WHERE HAVE ALL THE CUSTOMERS GONE? An overview of showrooming

An MBA student from ESADE who was taking my Retail Innovation course (September 2014) mentioned to me that, in Shanghai, several shopping centres have repurposed entire floors, with a shift from stores to restaurants.

martinez-ribes-showroom

(image: artchandising)

There are lots of countries in which retail chains are struggling to keep up sales and productivity, with many cases ending up in store closures. In the United Kingdom, the proportion of empty stores in 2008 was 5%. In 2014, this figure rose to 13.4%, according to statistics from the Local Data Company.

Forecasts in Europe predict a 3.5% increase in conventional retail sales in 2014, compared to an estimated rise in e-commerce of 11% in the same period. This figure reaches 18% in countries in Southern Europe (Reingold & Wahba, 2014, and Enright, 2013).

However you look at it, the statistics show that the retail sector is undergoing a profound transformation for one main reason: customers now buy in a different way. One of the best-known new ways of shopping is showrooming, the cause of so many headaches lately.

As EKN defined them in 2013, these showroomers are “channel agnostic customers” who completely interconnect all of the interfaces or channels.

Showrooming

Warc (2013) defines showrooming as the phenomenon by which customers see the product in a physical store and then buy it online at a lower price.

However, the practice of buying a product cheaper elsewhere was commonplace long before the internet existed. For instance, people often find out about and look at a washing machine in a department store in the city centre and then end up buying it cheaper at a neighbourhood shop.

A second subtle yet important point that is often overlooked by this common definition is that showrooming only becomes a concern for city centre stores when they miss out on the sale of a non-exclusive product. Zara does not worry unduly about a customer looking at an item of clothing in-store and then buying it on the chain’s own app or website.

Therefore, showrooming occurs when somebody checks out a non-exclusive product in a physical store and then buys it at a better price usually but not always online. Bearing in mind the growing number of people using smartphones, it seems clear that this is the great catalyst that has triggered the recent boom in showrooming around the world.

At its root, showrooming is a case of a multi-interface shopping process (physical store, smartphone, tablet, laptop, other physical stores, etc.) that takes place in various contexts (at home, in-store, somewhere outside the home with an internet connection, etc.)  [1].

When showrooming occurs, the main activities or functions traditionally performed by customers in the shopping process (see attached diagram) no longer have to happen in this order, nor through the same interface.

lmr-showrooming-en-b

(Click to enlarge / image: artchandising)

The fact is that, as a result of showrooming and even more so when smartphones come into play, the shopping process is no longer linear, but rather less predictable and subject to more stimuli that traditional ways of shopping.

Why do customers go to the physical store?

We know from experience that, when we make a decision, two things can happen: we get it right (making us feel good) or we get it wrong (making us feel bad) [2]. All purchases require a number of decisions, including which store to go to, which products to rule out and which one I end up choosing. To reduce the risk of error, we need information.

The information required for decision-making is different depending on the interface (digital or analogue) that is used to obtain it:

Type of information about: Analogue media Digital media
Functional aspects (product performance, price, etc.). Limited information (labelling).

Often higher price.

The information may be more detailed.

Often lower price.

Sensory aspects (user-friendliness, style, weight, etc.). Perceived with the 5 senses. Perceived with 2 senses (3 in the case of touchscreens).
Symbolic aspects (associations with the chain and the product). Depends on the case. Depends on the case.

We can see, therefore, that stores in which customers can see the product physically have an advantage from the perspective of the sensory contribution, while online stores tend to win in terms of functionality (sometimes with respect to greater information and often with a lower price). In symbolic terms, the influence of the brand has to be weighed up on a case to case basis. This could equally be said for both physical stores (e.g. Carrefour) and online operators (e.g. Alibaba).

