CHOICE: PICTURES IN AN EXHIBITION. ‘Curation’ in retailing

(Images: artchandising)

In 2012, many pharmacies in Spain have drastically reduced their inventory. The Government, their main customer, accounts for over 70% of sales and is not only negotiating lower margins but also paying later and later.

Keeping stocks down is very appropriate in financial terms, but not necessarily in terms of the impact on customers, who see how their usual pharmacy has become less convenient:  many products have become available only upon request and customers must return another day to pick them up. Product presentation has also become less attractive.

Such inventory decisions are common in retail. Mercadona, for example, significantly reduced its range in 2009.

This topic has enormous scope, affecting not only the financial and commercial aspects of an organisation but also the management of complexity within it (purchasing, logistics, and training, etc.). Put another way, it directly affects the balance sheet, the Profit and Loss account and the overall competitiveness of a retail company.

Tools for the assortment policy

It is well known that assortment in a retail company has two variables: breadth and depth. The first refers to the number of major product categories that a store (physical, web or app) makes available to the customer. The second refers to the number of options that the store offers within any given category (for example, the number of kinds of milk on sale).

By playing with these two variables one can describe many retail formats. A convenience store, for example, is characterised by offering a broad but shallow choice: a little (usually only best-selling products) of a lot of different categories. In contrast, a specialist shop offers many options (depth of choice) in only a few product categories, aimed at many different kinds of customer.

Several methodologies have been used, such as “efficient assortment” or “category management”, which has been promoted by AECOC* for years. Their usefulness is high when it comes to improving or adjusting an existing situation, but is nevertheless low when it comes to creating an innovative retail formula.

(*) AECOC, Spanish Association of Commercial Coding (Asociación Española de Codificación Comercial

On the other hand, the method by which category management has been actually carried out has led to it going into a steep decline, at least in the mass market sector. Suppliers led, developed and funded while those directly concerned, the retail chains, went about making range decisions using different criteria, not always in line with the patterns of their suppliers.

As a result, the current playing field presents a remarkable challenge: choice, a crucial element in commercial and financial policy, is addressed in a disorganised manner.

Customers change their preferences for both type and amount (for example, ‘three for the price of two’ promotions no longer seem to work as well as before), suppliers want to launch new products, but the likelihood of achieving sufficient market coverage is very low and retail not always are in tune with the customers or with the suppliers.


Academic studies

There have been numerous studies which have shown that an excess of depth of choice does not usually create a better quality of life for customers but instead generates more complexity, more doubts over what to choose… and ultimately less revenue, as noted by Prof. Barry Schwartz in his book, ‘The Paradox of Choice,’ 2003.

A study carried out by Sheena S. Lyengar (‘The Art of Choosing,’ 2010) looked at the reaction of supermarket customers faced with two alternative choices of jam.

The largest number of products attracted more customers (fascination effect), but  resulted in fewer sales. The human brain does not like complexity, doubt,  or paying conscious attention to things. Aspects such as these represent effort and aggravation in the purchasing process.

This finding is especially relevant since, according to research by Dixon, Freeman and Toman,  reducing the required effort creates more loyalty customers than, for example, giving them a fascinating shopping experience.

As Prof. Bran Wansink (Cornell University) noted, Costco in the USA has only 4,000 items in its range. The lack of choice is deliberate: “We’ve chosen for you,” says the chain.

The compass points towards the customer

The current challenge of choice, especially as applied to moments of innovation in retail, can be solved better if we start not from our current assumptions but from customer-centricity.

More specifically, a new approach is born if you start from a very simple question:

  • Shop, what do you mean to my life?

In other words, what is the shop to the customer? And also, what is the shop to the customer? Note that we are not using the verbs ‘to do’ or ‘to have’ but others: ‘to be’ and ‘to feel’.

One task that can have a high impact on a retail business is known as to edit. Once common in fashion retail, it can now be found in any sector.

To edit involves devising the sense that a given choice might have, through items provided by different suppliers.  It’s like composing a musical score using notes provided by third parties.  For example, designing a collection of accessories that expresses a Mediterranean character from a selection of existing items from various suppliers.

This type of activity is typical of a curator.

This rol is key to any museum exhibition,  the curator determines the sense of the event by choosing works that he or she did not personally create. The curator will also arrange and sequence them according to his or her determined criteria. As a result of the work of the curator, visitors will enjoy a consistent experience full of emotions and perhaps of learning, achieved in a chronological sequence, as a vivid storytelling.

One example is that which Gary Friedman, President of Restoration Hardware, cites as the company’s philosophy of business and, as such, of choice: “When we fearlessly fight for what we believe in and remain hopelessly optimistic about life, love and the future, we create an authentic connection with all in our path. Most importantly with ourself.”

Another example is that of Ferran Amat, owner of the iconic shop Vinçon in Barcelona, when he cited falling in love with products as a criterion for choosing them. In an interview he said that they were all products he would have in his own home.

The Curator

This term reflects its etymological origin in Latin, curare (to care for, to worry about); that is to say, those who are responsible for a matter or process, having talent, subject knowledge and management ability.

This role is now more relevant than ever in a retail company because we live not only in the information society but also with the burden and oversaturation of inputs with the associated risks of lack of attention and mental distraction of customers.

In short, adding more and more items is not necessarily the answer. The customer ‘reads’ and understands choice on a non-conscious level. I have no doubt that assortment communicates more and better than posters, displays or ‘stoppers’. Because it does so intuitively.
But for choice to communicate and sell efficiently, I propose the following three steps:

  1. Inspire yourself with the answer to the question, “Shop, what do you mean to me?” Answer if possible without using the usual topics: price, product, quality, service, location etc. Here the role of curator is essential, because it is the source of the assortment policy: to select the right products for the shop. The result will be an “edited” choice, which logically must be in tune with the shop as a brand.
  2. Organise assortment — and as such the layout of the shop floor — based around a well thought out  Semantic Structure of Assortment: a type of tree of consecutive criteria, grasped intuitively through empathy with customers. It’s not recommended to ask them directly via market research; it would be paradoxical to use a conscious method to understand an implicit process.
  3. Express it in a way that does not create chaos or visual pollution in the human brain. To do this, it is helpful to visualise the subcategories so as to highlight the most relevant in terms of what was mentioned in step 1.

In this way, choice will be in tune with customers. They’ll feel good about what they experience in the shop and of course about its functionality.

So, the breadth and depth of choice in an innovative shop — or at least a differentiated one – will be the result of a kind of philosophical human process; … and therefore very commercial.

Customers aren’t robots with wallets, but people who live their lives in the most harmonious and positive way possible.
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References (by order of appearance)
Schwartz, Barry. The paradox of choice: why more is less, 2003, Ecco edit., ISBN 978-0060005689

Iyengar, Sheena. The art of choosing, 2011. Twelve Edit. ISBN: 0446504114

About Costco:

  • cnbc.com
  • Dixon, Freeman & Toman, “Stop Trying to Delight Your Customers”, Harvard Business Review. Agosto 2010.

About Restoration Hardware:

About Vinçon:

  • obsmurcia.es

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Lluis Martinez-Ribes

Source: Código 84, nº 167. December 2012

INNOVATION IS ALSO IN FASHION RETAILING. Interpretation of Victorio & Lucchino Men

Image: inside the store (provided by the company)
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On September 20, Victorio & Lucchino (V&L) established its first shop for men in nr. 28, Lagasca Street in Madrid. The inauguration made a splash in the media and in the public. The Spanish real-life magazine Hola.com made the event its main story: “Victorio and Lucchino open a store for the XXIst century man”. The reason is simple: it profoundly reshapes the shopping experience, in such a way that from now on, plenty of men shall feel relieved when outfitting for the coming season.

