Is More Choice; No Choice?

Social psychologists Iyengar and Lepper carried out an experiment that illustrated how, in practice, more choice isn’t necessarily beneficial.  

They evaluated reactions to two tasting tables at a supermarket; on one they laid out 24 different jams and on the other just 6. While more people elected to stop for the wider selection (60% vs 40%), a dramatically higher proportion purchased from the selection of six jams, whereas only 3% did so from the larger choice. Put another way, less than 2% of people will buy from a display of 24 jams, but 12% will if you give them a choice of just six.
Ref: Consumerology by Philip Graves

The New Rules Of Retail

Robin Lewis states the 7 trends, that will shape the future of retail as below;

From Needing Stuff to Demanding Experiences: "The thrill of the hunt" offered to brand-savvy bargain hunters at T.J.Maxx and Marshalls, and the Apple Store turning electronics shopping on its head.

From Conformity to Customization: Specialized, personalized and localized niche brands like Nike ID and Keurig single-serve coffee machines begin to gain share from large megabrands, the continued growth of special sizes in apparel and footwear and the rapid growth of 3-D printing

From Plutocracy to Democracy: "Accessible luxury" for all: Missoni at Target, Vera Wang and Rock & Republic at Kohl's, Karl Lager “Lagerfeld at Macy's, Isabel and Ruben Toledo at Lane Bryant and the explosive growth of Michael Kors "affordable luxury"

From Wanting New to Demanding New and Now "What’s new today is cloned tomorrow", favoring fast-fashion brands like Zara and Forever 21 that create two new lines every week, the convenience of e-commerce, free delivery and neighborhood stores

From Self to Community Proliferation of social media, social shopping, community interests such as sustainability, global initiatives like human rights and safety; all are trends, no longer simply commercial promotional gimmicks

From Technology for Work to Technology for Life Technology enabling the blurring of lines between “life” and “work,” people are working during their “off” hours and playing during their “work” hours, getting what they need to get done whenever and however they can, using technology to save time.  

The creation of a new consumer segment, Luxury aspirants, drove the launch of many brands to cater to the up-market “yuppie” core of that segment. Brands such as Coach, Lacoste, Bloomingdales, Cusp (a Neiman Marcus spin-off), Dooney & Bourke, Michael Kors, Tumi, Tory Burch, Bonobos and others have successfully captured the contemporary, young, almost-upscale consumer, called HENRY (having enough, not rich yet).

With these trends in mind; he predicts that the traditional definitions of “retail” and “wholesale” will be irrelevant in the future because only those that transform their business models based on our three strategic operating principles will survive in the future.

The 3 operating principles are;

Neurological Connectivity : Today, as consumers expect the moon and stars "because they can" the retailer or brand must far exceed their expectations. They must co-create, with the customer, an experience that indelibly connects with their mind. It must be a holistic experience, consisting of pre-shopping anticipation, shopping ecstasy and consumption satisfaction, and it must be so emotionally compelling that the customer wants to repeat it upon the mere mention of the brand or retailer’s name.

Preemptive Distribution : This is the necessity of gaining access to consumers in front of the multiplicity of equally compelling products or services by existing precisely where, when and how the consumer wants you. Preemptive distribution relies on speed, agility and the ability to reinforce the neurological connection, or brand promise.  By definition, this requires an integrated matrix of all possible distribution mediums, the most important ones being those driven by the new, rapidly evolving technologies as well as distribution into faster-growing international markets.

Value-Chain Control : No consumer-facing business can achieve the highest levels of a neurological connection and preemptive distribution without complete control of its value chain, from creation all the way to consumption. This control is especially important in those parts of the chain that touch and connect with the consumer: namely, market research, where knowledge about the consumer and his or her dreams is determined; production and marketing, where the dream experience is created; and finally, the point of sale, where the experience must be competently delivered.

The retail or wholesale distinction will no longer be meaningful to consumers. Distinct brand names will provide the only worthwhile definition of value, whether it’s the nameplates of stores or the labels on the products in the store. The new business models for retailers and wholesalers alike will be those that can best implement the three imperative strategic operating principles.

He predicts that 80 to 90 percent of strong brands’ revenues will come from their own retail outlets. Finally, retailers such as Macy’s and others will have some form of leasing space to other strong retail brands, as many European and Asian retailers currently do. Perhaps department stores will invite powerful traffic-creating brands to operate “shops” in those categories in which they have been underperforming. For example, Victoria’s Secret, Soma and other brands might be more compelling in Macy’s historically share-losing intimates space. Not only would the department store gain the synergy of two go-to brands, they would also increase space productivity. And of course, the branded retail “renters” would get immediate preemptive distribution (department-store locations everywhere) for a relatively low capital investment. This synergistic strategy is already being employed by Nordstrom with Topshop, Brooks Brothers and “Bonobos shop-in-shops.

