Sunday, February 28, 2010

In search for growth

Growth is always present somewhere. But as customers needs and demands changes, areas of growth changes. Growth is a part of the life cycle, and as companies reaches the peak they need to more creative in order to not go down the slide of decline, in order to stay alive. As late Mc Donald owner Ray Kroc put it: "When you´re green you´re growing. When you´re ripe, you start to rot".

In order to stay in the sweet spot, retailers need to be flexible and follow the growth wherever it shows itself.o

Pride or comfort, good reasons for shopping

A proud consumer won’t necessarily make the same purchase as a contented one, according to a new study in the Journal of Consumer Research. “Previous research shows that positive feelings produce a ‘rose-colored glasses effect,’ leading products to appear more desirable,” write authors Vladas Griskevicius (University of Minnesota), Michelle N. Shiota, and Stephen M. Nowlis (both Arizona State University). “But we find that rose-colored glasses come in different shades.”

Although positive feelings of all sorts have often been lumped together into general categories such as “happiness” or “good mood,” the researchers found that different positive emotions had drastically different effects, including making some products somewhat less appealing. Since participants in the authors’ studies were not aware that emotions were affecting their preferences, the effects were largely unconscious.

The authors studied how product preferences changed depending on whether a person was feeling pride, contentment, or a neutral emotional state. Some participants read a short story in which they imagined doing well on an exam, which is known to elicit pride. “We found that pride enhanced desire for public display products,” the authors write. “Feeling pride led people to want nice watches, shoes, and clothing for going out. However, pride did not enhance desire for home products.”

In contrast, the emotion of contentment led people to want products for their homes. “When people felt contentment, they were more attracted to products such as beds, dishwashers, and clothing for lounging around the house,” the authors write. They were less enthusiastic about public display products. “Our findings suggest that shoppers are likely to want to buy different products depending on the specific emotions that they are feeling,” the authors write. “If a retailer is selling products that allow the consumer to ‘show off’ to other people, this retailer may want to induce feelings of pride through store atmospherics or advertising. In contrast, a retailer selling primarily home furnishings might want to try to induce feelings of contentment.”

According to Professor Brent Barr from Ryerson University School of Management 85 per cent of buying decisions are effected by either of the two feelings.o

Friday, February 26, 2010

More on 2010

A little reading for the weekend:

1. Trend briefing from David Stutts

2. 2010 Trends by the What´s next:Top Trends

3. Conflict are now a normal part of life even for coutries and people the Western World. The Brittish Ministry of Defence has put toghether a report on the subject and its probable evolvement up until 2029.

The Ministry of Defence says: "The Future Character of Conflict found that the global trends indicate increasing instability and growing opportunity for confrontation and conflict. State failure, extremists, increased competition for resources and the changing global balance of power will dictate why, where and how we engage in conflict. The study concludes that the character of conflict will continue to evolve. Though it is impossible to accurately predict the exact character of the future conflict, in many of our future operations we are likely to face a range of simultaneous threats and adversaries in an anarchic and extended operating area."

The report can be downloaded here.o

Wednesday, February 24, 2010

When is identity shopping relevant?

Shopping and to build ones identity through diffferent types of consumtion has been a fact for almost a hundred years by now.But the creation of a personal identity through shopping and by means of brands, starts much earlier today than was the case only 20 years ago. Children at early ages demands, and sometimes get, branded outfits, and almoste every fashion brand have a childrens line. Mobile phones has become another fashion item even at young age.

Children have a larger influence for the priorities of the familys consuption as whole and the tweenie-factor has got a lot of attention the last couple of years.

During their teens, youngster go through a more or less desperate struggle for freedom, and while the phase of childhood is all about fitting in to the family, the teens is all about fitting out of the family and defining oneself outside of the pattern beeing chosen by someone else. This is a fulltime priority for any teenager. Teenagers i the Western world have, of course an abundance of tools for expression through clothing, sports, ,music, technology and so on.

During the early years of adolescence the focus of personal branding shifts somewhat from the person itself to other areas of consumtion like the first own apartment etc. When an "real" relation with a partner becomes a priority "I" get a lesser focus to the benefit of "We". Compromise and nesting comes first, and "self-issues" are often set aside for building the common good.

Troughout the western world divorces and separations are common, and today, a person most often have several of closer or familylike relationship during a lifetime, leading to mixed families comprising of parts of several other families, sometimes on a part time basis as children spend time with the other parent.

The changes in life causes the re-discovering of "I" out of the "We"-context a multitude of times during lifetime, as one have to re-define oneself after a long period of compromising and taking the wellbeing of other people into consideration while beeing in a relationship.

When passing to a new "age", ie into the 30s, 40s or 50s, sometimes a crisis occur as a result of a sudden focus on the self and what the achievments in life have been som far. During later stages in life, when the family situation again allows for reflection, the needs for self expression are more balanced, not uncommonly directed to projecting a younger mind and the result of ones achievment, the "monument" over once life.