The essence of the Victorio & Lucchino brand

In the late 70s, José Victor Rodríguez and José Luis Medina joined efforts to create a brand, which has become over time one of the most representative and high-profile in the Spanish fashion industry.
When designing garments, they become inspired first by their homeland roots, which they then deconstruct and project into the future. They do so with a style that identifies them: aspirational, determined, seeking both perfection and good taste. Lastly, they add “a wink”.

What their garments’ label used to claim isn’t pure coincidence:  “40% love, 25% charm, 35% joy”.  V&L soon became a leading brand among women.

However, after reaching a strategic agreement with the company Manufacturas Andreu in 2010, V&L took on the challenge of selling directly to men. For over a decade, this partner had been supplying V&L its line of  fashion accessories.

Together with the key executives of the firm, Andreu and Xavier Aspa, we started devising the new retail formula by the end of the year.

Inspired by men

The company is clearly customer-centric. From the very beginning of the project  it was crystal clear that the retail innovation should be grounded in the understanding of the -not very passionate- relationship between most men and fashion.

The insights gathered in qualitative market studies indicated that in general, the male population regarded clothes shopping for a particular context (professional or leisure) an unwelcome chore, namely because it requires, at least, three kinds of efforts: it is time-consuming, coordinating clothes is challenging and, finally, trying them on is a hassle.

Therefore, the V&L concept was thought up to provide a greater life quality to those men who value a classy look according to their personal taste, and with a little mischief.

The playing field

At the time the project was being conceived, we saw that the fashion retail sector was undergoing radical changes, particularly in three areas:

  • Consumers have increased their expectations regarding product, services, price and environmental impact.
  • At an economic level, there’s economic instability, demand has decreased and margins are dwindling.
  • Digital technologies are becoming ever more available, thus allowing for new online purchasing habits.

More and better of the usual methods are no longer enough: new, innovative retail business models are called for. This is not meant to be trivial, but an entrepreneurial must.

The team was absolutely determined about one thing: we shouldn’t only create a shop, but a new retail formula, devised in such a way that it would attract customers back again and again. For this purpose, it was necessary to ground the purchase experience in these two axis:

  1. The shop should reflect the values of the V&L brand, its creativity and magic. The setting would be essential.
  2. The shopping experience should be empathic, smooth and customised. New and powerful technologies were called for, subtly inserted in the shopping process, heavily supported by the back-end and leveraging on cloud computing.


Image: inside the store (provided by the company)

The setting and its technologies

The shop has 150 m2 distributed in two floors, with a very high ceiling.

The ground floor represents a spacious living room, expressed with the particular imagination, style and liveliness of the two Sevillian designers. The products are displayed therein, separated by user context. There is an area dedicated to formal wear for work, another one for casual moments, and a third with a rather more country touch.

The shop maximises customer convenience by tailoring their shopping experience and reducing their efforts in a fun way, namely through two steps: the Pinpoint and the Canvas.

The Pinpoint experience

New customers are invited to enjoy the service of diagnosing their aesthetic preferences in the PinPoint area, a little study which reproduces the designers’ atelier.

There, customers can find out -with the help of a tablet and a stylist- what style matches their personal taste best for every context (work and leisure). Later, their body measurements are taken.

All this information is stored in the cloud for when it may be needed again. This way, return visits will take significantly less time (it won’t be necessary to start from scratch) and shall even be more accurate (the computing system knows the customer’s taste and updates it with every new purchase).

The Canvas revelation

Once the profile has been outlined in the PinPoint section, the customer is ushered to the Canvas, a 40’’ multi-touch table-tablet standing in an iconic space within the shop. There, and guided by the sales assistant, the machine proposes three outfits, taking into account the personal preferences and what they are needed for. The customer himself can also handle the oversized tablet in order to adjust the results.

The program can also recommend other combinations on the basis of a given garment the user might have selected, as it is capable of recognising every item in the shop by just placing it on the screen. A complex system of algorithms matches customer taste with garment tags.

The Canvas reduces the risk of a poor choice and the customer rests assured that the items he buys match, that they suit his style and all this without trying on many things.

This is a good example of how technologies shouldn’t be used for their own sake, but rather as a means to an efforts-free shopping experience for customers.

Two years, one orchestra

During the two years in which the project was developed, Andreu and Xavier hired outstanding professionals, each one an expert in their own discipline. Martínez + Franch (m+f=!) were entrusted with the retail innovation consultancy, while the conceptualisation of the interior was developed by both designers of the brand and the architecture firm “Madrid in Love”. The technology was built to order by Raona based on the Pixel Sense structure, a combination of Samsung and Microsoft products. Another key asset has been the fashion designer Gala Canut, responsible for the collection and style.

In addition, the company paid special attention when selecting the sales team, according to their human empathy and aesthetic sensitivity. Their training took long and was meticulous.

Andreu and Xavier haven’t only conducted the orchestra, but they have taken special care of every detail and played as many tunes as necessary to accomplish their results.

The shop will be considered a pilot for one year. In other words, it will be a space to learn until it  can be confirmed it works with high profitability and customer satisfaction. In the next stage, the chain shall expand in Spain and internationally.

More than just a shop

Victorio & Lucchino Men is a fascinating store and a fully innovative retail ecosystem, created to yield sustained cash flow. It is a complete business model (front-end plus back-end) that expresses the V&L brand with the five senses. It is based in customer centricity with a single purpose: sustained loyalty. That is why we have added the prefix -eco to the word system.

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Lluis Martinez-Ribes

Source: Código 84

special edition for Aecoc Congress

October 2012

FROM YOUNG TALENT TO LUXURY RETAILING. Interpretation of “Not just a label”

Stefan Siegel, founder of Not Just a Label
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Surprise in Brussels

July 4, 2012, Brussels. The speaker that followed my talk was Stefan Siegel, founder of Not Just a Label (www.notjustalabel.com). Dressed elegantly, in a slightly avant-garde manner, he explained his company to an audience of professionals from different sectors of the garment industry. The conference, organised by PROsumer.NET (1), explored the retail innovation trends in fashion products.

I was entirely captivated by his business model and his management style, being the latter visionary, holistic, passionate and pragmatic, all in one. In 4 years (despite the economic turmoil) his company has become the most influential platform of contemporary fashion clothing and accessories in the world.

What is “Not Just a Label”? (NJAL)

Just like myspace propelled many singers and bands into stardom, NJAL is playing the same role for promising fashion designers.

In other words, NJAL is the main global directory of young, talented vogue creators. It is the world’s online landmark showroom. It is the hub or meeting point for the offer and demand of stylish couture on a planetary scale. The content it visualises is that of art shaped into fashion.

The two Siegel brothers, Stefan and Danie, started the venture in 2008, leaving behind orthodox and well-paid jobs. Stefan had fashion experience while Danie had worked with information systems.

Artists who would like to appear in the directory can apply online, and are later analysed by experts. If their work is very good, they are accepted and listed free of charge. Out of these, only the very best shall receive the status of Black Sheep, achieving thus an even greater visibility.

It is a shop, too

NJAL is much more than a showroom where up-and-coming designers can display their collection and profile for free. Since 2009 it is also a market where the Black Sheep can sell directly their unique or limited edition products, made by the artists themselves. The company, that arranges the entire transaction, keeps a commission on the sale.

In 2011, NJAL was awarded the Drapers Etail prize to the best fashion sales web in the UK, because it allowed “nearly unknown designers gain global exposure and commercialisation”.

