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Wednesday, December 3, 2014

Random thoughts on the Retail Industry Fall 2014 Edition

Random thoughts on the Retail Industry Fall 2014 Edition

The ongoing debate about the health and wealth of retail is a lively one and retailers are getting smarter and dumber. I enjoy discussing with others about why they buy, how they buy and even where. I am just curious.
Our front load washer after 14 years decided to shout its anger during the spin cycle and shake the foundations of our house. Ok, so the bearing is gone and it’s a $700 repair. Time for a new one and guess what the Koreans are in play. Samsung and LG offer alternatives to the Kenmore and GE brands. The problem is that our model has now been replaced with a taller and wider front load system meaning my laundry room needs the built in space to be renovated. Not only do I need to buy a new washer but also a matching dryer AND need to renovate the space to accommodate their larger sizes. I still will need to build out an Arduino to tweet me when the drying or washing cycle is done as they do not have an Internet of Things option. The only thing I can salvage off the washer is the motor that can be reused somewhere else. The buying options are big box hardware, furniture store and Sears and The Bay. My wife visited the local Sears for showrooming and then called around (retail customer service over the telephone is a challenge and on-line experience differs among retailers). Since, her face to face sales experience with Sears was a positive one they had no problem price matching her other quotes and that included free delivery. (see below). The in-store sales person is valuable. However, we are in the process now of sorting out the reality of all promises made during the sale were no longer valid during the actual delivery that was delayed another 10 days due to paperwork error. Good thing is the store manager has taken interest to resolve and provide some customer satisfaction. What was promised? Free delivery, installation, old appliance removal and smiles. We were invoiced for delivery and installation but none was provided.

The Flyers story continues as the local paper delivers the bumper crop Thursday issue. Guess what as Target complains about poor sales, they still do not include a flyer. No wonder, we continue shopping at Walmart, Hudson Bay and Sears. Retailers need to PUSH content out to their consumers and the weekly flyer is still King. Guess who did not send out a Black Friday flyer?

With gas prices so low and my energy stocks losing money, many consumers are excited that they have another $30 - $60 a week of disposal income. It doesn’t go into a RRSP plan but will be spent this Christmas. The Retail ETF looks to be an attractive play if consumers spend their savings at the mall this winter. You can save more by getting scurvy and avoiding the high priced lemons and limes this winter as well. Many iPhone 4 users coming off contract will be getting the iPhone 6. Big data tells us this in a simple dashboard report pulled off their CRM. Retailers are looking forward to busier cash registers now that there is more disposable income but it appears Black Friday was a bit of a let down.

Consumers are a savvy bunch and they always expect more for less and will line up for days to get a $9 plasma TV on Black Friday and a $2 Blender. Retailers are savvier because their employees are also consumers. Retailers also complain about competition but the smaller retailers don’t because they are still in business 10 years later by offering good old fashioned customer service and expert product knowledge. Retailers will have to invest more into the multi-channel experience in order to continue their success. Retailers need to focus heavily on customer service and a positive 1-800 experience. Social Media is even more important as many complain about poor service over the Twitter broadcaster.

Shopper traffic in Canada fell 7% last year while on-line increased about 9%. No wonder there is a concern because on-line sales is costing the retailer more money. It has become too easy to research and price compare before jumping in the car and making a purchase. However, in some cases the consumer needs to rely on the sales person in the store for expertise. Not every sale is a real on-line sale.

Example 1: The $60 book in store is $40 on-line with free shipping. The book arrives in a few days in your mailbox. A no brainer as it’s just a simple book off the New York Times best seller list. The book retailer is not happy about free shipping that costs them some $$$ and Amazon doesn’t care about shipping.
Example 2: The washer/dryer needs to be bought in person as too many things need to be figured out like delivery, size, installation and logistics. Once you shake every one down as to who offers free delivery, who wants $79, sorry we deliver in 6 weeks to want it tomorrow, free installation and removal to we have to charge more if it’s in a condominium. Go in person. Have them write down every promise made.
Example 3: Groceries: Anything that has a short shelf life like fruits, vegetables and meats and such need you to buy in person. Cereal, flour, sugar and Oreos can be bought on-line.

