…. and about 1 in 10 of them are fraudulent.
=============
Recently, I returned an item that I had I bought on Amazon.
That’s a rare event for me, so I was pleasantly surprised that the process was relatively hassle-free … it took a couple of minutes to get Amazon’s return authorization … it was a short drive to a UPS store … the transaction at the UPS store took about a minute … my credit card was credited within a couple of days.
A couple of things struck me during the process:
> Most of the people in the UPS store were making merchandise returns — apparently, that’s become a big business for UPS
> Most of the returns were literally thrown into a big box … unpackaged and without paperwork … what happens to that stuff
Hmm
============
With that experience fresh in mind, I happened to come across a CNBC article channeling some data from a National Retail Federation report.
> In 2021, the US Retail Industry reported just over $1 Trillion in online sales
> Of the $1 Trillion, $218 Billion (20.8%) was returned for credit
> Of the $218 Billion, $23.2 Billion (10.6%) were fraudulent returns
> The $23.2 Billion of fraudulent returns consisted mostly of:
“Wardrobing” … wearing or using an item for one occasion and then returning it
Returning items that had been shoplifted, stolen, purchased from another retailer or purchased fraudulently (e.g. on stolen credit cards)
Resulting from employee fraud or employee collusion with bad actors
Not surprising, a big issue for Amazon and other retailers is what to do with the returns.
The cost of transporting, receiving, sorting, inspecting, repackaging and restocking returns is a costly logistical nightmare … especially for relatively low value items.
So, except for higher priced merchandise, the returns are simply thrown into a big box (as I experienced at the UPS store) … and the box of miscellaneous stuff is sold to scavenger resellers at pennies on the dollar.
See the CNBC articlefor the story of one couple who scavenges and resells returns.
Presto: logistical problem solved…
==============
P.S. Don’t feel too sorry for Amazon and other retailers. Based on my experience, the retailers just charge the cost of the returns back to the manufacturers who treat it as a cost of doing business.
It used to irk me when retailers would promote their “easy returns – no questions asked” policies, knowing that my company (not the retailer) would be funding the retailer’s largess.
Amazon Prime is pushing hard for sign-ups and online activity.
Conter-indicator: Recently, I’ve done more store-shopping than I have for a while.
=====
Bought a TV from Best Buy online and satisfied my need for instant gratification by picking it up at a local store.
Glad I did, because the TV had an “issue” and needed to be replaced … a quick 2nd trip to the store got me up & running with virtually no hassle.
Bought a new boat motor at West Marine.
Shopped for one online, wanted to touch the real thing.
Glad that I did because I ended up having a seasoned pro salesman introduce me to a motor technology that I didn’t even knew existed – eco-friendly propane powered outboards.
Bought one.
That said, my 30-something kids scoff that they by everything online.
Sound familiar?
OK, so what’s the answer?
What percentage of retail sales are now being done online?
In class this week, I was noting that for many (most ?) retailers, the difference between low (on no) profits and extraordinary profits is getting people to throw just one more item into the shopping cart.
Well, Business Insider must have been listening in …
=====
Specifically, BI offered up 18 ways that retail stores get us to buy more stuff.
Consumers are spending more on themselves this holiday season. This trend is boosting retailer’s sales for now but raising concern of consumer spending after the holidays.
Consumers are taking advantage of deals to snap up items for themselves and non-gift items for their families.
A few years ago, the FTC was hassling Sirius and XM Satellite Radio when they wanted to merge…. they fretted that a Sirius and XM would jack up subscription rates.
Apparently the FTC hadn’t heard of satellite radio’s main competitor – free, over-the-air broadcast radio,
The FTC pondered the case for so long, that the companies lost millions of dollars The companies finally merged, just in time to get one-upped by other media.
Now the FTC is turning its watchful eyes on the dollar stores.
From the HBR blog site: “The Myth of E-Commerce Domination” …
Forrester’s data on the top 30 product categories (which account for 97% of total e-commerce sales) indicates that e-commerce growth is clearly slowing overall:
If historical trends continue, e-commerce’s share of retail will rise from 11% today to about 18% in 2030, way below projections from a few years ago.
Of course, 18% isn’t shabby, but it’s not exactly world domination.
In class this week, I was noting that for many (most ?) retailers, the difference between low (on no) profits and extraordinary profits is getting people to throw just one more item into the shopping cart.
Well, Business Insider must have been listening in …
=====
Specifically, BI offered up 18 ways that retail stores get us to buy more stuff.
In class this week, I was noting that for many (most ?) retailers, the difference between low (on no) profits and extraordinary profits is getting people to throw just one more item into the shopping cart.
