Towards Freetail

In the past couple weeks, I’ve been stuck in a queue at the supermarket, IKEA, or other big box with lots of self-service checkouts. Stuck.

Contemplating whether standing the queue actually took longer than finding the items I wanted.

That maybe, just maybe, this entire endeavor could be made more efficient and joyful.

Rather than the punishment for enjoying the selection.

The Pay-What-You-Want Panera feels like a step in the right direction

“The majority of patrons pay retail value or more. Statistics provided by Panera indicate that roughly 60% leave the suggested amount; 20% leave more; and 20% less. One person paid $500 for a meal, the largest single payment.” – Jim Salter, Associated Press

Small Gaps Between Us

Notice all the stores Dave mentions are related:

  • Gap, Banana Republic, and Old Navy are all Gap Inc. brands.
  • Eight years ago when Apple didn’t have any retail stores, Millard Drexler, then CEO of Gap Inc, joined the Apple Board of Directors.

Personally, I can count on one hand the number of items I’ve ever purchased from Gap Inc. They just don’t sell things in my size, let alone style.

Hollywood Video in the Local Supermarket

Ran up to the local Cub Foods for a last minute dinner item this evening and snapped the above photo of the new Hollywood Video Express Kiosk over in a part of the store I never go to (Sturgeon’s Revelation frequently comes to mind while I’m grocery shopping).

I found two things interesting about this moment.

  1. Hollywood Video still exists – and enough to launch A New Thing
  2. Someone was using it

If I wasn’t in a hurry (why hasn’t Cub installed self-checkout?) and wasn’t already a Netflix subscriber, I might have stopped to check it out.

Ikea vs Target

Target’s “newplace newspace” line is an obvious strike against Ikea’s hip and disposable interior furnishings, and a big win for customers. (There are more Targets than Ikeas near me and if you’re in the US, I’d bet near you also.)

Then this morning I hear, Ikea to sell groceries.

Reminds me of the scene in the Right Stuff where Jeff Goldblum rushes in proclaiming “It’s the Russians”, kicking off the Cold Warer, Space Race (thanks Al).

UPDATE: 11 November 2005. I noticed somebody came by this post googling for IKEA’s target audience. For that, I’d recommend the lyrics to Jonathan Coulton’s song ‘IKEA’

Picky Customer or Circling Vulture

Jen and I went to a mall on Saturday. It’s been a long time since I’ve been to a mall on a Saturday afternoon. I left buying nothing and feeling extremely uninspired to shop.

I now know why Target sold Marshall Field’s last year to May Department Stores and why May Department Stores is praying to be bought by Federated.

Like advertising, commercial radio, and the airline industry, the entire department store model is broken. It’s no longer useful to customers like you and me. Every store looks exactly the same. Each store offers the same products under the same brands, in the same colors, at the same price, with the same reason offered to buy from them – none.

Perhaps, like in commercial radio, this homogeneity is a result of consolidation. That may be. I submit consolidation itself is a result of:

  1. a business unable to be successful on its own,
  2. the belief sustainable margins could be reached with enough volume.

Even if stores aren’t sharing inventory, they’re striving for blandness by stocking the few items that move at competitors and dumping the unique items – the ones that don’t sell. Leaving me, and I suspect, you, with a strong sense of blah.

As we walked through Marshall Fields (or was it Herbergers or was it J.C. Pennys?) the majority of the customer activity was in the inter-aisle sale racks. 50% off jewelry, 60% off menswear, racks and racks of stale inventory clogging up the aisles. That’s where the customers were. The full-price stuff getting no attention. The scene reminded me of my mom – doing the bulk of her furniture shopping at Going Out of Business sales.

Retail stores traditionally mark up their products 100%. That covers things like: the staff, the building, and the products that aren’t selling. Things that keep the business running, that keep the jobs in your neighborhood. If stores get the bulk of their business when they run sales (going out of business or otherwise),

    what incentive to the have to:

  • stock things worth buying not on sale?
  • differentiate themselves from their competitors?
  • stay in business?

This relationship is like that mean, yet popular high school girl telling the infatuated A/V club president, “We can be best friends as long as we never see each other.” Yes, we’re the popular high school girl and the stores are the geeky boys.