The Path of Life could be used for understanding and discussing how the need of self branding at different stages in life differ, and at what points self branding is more important than other.o

Branding, bullshit included

"The organizational changes we are making will help us streamline a culture of market-altering customer focus." This and more corporate bullshit could be produced by a mouseclick at the Bullshit Generator.

Agency bullshit sometimes sounds the same. Campbell uses two years of research how to redesign the packaging by, among another things, using a "team clipped small video cameras to the testers at eye level and had them later watch tape of themselves shopping for soup. Special vests captured skin-moisture levels, heart rate, depth and pace of breathing, and posture. Sensors tracked eye movements and pupil width." The result of this neuro-marketing study conducted by Innerscope Research Inc, then led to the new labeling and package design. The result of this study led to the conclusion that steam was emotional, while spoon was not.

Another wellknown reference to agency bullshit is the Pepsi story covered in Gawker wrote about the new Pepsi logo a year ago implying that all agencies sometimes have to make up evidence in order to sell their ideas. The Pepsi document takes this to a new level.

The pseudo science angle will not help the ad agency industry in the long run unless the results of campaign will continue to deteriorate. On the contrary, until agencies stop behaving like communication and branding is rocket science, people like Dave Knockles in the I am the client have a point in their polemic writings about the relevance of agency set up and movies like this will continue to roam cyberspace:


Monday, February 22, 2010

Thank God for the irrational consumer

How Customers Think, by author and Harvard Scholar Gerald Zaltman, a Harvard scholar says that only 5% of consumer purchasing behavior is based on rational thought processes, while the major part is due to subconscious motivation by means of design or other references to feelings or other basic instincts like fear or sex.

And what part do companies focus on? Thinking about how time agencies and advertising companies use in order to find yet another rational argument, picture or other piece of information to put into an ad or on a package makes one think.

A classic reference to this problem is the "what if Microsoft would redesign IPod"-movie:


Strategic planning, bullshit excluded

Execution and results is what really counts and with a ever more changing reality strategic planning has to be a lean and mean operation, giving a quick and easy to understand overview of goals and activites. Church of Customer made an easy model, that is easy to make, easy to share, one pager, showing the overall goals and everything attached to it´s execution. The result for a fictous company is shown here.o

CMO´s Social Media Overwiew

CMO is by their own description "the senior marketing executive’s one-stop shop for digital marketing insight". CMO has put together an easy overview of various pro´s and con´s of Social Media Channels of 2010. Please behold A CMO's Guide To The Social Media Landscape:

A pdf version of the overview is available by clicking here.o

More 2010 trends

Tim Stock, manager of a consumer insight think tank, and adjunct professor at Parson School of Design gives this lecture on this to come:


Sunday, February 21, 2010

Great content - great viral

The happiness machine, was a campaign launched by a tweet and an update of a Facebook profile, ie no media spending what so ever. It shows a Coke-machine that was actually placed at a cafeteria in Queens, New York. It dispenses free drinks to everyone, and after a while it starts to spit out pizza, flowers and other things, as a part av the brands "Open Happiness"-initiative. The reactions are authentic.

Uploaded on Youtube on Jan 12, and two weeks later it had more than one millions views. As of today more than 1,6 millions have watched the clip, showing that content creates traffic. Also covered by Mediapost.o

Upside down

In a guerilla campaign promoting the new loyalty program Sprize, Gap in Vancouver made an overnight makeover in one of their stores, litterally turning it on it´s head. No one passing by next day could miss the message. Members of Spritz get an automatic refund if the price falls on any item they bought, thereby deleting the risk of annoyed customers. No risk of buying today and seeing it on sale the week after, that is.


Jean Paul Gaultier on Target

Target continues the assault on traditional fashion retailers by launching the third designer in a series of “Designer Collaborations” available for a limited time during March and April 2010in the 1743 Target Stores and no The collection is said to be a "tribute to the American woman – celebrating the forces of style both past and present in American pop culture."

This shows the need to keep an I on the "smart buy" segment.o

Saturday, February 20, 2010

How tailored is the brand to the problem it is set to solve?

Innovation starts with a perceived problem or shortcoming of any existing product, or by presenting a solution for a problem not yet solved or even one that the consumer did not know he or she had. Consumer oriented product and package develop-ment starts by analysing the different situations and reasons for buying from a certain category or a specific brand.

Whether these situations are situations defined as a certain time during the day or during ones life, or if the buying is triggered or influenced by certain values or feelings gives endless possibilities for innovation and consumer oriented development, that goes hand in hand with the retailers strive to be at hand in those situations.

Package/product/brand/service development could include, but are not limited to the following:

-Focus on the buying situation

Is the buyer alone or together with children, family or friends?
Is he or she on the way to or from work, walking or travelling in a car or public transportation?
Is time a factor?

