to take away market share from Android and fared poorly with their iPhone 5C which directly targeted the Chinese market.  However, this new partnership with Chinese Mobile is important on numerous levels.

As China moves into the future, they are expected to become the world’s number one economy.  Within this, the population of China is aging along with the creation of a growing middle class.  Apple is betting on many of these adopters of low-end devices to make the switch toward its products and display them as a status symbol for others to see.  The world is continuing to become more global and Chinese youth are continuing to follow the trends of Americans.  As more youth enter college and join the career force, they will have the disposable income to afford these trends around the world.

Speaking from a competitor’s standpoint, I would be worried about these trends occurring in China.  This partnership will allow Apple to give even better deals to its current  China Mobile subscribers and become a true force to compete against in this market.  The effects of this partnership can also transfer to India in the future.  India represents another market that is still continuing to grow in regards to their middle class and development status.  On a related note, Apple’s iPad Air is beginning to release this Saturday in India which would further gauge the demand for their new products.  If this launch is successful, no doubt that Apple would be following up and try to expand their mobile line into this territory.

While Apple is determined to keep rolling out the same product lines throughout the world, they believe that they have created a product that is still differentiated enough for people to continue purchasing.  The question remains whether or not these growing middle classes value Apple’s products as they do domestically.

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Don’t Have to Be First, Just Faster Than Your Competition

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http://www.businessweek.com/articles/2013-12-05/h-and-m-turns-to-sportswear-to-make-zara-sweat

I came across this article and it peaked my interest mainly because I wondered how was this news.  Being an avid shopper of H&M, I already knew they had an athletic and sports section that had clothes such as jackets, shorts, and sweatpants.  However, more recently, they are beginning to roll out entire lines of these clothes and expanding their product line to even accessories such as sweat bands and running caps.  In a world where the athletic apparel industry is ruled by such strong brands such as Nike and Adidas, how would H&M even attempt to compete?

Not completely discernible which brand this is

From what the article appears to state, H&M isn’t  trying to become the top producer in the athletic apparel industry, they’re simply becoming the brand that takes away the future market share that Zara would occupy if they produced an athletic line.  Two out of the 4 top clothing retailers in the world (Uniqlo and Gap) already have athletic lines so H&M wouldn’t be the first mover in this regard.  Furthermore, you have brands with customers who will continue to purchase their products due to their loyalty and fulfilling a niche such as Adidas, Under Armour and Lululemon.  From this strategy alone, it seems as though H&M just doesn’t want to be the last guest to the party of this athletic craze.  As the issue of obesity in America and awareness of health consciousness continue to spread, it has created a demand for these products that will not go away in the near future.

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Looking at the product line of their sportswear section, there’s nothing incredibly unique about these items that can easily distinguish them from other brands.  The look, colors, sizes, and even the materials are all similar to what every other brand uses.  However, following the same strategy that it uses with its other product lines, H&M hopes to capture their audience based on their prices along with having one advantage that their main product lines do not have.  Enter in the athletic apparel industry where clothes do not easily go out of fashion within a season or year.  While running and athletic shoes continue to change over time, the apparel for these fitness enthusiasts have remained the same.  It would not be costly for H&M to hold these products in their inventory unlike their other lines where fast-fashion is a term that dominates their existence.  Athletic apparel is a good investment by this company because it would also not require the same materials in their product lines such as cotton or wool.

H&M is targeting these customers that are price sensitive and are merely seeking a product that will fulfill their workout requirements.  While I do not foresee H&M’s sportswear line as becoming the top player in this market, they will still compete favorably among their competition and still have that timing advantage over Zara.  By sticking to their core competencies and pricing these clothes appropriately, H&M has decisively made a smart decision in this incredibly competitive industry.

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