A handful of questions come to mind:

  • Is this Wal-Mart’s fault for teaching us that stores should strive to squeeze the livable-wages out of margins?
  • Is this the fault of stores like TJ Maxx where the department store’s unsold inventory lands a season later? Thereby reinforcing the ‘if you wait, the price will be lower’ lesson taught to us by the frequent sales.
  • Is this the result of a society so plush with potential options we need the threat of something being gone tomorrow to make a purchase decision?
  • One last question: If turning customers into circling vultures is the only way to make them buy, are the products worth selling?

Best Buy Focuses on Personas

Best Buy has taken the first step in their persona-centric model. According to the Wall Stree Journal’s Analyzing Customers, Best Buy Decides Not All Are Welcome, the sales associates have received training to briefly interview customers to determine if they are a Barry, Jill, or Ray Buzz.

In an effort to keep their store relevant in an increasingly e-commerce industry, Best Buy is also reducing rebates, promotions, and sales. Others may disagree, though I commend them in that decision.

This was also picked up by iaslash.

Wal-Mart.com Tests Ship-To-Store

Big box retailers are continuing their search for the Holy Grail of Retail – increasing merchandise selection without increasing real estate costs.

For years, Click’n’Pull for years. Unlike Click’n’Pull which is only available for in-store items, “Ship to Store” is only available for Wal-Mart’s web exclusive items.

This development is interesting in 3 major ways:

  1. It recalls the heyday of Sears & JCPenney catalogs, where orders could be placed and picked-up in-store.
  2. Both Sears & JCPenney currently offer an “order online / pick-up in-store” service. Sears.com has offered it for the past 4 years and seen 22% of online customers make additional sales while picking up their orders.
  3. This is for items not normally stocked by Wal-Mart. Knowing that Walmart.com merchandise is of higher quality and the store merchandise. Is this a way to gradually increase the quality of in-store merchandise, therefore a play against Target?

Dallas Morning News articles: Wal-Mart tests store pickup for online buys

Try Before You Buy

Even today, with all the Internet offers, shopping is often purchasing a product without first-hand experience with it. Our customer research has proven time and time again that if the product can be handled – it’s more likely to be sold.

Until now, it was nearly impossible for customers to actually try out a product without purchasing it and returning it.

The Washington Post recently published In-Store Testing, an article about Maytag, Best Buy, Whirlpool

As part of a new program, the company is encouraging consumers to test-drive appliances before buying them. Shoppers can throw in a load of laundry, wash dirty dishes and bake their favorite dinners. There’s even a package of cookie dough on hand in case people forget to bring their own

And [Raymond R.] Burke, the Indiana professor [University’s Kelley School of Business] , warns that mock rooms take up valuable retail space in a store. “There are serious costs associated with it,” he said.

Yes, formatting stores and products to support use requires a shift from an inventory-focused mentality to a customer-focused mentality. Products that can’t be seen, touched, and experienced cannot be sold. If you use your products as a way to facilitate a conversation with your customers, they’ll be more committed to you.

…estimates sales in the larger, interactive store are twice those of the older one. The biggest difference, he said, is how many appliances consumers buy. “Instead of buying one range, they buy the range and the refrigerator, and maybe the dishwasher, because they see how it works together,” he said.

McDonald’s Learns From Best Buy

In the Star Tribune’s recent “Best Buy Copes with Costs” article, they report that Best Buy’s customer-centric format roll-out (and here) has been scaled back 40%.

The customer centricity strategy has its costs. Operating expenses as a percentage of revenue were 2.2 percent higher at the test stores, the company said. But the test stores’ sales and gross profit rates also outpaced traditional locations.

That’s right – even with slightly higer operating expenses, Best Buy has dramatically increased sales by focusing providing an excellent experience to specific customer segments.

In a related development – McDonald’s has also declared that one brand experience doesn’t fit all

“…no single ad tells the whole story,” Larry Light, McDonald’s chief marketing officer.

He continues:

“We don’t need one big execution of a big idea. We need one big idea that can be used in a multidimensional, multilayered and multifaceted way.”

There you have it – 2 big names declaring mass marketing is not longer effective and moving their organizations to a more individual customer experience model. Is this the end of mass marketing and the return of local specialization and identity as Seth Godin recommends? I hope so.