-Focus on buying/storage problems

This includes easy-to-carry multi-packs (with a built in handle) which also may serve as a serving container at a party.
It could also mean packages that make storage in fridges easier.

-Focus on the moment of consumption

In which environment does the consuption take place?
In the livingroom, car or during a picnic?
By oneself, during a childrens birthday party or a football on TV?

How does this affect brand personality, package, communication?

-Focus on the mood of customers

Is the consumtion meant as a "mind changer" ie to make the consumer more awake, relax, rewind or consumed in order to reward oneself?

-Focus on the needs of large target audiences with a common taste or values.

The question of healthy life style is a major issue throughout the world. How can people feel more healthy? Is ecology an issue?o

Friday, February 19, 2010

Brand personality + wine

Austrian Oggau Wine Estate produces nine different wines and have assigned drawings picturing humans in differerent state of maturity to the botteles, reflecting the age of the wine inside. Faces of children, parents and grandparents make room for most tastes and combination with food. Each face has a human name, making it even more personal.o

Redefining service

Apart from price and assortment, service has been a key competetive factor in any retail concept. The question is; how much energy do retailers of today innovate their service offer, or even define what good service is? Up until a few years ago, service could be defined by the picture above - a wide assortment to suit any taste, and a top of that, a sales person ready to please.

Is this a universal definition that could last for all times? Most probably not. How many sales persons have you met in your life that really delivered something above the ordinary? How many retailers have categorized the range so that it is easy to find and choose among the merchandise? In a time where a lot of customers do not want to be bothered by a sales person at all, but make his or hers buying decision alone is time to redefine and widen the defintion remarkably.

People are still important, but cannot and should not compensate for bad store planning or signage. The store should be arrange to speak by itself, enabling consumer to choose if and when to interact with sales person.

1. Visualize the service offer

Making it possible to get an understanding of the complete offer saves time, both for the consumer and the staff, as well as it is strengthens the image of giving a wide array of possibilies.

2. Let discount offers speak for themselves

This makes it possible for sales personnel to focus on the consumers wanting the more advanced options.

3. Show that all products are not the same

Making suggestions on what to by in a specific situation, making top lists and arrange combination offers to make it possible to buy a complete function is different than only display products for consumers to discover for themselves or need to ask a person for help to find what they want.

4. Make the offer reachable in time and space

Vendingmachines are making their into new categories including fashion, mobile phones, food and shoes...

5. Use technology to show alternatives

Michel Giullon, an optician has a wide range of glasses but uses simple technology to help people choose.

6. Invite consumers to interact with the store

Build A Bear Workshop, REI, Vom Fass and other retailers make the visit itself a true experience and a part of the product itself.

7. Use education as a possibility to build relations and make consumers even more aware of the possibilities

Apple host seminars in their stores and brittish DIY-retailer BBQ offer tool training to women and children. Guess why? It works!

8. RFID will mean everything in service development

Metro Group have worked with RFID and other high tech devices in order to take service to a whole new level.

9. Don´t fake it-Make truly unique solutions

CB Perfumes takes personalized products to the extreme. Christopher Brosius, founder and owner states "People who smell like everyone else disgust me" indicating that everybody ought to have their own personal scent. And not surprisingly, this is what he offers. At CB Perfumes you can either choose to go through an interview of some 30 minutes where your preferences and personality is evaluated whereafter your unique blend from more than 5000 scents are mixed as you wait. You can also go for the option of recreating a "scent memory" from your child hood or other period in life when you felt comfortable. How about re-live your feelings by sniffing into a bottle of "Grandma´s kitchen"? This is true personalization.

So, take a look around you. Is showing up and smiling in your stores enough anymore?o

ASDA Living gears up

In 2007 , Wal-Mart owned Asda declared that they would go from 10 to 300 nonfood stores. This week they took a step further saying their goal is to be the number one nonfood retailer in UK within five years through a an offensive on-line presence and more Living Stores, the latter in a smaller format than previous locations.

The range include George clothing (on of the biggest private label fashion brands in the world), home electronics, furniture, CD/DVDs and health/beauty products.o

Thursday, February 18, 2010

Driving forces in channel development

No matter if you are a merchant of a crowded market in Beijing or a retailer in shopping centre in Birmingham or the Streets of Copenhagen, you can be absolutely certain of one thing: That your customers have never had so many options as they have today.

To say it frankly, there are few retailers, or suppliers for that matter, that would be missed if they suddenly, over night, would be extinguished from the face of the earth. As consumers, we are overwhelmed with possibilities and offers. One store, or chain, more or less, would considerably change our possibilities to buy what we wanted, at any given moment we wanted it. The world is full of similar retailers, selling similar products. The market is flooded with standardised goods in standardised concepts. So one of the biggest issues facing 99% of all retailers today is, in a world when we are no longer needed, how can we see to that we are wanted?

