What if Our Customers Just Don’t Have as Much Money to Spend?

We spend an awful lot of time trying to figure out how to sell our customers more stuff.  It’s been tougher lately and shows no signs of getting easier.  It’s the internet.  Or over supply and too much retail.  The customer wants experiences.  Poor distribution.  No product differentiation.  Too many brands.  A smarter and more cynical customer.

It’s all of that.  But maybe some of it wouldn’t matter as much if our customers just had more money.  For all of us the millennials, however we define that group, are an important group of customers.  But between lower wages, the gig economy, debt from college, health insurance costs, high rent and the requirement of having cell phones and sundry other necessary gadgets and services, perhaps they just can’t afford what we’d like to sell them.

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The New Company You Are Building as the Competitive Environment Changes (and Changes, and Changes)

Over years, I’ve written various articles about the evolution of our market and how we need to change to address it.  I’d decided it was time to pull all those ideas together in one, hopefully, thought provoking, insightful, action motivating piece.

Then a friend sent me Robin Lewis’s outstanding article on just this issue and I had no idea if I was relieved I didn’t have to write it or disappointed I didn’t get it done sooner.

Mr. Lewis’s article is called “First, The Bad News. Then 2019: Tough, Tougher or Toughest,” so don’t feel like you’ve escaped my occasionally urgent and cautionary tone on this issue.  He’s not precisely all sunshine and rainbows either.

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What’s Jeff Reading? Buying by Algorithm and Spoofing the Customer as a Marketing Tool

Back in July, I read an article called, “High-skilled white-collar work? Machines can do that, too.”  It talked about companies (Stitch Fix among them) using algorithms to design product and decide what and how much to buy when.  Here’s the link.

Two days ago my research department (whom I always hear from if I don’t give her credit) sent me an article on how the discount shoe retailer Payless, as marketing stunt, tricked people into paying up to $600 for pair of Payless shoes “…through an elaborate — and expensive — advertising prank to attract new customers and change the perception that the company sells cheap, unfashionable shoes.”  The article notes, and I want to make it clear, that Payless didn’t actually make anybody pay those prices and let them keep the shoes for free.  Here’s that link.

I try to take some time to think before writing.  That’s why you’ll often see a reaction from me well after an event happens.  My brain seems to require time to process outside of the urgent frenzy that can accompany an event.

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I Believe in Cycles- Even for Retail

I believe in cycles; there will be another recession (sooner rather than later is my personal belief).  There will be another major stock market correction at the end of which will be glorious buying opportunities.  We are coming to the end of another debt super cycle (see the book This Time is Different; Eight Centuries of Financial Folly).  After we get our comeuppance for all the stuff we wanted but didn’t want to pay for, the economy will be able to grow faster again.  I believe in long term social cycles (see the book The Fourth Turning) and that after our current period of social chaos we will find compelling reasons to  join together again.

I don’t believe this time is different.  Even for retail and despite the changing of shopper attitude, the internet, the customer being in charge, and the fact that we’ve been over retailed for a long, long time.

This was brought into focus when my research department offered up “With each department store that closes, a world vanishes” from The Washington Post.  The author, Micheline Maynard, started working as a gift wrapper at a department store in the 1970s.

I was stopped in my mental tracks when she wrote, “The store manager was like the mayor; everyone perked up when he strolled through, surveying his domain, bending to pick up bits of invisible fluff from the carpet. Department managers often had college degrees, and earned salaries and perks that made them the store’s upper middle class. Buyers from the designer section were the people who took the vacations you yearned for — they made glamorous trips to New York and Europe, coming back with look books and fabric swatches, letting us lower-ranking employees see the colors that would be popular next season.”

“These stores made an entire lifestyle possible for people who worked in them. Conversely, it was important for customers to see us as symbols of what they could attain, too. Customers were part of our community; our job was to sell them things that would highlight their good taste and let them share the sense of satisfaction that we felt after selling something special. That went both ways.”

“The store was a place for learning as well as teaching. I counseled customers not to put their crystal goblets in the dishwasher, to protect their thin rims.”

I doubt any retailer reading this is telling customers not to put their crystal in the dishwasher.  But she is describing precisely the relationship we as retailers want to have with our customers today.  Maybe think hard about that for a moment before moving on.

Somehow, we seem to see this as new.  Cleverly, we think, we’ve figured out that we need to provide our customers not just with a product, but with an experience.  Sounds like that’s what Micheline was doing starting in the late 1970s.  And while we’re at it, I’d note that they were focused on customer service, education and creating a relationship between the store, its staff, and the customer.

Perhaps, in a time of rapid economic growth and general economic prosperity, before the internet, improvements in logistics and supply, the speed of change and a dramatic oversupply of “stuff,” we could forget some of this.  Now, as the cycles turn, it’s back with a vengeance.

The tactics are different.  I’d say they are harder and costlier to implement as the expectation for “experiences” has increased.  I’d further say we’re not entirely sure what those tactics are yet.  The speed of change requires a different organization structure and mindset.  The retailers who evolve a process for creating experiences often without breaking the bank will have a leg up.

Still, it seems that “The more things change, the more they stay the same.”  I am just full of platitudes today, aren’t I?

Here’s the link to the article.