What customers attain by shopping there is a range of creative products, preselected by famous experts, locally manufactured and handmade by the designer, in limited series or as unique items, each one with their own story and inspiration. All this considering that end customers and authors are in direct contact all the time.

Altogether, a new philosophy and shopping experience of luxury goods is born, grounded in authenticity and sustainability.

This is a good example of how an online shopping experience can be just as rich as that of physical shops. Note, however, that this isn’t achieved by trying to emulate digitally what happens offline.

Several pieces; one system

NJAL discovers and selects the best designers of trendy fashion in two ways:

  1. By analysing and filtering online applications. Only the very good ones are accepted.
  2. By proactively visiting the foremost design schools in the world and the young designer catwalks. This way, they can add 200 artists a month to their showcase.

NJAL looks after its burgeoning youth, by accelerating their career through the following services:

  • List of job requests, as applied for by designers.
  • List of job offers: companies can inform a very exclusive group of artists about their vacancies.
  • Request for quote. This allows the potentially commercial interaction between companies and around 1,000 designers by means of a button next to their profile and collection.
  • Managerial services for those designers with greatest potential.
  • The sale of articles by the most talented in a transparent way.

The firm also undertakes workshops in design colleges, in order to present the latest trends in vogue.

Finally, NJAL also provides consulting services on fashion trends for large companies.

From the support of new designers to the sale of luxury products.

 

 

A well-managed dilemma

NJAL masters the management of an important dilemma:

a) The accomplishment of reputation, prestige and credentials by means of:

  • Showcasing the best, as it offers a selected and filtered content.
  • Using VIPs on occasion, like for instance when selecting products for retail.

b) The attainment of critical mass. This is achieved by democratising good design, providing free exposure to many talented artists, and obtaining in exchange usability and relevance.

“Lego-type” business model

NJAL is the paradigm for “a Lego business-model society” (2)

The firm now performs and combines smartly different activities or micro-functions (“Lego pieces”) that were once developed by other players in the sector.

One of the key tasks is that of curating or commissioning fashion design, currently in the hands of Diane Pernet, a leading voice in the industry. These filtering and organisation functions shall be more and more crucial in the overloaded information world where we live.

NJAL assumes the role of an orchestra conductor: it directs some and yet, has them do.

With these kind of assembled “pieces”, the system allows authors to shine with their own light and causes the traditional modus operandi of the fashion sector to become obsolete.

In a nutshell

NJAL has devised an ecosystem where every element plays different roles, which compose a sustainable business model when integrated. As a result, the company gains the preference of many stakeholders: talented creators, design colleges, fashion companies, specialised media and the public who fancies products with limited commercialisation.

As Diane Pernet asserts, what really matters in an online business is the combination of content and contacts.

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(1) PROsumer.NET is the network of European Technology Platforms for design-based consumer good industries and related research.

(2) Author’s own terminology to refer to the possibility of configuring new and non-standard business models by reallocating microfunctions between different players.

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Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

nº 166
September 2012

THE PRODUCT’S OUTFIT. Interpretation of packaging management

Image: Container for spices sold in bulk, designed by Carolina Caycedo, which was awarded in the category “Young Design” awards Liderpack of 2011
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On February 1, 2012 the Liderpack Jury granted an award to the best Spanish packagings. The most refreshing category was “Young Design”, consisting of junior creative proposals. One of them was a pack for spices sold loose. It was compact, small and practical, developed by Carolina Caycedo, a student at Elisava School.

We not only acknowledged its style (it was a contemporary revival of the paper cones made by the typical spice stallholders) but also its practicality (it could be opened and closed after use). We valued it because it answered current shopping trends: buying loose.

The packaging is more than just a pack: it is the outfit of a product. As such, it has a double purpose: the functional one, which is protecting the product; and the emotional one, which is evoking the product’s virtues.

Let’s reflect on 6 aspects that all packagings should comply with:

The brand expression
The packaging represents a customer promise. It is like an “imagination shuttle”, for it allows consumers to feel in advance all the sensations and satisfaction the product will convey (1). In other words, the packaging is one of the best means to express the brand sense, especially if done in an implicit and intuitive way.

Due to the power of pack designs, executives are advised to withhold from overstating their promise, that is, from evoking more expectations in consumers than what reality has to offer. Tempting as that may be, customers would feel frustrated and ultimately, deceived.

Galenic innovation

In pharmaceutical jargon, galenic innovation is that which innovates not the product itself, but its applications by making them easier, faster or more convenient to use.

This point is of particular relevance to packaging: a customer-centric approach translates in more product functionality, be it while buying it or using it. The easy-open is a clear example of galenic innovation.

Over time there have been great developments in this area, even in material packs for factory assembly lines.

Knowledge brings love
Information shouldn’t be looked down on, no matter how obvious. Without facts, a product cannot be compared. The info is all the product has to say about itself: in writing, visually and by any other element, that could be semiotically analysed.

Science has made some promising progress in packagings by making them smart. They can now indicate the status of their contents, like for instance, if there has been a break in the cold chain.

Another aspect that shouldn’t be overlooked is the text legibility. If a text is hard to read, due to its size or its colour, the pack shall not help at all in creating consumer trust towards the brand. We should bear in mind that seniors are the market segment that enjoys reading the most… and both Spain and Western Europe are areas with a great proportion of elderly people.

With one’s feet on the ground
The cost of mass consumer packaging should be considered with care. Not all markets can allow for the pack expenditure of confectioner’s shops in Japan, to give an example, where the packaging amounts to 30% of the product price.

Nonetheless, one should know where to save money and where not to. As an illustration, take eyeglasses. If these already included from the manufacturer an RFID chip -or similar system-, opticians could not only prevent theft in their shops, but also offer their customers unassisted and open access to their entire frame assortment.

There’s life beyond the shop
The packaging should be thought for two distinct moments (when it is bought and when it is used). From a customer-centric standpoint,  we could add it has also been designed to reduce efforts, either for transport (nature invented watermelons regardless of efficient logistics) or kitchen cupboard organisation.

All in all, we could even take a step further. If the packaging allowed for a replenishment option, that is, once the product has been used and thrown away in the appropriate container, it would automatically activate a device that adds its name in the next shopping list. The order could then be launched later, at the user’s convenience. This is just another example of how online and offline blend together.

Beyond sustainability
No one who ever dares to launch an environmentally unfriendly pack will win the WorldStar, the world’s most renown packaging award.

This environment consciousness is vivid among citizens. The use of sustainable materials and their minimisation are roads from which there’s no turning back. One day, consumers shall expect the environmental footprint of a product to be indicated on the shelf, just as they now can’t do without the price.

There’s another upward trend: the purchase in bulk. One can observe this in many sectors (groceries, flowers, pharmacies, wine, etc.). It is an environmentally conscious practice and a customer-centric exercise: shoppers buy the exact amounts they need every time, increasing their notion of expenditure control.

One might think this trend derives in the death of packaging, although with the loose sale a new ecosystem emerges:

  1. A simple or reusable packaging.
  2. It requires a new container-pack that can adequately protect the product in the shop.
  3. The section where customers can buy loose is a packaging on its own, too, with its scenery and sensoriality.
  4. In many cases, a flexible labelling system shall be necessary, in order to add information to the sold product.
In a nutshell
“Packaging management isn’t only about classy, low price and quality containers. It is a multifaceted business management method, that involves not only rational considerations (price, functionality and technical efficiency) but also emotional ones (the understanding of consumer needs and the subtle reflection of the company brand sense).”
It is a technique and an art at the same time.