Globalization, the fact that retailers cross borders at an increasing scale and speed, is giving more options to consumers than they had yesterday. And during the same period that the retailers has grown from their respective local origins into the global monsters they are today, the availability of production resources has developed even more, as modern technology has found its way even into the otherwise labour intensive Asian factories.

After WW2, and during the golden consumption decades of the 50s and 60s, production resources of the world had a hard time coping with the demand of the growing consumerism of the west. All this is now a thing of the past. To say it at the very least, there are already too much products and production capacity to meet a real need, from consumers of the world. And as the earlier less quality minded Asian industries are moving into high tech and providing design up to the level of their western adversaries, they have moves up to being equivalent.

So what is the logical consequence when similar product sare being distributed by retailers under heavy pressure to increase volumes and saturate the market before their competitors do?

Needless to say, this affects price. And why shouldn’t it? In a world of abundance of equally good products, performing equally well the only difference lies in the price. And as the low price alternatives has moved up in quality, the medium price segment has been the target for many of the big box retailers, using their international presence to by volumes at the right place for the time, and then distribute it to the place where the buyer is. As one spokesperson choose to put it: “Bad products are´nt just that bad anymore.”

And when the market don´t grow as fast as the retailers expand their already vast distribution networks with yet another store, price is certainly in the focus.

But there is yet another aspect than bad product quality that has to be overcome if consumers should be willing to increase the share they buy on discount, and that it the psychological one. Namely, the fact that consumers have used their ability to pay a little more, and thereby expressing themselves as being at a certain level on the career ladder. In many western countries a large middle class, has led to a majority of the traditional retailers being in the medium price segment. And in a world with a direct correlation between price and quality, who would like to be the one buying at the low end.

However, the aspect of quality has changed along with the rising quality in general. Look at fashion retailing as one example. A few decades ago clothing were largely bought as durable investments that should last over a certain period of time. Fashion was at the high end, a not really at the reach of the large mass of consumers. Since then personal expression and individualism has evolved the public into being more interested in showing who they are. The durable aspect of clothing has given away to the fashionable aspect, and clothing is not really worn to the end of the technical lifecycle of the textiles.

The Spanish fashion gigants Zara and Swedish H&M have been the ones which have harvested from this transformation, and have to a large extent made it happen. While the traditional clothing retailer used to work with a few collections each year, Zara and H&M are constantly pushing new fashion to their store at a price level much lower than otherwise expected from a fashion retailer. Zara has a reputation of copying trends and model from the catwalks and then get them to the stores faster than the famous fashion brands themselves. The Spanish retailer has some 200 designer working full time to get the right models out to the stores faster than anyone before them. In a Zara-world, getting a top or a pair of trousers from the drawing board and to the stores in less than three weeks is an everyday operation. Zara launches two minicollections each week, using no promotions or tv-commercials whatsoever. There is no fixed assortment and as a true fashion retailer, it changes with what is hot right now. The store being their only medium, they are situated in a building with an “interesting architecture” and as consumers learn that they are launching new stuff at the speed of light, their customers come there often.

H&M has been growing internationally the last decades into being a hot fashion retailer, and hardly anyone buying from their 5th Avenue store in New York, where the windows change during the days to show a different offers to the people passing by at their way back from work, than what they saw when they walked buy on their way there, could guess that H&M still struggle with a low quality image of the elderly consumers in Sweden that remember its first years in a time were clothing where meant to last.But now, when fashion is changing faster than ever, who needs durable cloths? And can anyone doubt a retailer that has sold both Lagerfeld and Stella Mc Cartney outfits at discount prices?

The horn of plenty is leading to a situation where consumers have understood that whatever I want to buy, there is probably a better price somewhere else. And when they have slowly realised that low price necessarily do not mean low quality, the bargain hunting has reached a new level. Because, if one could find a product with the same function and similar perceived quality, at a considerably lower price, but without the frills of the market leading brand, would´nt that be a smart thing to do? And at the same time, wouldn´t one be a total moron to pay more for a similar product if one had the choice? This psychological change has made the low end to become the “smart buy”-segment.

To borrow the words of Allen C. Questrom, JC Penney Company: “While there once was a stigma at-tached with bargain hunting, the only thing consumers seem to be embarrassed about is paying the full price”.

That about sums it up…

From mainstream to extreme

So EDLP – Every Day Low Prices – retailers have challenged the medium price segment from below, possible by rising average product quality and boosted by consumers changed perception of what quality is all about. As discounters of all categories has moved across the continent, there is almost always a discount alternative within reach of all consumers.

German Aldi and Lidl within the supermarket segment.
Swedish IKEA within interior decoration
Finnish K-Rauta and German Bauhaus within DIY
British Dixon and German MediaMarkt within brown and white goods
Swedish H&M and Spanish Zara within fashion
American Toys R US within toys

The ones having the hardest time to cope with the newcomers are often the local, by tradition, medium price segment, mainly because the discounters of today use their massive purchase power to buy the same brands as traditional retailers do but at a lower price and then selling it buy less margins. And often having newer and better looking stores, who would want the old ones?