Quality Information on the Internet and Ecommerce

Mary Meeker is a venture capitalist focusing on the internet and new technologies.  She’s a partner at the VC firm of Kleiner Perkins Caufield & Byers.

Every year, Mary offers up her Internet Trends report in the form of slides.  This year, it’s 294 slides long, but I’m asking you not to be put off by the length.

Some of the slides have very little on them.  Some you may not care about.  Speaking for myself, some you may not quite understand.  “Hyperconverged Infrastructure” sent me scurrying to Wikipedia.

Okay, so maybe you don’t want to look at all the slides, though I think you’d find it well worthwhile.  But the sections on e-commerce, advertising, and consumer spending might get your attention.  Those sections start on slide 44.  Look, just go to slide 71 on the extent to which social media is driving product discovery and purchasing.  If that doesn’t get your attention, I give up.

Personally, I hope you choose to spend some time on the last section (starting at slide 278) on where your tax dollars go and the debt we’ve built up.

Here’s the link to Mary’s presentation where you can view and, if you want, download the report.  No charge.

Some Ideas About the Retail Environment

My research department has been coming up with interesting reads I haven’t had time to pass on.  Here are three worth a few minutes of your time.

5 Ways the Future of Retail is Already Here” shouldn’t surprise anybody who’s been paying attention.  But it’s interesting to see these five retail evolutions listed together and consider the cumulative impact.  What does it cost to do this stuff?  What’s the impact on customer service and how it’s staffed and carried out?  Perhaps we need to pause and redefine what customer service is.

Do we believe that by “giving the customer what they want, when they want it, where they want it, and how they want it” we’re building our brands and any loyalty to them?  I’m worried we’re just making it easy for customers to move seamlessly and without friction among brands.  Chasing today’s mantra of customer service is starting to feel like a defensive response to competitors rather than a strategy for building customer loyalty.

We’ve all acknowledged that the customer is in charge.  What’s the sound business model when the customer expects more, wants higher quality, and doesn’t feel compelled to come back to your brand?  When your product is hard to differentiate from your competitors, I’m pretty sure it involves scarcity and thoughtful distribution.

Okay, item number two.  Not an article but a website for 3D printing.  It’s been a few years now that I’ve been saying, “Hey! It’s coming.  Please pay attention.”  Here’s the link to a company called Shapeways.  Spend a few minutes understanding their process.  If you didn’t find it yourself checking out the web site, I strongly suggest you go here, scroll down a bit and watch the four minute video under “We’ll Produce It For You.”  The capabilities and variety of materials they work with are quite impressive.

Finally, I call your attention to, “A new report says 1 in 6 millennials has $100,000 in savings. This is how some found a way to stockpile cash.

It’s not the most rigorously prepared article I’ve ever come across, but it’s worth thinking about.  First, people who are saving money aren’t using it to buy our products.  I’ve suggested before that the millennials are like my mom’s generation that grew up during the Great Depression in the sense that they have been through a tough financial crisis.  For my mom, the experience evolved into a life long financial conservatism and reluctance to spend- even when she had lots of money.

If true, how do you address it?  Perhaps a group that thinks this way might be interested in quality and long-term value.

That’s it.  Hope these three are thought provoking.


“What If You Are a Retailer Thinking of Just a Few Collections a Year?”

Or a brand for that matter.  Please find 13 minutes to watch this Ted Talk on the evolution of retail in China.  If you can’t do that, at least read the transcript in six minutes or so.

The trends she discusses are enabled by the fact that 90% of online sales are controlled by two companies in the Chinese market.  She tells us what is happening right now in China.  This is not about a possible future- it’s about how the Chinese retail market is operating right now.

Everything she highlights you are already seeing in your country, though the scale and rate of expansion is probably less.  Is this the future for your market?  Are there cultural or structural differences that might restrict it or, more likely, make it different?  Sure.  Probably.  I guess.

Next, you might check out this New York Times article on how Amazon is facilitating the emergence of cheap, high quality consumer devices.  It’s focused on electronics, but it’s worth considering how your product might be impacted.  Or maybe how it might benefit?

Both offerings tell us how market forces are driving a better deal for the completely in control consumer.  Both also give us some insights into how brands and retailers are eviscerating their traditional business practices to satisfy those consumers but still be able to earn a profit.

Retail Futures: Robo Shops?

So, I don’t know what’s going to happen this afternoon, much less five years from now.  Without comment, I just want to direct your attention to this article/presentation by the BBC.  Just go to this link, hit “TAP HERE” and start reading, scrolling and watching.  I’m sure some of this is going to happen.  I’m sure some of it isn’t.  I’m sure some stuff we haven’t even begun to imagine is going to happen.

Not predicting the future here.  Just want you to consider the possibilities and consider how it might be used to help your business.

3D Printing Finally Taking Off?

During the last couple of years, I’ve written some articles pointing to the emergence of 3D printing, urging you to at least be aware of the trends even if we agreed it wasn’t going to rock your world today.  I wrote about it here, here, and here.

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More Ideas About the Future of Retail

A reader sent me this article discussing how retail seems likely to evolve.  Why don’t you go and read it before I offer my comments?

The author (Doug Stephens) and I are, in general, in violent agreement about the direction and speed of retail change.  We further agree that if you, as a retailer are paralyzed by uncertainty and aren’t at least trying to keep up and figure out how to change, you’re in trouble.

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