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(1: as mentioned in previous bubbles, imagination plays a leading role as a sales stimulus)

Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

nº 164
June 2012

IMPACT, SEDUCTION OR RELATIONSHIP? Some trends for in-store displays

It’s no laughing matter. A vast amount of non-academic literature states categorically that most of the shopping decisions take place in the store.

Barbara Grondin (1) claims that 50% to 70% of shoppers are influenced by at least one of the different in-store media: posters, displays, hangers on the shelves, stoppers, etc.

Millward Brown (2) mentions that around 70% of brand decisions are made in the shop.

Jeff Froud, Strategic Planning Director at OgilvyAction (3) points out that 72,4% of visitors in a shop take at least one of these decisions:

  • What amount to purchase (52%)
  • What brand to choose (39%)
  • Whether they purchase a new category they hadn’t considered before (29%)
  • Whether they leave empty-handed (13%)

The shop impact may vary depending on: the kind of product (going shopping -for leisure- is different from doing the grocery shopping -as a chore-), the customer context (for instance, when they just received their wage), or the personal profiles. Without a doubt, the impact will also differ according to the visitor experience the shop has prepared. This aspect is usually overlooked in many studies.

In any case, regardless of the numbers, what happens in the shop is of foremost importance.  Amancio Ortega (Inditex) already pointed this out: “The store is the best way to build a brand”.

The relevance of in-store displays
Displays are one of the top means to boost sales in the shops. Their relevance is such, that Liderpack grants awards to the very best every year in Spain. They come in all sorts, shapes, assembly systems, finishes…

And their purpose is multiple:

  • To impact visitors by making them aware of something that otherwise would be ignored.
  • To persuade them to buy something unplanned for.
  • To achieve a cross-sell: buy this, along with that, too.
  • To achieve an upsell, that is to say, elevate the product level of what the buyer intended to purchase originally: choose this (and more expensive) option.

On the whole, the aim of displays is to sell more, here and now.

Who could be drawn by such goals?
It’s not a fool’s question. One would answer head-on that both the shop and the supplier have an interest.

However, most of the displays submitted to the yearly Liderpack Awards belong to suppliers, who are very interested in promoting their brand in third-party shops.

The smart retail company (the chain) isn’t very keen on selling supplier-branded products… nor those of its own brand. What it really is eager about is selling the shop, or in other words, that buyers choose their shop over any other.

The best chains aren’t concerned so much about the average sale per receipt as they are about their customers’ frequent return. There’s mathematical evidence to back this statement. In the supermarket advertising of Aqui é, the company advised their shoppers to buy more frequently instead of too much, because their groceries would then be fresher, healthier, more flavoursome and in consequence, they wouldn’t go to waste.

When customers decide to do their shopping in a given chain, they select a product with a very big packaging: the shop. Inside this shop-packaging there are other smaller packs: the sections (with more or less appeal). Within this section-packaging there’s another smaller one, called shelf. Finally, the tiniest of them all is the item’s own packaging, what we colloquially know as product.

When customers reach this point, they have already gone through the three mentioned packagings, all of them chain-branded. It is easy to understand the implicit power of the own brand, when not using the ideological concept of private label. And it is also easy to grasp why more and more suppliers choose to sell directly to consumers, i.e. to be in retailing.

Until such a strategic decision isn’t embraced, companies opt for B plans, such as:

  • Shop in shop, just like those of Roca in some of their dealers’ stores.
  • Areas with atmosphere, like the ice-cream shops that Unilever has set up in collaboration with some chains.
  • The use of posters, or even better, displays, because they can include the products.

In-store display trends
I believe we shall see the following trends in displays:

  • Sustainability should be something considered upfront, right from the briefing stage. Whatever is temporary must contemplate its recyclability, for there is only one planet.
  • They must be attractive in order to break the customer’s lack of attention, which in turn is a consequence of today’s hyper-stimulative way of living. Nonetheless, shouting louder is no longer the right path. The word impact has a suspicious undertone; It would be much better to attract, stimulate and seduce instead. It would also be convenient that shops weren’t visually polluted by displays. When a rowdy store is put in order, and its assortment is arranged in relation to a semantic sequence of customer-oriented criteria, the turnover increases around 7%, according to my experience in several cases.
  • Make customers interact with the display. One way would be through mental interaction via story-telling, in which customers get carried away if their imagination is properly stimulated. Thus, they co-create the message and adapt it to their taste. A second way could be through a multi-sensorial physical interaction like the Sony display, for example, that won the 2010 Award. The visitors could try any of the photo cameras on exhibit and once they did, an interactive screen would come up with product information. Customers could then choose to expand whatever info they required.
  • Because of the human nature, communication is bidirectional, but today only a minority of displays allow visitors to get in touch with the company, for example, by giving their opinion or suggestions or similar. In this respect, many museums are one step ahead of everyone else, for they offer visitors the possibility to write about their experience in guestbooks when leaving. What customers say to other customers is much more convincing than what a company can publicise about itself. If the brand is good, it needs to persuade less and can work more on facilitating customer interaction through different platforms.
  • In my opinion, an in-store connection with someone at a distance is another growing trend. Through the display and via internet, customers can ask for help, information or advice. If half of the Spaniards already use smartphones, why can’t a shop display be connected to the internet?
  • A display with these afore mentioned features could easily be turned into a market research tool, developed in real-time, which could provide insights on what the public likes about a product or doesn’t understand about it -and of course, this would be done without having to ask anything to the person who’s experimenting with an exhibited product.
  • All in all, the display can facilitate the sort of shopping process that people do now: just like with cars or carpets, their experience often starts on the internet and ends in the store. Sometimes, customers are in the store and check something via their phone’s internet, with the possibility of finishing their shopping at home and online. This multi-stage vision of the buying process (by fusing online and offline) will prompt a great degree of innovation in retail.

Where will the purchase decisions be made?
Given that barriers between the digital and the physical have nearly disappeared in customers’ eyes, it would be sound to create displays that could merge:

  • Presence + distance
  • Functional information + boosting imagination
  • Bidirectional communication (from/to shoppers)
  • Understanding of what aspects of the product really attract the customer.

From now on, the decisions shall be made in both types of shops: molecular and digital. Shall the percentage of shopping decisions made in-store become one day an urban legend?

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Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

nº 165
July-August 2012

A STORY ABOUT SEDUCTION. The shopping experience and its evolution in academic investigation

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583 million results in 0.47 seconds. That’s what you obtain when searching “shopping experience” in Google. It is a hot topic, an expression on everyone’s lips… and as a result, paradoxically dangerous.

Here we shall see the evolution of the concept shopping experience in academic literature and conclude with some practical thoughts.

 

The playing field

This experience takes place in the store, where many shopping decisions are taken. How many? I’m not sure, as I doubt that a fully validated percentage even exists. If it did, it couldn’t be applied in the same way to people who are doing their shopping (chore) as to those who are going shopping (leisure). In addition, there are two kinds of buyers who represent different situations:

  • Those who are replenshing, well aware in advance of what they want to repurchase. They know their products so well, that they spot them at first sight on the shelf, just by their shape or colour.
  • Those who make up their mind on the go, based on what they see, read or perceive in the shop. Whatever these end up buying will be much more influenced by what they have experienced in the point of sale than the previous ones. In particular, what shall be influenced is their motivations, beliefs and attitudes.

From 1973 to the early 90s

Philip Kotler (1973) was the first one who claimed that the atmospherics of a shop was a marketing tool. When the design is consciously thought up, it produces emotional effects on the visitor and this increases the probablity of a purchase.