Well, Business Insider must have been listening in …
=====
Specifically, BI offered up 18 ways that retail stores get us to buy more stuff.
In one svelte move, JC Penney launched near-total, point-by-point repudiation of ex-CEO Ron Johnson’s attempt to turn the retailer into a chain of Apple stores.
Now, everybody’s piling on Ron Johnson – the former Apple exec who flamed out trying to turnaround JC Penney.
He didn’t seem to value JCP’s employees (which might be understandable) .. and he didn’t seem to value JCP’s customers (ouch).
One pundit says that Johnson’s downfall was his inability to connect with JCP’s core customers.
Mark Ellwood, a retail expert, says that Johnson’s obliviousness to the plight of his value-conscious customers begs comparison to another doomed leader.
“Ron had a Marie Antoinette-ish approach to the customers … He always seemed slightly embarrassed that he was dealing in middle market product.”
Like the “let them eat cake” French queen, Apple store prodigy Johnson could not relate to the people who will still coming to the JCP stores..
Penney’s customers became frustrated and confused when JCP stopped discounting merchandise.
Johnson’s alma mater, Apple, almost never has sales, but that approach doesn’t work for JCPenney shoppers, writes Dale Buss at Forbes.
“His attitude … was very much along the lines of ‘let me tell them what’s good for them,’ rather than ‘tell me what you want as a customer and let me see how I can achieve that.'”
“[Johnson should have gotten] to know J.C. Penney shoppers a bit before he decided to treat them all like eager iPhone buyers who are so enamored of the merchandise that they don’t pay any attention to price”.
Earlier this week we posted that JCP CEO Ron Johnson insisted at an investor conference that Penney’s “marketing is really starting to connect” with customers … and that in 2013, Penney will become “a happening place.”
That was 2 days ago. Then yesterday …
According to USA Today: CEO Ron Johnson announced a strategic evolution to its plan to offer everyday low prices that customers could count on rather than the nearly 600 fleeting discounts, coupons and sales events each year.
Answer: Nobody yet, but some Macy’s customers think that it would be a good idea
Facing a petition from consumers to ‘dump’ Donald Trump as a spokesperson, Macy’s claims that marketing and politics have nothing to do with each other, despite using some of Trump’s famous political comments as inspiration in the company’s new campaign.
As a petition encouraging Macy’s to “Dump Donald Trump” continues to gain steam, with nearly 558,000 signatures, the retailer shows no sign of dropping the outspoken tycoon.
Most press reports have said the Black Friday was boomville.
Really?
Not according to Gallup which reported that “self-reported spending” during the Black Friday weekend was down almost 20% from last year … from $103 to $84.
Punch line: A record number of shoppers spent Black Friday weekend shopping for deals, revealing new consumer trends present this holiday shopping season.
A record 247 million shoppers visited stores and websites over Black Friday weekend, up from 226 million last year. The average shopper spent $423 this weekend, up from $398 last year, helping total spending reach an estimated $59.1 billion.
Here arefour things we’ve learned from the holiday-shopping kickoff: (more…)
Punch line: Red Bull is riding the stratos wave, launching 3 new flavors for Red Bull fans. 7-Eleven will carry the new items exclusively until they are released more broadly later this year.
More than 8 million YouTube viewers watched daredevil Felix Baumgartner plummet at the speed of sound from 24 miles above Earth to a lonely spot in New Mexico. And you can bet that every one of them noticed the Red Bull logo plastered on his spacesuit thanks to the company’s major financial investment in making the space drop occur.
It was a giant step for sports sponsorships, one that likely inspired more than a few of those watching at home to sample the brand. Now Red Bull is offering up a few more flavors to help folks feel a rush of their own. However, if consumers want to have a taste of the new flavor and can’t wait till next spring when they are released on a wider scale, they’ll have to go to a 7-Eleven. The convenience store chain has signed a deal to become the sole distributor of Red Bull’s first three flavor extensions, through the end of the year.
Energy drinks were a $9 billion business in the U.S. last year, in no small part due to the partnership between Red Bull and 7-Eleven. Said a 7-Eleven rep, “As our guests look to refresh and re-fuel morning, noon and night, enthusiastic Red Bull fans can get their first taste of these new flavors only at our stores. The Editions from Red Bull will launch nationally in March, so we know Red Bull lovers will be eager to get their hands on them early.”
Last year, Toys R Us became one of the first big-box chains to launch its Black Friday specials at 10 p.m. Thursday. This year, Wal-Mart matched the move.
So Toys R Us opened its doors even earlier, at 9 p.m.