The usual way of tackling the challenge

Faced with the reality of showrooming, chains have mainly responded along three lines:

  1. Penalizing showroomers when they are in the physical store, for example by not offering them WiFi or making them pay if they leave without buying anything. Obviously, this is not the most common solution nor, of course, the most suitable approach.
  2. Ensuring the exclusivity of the majority of their products. This lets them prevent other stores offering these products and stops customers being able to compare. This approach is often impossible if the chain does not have enormous purchasing power. A slight alternative of this approach involves achieving exclusivity in terms of a small variation of a model, which is given a slightly different code, thereby preventing direct comparison. If this response is feasible, it may be appropriate, but it is often not enough.
  3. Lowering prices to undercut competitors, especially those that sell online. Although this approach may improve the rate of purchase avoidance, its side effect is a reduction in gross profit and, as a result, the equilibrium point is much higher. If we take into account the fact that costs tend to be higher in a physical store than for their online competitors, companies taking this approach run the risk of making losses.

A proactive approach for city centre stores

The first part of the response is to play to your strengths, in this case, the sensory side of shopping. Turning the store into a launch pad for the imagination (e.g. as Ikea does in certain parts of its stores) and a place that inspires a particular emotion triggered by the simultaneous stimulation of various human senses. Let’s not forget here the important role that sellers play in this respect. All of this goes towards creating a packaging or micro-context, a crucially important aspect of any neuromarketing strategy, as we have seen in earlier articles.

The second part of the response is not only “stemming the tide” but rather facilitating the other part of the shopping experience: being easy to use from an operational perspective. In specific terms, this means enabling customers to access the information through various interfaces. Let me explain.

The information found on a physical label on a product is often insufficient, if the customer wants to feel more confident about their purchase. In this case, the retail chain can offer information on demand, whether that is through interactive screens activated with the product code or with a code than can be activated using the customer’s smartphone.

When the customer uses their smartphone in the store, there are two possibilities: the chain’s app (or website) opens, or this app belongs to a third party. In the ideal scenario, the customer could activate a code on the product shelf to activate a code in the chain’s own app, without having to type anything in. This would give customers more information about both the product and the additional benefits offered by the chain when customers choose to buy from them (e.g. methods of payment, delivery outside the standard timetable, extra warranty, etc.).

Ideally, when customers use the chain’s own app, it shows them something relevant or, in other words, personalized for that customer. For instance, if somebody has a baby, they could be recommended the option of a promotional pack suitable for that context. This would be a case of big data being applied to showrooming.

It is worth highlighting here that anything that reduces the effort required (e.g. easily accessible information, non-technical language, avoiding repetitive tasks such as entering personal details or customer card details again, etc) is likely to generate greater sales.

Moreover, from the same platform, all of the information could be sent to somebody for them to give their opinion, reserve the product and maybe even buy it.

As a third response, albeit complementary to the others, a sales promotion can be added that is issued to registered customers who have given permission for their smartphone to be identified. For instance, customers who spend a long enough period in a particular section of the store could be sent a digital coupon for a certain amount that is only valid for the following half an hour. Technologies such as iBeacon can help, as long as they are not intrusive; the cortex would take issue otherwise.

The result of all this is that city centre store companies have to adopt a multi-interface strategy or an omni-channel approach as it is commonly known. In fact, a more suitable name would be a fully customer-centric strategy, as it offers a complete, personalized experience that is interconnected throughout all of the interfaces.

Operating through all of the interfaces, chains have more opportunities to gather information about customers and, as a result, to general a more enjoyable, personalized and stimulating shopping experience.

John Lewis, a good example

One really good example of the integration between interfaces is the British chain John Lewis, winner of several awards for offering customers an omni-channel experience.

The products in-store have two codes: the traditional one and another in-house one. By scanning the latter with their mobile phone, customers access the product information on the company’s own app. As well as the technical specifications being provided there, customers can also see other complementary benefits that John Lewis offers customers for shopping on their website, personalized discounts generated from previous purchasing data, information on demand and other aspects that make the shopping process easier.

As a result, the chain has managed to establish itself as many customers’ preferred option, even though its prices, while competitive, are not the lowest on the internet.