Retailers have now found a way to be like UPS. UPS will try once to deliver your package after which you have to go pick it up at their depot (hmmm you pay shipping to go pick it up yourself). Canada Post will either leave it in your mailbox or have you pick it up at their very local depot located at Shoppers Drug Mart or a variety store. Retailers are trying to not ship your product for free anymore. They are being creative in having you order on-line and then pick it up in the store. They are looking to expand how you can pick it up at their store or at a community locker at a mall. If I can order a $60 book and pick it up in the store maybe I should buy it on-line for $40 with free shipping and let  Canada Post deliver it to my door in 2 days? That is the interesting question mall owners and retailers are trying to answer.

Big Box becomes Mid Box

The days of these mammoth big box stores are now becoming smaller and more efficient. Take the big box and do some space planning and it can fit in a smaller store. Consumers are no longer going to feel excited walking into a wide expanse of blinking lights when all they need to do is go to a locker to pick up their order. Bad news for the retail developers as space needs are dwindling. Why must I pay list price because your heating costs are so high to warm up a 20000 sq foot store?

Amazon Threat

More so in the USA but less so in Canada as they continue their location wall for services across borders (Sorry the Kindle book is not available in Canada…means I get it from Kobo in Canada) but they do have 50 million products available. AMZN continues to be a 800 pound gorilla stateside. Consumers also do not care if the retailer makes any money on what they sell because they can buy the same product from other retailers. Now how come everyone doesn't offer similar to Amazon Mayday?

WalMart Threat

Their new Grab & Go service will be interesting as they try to get consumers to buy on-line and then pick up at a locker in-store with an access code. Wait, I am ordering my toilet paper and shampoo on-line with free shipping as I do not want to go take a drive to go buy it. Wait, if I go to the store I can get a RedBox DVD for $1.50. Wait, what do I do?

Home Delivery vs Pick Up In-Store
Let me defend the in-store picker uppers as they are not home during the day to take delivery so they are happier picking the stuff up on their way home from work and can run in and empty the locker and zip home. Ok, just do not park in the front entrance as it is a Fire Zone – No Parking. I thought the idea of the lockers being near busy transit might make more sense for the busy consumer. Ok, I park in a real spot and then enjoy a haircut, a McDonalds coffee and then hot the Grab & Go locker on the way out.

The Last Mile

In Telco, the last mile was always key and so it has now become the same in retail. How do we get orders to our customers in a cost effective fashion? Do not offer free shipping as this is a cost the retailer must bear and can account for considerable profit loss. Let us find a way to get the customer to pick up their on-line purchase in-store at their expense not ours. There is a cost associated with Free Shipping that retailers have their eyes upon. Right or wrong we need to celebrate those retailers that will offer options for how you shop and how you pick up your purchases. Every retailer and now mall owner is looking for ways to keep the consumer in their car and not in the store. I can get go to the drive through ATM, get a coffee at a drive through Starbucks, pick up my antibiotics at a drive through Shoppers Drug Mart, pick up my on-line groceries at a drive through Loblaws, pick up my Shampoo, Diapers, Pet Food and Kindle charging cord from WalMart Grab & Go (ooops it too cold to get out of my warm SUV so I will wait until its warmer) and I am late for my Back Massage from the RMT that does in-car services. The world is changing as we speak.
Mall Overhaul
In Canada we have seen a raft of store closures and American Retailers pulling out and new American Retailers jumping in. The mall is changing and they are trying to find better ways to attract shoppers into their environment. Look for more events, activities and promotions to take place in the year to come. Look for tier B and C malls developing tenants that are not retail. These empty spaces are ideal for medical clinics, libraries, entertainment, restaurants and maybe even community centers or schools. This is a good idea because over time the mall will be more people orientated than consumer oriented. This is slowly happening here with more Dollarama’s showing up in these smaller malls but a local mall begging for tenants has a fitness center, an employment center, several non-chain restaurants, a medical clinic embedded in a Pharmacy and a day care center.  This is adapting to the local consumers’ needs a lot faster than any on-line experience. Humans will continue to crave and experience tactile and social interaction in their daily life and why not so at the local mall.