“This is just the beginning,” said Ken Homa, professor of marketing at Georgetown University’s McDonough School of Business. “Next year, we’re likely to see everybody doing this. . . . The guys with the first opportunity to get to somebody’s pocketbook are likely to take share away from their competitors.”
Accurately quoted and, if I must say so myself, captures the essence of my message … and my style.
Abercrombie & Fitch’s skin-filled ads and nightclub vibe once delighted American teenagers and infuriated parents.
Today, many aren’t even paying attention.
The once-edgy retailer has lost a third of its market value in the past year as it grapples with falling sales in Europe and the U.S.
While Abercrombie blames the economy for its woes, brand consultants say it also has failed to change with the times.
Today’s teens are underwhelmed by the half-naked models and blaring, dimly lit stores.
They’re also less inclined to wear Abercrombie’s longtime uniform of pricey denim and graphic T-shirts.
Sales at non-U.S. stores open at least a year plunged 26 percent in the second quarter.
Abercrombie shuttered 71 U.S. stores in its most recent fiscal year, and in February said it will close another 180 through 2015.
Today’s teens are “radically different” from other generations … and have a bevy of options thanks to the boom in fast fashion from Forever 21 and H&M.
Abercrombie is “positioned well to take advantage of this group’s desire to be rebellious and indie and different, because that’s what the brand is about … but right now the product mix doesn’t communicate that or facilitate it.”
Michael Francis helped make Target a roaring success. So, JC Penney CEO Ron Johnson offered him a $12 million signing bonus to jump ships. Francis took the bait.
Bad decision …except for the $12 million … which Francis gets before the tax rates jump on Jan. 1.
Now, Francis taking the fall for Johnson’s “no sales” strategy’s failure to ignite consumer interest.
Johnson’s still claiming that his idea is fine but it wasn’t marketed right. That there was a failure to communicate.
After all, a sleek logo and aggressive “retail list price maintenance” worked at Apple … so why shouldn’t it work at a commodity rag place like JCP?
J. C. Penney ousted its JC Penney brand president, Michael Francis.
Francis was hired last October “at great expense” — a whopping $12 million signing bonus — from Target.
He is seen as taking the fall for his boss, company CEO Ron Johnson, the former Apple top retailer who oversaw JCP’s new brand strategy in January.
Johnson who championed the idea of killing coupons and sales in favor of “fair and square pricing” (a reference to its logo), so-called “month long value” and “everyday low” pricing.
JCP recently scrapped that strategy and is re-embracing the dreaded s-word — “sale.”
CEO Johnson “will assume direct responsibility and oversight of the company’s marketing and merchandising functions.”
Ken’s Take: If I were JCP, I would have fired the Apple guy and kept the target guy … eventually, they’ll fire the CEO, too … and probably promote their VP Finance to interim CEO … as soon as it becomes evident that the critical Christmas season is a bust
* * * * *
In case you missed it, I was on NPR a couple of weeks ago commenting on the JCP strategy.
JC Penney is ramping up its promotional messaging in the wake of a dismal first quarter.
The retailer has added "Best Price Fridays" to its calendar
Certain products are marked down on those days, and the lower prices are in effect until the product sells out.
"The additional Best Price Fridays equates to adding promotions and is a step away from the company’s pricing strategy, suggesting that the company is willing to forgo its original thinking."
Store associates also have been instructed to place stickers with new prices for best price and month-long value items next to, rather than on top of, original prices.
The new approach will better highlight savings for customers so that they can … "Do the Math" .
"The change in strategy is an admission that the company’s existing pricing strategy has flaws — less than 120 days since Ron Johnson’s new model took course on Feb. 1."
In discussing first-quarter results, executives admitted there has been confusion surrounding its pricing strategy and lack of coupons.
Shocker: Shoppers like deals and find it incredible (i.e. not credible) when a promotions-intensive retailer claims to have “seen the light”.
Punch line: JC Penney’s is trying to re-cast itself as the “fair & square” retailer. So far, the dogs aren’t eating the dog food. Why? It’s simple behavioral economics. People are predictably irrational.
Personal note: When I was at Black & Decker, we tried to lead the industry out of constant rebating. You know, $5 back if you mail a receipt, UPC code, etc. to some PO Box in Texas.
When we stopped offering rebates, competitors doubled their’s and ate our lunch.
JC Penney’s “Fair & Square” campaign, which launched on Feb. 1, appears to be a disaster.
Revenue dropped 20 percent; customer traffic fell 10 percent; the company lost $163 million in the 1st quarter.
Could we have a moment of silence please for what might be the last heartbeat of honest price tags?
Not only did Penney’s plain pricing structure fail to attract fair-minded shoppers – it “repelled” them.