All new business entities will be strategically conceived to provide maximum access to consumers and positioned to gain maximum access for the business. Therefore, they will operate in a multitude of distribution channels (mobile, clicks, bricks and catalogs), with a multitude of different formats (from small, convenient and flexible to larger, all-inclusive destinations), and all will compete in as many consumer, product and retail sectors as the brand or service entity can credibly pursue. However, all retailers will fit into one of our three newly defined sectors;

the Commoditization sector;

the Omni-Brand to Consumer sector; or

the Liquidation sector.

Also, the back-end functions’ operations, production, logistics and distribution will be tightly centralized for maximum-scale leverage and productivity synergies, as well as to support the enormously complex and segmented front ends of their businesses.

Incidentally, this redefinition of retail favors what he defines as the Omni-Brand to Consumer model. Because of its optimum alignment with the New Rules, this model is best positioned among all sectors for preemptive distribution and the delivery of a neurologically connecting experience.

Finally, he predicts that e-retailing in all facets, including mobile commerce and the linkage to stores through omni-channel initiatives, will continue to grow. Every large chain will begin to see its stores as either a distribution center or an experiential palace. There will be no neutral ground. However the players that currently operate exclusively in this space, such as Amazon and eBay, will eventually open brick-and-mortar stores for the purposes of preemptive distribution and enhanced delivery of the neurological experience.  These competitors will also continue to redefine the value chain with a set of capabilities and relationships that will make the realization of same-day delivery a feature in every major metropolitan market and will therefore further challenge those stores without any clear point of differentiation.

He emphasizes the requirement of massive differentiation for a retailer or brand to survive. This differentiation has to exist throughout the entire business model, from sourcing to delivery, and most importantly in the eyes of the consumer. If you are not clearly differentiated, even unique, then you are vulnerable to extinction. The highlights below of the transformed traditional models encapsulate all the foregoing, and essentially represent the New Rules for successful change and the effective implementation of  three strategic operating principles

Rules for Transforming Traditional Retailers

Change the Retail Value Proposition: Become a branded neurological experience, not a store.

Adopt a New Structure: Reorganize around lifestyles.

Accelerate Private/Exclusive Branding or Lease Space to Compatible Brands:  Cede control to other powerful brands, but exercise total control over your own.

Preemptively Access Consumers with:

·         Larger urban “lifestyle experiential emporium”

·         Smaller freestanding neighborhood stores

·         Private branded specialty chains (e.g., INC and Arizona Stores)

·         New channels of opportunity (pop-ups, in-home, etc.)

·         Integration of all distribution platforms (clicks/bricks/catalogs)

·         Investment in new technological channels of distribution.

Rules for Transforming Traditional Wholesalers

Change the Wholesale Value Proposition: Become a portfolio of lifestyle-branded retail specialty chains providing neurologically connecting experiences.

Adopt a New Structure:  Reorganize around preemptive distribution strategies through all possible platforms and mediums (clicks, bricks, catalogs and more), including providing exclusive brands to transformed retailers and selecting compatible transformed retailers to lease space for total management and control of individual brands. Pursue cobranding joint ventures with compatible retail specialty chain brands. Create a clear distribution strategy that has exclusive, segmented product by retail partner and price point.

New Rule for E-Commerce and Mobile Pure-Play Brands

This newest and fastest-growing retail sector, which includes Amazon, Zappos, eBay, flash sites, social networks and the older QVC and HSN, must also transform its models to embody the three operating principles. The most successful brands, such as those just mentioned, are all striving to create great experiences as opposed to simply providing convenience. The newest rule for this sector will be driven by its need for greater preemptive distribution. This will mean faster and faster access through mobile purchasing and rapid delivery. He believes this will ultimately lead to e-commerce expanding its distribution to include brick-and-mortar stores, within which they can better provide the neurological experience, particularly for those products requiring a more high-touch experience such as apparel.

Regardless of operating on all distribution platforms, all will attempt to control, if not own, as much of the value chain as possible, from Amazon’s cloud to eBay’s PayPal payment system. All of this will be further intensified as Google, Facebook and others begin to enter the retail world at scale with even more diverse business models.

At the end of the day, those who succeed will be brand managers whose sole responsibility is to manage and control the preemptive distribution of their neurologically addictive and highly differentiated brand from its creation all the way through to consumption.”

 Source: Lewis, Robin. “The New Rules of Retail.” St. Martin's Press

Turkish E-com Retailing in 4 Slides

A short summary for Turkish Internet Retailing

Sources
TUSIAD Dijital Pazarın Odak Noktası: E-ticaret, Sinan Afra, 2014
Southern Europe Ecommerce Report 2014, www.ecommerce-europe.eu
UNCTAD Information Economy Report 2015

End of Brand Worship Era in Fashion

"It’s not enough to be fashionable – one wishes to appear intelligent as well!"