The medium price segment has, in general, been to similar in terms of quality and perception compared to the discount alternatives to be able to compete on the same level. That is the difference in price has not been up to par with the value it deliver. The medium price segment have not been able to deliver value for money, the option of self expression or any of the criteria needed to compete at the same level as the big box discounters.

So if you really want to stand out in a crowd it is the upper segment you have to go to, not necessarily luxury, but up to the premium level. The arrival of the discounters came timely as consumers demand of new products began to rise on every level. In a time where more and more wants to define their personality and show who they are, and at the same time have it all, buying some of the things you need at a lower price is almost necessary to be able to buy the things you want.

Looking at all the things any European fills (or litters) their home with, continuing buying everything at medium price level would not make room for all the consumption that any middle class wants these days. Anyone would expect to own a car, or two, a mobile per person, a DVD, a comfortable home, an ok closet given the line of work you do, the possibility of going on vacation at least once a year, and so on. The income of the working force has not risen in the same pace as the possibility to spend it. It usually takes some degree of compromise to get all the things you want. And this is where today discounter comes in handy. Discounters make it possible to by standardised products, with an ok quality at a low price, and thereby make room for some consumption in the premium segment within prioritized areas, primarily those who really define the consumer as an individual. So one person could by a BMW and the go to Lidl for cereals, while another person buy a luxury fishing gear and an Armani suit, while skipping the car totally.

Buying discount is no longer a thing for the poor, and buying premium is not only for the rich. The consumers jump from one extreme to the other depending on what the category and the product or brand means for oneself as an individual. If it helps define who you are in a good manner, then it is bought at the premium segment, and if it is considered an unprioritized commodity it could just as well be bought at the lowest price possible. And this is a major difference from yesterday, when everyone consumed at the same level as you were on the income ladder. The rich were buying luxury and the poor at discount heaven.

Markets with increasing sameness and competition, diverges from mainstream to extremes, that is the bulge that the medium price segment consists of, is flattened out and replaces by to minor bulges, one at the smart buy, and one at the premium segment. And at the same time markets diverge in another dimension as out of town category killers at the same time as convenience concepts pop up in neighbourhood and city centres. The extremes are growing, thinning out the middle.

This development has led to dramatic changes in the retail concepts of the mature markets of the world.

As a consequence of the increasing competition retailers are bringing new formats into the action. To a large extent, those formats could be fitted into four main categories of development, each with their own characteristics and success factors.


Discounters are the fastest growing retailers today as an overcrowded marketplace logically breeds price competition. The discounters generally offer a smaller range to be able to create an efficient supply and logistic engine to feed the stores. For some consumers they are a supplement of the ordinary super market for specific items, and for other people the main store.

Considering that 90% of a typical shopping basket for a family is built by choosing among some 150 articles, it is understandable to grasp the ongoing behind the recent growth of the discount sector.

Discussing discounters it is also critical to realise that discounters are not all the same. Some hard discount concepts like Aldi carry 90-100% private labels, while other like Lidl supplement PL with the market leaders in every category, if possible, giving the consumer a reasonable offer even if brand con-sciousness is a factor. Other growth strategies includes small scale, small village locations, such in the case of the German Schlecker.

The psychological factor behind the public acceptance of buying cheap in terms of a polarized consumption has been discussed earlier.

Also, several discounters has moved up on the image ladder projecting themselves as “a real supermarket” by shaping up store environment, shopping experience and adding certain products to build a quality image. An example of the latter is Danish Nettos incorporation of ecological products. Through better logistical systems the number of SKU:s can also be set at an higher level to meet consumer demands and play the game of being, the real thing.

Being a true hard discount operator, controlling costs within the organisations are critical to be able to achieve financial goals. For companies such as Aldi typical staff costs is around 3-3,5% of total turnover, and the small range combined with a well oiled logistical machinery are keeping stock costs at some 0,01% while marketing stays around 0,1% of the turnover. Total operational costs (excl. goods) are kept below the 10% level. Keeping costs down are essential to be able to keep prices down.

Dealing with discounters

Discounters are serious about their price image and totally committed to preserving their image as an every day low price provider. Any branded goods supplier trying to tell them stories about brand strength being a reason to sell their goods at a higher price are shown to the door, and suplemented buy a non-branded product.

From a brand owner and supplier point of view, this is bad news at first look. On the other hand, neglecting to se the upside of discounters, could prove disasterous given the fact that discounter share of many markets are up to 30-50%, leaving a small volume for “the others” to battle over.

This being the fact, lets look at discounters from a positive perspective:

Their size and market share make turnover/SKU reach fantastic figures if compared to their competitors. Discounters are good customers if correctly understood and treated as what they are – a logistic battle cruiser always looking for their next target.