Apparently, if a firm tries to educate consumers on tricks and traps, and tries to offer an honest product, a funny thing happens: Consumers say, “Thank you for the tips,” and go back to the tricky companies, where they exploit the new knowledge to get cheaper prices, leaving the “honest” firm in the dust.
“Once you educate consumers on the right way to shop, they will seek out the lowest cost store.”
To oversimplify, here’s Penney’s problem.
JCP told the world that retailers only offer their best prices during crazy sales, and Penney stores would no longer host them.
Sensible consumers apparently took that information to heart and decided to simply wait for such sales at other stores.
As an added benefit, Penney lowered consumers’ search costs, because they now knew they didn’t need to bother driving to a Penney’s store anymore.
Penney’s is also leaving a lot of money on the table by rejecting a phenomenon known as “price discrimination.”
Some people have more money than time, and some have more time than money.
Some shoppers don’t mind spending hours to save $20; others would gladly give a store $20 to escape quickly. Smart retailers get money from both.
By killing couponing, Penney has eliminated its ability to satisfy price discriminators.
But the real problem is Penney’s ill-fated attempt to cast itself as the only fair poker player in a game of cheats.
Shoppers just aren’t buying it.
However unsophisticated consumers are, very few of them believe a pair of shoes bought at Penney’s everyday low price will be cheaper than a pair of shoes bought at Macy’s on clearance with a 25 percent off coupon.
Punch line: Ron Johnson earned fame by designing Apple Stores. He was lured to JC Penney to inject some of his merchandising magic. Johnson immediately set out to remake JCP into Apple Stores: no discounting, corner boutiques, hangout areas. Based on initial results, it’s safe to conclude that JCP isn’t exactly Apple. Hot, world class products can make a lot of store formats work … but, apparently, hot store formats can’t make “ordinary” products explode.
J.C. Penney CEO Ron Johnson is getting a taste of what it’s like to run a retail operation without world-beating products, and so far it is not pretty.
JCP is in the early stages of a transformation led by Mr. Johnson, the former senior vice president of Apple’s retail operations who took over the retailer last fall.
Mr. Johnson, who won plaudits for reinventing the retail experience with Apple stores’ clean lines and empty space, has laid out an ambitious yet risky plan that involves carving stores into a warren of specialty shops, turning the center selling space into an entertainment and hangout area, and eschewing constant “sales” in favor of lower prices every day.
So far, consumers don’t seem to like the strategy,
Company executives said that weaning of shoppers from their coupon addiction has hurt sales and store traffic more than anticipated.
65% of sales were at full price, but store traffic dropped 10% and average customer spend dropped 5% compared with a year earlier.
JCP’s quarterly earnings report marked the first time that investors could gauge the impact of the new strategy.
The company missed nearly every financial target it had set for the latest quarter.
The retailer reported a $163 million loss, more than twice what analysts were expecting.
Same-store sales slid 19% … margins narrowed to 37.6% from 40.5%.
Investors whispered to each other about the “bloodbath.”
Penney’s shares plummeted 13% to around $29 as the company suspended its quarterly dividend and announced that it will not meet its previous annual earnings target.
Fitch Ratings lowered its credit ratings on Penney to junk territory, citing risks of rolling out the new pricing strategy.
The earnings report is a blow to Mr. Johnson, who said the turnaround has been a lot harder than management expected.
* * * * * Ken’s Take:
(1) When economic times are tough and daily deals (think Groupon) are the rage, it’s a fool’s mission to try peddling “ordinary” merchandise at list price. You’re just a sitting duck for competitors who will discount off your benchmark price.
(2) Unless you have exclusive, hot products or a substantial competitive cost advantage (think Walmart), everyday low pricing won’t work … you have to provide a lot of shopping “experience” to justify higher prices.
(3) Stop by a JCP store and ask yourself: Are these folks clamoring for a shopping “experience’? Or, flip the question: Are there a lot of folks who are looking for a shopping experience thinking “let’s rush over to Penney’s”?
Target is asking suppliers for help in thwarting “showrooming” — that is, when shoppers come into a store to see a product in person, only to buy it from a rival online, frequently at a lower price.
Target suggested that suppliers create special products that would set it apart from competitors and shield it from the price comparisons that have become so easy for shoppers to perform online. Target asked the suppliers to help it match rivals’ prices.
Vendors are likely to have little choice but to play ball with Target because of its clout as the second-largest discount chain.
Some analysts said Target’s new tactics are unlikely to reverse the showrooming trend.
Online-only retailers have significantly lower labor costs and, at least, for the time being don’t collect sales tax in most states.
