Monday, December 15, 2008
Friday, January 11, 2008
Sometimes Companies Just Say Yes
But business is risk, and companies must shake off the dust and try something new at times just to keep from being moribund. Today, IKEA is an example. A comedian and filmmaker, Mark Malkoff, had to have his New York apartment fumigated, so he decided it would be an interesting video to literally move into an IKEA store for the week. He asked - and they said yes. So he's in the store in Paramus, NJ at the moment, having fun and creating an enormous opportunity for positive PR and viral marketing. You can see the ongoing video series here. Realistically, there was little downside for the chain, much potential benefit, but saying no is so easy. Management there didn't, to their credit.
Thursday, December 27, 2007
Holiday Sales Hangover
Clearly investors and businesspeople are only happy when there is a significant rise in sales year over year. But satisfaction is a relative term, and depends completely on expectations. Having rosy expectations when credit is mangled, when people are stuck with ballooning housing prices, and when fuel is up enormously over last year is simply deranged thinking. How could anyone expect the average person to be willing to go even more into debt to line the pockets of a relative few? You can't expect people to inhale and never to exhale, and so you cannot expect them to always shell out more this year than last, particularly when you want that number to exceed inflation. When asking themselves, "What could we have done better?" I think a wise answer might be, "Stop telling ourselves stories to feel better, and face reality so we can consider viable options, not fairy tales."
Friday, November 23, 2007
Thanksgiving Sales Rituals
But entire industries are facing real problems. Tightening credit and lack of money is huge pressure. There have to be major changes in how they do business. They have to understand that sales can't necessarily rise every year, you can't count on more people spending more every year. Investors can't count on ever expanding sales. Perhaps it's time to understand that companies can't stand with one strategy for one set of demands. Perhaps it's time to know that constant expansion is like constant inhaling. There must be cycles of expansion and contraction. When conditions contract, perhaps what a smart company, management, board, and investors do is look to use the time to strengthen the organization, find weaknesses, reform bloated processes, and otherwise realize that there could be advantage into changing a business approach to get ready for the next expansion. But that would require a view extending beyond immediate personal gain, and that doesn't seem to be in the cards in business these days.
Tuesday, October 09, 2007
Christmas in October
Shattering records for an early start, Wal-Mart is cutting prices on toys in mid-October, but the company is not calling it a holiday sale. L. L. Bean has started advertising free shipping — but it is shying away from the H word. And Toys “R” Us is marketing a temporary store in Manhattan, but consumers have to study ads to find the name: Holiday Express.According to the article, what has pushed them back this far is the expectation of a lackluster holiday shopping period. So much for the day after Thanksgiving. This offers more evidence that there could be a broad economic slowdown, I think, or at least for a lack of business confidence, which can become the same thing. I see why retailers are about holiday sales, as many see 60% of their business from September to December. But I don't see a logical reason why worries transform into a strategy of starting the sales earlier. When you have the sales start so early, you lose the chance of getting anyone to pay higher prices at all. The result is a self-fulfilling prophesy of lower dollar sales and lower margins.
You can't solve a problem that stands outside the realm of efforts you currently make by doing more of the same. maybe retailers need to do something completely different and find a way to deliver value that isn't offering goods for less. Why not offer a shopping service, where people can call teh store, say what they want - maybe even get gift suggestions - and have all the stuff put together for them so they can simply pick it up? That does sound suspiciously like an online shopping facility, which is fine. Just add a little bit extra service and position it as what it is - a way of getting what you need done without getting strung out. Let a number of retailers work together on a holiday season gift registry, so you don't have to guess what Aunt Mildred wants, and you don't have to go to a particular store. Have a recovery zone in stores, where consumers can sit, rest, and get a free cup of coffee and cookie or other snack.
I won't expect to see any of this from now to the end of December. Businesspeople seem wed to continuing things they way as they have always gone, or to treat sales as a zero sum game, where the benefits go to either you or the customer. And zero is exactly what happens.
Friday, May 18, 2007
Learning from Retail Profit Growth
But even the private label work is being designed by names - Vera Wang and Polo Ralph Lauren, for example. Maybe consumers are getting tired of paying for junk. That's not to say designer labels are necessarily better, but at least there is that buyer association. And it's the design name that seems to be important. Yet by doing more private label work in particular, the companies cut out layers of expense, which is why the profit jumps were so far ahead of revenue lift. Penney's revenue was up only 3 percent, while Kohl's was up 12.5 percent and Nordstrum's same store sales rose 9.5 percent. At the same time, Federated missed analyst expectations and there are warning sounds coming from Arkansas as Wal-Mart says it, too, could fall short of Wall Street targets. Clearly the two should be looking at what their competitors are doing right.
Sunday, April 29, 2007
Retail Price Optimization
For Music Labels, Distribution Is the New Worry
big-box chains are now responsible in the U.S. for at least 65% of music sales (including online and physical recordings), according to estimates by distribution executives, up from 20% a decade ago.Having that much potential distribution and sales tied up with a limited set of customers is a scary concept for any company for a few reasons that I learned in my time in business and in writing about business. One is that with so much ability to exert pressure, you can bet that prices to the retailers will eventually be coming down. Another, you now have narrower demographic segments dictating what will be commercially acceptable music.
Third, big producers need small producers to create new niches and open fresh areas for production, and that gets much tougher when the large stores are going to be less likely to pick up the work of small labels because it becomes too much trouble to maintain a vendor that supplies a small amount of what the retailer sells.
The kiss of death is, as the story mentions, is that the stores will find the category unprofitable compared to other areas:
That's partly because, with CD sales falling steeply, the discs aren't as hot as other products the stores sell. Also in the wake of the Don Imus controversy, the debate over the lyrical content of rap, rock and pop has flared up again. Oprah Winfrey recently has focused on rap lyrics on her talk show.Best Buy has apparently reduced the space devoted to CDs, and Wal-Mart has given a quiet heads-up to the big music distribution industry that it will cut back space for music by as much as 20%.
What's a record label to do? Learn a lesson about non-traditional distribution. Some book publishers have been smart, putting their books for years into places where their natural customers might appear but that aren't the usual independent and chain stores. Most publishers don't get it, which is why so many are having problems. You have to meet the consumer where the consumer wants to be. So look at what Starbucks has done and start moving in that direction. Popular music labels could experiment with selling CDs through various fashion outlets, specialty interest stores, and other places where they could receive impulse buys - if music isn't a life style purchase, I don't know what would be. Put it in in the Gap, in Williams-Sonoma, at news stands, in gas stations, in craft stores. It doesn't matter where so long as the people who go to those places are the sort who buy the music. When things get tough, it's time to start thinking outside of the big box.