- A campaign together with a discounter will move large volumes
- They know what the want and usually leave little room for understanding.
- Centralized organisation makes negotiations uncomplicated

Discounters can, due to their large share create fast penetration of new products and move markets shares, as well as help getting over stocked items out of the warehouse.

On the dark side of things, discounters are price leaders, closely monitored by other operators, and to some extent the ones setting the standard on key products. Discounters must be treated with respect.

Out of town hypermarkets

As demand grows so does the stores. For the car owner, having a time conscious family, making weekly shopping trips, hyper markets are the format of choice.

Providing a range of more than 30000 SKUs, a number which in some cases in Germany and the US could be multiplied with two or even three, the multitude makes all the difference.

Typically situated out of town, the hyper markets offer a huge assortment of both food and non-food articles, striving to get as much share of wallet of their customers as possible. With this in mind they are also the number one developer of service products such as loans, insurances and so on.

Having a range with a multitude if choices in every category, some hyper markets exists as premium suppliers of ecological fresh produce while others are in the lower price segment. Having a large degree of families and given the market development as a whole, hypers on the European arena usually leans towards the discount side, rather than being the premium provider, at least as an image. The size of the assortment leaves room for at price/quality ladder were both the high end products fits along with the bulk family pack at discount prices. As families are a key target segment, price is always in focus, in terms of being able to bring a low price offer to the market at any time, in any category. There is always a good offer of the week.

Dealing with hypers

Hypers have two main differential factors:
Size and price. That is the ability to provide the entire need for even the picky consumer looking for a special brand, as well as providing an EDLP-offer to pay for the gasoline needed to go to the store.

As with discounters hypers move huge volumes, but mainly on campaign-SKUs. Due to logistical reasons hypers also make cuts in their assortment, putting C-brands out in the cold in favours of PL.

Hypers are an interesting partner to get the level below top sellers to the market as they need it to build the image of the total provider. The potential of being a campaign-SKU provider needs not to be addressed.

Neighbourhood stores turning into convenience providers

Yesterday’s neighbourhood stores providing the basic needs for the customers are slowly adding products and services to attract an ever more demanding, time conscious audience.

Stopping by at the convenience store these days could mean gripping a cup of latte, or a snack engineered to fit on-the-go consumption or a quick stop on the way home from work to get something for dinner. On many markets a large degree of the popula-tion eat out at night or deciding what to have for din-ner at the last possible moment, creating the need for a large “pantry” at close range, as going to the super market seems as a major event as a daily routine. To “dock” into the convenience station at the corner requires much less time, and energy.

This has created the modern convenience store with a wide but shallow range of staple goods often complemented with some form of MRTE - Meals Ready To Eat, on the go or at home.

The petrol stations are often providing the same service and function for the driving audience.

Dealing with convenience stores/petrol stations

Convenience stores are interested in one thing only, to be able to provide convenience at any time, thereby providing repeat visits.

This means that they have to carry well known brands in many categories, with package sizes adapted to either smaller households or on-the-go consumptions. No one goes to 7-Eleven looking for a 20 kg sack of flour.

They are also interested in bringing in new interesting products giving new convenience experiences for their customers.

Premium players create innovative shopping environments

While discounters roam the market with their lean and mean assortment/price-combination, other types of players emerges in the other end of the market.

Premium providers, either in the form of evolved super markets, product specialists, serving a small niche, have “everything” within a category or experience shops inviting the consumers to be involved in the product itself.

The premium segment grows as a counter weight to the discounter. However, the volumes cannot be compared to the discounters, but still, the premium providers are an interesting factor adding vitality to the market, above the level of the traditional supermarket.

One premium providers that deserves mentioning are M-Preis, an Austrian supermarket having the pay off, the Seriously Sexy Super market. Combining an astonishing architecture, unique for every store, with a wide assortment lifts M-Preis far above the average.

Others include Vom Fass, niche operator selling unbranded oil, vinegar and spirits enabling their customers to pick from over a hundred bottles, combining it with their liquid of choice and thereby creating their personal product, at the same time as they have an interesting chat at the store.

Dealing with the premium provider

Premium providers survive by being special, enabling them to charge more due to the shopping ex-perience as a whole.

Therefore selected and small exclusive brands always should find their way into the premium alternatives, which also add life to the category as such, as it is often frequented by connoisseurs and early adopters looking for the next kick.

Needless to say, price comes second.

Logistics and branding

Apart from the four main development directions there are also the branding and logistics powerfield to take into consideration. There is a common misconception that low price operators cannot use branding. Anyone that have visited a flagship store of an discounter knows this is not true. On the other hand, a streamlined logistic optimizes concept could be a part of a premium concept. Beeing a premium player does not exclude cost optimization!o

Wednesday, February 17, 2010

Facing the facts

Just a few years ago, the large retailers really needed major brands, making them vulnerable to pressure from suppliers.