Then, companies in retailing understood the importance of interior and exterior design as a way to stimulate the willingness to purchase. That is, they intended to influence customer behaviour and this aim was their prevailing mindset.

As a marketing tool, the ambience has three main contributions to make:

  1. If properly differentiated, it draws attention to the shop.
  2. It is the message. The shop communicates something to the visitor.
  3. It’s a way of bonding with the shop and its assortment, which increases the immediate intention of purchase.

From the early 90s to nowadays

At that time, it started to become clear that which today is an actual clamor: markets and audiences are increasingly fragmented, and therefore it’s difficult to achieve an effective communication with limited resources. Using the shop as a means of communication could become more cost efficient.

In this context, the main goal was to identify what has most influence on the shopping behaviour.

We can highlight two of the most relevant investigations in this second stage:

Donovan & Rossiter (1982) studied the works of Mehrabian & Russel in further depth, in order to investigate the responses that certain stimuli would cause on visitors. These are some of their conclusions:

A high degree of novelty and sophistication in the shop creates stimulus and interest.

In appealing surroundings, a high level of interest derives in a larger probablity of positive reaction. Conversely, if the interest and attention of a customer are activated in an unpleasant ambience, the reaction is negative.

That behaviour might also determine the time in the shop, the eagerness to explore, the readiness to talk or interact with other people, the predisposition to spend more money than forseen, the intention to return and the customer satisfaction.

Baker et al. (1992) completed the previous model by classifying the variables of the shop’s interior ambience:

  • Atmospherics: music, light, fragrance.
  • Social: presence of sales assistants, furniture and customers. An empty store discourages customers… in the same way that a crammed one would.
  • Design: both functional (wide corridors, e.g.) and aesthetic.

All these points are of proven relevance, but their combined use hasn’t yet been sufficiently ascertained in order to foresee a given outcome out of each mix.

The shopping experience today

The emphasis is currently put on a shopping experience that expresses the differential sense of the chain brand. Firstly, to draw customer attention, and next, to feel the values of the chain at their fullest.

On the other hand, today the shopping experience cannot be complete without taking into account the internet. Similar guidelines to those of brick and mortar shops can be applied, even if less senses are involved.

It is basic that the shopping experience shows the same brand sense as the retail firm, both in the offline and online shops. The interaction experience must be nearly equal, because digital and physical media are every day more intermingled. (87% of people who buy a car in a dealer have checked them all out on the internet previously).

The players

At the beginning, the first companies that enhanced their customer shopping experience were in the retail business already.

Later, suppliers who saw that many of the purchases were decided in situ awakened and chose either of these two paths:

  • To strive to draw visitor attention towards their products in third party shops. Consequently, all sorts of displays and exhibitors have thrived, including sophisticated ones with augmented reality. An avalanche of digital media is now available, yet its focus is in many cases more appropriate for the second stage we mentioned (communication by improved impact) than for enhancing actual brand experience.
  • Other suppliers, conscious of the power of multisensoriality but seeing the limitations of acting upong third party shops, have decided to launch their own retail outlets, both offline and online. The examples flourish in every sector and corner of the world. In the mass consumer sector in Spain there are several yogurt shops opened by Danone, and Nestle launched the webside diseloconchocolate.es (tell him/her with chocolate, in English).

In any case, it’s important to remember that communication flows in both directions. Customers now can and want to say things to companies. Thinking about only improving the unidirectional communication just comes to show an obsolete and ineffective management approach.

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Lluis Martinez-Ribes

In collaboration with my former student Aline Adam (MSc Esade).

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Bibliography, in order of appearance:

Kotler, P. (1973). “Atmospherics as a Marketing Tool”, Journal of Retailing, Vol. 49, Nr. 4, pp. 48-64.

Donovan, R.J. Rossiter, J.R. (1982). “Store Atmosphere: an Environmental Psychology Approach”, Journal of Retailing, Vol. 58, Nr. 1, p. 42.

Baker, J. Grewal, D. and Parasuraman A. (1994). “The Influence of Store Environment on Quality Inferences and Store Image”, Journal of the Academy of Marketing Science, Vol. 22, Nr. 4, pp. 330

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Source: Código 84, (Burbujas de Oxígeno)

nº 163
May 2012

FLYING HIGH WITH DESIGNER CARPETS. Interpretation of the Nani Marquina shop

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Nani Marquina won the “2010 Shop Prize”, an award that is granted to the best stores in Barcelona. Her shop opened in december 2009, with the mission to offer designer carpets throughout a 650 m2 space, situated on Rosellon Street, on the corner with Diagonal Avenue.

Nani Marquina is the engine of the company named after her. She is an entrepreneur who not only fashions carpets -awarded on several occasions, too-, but also her own brand. She’s resolute, tenacious and assertive in her facet as a businesswoman. But on the other side, she’s also openly playful as a designer.

The shop is the actual reflection of her spirit. It is framed within an austere container: an antique garage, newly refurbished. Its cement floors and naked walls are brightened up by designer carpets, some of them hung in the air, like stars amidst a cloudy night.

 

A splash of history
At the very start, Nani Marquina began selling her creations in the usual way, through third parties, which were often specialised home decor shops. These used to say that her carpets were difficult to market and expensive at that, and therefore didn’t give them enough space within the stores, which in turn made her products less appealing and even harder to sell.

It was crystal clear to Nani Marquina that the specialists wouldn’t go for her brand, so she decided to launch a new channel: direct sales to the public by means of her own shop. This is how the retail project was born, a story with very good prospects.

In the first year, Nani Marquina SL attained 2,6 million euros in turnover, out of which she exported around 60%. In 2011, the shop alone obtained 30% of its turnover from the Spanish market, which translates into 320.000 euros or, what’s the same, about 492 euros per m2 and year.

However the company, like most concentrated on home accessories, has seen how its turnover has dropped by 34% since 2007, because of the contraction in demand, both in Spain and abroad. Nevertheless, the negative impact is smaller than that of the sector due to two things, mainly: the strength of the brand -whose main motor is design- and the decision to allocate resources in other markets beyond the Spanish one, such as the USA or France.

 

Who does Nani Marquina enthrall?
Locals and tourists alike are bound to her spell, in particular those who appreciate contemporary design in home products and have a medium to high purchasing power.

The shopping process tends to be long, because it is of an involving kind. Customers usually start by visiting the virtual shop window on the internet, so when they arrive at the actual brick and mortar premises, they are pretty well informed. In spite of that, they do love personal advice once they set a foot in the store.

This kind of shopping is slow and deliberate, unhurried, for it is part of the leisure time of customers. For this reason, Nani Marquina upholds that shops should be able to open on bank holidays, too.

The triple charm
The premises consist of three floors:

The ground floor has two entrances like hallways, both enhanced with some of her carpets.

The first floor is visible and easy to access by means of a ramp. It is decorated with rather more formal carpets, with a premium touch, amongst which one can find some creations developed with other independent designers.

Likewise, the semi-subterranean floor is in full view and can be accessed by a ramp as well. This area displays more informal rugs, from patchwork to chill-out, with  such a style that the entire ambience becomes suggestive. The patterns allow your imagination to get carried away… No wonder this room is also available for presentations, talks and other events.

As regards to the actual exhibition of the carpets, Marquina arranges them on the ground or hangs them from the walls. The latter are a treat for the senses: they can be admired from a distance or close-up, and they can be touched and experienced much more fully. Since this is not their usual position, they are also understood differently. The entire environment has been taken care of in every detail, whereby all the individual products match so perfectly with each other, that they look like a giant work of art.