On-Line going Bricks and Mortar

Sure Amazon is opening up a store in New York City as a test to expand to other major cities but then Clearly Contacts is a web store first and is seeing great results in adding retail stores to its fleet. There are other examples that are experimenting with a pop up before going bricks. In Toronto, the successful food trucks will go bricks to get revenue during the cold winter months that the food truck is parked which to me I feel the food truck is a virtual on-line service almost.

We love to buy and we love to buy and we hate to buy. We love to buy things that satisfy our souls and bring us happiness and we love to buy things from brands we trust and more so when it’s an easy experience. We hate to buy when it becomes a hassle and gets complicated. Many still buy poor quality for the short term and treat it as disposable products. Many buy because it’s cheap or on sale while others buy a heritage item that will last. Regardless, retailers are using big data to better understand the consumer’s behaviour and better serve your needs. Loblaw’s is pulling all levers in healthy food, big data, better service, new buying options and in-store services that is improving their bottom line.

Brilliant Example: A book store has an app that allows you to create a Christmas wish list and also share it. Tell me that the big data analytics is not in a huge play here? We are telling the retailer what we want for Christmas, where we rank it and what we do not want. If no one wants Broccoli flavoured candles I would let my buyers know immediately to stop buying that stuff and maybe throw it up on sale to free up valuable floor space. However, if the Samsung Tablet is a top item please have a selection of cases and accessories available at the time of purchase because I surely do not want to buy the tablet from you, get the case from an on-line source shipped to my house and the screen protector from a bricks store because I could just go buy that from one place and wait a few days for delivery (all with free shipping). Do I buy from a book store or an electronics store? I may just buy from a one stop shop store.


All we want is to be able to go to the store and choose among 4 electric tea kettles at various price points and pick one. If you succeed we will buy $10 worth of tea and maybe some other impulse purchases while we are at it. If you have a poor selection or we sniff that pricing seems high then we walk out and promise o never waste our time again. If we are in your store, live bodies that can assist in our purchase will be of immense value especially if we are dropping $2000 on a washer/dryer combo or even a $2000 DSLR. If we need no help then we can just go to Costco and buy whatever camera is on the skid but then we cannot buy a camera bag, filters, another lens, flash or accessories that are recommended by the sales person or get a coupon for a free photography class in-store.

Retailers and Consumers alike will jostle back and forth, exchange big data, try to trick the analytics and forever continue their journey to get the best product, at the best price delivered with the best service.
BTW I have cancelled my non-chip credit card as its been hacked too many times and due to its higher fees to the retailer is not widely accepted.

BTW I cannot use Apple Pay as my iPhone 4 is now a slow iOS7 camera device and my primary smartphone is an Android. My payment of choice will continue to be cash, debit and credit (both with chip card security enabled). Paypal is still my on-line payment service. There will be some interesting debates about who will have the app of choice for universal use. I think that Starbucks won’t care because I can buy a coffee and pay with an app or just have them scan my watch and let Pebblebucks do all the heavy work. Do I need Apple Pay to buy a coffee at Starbucks?

BTW I still get excited to go through the stack of flyers every Thursday evening. Grocery shopping continues to be based on low price and highest quality and really only 2 stores are on the short list. Buying decisions and impulsive ones continue to be based on the Staples, Best Buy and Future Shop flyers with the occasional Canada Computers and Tiger Direct. When on business in the USA, I can be influenced easily by a Target or Macy’s flyer included in the morning newspaper. Bricks, Flyers, On-line or word of mouth …pick 1 or 2 and go fill that shopping cart.

Central vac Repair
I needed a new motor and calling around the price varied from $169 to $299 for the same part number.
I called the manufacturer and the wait time was over 20 minutes while listening to some poorly recorded announcements. Finally, after providing the part number which was unfamiliar to the CSR another 10 minutes of wait time (they probably could have Googled it faster) to be told to call the dealers as they do not deal direct with the public. Why can’t they say that up front or in the announcement queue?

I saw that I could get it on-line for about $120 but preferred to go local and when I inquired with each store owner as to why the price was so high a few mentioned that they are made in china. My response was “shouldn’t they be cheaper?” I guess not. Hopefully this motor will last another 15 years and they were all surprised that it lasted that long stating 5 years of use was typical. I learned something new today and that was that a motor should last about 5 years. So shop around to get the best deal for the same item.

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