Amazon can sell products so cheaply because it uses its other profitable units — such as cloud data storage and fees it charges others to sell on its website — to subsidize the rest of its business.
Punch line: Due to low usage rates and limited popularity among younger shoppers, self-service checkouts are becoming phased out at a few retailers. Yet, these self-checkouts can result in lower labor costs. A cost vs. benefit situation results…
… Despite an almost universal dislike for standing in long or slow checkout lines, an overwhelming majority of shoppers opt for cashier-assisted lanes instead of self-service, according to the 2011 “Food Retailing Industry Speaks” report …
Self-service checkouts — introduced nationwide about a decade ago — have fallen in popularity. About 16 percent of supermarket customers used the self-service lanes in 2010, down from almost 20 percent in 2006 …
Almost 85 percent of customers choose a cashier to ring up their purchases when at least one self-service lane is available …
Perhaps as a result, supermarket chains such as Albertsons of Boise and Big Y Foods are removing self-service checkouts …
Self-checkout lines get clogged when customers need to wait for store staff to assist with problems with bar codes, coupons, payment problems and other issues that invariably arise with many transactions.
Stores that remove self-service checkouts are creating more opportunities for customers to interact with the staff, thus increasing customer service …
Best Buy concluded that companies are often oblivious to the fact that not all customers are profitable ones. Some are very lucrative to deal with, while others cost more to sell to than the business is worth.
They called the first group angel customers and the second demons.
By catering to the angels, companies can reward customers, employees and shareholders alike.
In short, here’s how it works: Figure out which customers make you the most money, segment them carefully, then realign your stores and empower employees to target those favored shoppers with products and services that will encourage them to spend more and come back often.
Sounds good.
Unless you’re slotted as a demon, in which case you get shunned as profitless instead of being cultivated for your potential.
Even at the time, critics argued that intentionally dissing a bunch of your customers was a bad idea for retailers. Someday, you may just need those demons to keep you afloat
Well, it seems that those days have come for Best Buy.
In a nutshell, the author points out that a nimble Amazon is cleaning Best Buy’s clock, that killer electronic products are few and far between, and that having money tied up in brick & mortar isn’t where you want to be these days.
He forgot to mention the demons … maybe they’re getting their revenge.
Punch line: This holiday season Patagonia went on a limb and launched a “Don’t buy this jacket” campaign – including a full page ad in the NY Times – to address our culture’s love of consumption and the impact in has on the ecosystem. Do you buy it?
Patagonia raised eyebrows with its Black Friday/Cyber Monday message this year — “Don’t Buy This Jacket” — including taking out a full-page ad in the New York Times.
It’s all part of the brand’s Common Threads initiative, which promotes sustainability and avoiding waste.
The message: “Cyber Monday, and the culture of consumption it reflects, puts the economy of natural systems that support all life firmly in the red. We’re now using the resources of one-and-a-half planets on our one and only planet.”
…”It’s time for us as a company to address the issue of consumerism and do it head on. The most challenging, and important, element of the Common Threads Initiative is this: to lighten our environmental footprint, everyone needs to consume less. Businesses need to make fewer things but of higher quality. Customers need to think twice before they buy.”…
On the Web, every click and jiggle of the mouse helps e-tailers customize sites and maximize the likelihood of a purchase.
Brick-and-mortar stores have long wanted to track consumers in a similar fashion, but following atoms is a lot harder than following bits.
For the most part, they’ve been forced to rely on consumer surveys.
“The problem with survey research is the consumer can say one thing and do another.”
To get a better understanding of their customers in real time, mall operators are monitoring shoppers’ behavior with devices that track mobile-phone signals … are finding new uses for old tools such as in-store security cameras.
The goal is to divine which variables affect a purchase, then act with Web-like nimbleness to deploy more salespeople, alter displays, or put out red blouses instead of blue.
Starbucks Corp. is buying a small, upscale juice maker Evolution Fresh — a deal that shows how serious the company is about transforming itself into a consumer products player.
Many packaged-food and beverage manufacturers have struggled to boost profit margins amid high marketing and commodities costs, and some brands have been pushed off store shelves entirely.
Starbucks’s business model will help it succeed where others have failed, because it can test new products in its stores before introducing them to supermarkets.
Starbucks also may not have to spend as much money on traditional marketing and customer acquisition as other food manufacturers, since it can use its stores as advertisements.
Getting a product in front of the 60 million customers who frequent Starbucks stores around the world each week is equivalent to airing a commercial on the top three television shows weekly.
TakeAway: Consumers are spending more on themselves this holiday season. This is boosting retailer’s sales for now but raising concern of consumer spending after the holidays.