Nani Marquina, the brand
Nani Marquina, daughter of an industrial designer, wants to arouse certain perceptions in those people who enjoy the art of carpets. She does this by selecting specific colours and textures.

When one rolls out a rug in a room, the human senses perceive a transformation (the object suddenly starts shining with a different light). Users feel warmth and a growing attachment to the piece of genius -and both sensations are highly gratifying.

In addition to this, the designer conceives every product with three main values.

Reminiscing tradition. Marquina strives to recover -if not reuse- something that still exists but might shortly fall into oblivion, be it the old knowledge of the trade, the traditional techniques or themes from the past. She is always drawn towards rediscovering something in disuse, like for instance, the garage itself which she decided to turn into a shop. Many big adventures start in a garage.

Breathtaking fusion. Nani Marquina doesn’t only dwell in the past, she also embraces contemporaneity. She becomes inspired in tradition so as to retrieve something unique, yet respecting its origin.  Thus, new creations are produced with ancient techniques or traditional fabrics, and alluring results.

A touch of mischief. Her art has, in my opinion, a third register: a glimpse from childhood. When we are children, we are more daring, very bold, and extremely imaginative. This indomitable spirit is still alive and thriving in Nani Marquina carpets.

In a nutshell, I perceive this brand as tradition rediscovered through contemporaneity, with a playful and eye-catching twist.

Her retail challenge
The carpet shop has a considerable challenge. No matter how attractive its creations are, it isn’t possible to launch lots of new items every year. In consequence: A pretty rug shop could end up becoming a pretty museum (in the classic sense, where everything is unchangeable).

To avoid this risk, the shop employs three techniques:

1) It relocates some carpets, thus originating new clusters, or in other words, new aesthetically matching groups.

2) It complements its carpets with certain home product categories, such as objects with history, spiritual design, and diverse origins, like India or Japan. Their presence, aside from that of the rugs, is only temporary.

The main role of these elements is to spice up a dish, just like pepper, with a hint of variety and surprise in an inventory -that logically- can’t rotate that often throughout the year.

In their labels, the shop not only indicates the price, but tells the story of every product. Whoever knows about brands, shall be well aware of the power of narrative and storytelling.

3) It organises customer events, for in this shop… stuff happens. It holds all sorts of events for many public segments, children included.

Flying lessons
By analysing this shop we have learned aplenty, although we could highlight four issues as the most important:

  • A passionate expression of the brand sense and values, very well devised in advance.
  • The launch of a new channel (direct sales to customers) means that the designer had to stop selling through home decor shops in Barcelona. On this issue, let me quote a piece of wisdom from a prominent professor at Esade, Francisco Vilahur: “Strategy is an exercise of denial”.
  • This business is aware it is part of a combined online and offline shopping process, with no gaps or patches in-between. The web www.nanimarquina.com blends perfectly with the shop on the street. As a matter of fact, hybrid start-ups such as hers will be statistically the most common in the near future.
  • This store is just as customer-oriented as its brand. The frequent trips of the designer to Asia have perhaps influenced her mentality. She has struck a balance when preferring “and” rather than “or”, by uniting, connecting and fusing a variety of elements and techniques into the creation of a whole.

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Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

nº 162
April 2012

MELTDOWN OF CORE RETAIL PARADIGMS. Large urban chains now in a tight spot

Image: artchandising.com

The alarm bell was struck by the BBC, The Guardian and even The New York Times. Many of the retail chains that boast shops in the hight street have seen their sales drop. This has led companies to close down their points of sale, sell their shares or still more, go bankrupt.
As a consequence, certain retail areas are starting to show troubling symptoms: empty premises, less street charm and loss of visitors. Indeed, American city centres are now undergoing a progressive decline of their social life.

Being big is no longer a key to success in retailing. The location either, even if it has been traditionally defended as a core issue. In fact, many shops from large chains located in main streets have lost sales and profits. Today, traditional paradigms are falling to pieces.

Possible causes
Six factors come forth when investigating the situation:

  1. The uncertainty as regards to the future puts off customers from shopping. This is mainly reflected in home products, such as furniture.
  2. The competition of two sale formats: on one hand, the internet stores (about which a blogger remarks: “the street shops are like web showrooms. You first go window shopping and then buy online”). On the other hand, the large “supermarkets”, those typical superstores that expand their non-food product portfolio at rock bottom prices.
  3. Many commercial streets aren’t practical: it’s difficult to park, the opening hours are unsuitable, etc.
  4. In nearly every street one can find the same chains. And this phenomenon extends to most commercial centres and cities. In France they call this “Londonisation”, whereas the British New Economics Foundation (NEF) states that 41% of the city centres are cloned (“Clone Town”). (1)
  5. Most of the affected chains have something in common: little differentiation and no “soul”. It doesn’t matter if they are discount chains: low prices no longer guarantee success in times of crisis.
  6. There is a new trend arising amongst consumers in several countries, including Spain: a warmer feeling towards local shops and companies. The gigantic and excessive size of some chains seems to overwhelm clients, as it already happened some time ago with Migros in Switzerland.

Although these symptoms have a certain degree of impact on everyone and everywhere, there are cities like New York or shops -both big and small- that are still performing well. It is indeed moving to read how the British praise John Lewis, whose format (department store) is not in itself particularly original. Many customers claim their great shopping experience is due to the fact that the employees are also the company shareholders.

And what can the chains do?
Become inspired. Here are six thoughts that could help in the process:

  1. Right prices for good products are not enough. The shop must provide a positive vibe to customers, not only when they buy or consume, but also throughout their life. Every day more shops and chains target this: Luta for sportswear (luta.co.uk), Dayles Ford organic for organic food (daylesfordorganic.com), the Southafrican brand Earth Child for environmentally-friendly clothing (earthchild.co.za), or the American Giggle for parenthood products (giggle.com).
  2. In times of crisis, the price is important, but values also count. Those brands which are based in authenticity, ethics or empathy, will certainly connect better emotionally or personally with their customers. The germ of such a realization is the new proposal launched by Eroski: “Contigo” (“With you” in English).
  3. The Corporate Visual Identity (CVI) handbooks should be reviewed, as now “modern” is not a synonym for “the comfortable uniformity of all stores”. Modern now means merging in a neighborhood as a vital part of it, without loosing the original DNA of the brand-chain. This balance could be called “IVC 2.0” or “Flexicorporate Visual Identity”, and would certainly require professionals to adapt their sensitivity to the customers of each area, rather than to the predefined headquarters’ “comfort-zone”. This strategy is indeed more complicated, but also more empathic. Some years ago, Esade launched a Flexi-Logo for the Marketing Management department. It consisted of the Esade logo, the department logo and an area where every professor could place his or her own photo. Now more than ever, purism and uniformity are a thing of the past.
  4. The size in retail, although important, is no longer a recipe for success. However, we should differentiate two aspects. Firstly, the size of the shop has to be the one which properly conveys a meaningful purchasing experience. If it is too small, it isn’t playing the right music for people to hum its tune. Secondly, the size of the chain. It is inevitable that companies shall continue growing in order to become competitive, but they should also take steps to avoid being perceived as arrogant. Economies of scale are still vital.
  5. Shops should offer customers several integrated purchasing methods: the store itself, smartphones, webs, etc. (2)
  6. Costs may increase because adapting shops to each area and implementing a multi-sales method are an added-complexity. To avoid this risk, however, it is important to pay attention to the “economy of scope”, by which the company achieves more versatility with less elements. In the car industry, a manufacturer can produce different car models with very few components.