Brand hybris is a thing of yesterday. Retailers are no longer only a distribution operation run by small scale merchants, but have evolved into branded companies themselves. Understanding of the retailers own respective strategy, on an overall global, country and concept level is a key issue.

The role of the supplier is to help the customer to reach their respective goals of differentiation by giving tools of relevance, to the customer in the situa-tion the customer meets the consumer. That means that the supplier should walk the same shoes as their respective retailer, and align its production according to the direction where the retailer is going, thus provide SKUs that is engineered and priced to fit the retailer’s respective strategy.

Retailers want to be understood. The first role of the branded goods provider is to understand.

Brand owners are stumbling under the pressure of shorter product cycles and lesser media attention, along with hard core SKU rationalisation.

There are no power brands – only brands that sell more, and brands that sell less. The traditional view of brands as sacred assets that must be allowed to exist just because they have a long history or are cherished by key officers in the organisation, or by small groups of consumers at some time of the years is no argument for keeping a brand or SKU in production. Mind space that cannot be converted to shelf space is of no use whatsoever. There is no room for politics in internal discussions or defending babies that should be able to stand on their own. Sales figures are the only relevant measurement of real brand strength. Mind space is not paying the bills.

The role of the supplier is to help the retail to reach their respective goals of differentiation by giving them tools of relevance, to the retailer in the situation the retailer meets the consumer. Brands are still assets but needs distribution to be able to bring value to their owners.

To get to the shelf relevance to the retailer and thereby the understanding of the retailers goals and how the specific SKU should help to reach that goal, is crucial. There is no substitute to distribution.

Therefore any internal discussion on any supplier should start with the question, "in which channels do we deserve to be on the shelves?"

Discount grows by the minute

The discount channel is, largely, virgin land for many supliers. A traditional view on branding as well as seeing discounters as a threat rather than a potential volume channel has hampered the development of the distributions via this channel. The fact that the Stockholm office is situated far from where the action is, is also a fact that has to be considered. Category Directors and Brand Managers, along with their consultants, must understand the dynamics of local markets and move away from 20th century branding theory were everybody can build a brand.

Discount is gaining power. If suppliers do not choose to align with the needs of this specific channel, and the threat it constitutes to others, the share on the markets with a growing number of discounters will decline as Every Day Low Prices gets to be the standard on these markets.

The role of the supplier is to provide SKUs that could be priced in accordance to the need of the market. No retailer sets the price level on its own. The market does collectively. But for the branded goods provider trying to push its brand portfolio to anybody this means bad news.

To understand and act to address the needs of the discounters is a major task on several markets.

PL is an essential part of key retailer’s strategy

Price and differentiation are two different reasons for launching a private label, and the PL share is on the rise on a global scale as competition sharpens.
Private Labels means that the retailer is taking charge of several functions such as marketing, certain product development and other things, and that the supplier to a large extent merely is a production facility. In special cases branded good has been converted into PL buy being offered exclusive distribution.

There are several key questions that need to be taken into consideration.

-The volumes that retailers PL have and their rate of growth as consumers accept them at a larger scale. PL-opportunity means large volumes.
-The question of available capacity at plants. Do we have spare capacity that makes us loose money?
-If a retailer approaches with the possibility of PL-production, any cost based calculation must be stripped from normal administration, product development, and internal procedures and so on. PL-production requires a dedicated organisational function.
-If a retailer wants a PL, he will get it. Saying no will bring the volumes to anyone else.

In a world where the supplier understands the needs of the retailer, he will also understand the need for a private brand, and be able to provide it if asked.

Addressing the retailers relevant needs for differentiations are crucial to stay and grow in the market.o

Is the supermarket a part of history?

Being the original self service concept with a history of half a century, the one format loosing to any challenger, is the super market. Being the traditional choice due to its reasonably priced/reasonably sized assortment situated at a popular location, the super market looses to price conscious shoppers choosing the discounter for the staples, the deli for the extras and the convenience store for the things that they need right now.

On the German market, discounters has replaced super markets to a large extent, while in Denmark, Sweden and other places the battle still rages with a large degree of the market still in the traditional channels and with players fighting with a wide array of weapons, some on the offensive and some en-trenched defending what they have.

The reaction to discounters and other formats are mainly:

Imitation of discounters:

Cutting out SKUs in each category enabling to lower prices though not to discount levels.

These actions are needed but also prompted by “normal” competition and increased pro-ductivity demands.

Heavy private label saturation.

Private label products supplement market leader and second runner up, as a low price alternative or a differentiation factor, adding quality image to the retailers store brand.

Creating discount ranges

Especially Danish supermarkets has followed the strategy of creating a 200 or 300 SKU wide “EDLP-assortment” with basic items to battle the discounters.

