By Elliot Gluskin

May 10, 2005

Look Out, The Future is Here!

For some time we've been telling you how we're now in a consumer-centric market where consumers are the decision makers - deciding what products and brands they want, where and how they'll buy these products, and how much they'll spend.

However, as proven in the book "Trading Up: The New American Luxury," price is no longer the critical factor it once was. For today's consumers it's all about fulfilling the experience and passion of their lifestyles. And as recent articles clearly show, more and more retail categories are changing their mindsets about how to interact with the consumer as well as their physical businesses to give consumers what they want.

Consider the following examples from the consumer electronics category, taken courtesy of Retail Traffic Magazine. Electronics manufacturers are getting into the retail game using small, stylish stores to add an extra dimension to their sales appeal. The operative terms are "connecting" and "experiencing." These stores fall into two camps: stores (places that sell merchandise) and "unstores" (those that do not). According to James Rosenfield, national director of retail services for Cushman & Wakefield Inc., "it's all about building the brand. Showcase stores being built by Apple, Sony, Nokia, Nextel and Sprint get people excited about the product and how it relates to their particular lifestyle."

  • Samsung has opened a 10,000-square-foot, demo-only "Experience" store on the third floor of The Shops at Columbus Circle in the new Time Warner complex in New York City. It's a permanent "unstore" that allows consumers to test, try and even borrow the latest products, with no pressure to buy.
  • Sprint hired California architect Richard Altuna to redesign its stores. Spaces will be transparent to alleviate the fear many have of complex phone gadgets. Visitors can even watch technicians repair cell phones.    Nokia supports its brand with six Experience Centers, "where visitors can feel free to browse, touch and experience the full line of Nokia products on their own or with the help of an Experience Center guide. They are zero-pressure environments."
  • With more then 100 Apple Stores, Apple Computers is a pioneer in this field. Their most recent experiment is with mini-stores which average 750 square feet. With stainless steel walls, and seamless white floors and ceilings they are an extension of Apple's much admired design esthetic. Within these mini-stores are located Genius bars - where black-clad tech support staff offer operating advice and take in repairs from behind a sleek bar-like counter. PC World columnist Rebecca Freed says, "They're more boutique than big box, and service makes a difference."
  • Fifteen years ago, Sony established its Sony Style concept in Canada. By 2006, thirty Sony Style stores will be spread across the U.S. These high-end electronic boutiques let buyers sample gadgets in comfortable, well-staffed settings. The upscale floor plan lets visitors imagine Sony products in their own home.
  • palmOne Inc. currently has over a dozen boutique-style outlets in upscale locales, each of which are designed as cafés to make visitors feel at home.

In each of the above cases, it's become all about the consumer experience and how these products fit into their lives. The recent editorial in Bicycle Retailer & Industry News from Michael Basch, CEO of the YaYa! Bike Cooperative ties in very nicely with what the consumer electronics manufacturers are doing - making it about the customer experience. The current efforts of Trek and Performance in the marketplace would be better served if they built their stores with the mission to recognize and deliver the customer experience.

The next retail category example we'd like to look at is pet food. A presentation given earlier this year at the National Grocers Association convention by Nestle Purina PetCare, showcases the power of data in this category.  The following findings were presented:

  •  Approximately 56% of U.S. households have at least one pet in the home,
  •  The percentage of households owning a pet is significantly greater among those with higher incomes,
  •  During the average lifespan of a dog (12 years) or cat (14 years), its owners will spend $5,200 and $4,700 respectively,
  •  Over the same period of time, a consumer will spend less on other major categories such as baby care ($3,178), soda ($2,128), and snacks ($1,246).
  •  Depending on the retail channel, humans will spent up to $9.57 for every dollar lavished on their pets.

It's important to understand that the pet food category is driven by consumer data. This data can be used by category stakeholders to differentiate their businesses from their competitors in the marketplace. The pet food and care industry is but one of many industries that understand the power of consumer data to position themselves for the future.

As referenced by the title of this writing, the future for our industry is here today if we begin to make a concerted effort to act based on consumer data. Imagine the increased economic standing of our industry stakeholders (manufacturers, distributors, retailers, et al.) if there was a free exchange of data about the consumers who purchased cycling products. No longer would we have to worry about the actions of big box retailers, direct response companies, and internet start-ups. The power derived from our knowledge of the consumer would differentiate our channel from all others.

Another indication that the future is fast approaching is the increased recognition of a demand-driven strategy. What is this? It's essentially both a mindset and ability to use deep insight into customer preferences and behavior in order to deliver optimal value to your most desired customers. In an age when the consumer of the 21st century has more information and more choices than ever before, retailers and manufacturers that are able to align their businesses around consumer needs and aggregate patterns of behavior can achieve competitive advantage in this dynamic market.

A demand-driven strategy revolves around data - plenty of data that pinpoints preferences, desires, and experiential needs of the consumer. This information will allow you to act smarter and with more confidence. Now, why do you need to implement this type of strategy?

For retailers, it's a competitive necessity. Consider the following:

  •  Simply following the competition, almost by definition, places you one step behind the competition,
  •  Understanding consumer demand allows you to negotiate vendor deal terms and understand the best way to pass-through cost changes,
  •  The cost of losing a customer due to price image or poorly executed promotions is too great.

For manufacturers, the greatest opportunity lies in increasing trade performance with superior selection of promotion formats and price points. Consider the following facts taken from a study done by Cannondale Associates as well as other studies done:

  •  On average, consumer products manufacturers spend 17 percent of revenues on trade promotion - a figure that's been steadily increasing over the past decade,
  •  Between 80 and 90 percent of trade promotions are not profitable for these manufacturers,
  •  78 percent of manufacturers do no analysis of their trade spend effectiveness.

Using a demand-driven strategy focused on meeting consumer needs will allow manufacturers to increase the profitability and effectiveness of their trade promotion spending.

Throughout this article, it should be clear that today's "future" has two things in common. The first is the focus on the customer's experience. The second is the focus on the customer through capturing consumer data you can use to deliver the experience consumers want. Are you ready for the future today? In order to survive and prosper you have to be, so don't wait for tomorrow.

 





 

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