What habitats can contribute to
The commercial habitats could also consider several practical decisions for its shopping streets or areas:

  1. The main ingredient to a shopping experience is the ease with which customers can perform this activity, thus minimizing their efforts. By way of example, the schedules: shops should open when customers are prone to buy what is sold there.
  2. The commercial areas should provide its customers with a clear meaning, which becomes its main axis. They must express it with authenticity, personality, determination and charm. There are great opportunities for locations that implement this premise, such as the Boquería market in Barcelona, the San Miguel market in Madrid or the Borough Market in London, among others.

When the shop is small, the area is relevant. In the Medieval Ages, the offer concentration attracted demand.

References:

  1. www.neweconomics.org—clone-town-britain
  2. See the previous bubble. “Puentes de autopista, de lianas o pasarelas. El sentido del ‘multicanalismo’ en retail” (in English: “Highways, lianas or footbridges. The meaning of  ‘multichannel‘ retailing”), in  Código 84, nr. 159 (December 2011), p. 106-108.

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Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

nº 161
March 2012

BUSINESS AND HUMANISM: AN AMAZING COCKTAIL. Interpretation of the iFil shop

Ifil’s strategy. Selling ​​the pleasure of creating something with one’s own hands.

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A young woman went on stage on October 27th, 2011. She was dressed for the occasion: in the wool sweater she herself had knitted. On that day, she was awarded a prize that certified her commercial establishment had been voted the most outstanding in the 2011 edition of the “Barcelona Best Shop Award”. Her name? Sílvia López, who together with her associate, Carmen Garcia Mor, runs iFil (i-Thread in English), a business specialised in knitted fashion garments.

At that time, I was part of the jury and can confirm that among us, there was no place for doubt: IFil represented a business model in retail with a very special connotation and sensitiveness. Hence, our absolute unanimity.

There’s something about iFil…

IFil is a shop whose sole purpose is to teach its customers to knit their own textile garments, by offering them everything they need to do so. IFil actually sells the pleasure of creating something with your own hands.

If we only scratch the surface, the shop is no more than a mere example of a specialised enterprise, a kind of business that works well for big cities, but that would certainly go bust if set up in smaller geographic areas.
However, a specialised shop is that which knows a lot about a very definite product category, it is a shop with a trade. This means three things: (1) a narrow assortment (with few categories), (2) but a deep one (it has a remarkable number of items to choose from), and (3) addressed to different customer segments.
This third point doesn’t usually come up in related literature, but it is of vital importance for the sustainability of a specialised business. If the targeted customers aren’t multisegment, the company sales become very limited because they stem from a narrow assortment.

In this case, the segments range from people who never before had touched a knitting needle or who once knew how to but gave up, to those who are enthusiastic practitioners. The challenge for both business partners was to show people how knitting could be easy, fun and fast! Indeed, they have a good command of marketing: they talk about “showing”, which involves much more than just “doing”.

About beginnings

Sílvia and Carmen, the girls with an everlasting smile, share a fondness for design and fashion… and perhaps because of this, they choose to be absolutely unconventional.

Sílvia studied textile design in Paris and learned about the commercial aspect of art. She then worked in a renown online sales company, that offered promotional products, but in the job she missed the possibility to create something with her own hands.
Carmen is an industrial designer, whose grandmother not only taught her how to knit, but also passed on this passion to her.
Both artists met about three years ago and discovered they shared their motivation and values: Why should the road to fashion be paved with impulse consumerism and not with open hearts? On October 23rd 2010, they opened iFil.
Sílvia and Carmen aren’t interested in making their customers discover or recapture the knitting excitement, but rather the excitement of creating their own presents or wearing their creations. This statement contains both humanity and a deep marketing vision (the whole point is not to manufacture a product, yet to enjoy your own production later).

Their business plan paid lots of attention to the details. Take the name, for instance. It includes two elements: “I” (as in me) and “fil” (thread, in Catalan). Moreover, the latter also sounds like “feel” in English, so an English speaker would understand: I-Feel.

The secret to iFil

The founders do not want to be a mere shop of woollen goods, but a non-commercialised area, where customers can learn about knitting in an easy, fun and fast way. The two designers offer examples and ideas for all skill levels, and have prepared very simple and visual instructions for every garment.

The shop is easily read. For starters, one can perceive a central “avenue”, with its sides nearly covered in full by identical and annexed modular pieces of furniture. These structures deserve special attention. Each one of them exhibits a garment as a model, hung from above and placed in the centre, with two possible wool types with which to knit it on either side, as well as the available colour patterns. Underneath, it displays an assortment of balls of yarn, ready for purchase once the customers have made their choice. In a way, the modular structure facilitates the purchase decision: similarly to a waterfall, the customers become excited by a model, enhance their experience through their senses (material textures, colours…), up to the point where they select the items they will buy according to availability. To sum up: customers are taken by the hand from an initial emotion to an easy decision.
Altogether, this exhibition model allows for an interesting psychological sequence: the model-garment guides the clients, helps them reflect on their options, and then finally picture themselves with the future sweater they will make. From the minimisation of risks to the gratifying customisation of results.
One of the key aspects to the business is the pattern that people receive when purchasing the material to knit the garment. In fact, this is the maximum expression of the businesswomen’s will to encourage the hobby. It is indeed a differential way of providing support to customers, inasmuch as it demands an effort in know how and implementation.
Lastly, I would like to highlight another of their business strengths: one main supplier, Katia, a Spanish company that bases its products on good quality and commitment. There are renown retail companies that succeed due to a back office strategy more than to what the public can actually see. That is, iFil suppliers -more than business partners- become accomplices and travel companions.

The subtle touch

The interior design is so simple and clear, it could be considered minimalistic… but it isn’t! Its expression is subtle, intuitive, charming and anthropologically feminine.

Over the lateral modular structures, one can admire strips of cloth surrounding their perimeter. These, joined together, look like a very long scarf with poetic thoughts, revealed in words or by means of evocative pictures. One certainly notices the passion for this hobby-trade in every detail.
The premises don’t only contain products, but also a seemingly endless amount of services for the customers, such as a special day to get advise, or a wide range of activities like the the weekend monographic and the Express Workshop, where customers learn the basics of knitting for free. The artists not only undertake these activities in the shop, but also strive to spread this hobby in city squares.
At the end of the process, all the garments are given a label that reads: “100% made by me”, thus fostering the self esteem of the knitter.
Not only Catalan and Spanish are spoken in the shop, but English too. All three coexist in a friendly atmosphere. The business partners use any of these languages in their warm, empathic and pleasant manner. Their smiles help as much as the techniques they teach.
The result of all these efforts is the founding of a community of knitting lovers, who meet either in the shop or interact through facebook and the blog.
Thanks to the award, Sílvia and Carmen have achieved more visibility. By way of example, the following video.

As a consequence, the main source of new customers is mouth to ear, the most reliable way to make a business grow.

Values above all

The shop is a meeting point for those who value knitting. It is abuzz with social activity, especially in the evenings.

“What you do with your own hands isn’t only special because it empowers you, but also because you feel the magic of handmade work, you live the present moment. By doing so, you relax and are moved just by thinking about the person you are going to give this garment to once it’s finished. If it’s not perfect in the end, no worries: life has its flaws, too!” exclaims Sílvia.

The businesswomen -and artists- believe in creativity, simplicity, imagination, calmness and love. And so they declare it publicly in their shop.

Facing challenges

Not everything is perfect. The avalanche of customers doesn’t leave much time to organise the entry of the shop, the area that establishments usually take most care of. For example, at the entrance there is a blackboard with uncountable activities written in chalk, however not all of them updated as the owners can’t always manage to do so.