Finding our bearings

The objective of retail chains is not to prevent customers shopping online, but rather ensuring that they do so using the chain’s own range of interfaces. As Ann Zimmerman (2012) says, competition is not between stores or website, but rather between your website and the rest.

Showrooming is just the tip of the iceberg that shows the deep-rooted transformation that is happening and going to happen in retail, the cause of which is the fact that customers live and shop differently now. Achieving harmony with customers’ lives should be a greater trigger for companies to transform, rather than simply reacting to a rival’s initiative.

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[1]  Context refers to the combination of a particular time and place.

[2]  For this reason, what people like most is not having to make a decision.

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Bibliography

  • EKN (2013), “The future of the store”.
  • Enright, A (2014) “U.S. online retail sales will grow 57% by 2018”. Internet retailer, 12th May
  • Internet retailer. “European E-Commerce Forecast 2013-2017”.
  • Local Data Company (2014) “Vacancy report H1 2014”.
  • Reingold, J. & Wahba, P. (2014) “Where have all the shoppers gone?” Fortune, 3rd September
  • Warc Staff (2014) “Retailers face the omni-channel gap” Warc, 18th March
  • Zimmerman, A (2012), “Can retailers halt showrooming?” The Wall Street Journal, 11th April

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Lluis Martinez-Ribes

Source: Código 84, number 183.

December 2014

IF IT’S FREE, EVERYBODY WINS. Interpreting “free” in business

According to Flurry, a company of Yahoo group specialist in the use of apps, approximately 90% of the apps in Apple Store are free. Google also gives free access to their search engine services. Hours of work of talented people given for nothing!

Let’s explore this business practice and see what we can learn from it.

freemium-14

From a customer perspective

Even if it’s permanently or just for a short period of time, customers are delighted when they find out that a product or service is free. It’s a nice surprise, something pleasant.

For this reason when someone gives us a gift, our body releases dopamine, a neurotransmitter associated with pleasure and reward feeling.

Scientists affirm that human beings need to enjoy small pleasures in everyday life (for instance, a glass of wine after work, leafing through that attractive magazine before going to bed, etc.), not only to make our life more pleasant, but also to prevent depressions, anxiety or poor performance.

There is also another interesting aspect for the customer who is offered a new product for free: if he doesn’t like the product, the risk assumed is almost zero.

Prof. Sandro Castaldo, from SDA Bocconi, explains this saying that the relationship between the company (or product or brand) and the customer can begin with a first stage: new customers must not feel the risk when pondering over a new product. And one of the best ways to get this is by experimenting it for free; being it for a period of time (e.g. two free sessions of fitness), or in a small amount (e.g. a sample of moisturizer inserted in a magazine).

So from these two perspectives -biological and relational- the surprise of seeing that something is free is really good for the people.

From a business perspective

At a first glance it might seem that firms shouldn’t be interested in giving their products or services for free. However, if we go further into the issue this statement can be qualified.

In a society in which the things that are sold are not always “squeaky clean”, if a company gives their customers the chance of getting in touch with their product for free -without risk-, this is the best possible marketing, both for the first product launch and for when new customers are sought. As Ariely (2008) says, the true attractiveness of free is related to the lack of risk of loosing something due to a bad purchase decision.

So, the cost of what is temporally free must be considered by the company as the “seed” of a new customer.

After all, I encourage (most of) the companies to feel like “customers growers”. Like farmers do: they plant a seed, take care of it, they water the plant, and then they harvest the fruits, and if everything goes well, the amount will increase in every harvest.
I think this agricultural approach is more interesting than the one of hunting customers -they are usually called “target”, “hitting” them with a given “intensity” of advertisements and without listening much to them, except when a market research is conducted.

Apart from this temporal investment of giving something for free, there is another approach, this one of a strategic kind. Companies can take a business model which is colloquially known as “freemium”, the contraction of free and premium. Like well-known companies such as Dropbox, Evernote or many games do, it consists of offering a service for free in its basic option, and a much more complete one -usually without advertising- if the customer pays for this premium upgrade.