Consumers are taking advantage of deals to snap up items for themselves and non-gift items for their families.
According to the National Retail Federation, six in 10 planned to buy non-gift items this holiday season, spending an average of $130, up from $112 a year ago.
Research from Shopper Sciences found that a majority of shoppers spent more on themselves than on friends and family during the post-Thanksgiving shopping period. And 80% of shoppers surveyed spent more than they planned to.
Some retailers are even marketing the concept of self-gifting. NRF recently highlighted J.Crew, which featured a “Gift Yourself” section on its website, along with the text “To: You, From: You.”
While self-gifting is good news in the near term, in the long term it could prove problematic.
“Many went into the holidays thinking, ‘I need a new laptop, but I’ll wait until the prices are good.’ If consumers are waiting for the holidays, that creates a challenge for retailers [trying to] pull shoppers in the other 10 months of the year. It’s a blessing during the holidays and a curse the rest of the year.”
Takeaway: Google launched its first retail pop-up store in London, called the Chrome Zone. Google hopes to appeal to consumers’ desire to physically touch and experience a laptop computer before purchasing it. Let’s see if it helps boost the company’s holiday sales …
… Well, the wait is over and the company has opened its first store… as a “store within a store” in central London — a pop-up boutique.
The 285 sq. ft. pop-up store within the Currys and PC World superstore on Tottenham Court Road “only sells Google’s (Samsung) Chromebook laptop and a few accessories such as headphones” and “will run for three months up to Christmas” …
A second Chrome Zone location will open this week (Oct. 6th) at a PC World superstore in Essex. “We’ve put a lot of effort into making it feel welcoming, homely and, dare I say it, Googley,” said a company spokesperson.
“It is our first foray into physical retail,” said Arvind Desikan, head of consumer marketing at Google UK. “This is a new channel for us and it’s still very, very early days. It’s something Google is going to play with and see where it leads“
TakeAway: Retailers, in an effort to compete online, offer free shipping. It may hurt their margins, but they hope to make it up in volume.
A few years ago Amazon tested free shipping in the US and cut-rate shipping in the UK. UK sales increased, but by a far lower percentage than US sales. Amazon fully implemented free shipping in both the US and UK.
Traditional retailers are taking the expensive step of offering more free-shipping deals this holiday season, as they seek to lure the growing number of Internet shoppers to their websites and away from online-only rivals, particularly Amazon.com .
Toys “R” Us has made its entire on-line inventory eligible as long as customers spend $49. Similarly, Wal-Mart Stores Inc. has made every consumer-electronics item on its website available for free shipping through Dec. 19 with a minimum $45 purchase. And Best Buy Co. is offering free shipping for every product it offers online, including giant TV sets.
“Free shipping used to be a way to entice customers to your store over another site, but now it’s just the price of entry.”
High shipping costs can turn off customers altogether. Amanda Lordy recently canceled an order for $30 of gourmet cheese because the site was charging $14 for shipping.
Nordstrom., which in August, began offering free shipping and returns on all online orders, estimates that the free shipping cut its gross margin by about 0.15 percentage point.
Amazon, however, is expecting its fourth-quarter sales to jump between 27% and 44%. The company loses more than $1 billion a year in shipping costs. Its operating margin shrank to 0.7% in the third quarter from 3.5% a year earlier as expenses rose 48%.
Last week I posted my talking points to a Wash Post reporter asking about retailers moving to Thanksgiving evening openings in advance of Black Friday.
I served up some ivory tower stuff about budget effects, shopping days’ effects, etc.
Last year, Toys R Us became one of the first big-box chains to launch its Black Friday specials at 10 p.m. Thursday. This year, Wal-Mart matched the move.
So Toys R Us opened its doors even earlier, at 9 p.m.
“This is just the beginning,” said Ken Homa, professor of marketing at Georgetown University’s McDonough School of Business. “Next year, we’re likely to see everybody doing this. . . . The guys with the first opportunity to get to somebody’s pocketbook are likely to take share away from their competitors.”
Accurately quoted and, if I must say so myself, captures the essence of my message … and my style.
TakeAway: RadioShack’s emphasis on mobility products (aka. cell phones) turned away their core customers – parts & gadget buyers. Now, RadioShack is trying to get these customers back.
In a candid presentation, RadioShack’s CMO Lee Applbaum described how the marketer abandoned its core do-it-yourself customer, in a bid to embrace mobility.
As the mobility business grew, the “signature” business, which includes things like accessories and power products suffered, falling from 38% of the business in 2009 to 32% in 2010.
Shareholders and analysts took note of decline, considering the category has very high margins, drives frequency and encourages loyalty.