Imitation of premium providers

Focusing on fresh produce and service density

Going back to basic, and providing high qual-ity fresh produce for the quality conscious consumer is an often used tool, though one that increases cost and normally lowering margins. This has to be done will great con-sequence if the customer should be able to tell the difference from today’s stores.

Upgrading shopping environments

Adding new fixtures and upgrading stores to new concepts is a weapon that is creating the need for heavy investments, and needs to be really differentiation and innovation to be more than “another rebuilt store”. This is a way to imitate some of the premium providers.

Consumer differentiations

Differentiation of stores to attract and stand up to the needs of different type of target seg-ments such as Spanish Plus Fresc, with different departments in the shop depending on if you are health conscious, interested in new products, living in the fast lane and so on.

Bringing in eye candy and new hot premium products

New displays and special selected ranges, once again borrowing the tactic from premium providers, though doing this to the extent that creates an impact means a large investment.

Imitating convenience stores

Creating quick-shops

The idea behind quick shop is to that offer a few selected SKUs just inside the entrance enabling the hurried consumer to grab a few basic things like milk and bread for tomorrows breakfast, without having to instead of rush-ing to the nearest convenience store. I e a convenience store within the super market.

Doubtlessly, the competition will lead to a place were the term super market no longer is relevant to describe the stores that fits the standard criteria for being a supermarket. Some players will move into soft discount and others be converted into almost truly premium concept. Smaller supermarkets, especially in city locations will probably turn into convenience type stores while larger ones will be squeezed into compact hypers.

The defensive actions taken by cost cutting, which often should have been done a long time a go, and going back to delicatessen for example is not neces-sary something that the customer consider are worth paying the price for. And no matter what, fighting with price against a discounter is a war of attrition a super market cannot win, as it cannot win the war of costs.o

Tuesday, February 16, 2010

Chocolate addicts behold

Chocri is a netbased store offering customized chocolate for any preference. By combining either milk, white och dark chocolate with spices, nuts, grains and toppings and other ingredients some 10 billion combinations are possible, enough for any chocolate craving consumer on the planet. The chocolate is organic, fair trade and the company also donates a percentage to DIV, a help organization that cares for children on the Ivory Coast, home of much of the choclate that is sold by Chokri.o

Monday, February 15, 2010

Breaking up

Jess Cartner-Morley, writer, wrote a letter to her once-favourite retailer Top Shop explaing why she wanted to break up their relationshop and UK Guardian newsletter published it.

This could be seen as a parallell to the "Bring the love back"-campaign that I mentioned in a previous posting.

For a unsatisfied customer breaking up is not hard to do...Read her letter here.o

The top trends for 2010 by the Trend Hunter

These are the top 20 trends from Trend Hunter TVo

Retail design: Shop Windows 2.0

Fashion retailer New Look New Look selling shoes and clothing to men, women and children took their concept one step ahead when opening their Oxford Cirkus store. With a flexible system of lighted boxes apart from other eyecatching devices there is place for a lot of merchandise to be shown to the passing crowds.o

Who's buying what?

You are what you buy. This has been the mantra for the last decade, when lots of consumers have been defining what they are by what they buy, no matter if it is in the premium segment or from Wal-Mart. The term smartbuy became a lable for products with a high quality and a lower price than the market leader of the category, and as the discount operators like Target have invested even more design into their products this gap have widened.

Spending as a definition of oneself has no taken a new turn into social media.

While social media growth have been focused around around Twitter and Facebook, as the mainstream mass social media, nisches of this industry is constantly growing as well. is a newcomer enabling consumers to share their new things with friends and allow them to be commented on. Of course an Iphone applications allows the user to update the on line profile while in the store.o

Bring the Love Back

While most advertising during the recession has been geared towards price and producs, and marketing budgets has been reduced in order to control costs, the advertising industry see 2010 as an opportunity to get back on track.

The campaign Bring the Love Back is a reminder for retailers to keep their focus on building honest relations with their customers, as the budget goes back up to pre-crisis levels, instead of going back to ego-boosting campaigns.o

Sunday, February 14, 2010

"The world does not need another Vodka...

...introducing another Vodka". Swedish GeVe Spirits has been producing the Ginseng Vodka for some years now, in a bottle designed by Lars Hall. Winning the Gold Medal for Best Design and Packaging in Vodka Masters in London in 2008 and Platium in the flavoured Vodka category in SIP, LA just before Christmas, it has been standing out as a truly innovative product despite the fact that, as GeVe Spirits themselves say on their web, the world does not need another Vodka.

GeVe Spirits followes up the success by launching the premium Smooth Vodka, an ecological product and internationally recognized by Gold Medal in Vodka Masters in 2008, Gold Medal in Cannes 2009 and Double Platinum and Gold in SIP Awards in LA in November 2009.

Of course expectations are sky high for the new Mystical Red berry vodka with tones of pommgrenate and raspberry,

This clearly indicates that the innovations in the vodka category is far from over. Read more here.