Chanel, Dior, Gucci and the others will continue to develop luxury as a business. At the same time, we are seeing a complementary reaction, which is that a consumer may accept paying for the latest very trendy Dior bag, that she’s seen in all the magazines and advertisements; but she’ll see no shame in going to Zara and buying a T-shirt for 10 euros, because it’s pretty and it’s a fair quality for the price. Then she may go to another store, a bit more expensive but not as well known, perhaps run by a young designer, where she’ll buy a skirt. And these items, when brought together, reassure her and send a message to others that she’s an intelligent consumer, not dazzled by marketing, in charge of her own image.’

In other words, the era of slavish brand worship is over The designer Alber Elbaz, of Lanvin, recently commented, ‘We’ve reached a turning point. Nobody wears logos any more. People aren’t hesitating to mix Lanvin with Topshop. Everything is becoming more democratic.’ 

From "Fashion Brands", Mark Tungate, 2004 

Seeing New Products in the Stores makes Consumers Happy:)

“Recent studies have shown that when consumers go shopping and discover something new, the brain releases dopamine and serotonin (chemicals associated with feelings of well-being, happiness, and addiction). As Dr. David Lewis, the director of Mindlab International, has said: "Shopping experiences trigger brain activity that creates these 'euphoric moments'™ But what is most interesting is that these 'euphoric moments' can be created by the frequency of new items in the stores and the expectation of finding something unexpected."

Could it be the main reason of Zara's success?:) 

From: Lewis, Robin. “The New Rules of Retail.” St. Martin's Press, 

FOMO : Fear of Missing Out

According to Robin Lewis; the reason of our addiction to our mobile phones is FOMO;

“a chronic condition called Fear of Missing Out, or FOMO, anxiety or worry that one might be missing an opportunity for social interaction, a novel experience or some other satisfying event. British psychologist Andrew Przybylski led a study that found that the less people felt autonomy, competence and connectedness in their daily lives, the more they felt FOMO. 

People high in FOMO were also heavy users of social networks, which provide constant opportunity to compare one's status with those of others, and to make sure that you are having as much fun and excitement as you perceive that others are having.”

Lewis, Robin. “The New Rules of Retail.” St. Martin's Press

Human Mistake is Tolerated; what is not tolerated is not to take responsibility for shortcomings!

On September 11, 2001, Midwood Ambulance Service employees responded to the terrorist attack on the World Trade Center in New York City. Shortly afterward, an e-mail surfaced, which reported,

“My family owns an ambulance service in Brooklyn, NY. . . . My uncles were at ‘Ground Zero’ during the attack, to help the victims. They donated their time to help with this crisis, as many New Yorkers did. A great number of people were in shock from the devastation. As many of you know, shock victims are supposed to drink a lot of water. My uncle went to the Starbucks down the street to get bottles of water for the victims he was treating. Can you believe they actually charged him for it! He paid the $130 for three cases of bottled water out of his own pocket. Now, I would think that in a crisis such as this, vendors in the area would be more than happy to lend a little help by donating water.”
The e-mail continued, “I love Frappuccinos® as much as anyone, but any company that would try to make a profit off of a crisis like this doesn’t deserve the . . . public’s hard-earned money. Please forward this e-mail to anyone you know and encourage them to do the same.”
Unfortunately, this e-mail was accurate. A Starbucks store staff had chosen to charge full price and not give away $130 worth of water during the September 11, 2001, tragedy. In addition, several efforts to get the matter resolved were mishandled. When the e-mail surfaced, Starbucks leadership did the right thing. Then president and CEO Orin Smith not only had a $130 check delivered to the ambulance company, but he called a representative of the business personally to apologize. Independently, the Starbucks stores located at Ground Zero were operating around the clock and they were providing free beverages and pastries to rescue workers and volunteers.

“At a corporate level, Starbucks was making contributions in excess of a million dollars to the national relief fund. But the bad news of the water sale certainly made a big splash in the pool of public consciousness. Starbucks leadership fortunately understood that most people are willing to forgive human error. What they won’t tolerate is a failure to take responsibility for mistakes or an unwillingness to resolve the shortcoming.
With the grace of competent leadership, Starbucks did not seek to scapegoat or place blame on the store staff who made the errant decision in an unimaginably stressful situation. Instead, Orin Smith understood something that most great leaders appreciate: when you are wrong, admit it, fix the problem, and stay the course in areas where you are making a positive difference.

Ideas to Slip on

- While it’s natural to avoid contact with detractors, much can be gained by welcoming them into the early stages of problem-focused discussions.

- It is essential to correct misinformation swiftly.

- When errors are made, it is important to take direct, unequivocal responsibility and follow up with corrective action.

 From: Michelli, Joseph. “The Starbucks Experience.” McGraw-Hill, 2007.