Initially, RadioShack told itself that people just weren’t buying those products anymore.
But, as evidenced by the Wired article and a slew of blog posts, it quickly became clear that wasn’t the case.
“For all the work around the rebranding, we didn’t spend ample time understanding our customers.”
Once RadioShack acknowledged the problem, it moved quickly to re-establish connections with the DIY shopper.
RadioShack began asking those consumers what they wanted, reaching out via its blog and social media. The response was swift.
A program called “The Great Create” leveraged RadioShack’s roots and attracted 110 million impressions in the first 30 to 45 days.
That’s the question I was asked by a reporter from the Washington Post yesterday
Here’s what I told her:
In general, Christmas shoppers operate against some sort of Xmas spending budget. That’s called a budget effect.
The budget may be conscious or subconscious — it can be explicit (written down in detail) or vague (e.g. spend no more than some amount).
A shopper’s budget typically has some stretch to it, especially if times are good. But, there is likely to be little or no budget stretch in tough times (like now).
One impact of early openings on retailers is a shopping days effect.
You might expect shoppers to expend their full budgets regardless of the number of shopping days available to them. That is, they’ll spend their budgeted amount whether there are 30 shopping days or 32 shopping days until Christmas. It doesn’t always work that way. There is some evidence that some money may end up left in shoppers pockets if they don’t have enough convenient opportunities to spend it.
So, added shopping days — or a part of a shopping day — tends to insure that consumers spend more (or all) of their budget.
The biggest impact on retailers is the market share effect.
Given the budget effect, retailers are fighting for a share of holiday spending budgets that are essentially fixed.
So, it’s to retailers’ individual advantage to get a first mover effect. That is, to have people spend money with them first, perhaps leaving less budget available for competitors.
The bottom line is that overall, sales may increase very slightly since shoppers have an extra opportunity to spend (the shopping days effect).
More important, this year, retailers that open on Thanksgiving night are likely gain share by getting into shoppers wallets sooner than their competitors, making sure that they get their fair share and maybe a little more.
Next year, market shares will likely reset as competitors follow suit and open earlier.
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Side note: Many of the retailers opening on Thanksgiving are considered low-end merchants. Think Walmart. Higher-end retailers might tarnish their images by participating in T-day openings.
TakeAway: Retailer optimism is lower this year. Yet, Target hopes to spur sales with a two-day Black Friday sales event and the return of Christmas Champ ad campaign.
With Black Friday just a week away, a new survey shows that retailer optimism about sales growth is lower this year than in 2010. Heavy discounts are expected to rule the day as many retailers move their Black Friday operations to Thursday in a dismal zero sum game sales spiral …
To pitch its 2011 two-day Black Friday sales event, Target has rolled out a collection of “tips” from its effervescent, slightly off-kilter shopping maven.
Promoted as their @ChristmasChamp on Twitter, the manic Black Friday sales lover (brilliantly portrayed by comedian Maria Bamford) was Target’s secret weapon that drove the store’s 2009 Black Friday sales to its biggest ever levels despite a grim holiday shopping environment. Bamford was so popular that Target brought her back in 2010.
And so here we are again in 2011 and Target is again turning to Bamford. But the ads the retailer is running are the same as last year …
We kid, but Target’s regifting of its popular, two-year-old campaign is nothing to laugh at if it’s working. Indeed, if a brand runs a holiday ad enough years in a row, it can become iconic.
TakeAway: With projected holiday spending down, big retailers hope to boost sales on Black Friday by opening up even earlier.
New plan for T-Day: schedule dinner for 4 p.m., eat way too much, take a really long nap … then at midnight, head for the stores to buy some plus-sized clothes (for me) and heavily discounted gifts (for loved ones).
More retailers are concluding that 4 a.m. on the Friday after Thanksgiving just isn’t early enough. Macy’s said most of it will open at midnight. That’s four hours earlier than in recent years.
Last week, Target said it will break with its usual around-dawn opening practices and begin business at midnight on Thanksgiving night.
“In dollars and cents, it probably gives the retailers that are opening extra early another fraction of a day’s sales … and, it does engender publicity, which, in this environment, is very valuable.”
This year is expected to be especially competitive because spending is projected to be a bit lackluster.
The National Retail Federation expects total retail spending during the holiday period to rise 2.8%, down from a 5.2% increase last year.
Shoppers are expected to spend 4.6% less this year on gifts, or about $516.
TakeAway: Malls and shopping centers are countering lower traffic and closings of traditional brick and mortar stores by turning to unique shops and services to draw revenues.
Mall giant Simon Property Group opened an aquarium at its Grapevine Mills mall. Real-estate brokerage Jones Lang LaSalle put a fencing academy in a former Old Navy store, and a community theater on the lower level of a former Boscov’s store.