Once the customer becomes familiar with that service, he usually desires to go further. And then he is willing to pay for that second premium level, in which he won’t find advertising. For this reason, Pujol (2010) says that freemium is a way to generate demand.

There is life beyond freemium

One of the methods I propose to innovate in marketing and retail is to “move away from the trade guild”: instead of selling good products, try to be of customers’ life (including such good products).

If we sell more or less the same as the competitors, the result is clear: due to the similarity, there is an evident risk of a price war. If such a tragedy happened, the gross margin would decrease, and this would reduce the company “energy”, because the gross margin is like the sap of the plants.

There are companies that know how to sell something apparently more abstract, but very relevant for the customers in certain moments of their life. For example, the company Ziferblat has cafeterias with a very relaxing atmosphere in Russia (Moscow and other cities), London, and soon in New York, in which they don’t charge customers for what they consume, but for the time they spend in there. In Moscow an hour costs around 2.5€ and in London, around 3.75€ (*).

Here, products are free. Instead of selling what the guild sells (with the risk of similarity and the feared price comparison), this retail chain happens to sell something very relevant to their customers’ life: quality time.

Beneath the pavement, the beach

This famous sentence of May 1968 in France is enlightening of the naughty look we can use in business. Instead of remaining in the surface (“the pavement” – what’s free) some managers decide to transform the reality changing their job: they want to be part of their customers-person’s life.

This business transformation may also be called “innovation”. Actually, this is the core part of a sound neuromarketing strategy.

(*) Calculation made in mid September 2014

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Bibliography

  • Ariely, D. (2008) Las trampas del deseo. Editorial Ariel.
  • Busacca, B. & Castaldo, S. (2002) “Trust in market relationships: an interpretative model” Sinergie, Vol. 58: pp 192-226
  • Flurry, The history of app pricing
  • Pujol, N. (2010) “Freemium: attributes of an emerging business model” Social Science Electronic Publishing.
  • Ziferblat

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Lluis Martinez-Ribes

Source: Código 84, Special number AECOC Congress.
October 2014

WILL THERE BE A REVOLUTION? Not Just a Label, an alternative in fashion retail

According to Stefan Siegel, founder of Not Just a Label (NJAL – notjustalabel.com), in the West, clothing items sold in the high street stores are only worn around four times before they are disposed of (1). It is easy to imagine the economic, social, cultural and environmental impact that this implies.

Around Christmas 2013, Siegel sent out a call for a revolution in the fashion sector (2), “a world that seems to look no further than the constant desire to change, stimulated by low prices”.

njal2-en
Image: Artchandising

What revolution is he calling for?

Created in 2008, Not Just a Label is a world-leading online platform that presents 15,000 promising young fashion designers from 106 countries (3). They can use this platform to promote themselves, not only with a view to being hired (talent market), but also to sell their designs to customers around the world (fashion product market).

Siegel’s regular contact with promising young designers got him thinking about the possibility of commercializing fashion in a different way. With this in mind, his goal is for NJAL to become a meeting point where demand and supply for designer fashion converge.

What is so different about this marketing strategy?

NJAL’s marketing strategy is underpinned by 5 main pillars:

  1. Hand-crafted items, often one of a kind. NJAL pre-selects the best designers and presents products made using hand-crafted methods, items of clothing with a story behind them.
  2. Visibility of the creator. The customer knows exactly who is behind each item and can contact with the designer directly.
  3. Designers have a significant source of revenue, keeping 70% of the sale price for themselves. NJAL does not impose any additional charges for being present on the website. (Siegel, 2013) (4).
  4. Web-based. None of this would be possible if it were not for distance selling via the web. However, rather than simply enabling commercial transactions, the site provides a platform for a community of people that share similar values and an appreciation of craftsmanship. This is how these human values create demand.
  5. Hand-crafted, anywhere around the world. With the exception of logistics, this method eliminates the geographical distance between the designer and the customer, giving rise to an innovative retail concept that blends the magic of craftsmanship, usually associated with a local scope, with the cosmopolitan nature of the users that visit the website.