On the other hand, the challenge of seasonality is another key point, in that it leads to a larger profitability. The business partners tackle this area by proposing suitable materials for those warmer months, together with very creative activities. But above all, they rely on their website to sell to people living in other coordinates.

In a nutshell

Retailing based in humanity provides an irresistible magnetism for customers, which is craved -but not achieved- by the strictly commercial chains, no matter the amount of advertising they invest in.

When you add a spotless corporate management, which includes the non-visible part of the trade, to a humanistically-focused enterprise, the outcome is an outstanding business model in retail.
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Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)

nº 160
February 2012

HIGHWAY, LIANAS OR PEDESTRIAN BRIDGES. The meaning of “multichannel” retailing

Customers are increasingly frequently using their telephones to connect to the Internet within shops themselves, to obtain more information. (Image: Aina Albi / Artchandising)

ABSTRACT

More than “multichannel retailing”, think about giving customers more options and making things easier for them, whilst maintaining the brand experience.

__________

Ahead of my talk on innovation at the World Retail Congress (Berlin, September 2011), I had the chance to see the subjects that aroused most interest at the largest world retail industry conference. The topic that attracted most managers was “multichannel retailing”.

The use of the Internet is already a reality. A growing number of individuals make purchases online and therefore companies also to think about accessing the public directly via the Internet besides doing it via physical stores. 37% of Spanish Internet users who shop online prefer to buy from companies that also have physical stores (Nielsen Co).

What is it all about

This sales strategy, usually often referred to as “multichannel retailing” is in reality, a multimethod retail sales strategy.

We are not simply talking about the addition of sales through computers, because – the scope is far wider: catalogues (don’t forget about of them yet!), smartphones (via Internet web or specific applications), telephone sales, TV infomercials, visits from sales representatives, multi-brand stores, single-brand stores, Horeca, multi-brand websites (vente-privee , letsbonus, privalia, etc.), places to pick up orders, vending machines, factory stores (such as the famous shop of the González Byass winery), etc.

In all these methods there are three elements: the money, the information that the customer requires in order to ponder and take his decision (product description, price, etc.), and thirdly the dispatch of the purchased goods, in other words the logistic flow.

What is interesting is that these three flows can either be realized out using the same method or being spread amongst several. In Korea, Tesco recently launched a kind of ‘virtual supermarket’, located on underground station platforms. (Whilst waiting for their train on the platform) , passengers can do some of their shopping by scanning the codes of the items they want to buy using their smartphone and then ordering on the train.

On the other hand, customers are increasing frequently using their telephones within the shops and connecting them to the internet to obtain more information.

Pros and cons

When a customer wants to buy a service or a product, they are far more likely to make the purchase if it is made easier for them; for example more options to buy or to get information.

It is important to remember that increasing convenience is a great way of increasing sales, even in a grim economic climate. For example, in Catalonia in 1995, the sales of theatre tickets rose by 59% after it became possible to buy them by phone.

There is statistical proof that, in general, if customers have more access methods, the turnover, the number of hard customers, the number of purchases per customer and the loyalty of those who make their purchases using the different media increases. (1) (2)

However, the side effects are far from negligible. There may be conflict between the types of business customers, the retail prices may vary, and the organisational complexity may increase.

Boundaries

Imagine you are using your smartphone because you have to provide guidelines for a negotiation process:

–        You look at the company’s website and find interesting information.

–        You use this information to make some calculations.

–        Then you send send an e-mail to your colleague on how to negotiate.

–        Finally, you write a personal note to remind you of the approach.

You have alternately been online and offline. Let me ask you a question: were you aware of when you were online or offline?  I imagine that you simply felt it as using your smartphone.  The perceptual boundaries between online and offline are becoming blurred. Therefore, if customers using those phones do not perceive these changes, what is the point to be either a “company.com” or a “company.brick”?.

The logical thing is simply to be a company which is focused on increasing customer value. For this purpose, we must put the customer-persons in the middle and allow them to access our company, in other words our information, products/services, using a large number of “bridges”: a physical store, website, telephone application, customer service phone line, vending machines, sales representatives who visit customers, etc.

Each bridge has its pros and cons. None of them is good or bad per se, simply suitable or less suitable for a specific type of customer. One customer might use a bridge to look for information, another to make purchases and yet another to pick up the product.  For example, in Spain 29% of Internet users consult the web in order to get support in their purchasing decisions they will take when buying products or services at physical shops (Nielsen Co).

More specifically, a key variable determining the use of these methods is the type of product. For example, when it comes to furniture sales, 50% of customers use the Internet to look at products, then 62% buy their goods in a physical store, whilst 73% have it delivered to their home. (3)

Each bridge has its own specific characteristics

Due to its own individual nature, each “bridge” involves different levels of investment and cost. Normally, the public tends to accept price discrimination (charges or discounts) when using one method in preference to another. For example, if they go and collect themselves what they have bought online, they would not expect to be asked to pay transport costs.

Customers who use different methods to buy products/services (for example, purchasing Coca-Cola customers, can buy in supermarkets, in Horeca, in vending machines), buy more, improve their brand perception and do not mind so much that there are different prices (Professor Chiara Mauri, Coca-Cola research, Italy).

Moreover, the sequence in which new sales methods are launched is important, as the same Professor states in another case. For example, it is more logical to start selling in multi-brand stores and then, when the brand awareness is high, to launch single-brand stores. This sequence improves the brand image and increases its visibility.

Basically, it is a matter of putting the customers in the center and serving them no matter which sales method they choose. The customers will be happier, experiencing the brand more intensely, in a more multifaceted manner and this will increase their brand loyalty. (2)

The method that will become most important for accessing the Internet will be the smartphone, not only because more and more people now use them (smartphone searches increased by 181% in the first trimester of 2011), but because its proximity to the body makes it more convenient.

According to Google, 80% of a person’s purchases are made within a 4-km radius of their home. This fact, combined with the smartphone, is going to give rise to new, innovative, customer-centred retail business models.

In addition to this, when the convenience of a method increases, as in the case of tablets, its efficiency increases (iPad is giving UK retailers a 350% better sales conversion rate than the iPhone, according to the Just Eat chain).

However, physical stores have not become obsolete. They remain the most sensory means of expressing the brand and making people experience it; thus, if they are designed with an appropriate strategy, the result is brilliant to improve and to increase sales.

Management implications

What will become standard is not the mere co-existence of “channels”, but rather the design of an integrated system of communication-sales-logistics methods, like “bridges” between the company and the customers.

These have to be the real center. They have to feel that they are being taken into account and their brand experience (product or chain) is the same, whichever access method they decide to use at any given time.

The engine of this system will be Customer Relationship Management (CRM), because what really matters in order to increase the cash-flow is making the economic long-term value of a customer grow (lifetime customer value). The danger of obsessively focusing on average ticket amount is that the company may neglect important aspects of running a business.
Bibliography

(1)    Morschett Dirk *, Zentes Joachim, Schramm‐Klein Hanna, Cross-Channel Integration – Is it valued by Customers?  Paper at EAERCD Conference, Parma July 2011.

(2)    Corey Yulinsky, McKinsey marketing practice. Multi-channel marketing. Making “bricks and clicks” stick. 2000.

(3)    PwC UK. Pick ‘n’ Mix: Meeting the demands of the new multi-channel shopper, p.1-20. 2010.

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Lluis Martinez-Ribes

Source: Código 84, (Burbujas de Oxígeno)