Perhaps the most unusual use of a former big-box store is William James’s Arms Room gun shop and shooting range, which opened last year in a former Circuit City store.
Rising retail vacancies, and loosening rent demands from landlords at struggling shopping centers, are creating opportunity for tenants previously housed in community centers, industrial parks and home basements.
“In the past, we’ve typically been in industrial parks because of the [low] cost per square foot,” said Howard Picker, founder of Speed Raceway. But retail landlords “are coming down on price and more willing to work with tenants like us,” he said.
The proliferation of “nonretail” tenants comes as traditional stores cede ground in U.S. shopping centers because of constrained consumer spending and decades of retail overbuilding in the U.S.
Landlords are embracing unusual tenants as a way to continue drawing visitors to their shopping centers, even if those patrons aren’t necessarily coming to shop.
A little extra traffic generated by a gym or a trampoline center is better than an empty storefront that draws no one, they say.
Costco said it is raising membership fees 10% for about 22 million customers, as the largest U.S. warehouse club operator seeks to offset rising costs.
The fee increase is the company’s first in more than five years.
Currently most members pay an annual fee of either $50 or $100 for executive members
What’s a “seniors’ buffet”, you ask?
Well, Costco is famous for having blue-haired women cooking up and passing out food samples. So many, that legend says that some fixed income oldsters buy the membership just so they can come and graze on the samples.
I’m not into to that, but I am into Costco’s giant hot dog and 16 oz. drink for $1.50.
When you think Walmart, you generally think big and you don’t generally think groceries, but its Neighborhood Market stores may change that.
Chicago opened its third Walmart this week, but this is a Neighborhood Market store … At about 27,000 square feet, the downtown store is a fraction of a regular-sized Walmart, which can be as large as 150,000 square feet.
And while groceries are typically 1/3 of the product sold at a Walmart, it takes up ¾ of the Market …
Walmart has been opening Neighborhood Markets since 1998 and now has 155 nationwide with plans to have 300 of them by 2013 …
Chicago launched the first Walmart Express in July. “Our approach to the city of Chicago is to be flexible,” Walmart spokesman Steve Restivo. “We want the store size and the merchandise mix to be a reflection of the community it’s in.” …
Hurricane Katrina taught big-box retailers that they need to be an integral part of hurricane preparation and relief efforts.
For nearly a week in advance Irene, big-box retailers like Walmart and Home Depot were getting ready.
They’ve deployed hundreds of trucks carrying everything from plywood to Pop-Tarts to stores in the storm’s path.
It’s all possible because these retailers have turned hurricane preparation into a science.
At Home Depot’s Hurricane Command Center in Atlanta, for example, about 100 associates have been trying to anticipate how Irene will affect its East Coast stores from the Carolinas to New York.
They have been focusing on stocking a short list of items including generators, chain saws, water and tarps.
Those supplies were flowing to stores because of a process that began months ago, at the beginning of hurricane season.
“We take storm product, both pre- and post-strike product, we stage those in containers and we have them in our distribution centers, really ready for a driver to pull up and pick up and take them to our stores.”
Walmart is able to anticipate surges in demand during emergencies thanks to a team of meteorologists and a huge historical database of sales from each store as well as sophisticated predictive techniques.
That system is helping them allocate things like batteries, ready-to-eat foods and cleaning supplies to areas in the storm’s path.
“They know exactly what people want after a hurricane … for example, the most popular food item after a major storm is strawberry Pop-Tarts.”
OK, plenty of Pop Tarts … now, how about those D batteries?
According to research coming out of Australia, and reported in RetailWire:
Male-only supermarket shopping aisles that focus on gender-specific products rather than merchandise by category could encourage men to browse longer, trial new items and spend more.
“Research has shown that there is a group of male shoppers who have a ‘fear of the feminine’ or fear shopping among women’s health products such as tampons, waxing strips, pink razors and body scrubs,”
“Further, research found that men made more purchases … of health products that were not placed in high traffic areas or next to feminine-inspired products.
Apparently, some men are apprehensive of women’s products and are therefore less likely to spend time perusing their own personal needs.”
The answer: Creating retail ‘man caves’… “Gender specific aisles providie a relief to men, inspiring them to explore and discover new products … and create a sense of privacy, even sanctum.”
I can’t wait to go shopping tomorrow … I need some “privacy, even sanctum.”
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Random Finding: Men also shop differently, valuing efficiency and independence over customer service and tend not ask for help.
Or, as Grandma Homa used to say: “Women shop, men buy.”
The Homa Files 