NJAL’s competitors

NJAL’s new retail proposal directly takes on what we could refer to as “mass fashion”, headed by large fashion companies that offer a broad variety of clothes, always “fresh” and on trend at remarkably low prices.

The world of fashion seems to be a reflection of post-modern society: consumers who require constant change due to the passion for their appearance. Customers do not ask any questions about the story behind each item. They place no importance on its background, how it was designed or made.

Continuous changes of appearance are also facilitated by low prices, the result of mass production in countries with low salaries, and optimal logistic management (5). Based on the statistics, we can safely say that mass fashion has succeeded as a business model.

Operating against this statu quo, NJAL places the emphasis firmly on the visibility of the process, particularly with respect to the designer, underpinned by a different set of values: authenticity, creativity and sustainability.

However, the NJAL model involves a significant side effect – its products are expensive as a result of three factors:

  1. they are hand-crafted;
  2. the higher transport costs of shipping items individually, and
  3. accounting for the designer’s salary, who uses more expensive materials as they buy smaller quantities.

All of this means that, without intending or wishing to, NJAL moves towards the premium or even luxury end of the scale. In other words, NJAL’s initiative not only competes with mass fashion, but also with luxury clothing producers. They are battling on all fronts.

Moreover, there is the additional challenge that luxury fashion companies are also changing. Due to the fact that many customers are increasingly less loyal, as well as the desire to sell more by attracting new segments of wealthier customers, some firms are using elaborate marketing manoeuvres to access the world of ‘masstige’ (an abbreviation of ‘mass-market’ and ‘prestige’), launching more affordable sub-brands, whilst striving to maintain their DNA, traditionally rooted in craftsmanship and exclusivity.

Furthermore, nowadays, luxury fashion is also sold on the Net, with successful online stores such as Net-a-Porter, a website that combines “the thrill of shopping at a chic boutique with the pleasure of reading a fashion magazine” (Brodie, 2009) (6).

Will there really be a commercial revolution?

There can be little disagreement that NJAL represents an innovation both in terms of business model and commercial strategy. One of the decisive factors is the fact that the products need to be sold at a high price that few people can afford. As such, NJAL is unlikely to become a mass revolution if we measure the shift in terms of sales volume.

NJAL’s commercial model offers great opportunities to designers, the biggest winners in all this, as long as the platform attracts a segment of customers with a certain purchasing power that share particular underlying values.

And this is exactly what NJAL’s customer profile is like – primarily young independent women, who are extremely confident and value authenticity, creativity and sustainability. They work in professions for which they earn significant disposable income. They want to wear clothes that set them apart and which are impossible to find in conventional stores. Their loyalty to NJAL and the number of times that they shop there are far higher that the standard rates for traditional fashion retail.

In short, NJAL will not steal market share from mass fashion, but rather it will gain ground in the segments of luxury fashion or masstige, as it attracts a very specific profile in terms of its potential clientele, which is not only characterized by its purchasing power but also its human values with respect to life.

In terms of management, this represents an innovation in commercial strategy focused on a particular segment and customer profile that is clearly on the rise at a global level.

With this in mind, I believe that NJAL will not be herald a mass commercial shift, but rather a segmented commercial revolution.

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  1. Boyd, C. (2012) “Behind the design: An interview with Not Just a Label”.
  2. Siegel, S. (2013) “Editor’s Letter 2013. Calling for a Revolution”.
  3. According to 2014 statistics.
  4. Siegel, S. (2013) “Editor’s Letter 2013. Calling for a Revolution”.
  5. Kunde, A. (2013) “Western Europe Overview: From Home of Haute Couture to Hotbed for Disposable Fashion”. Euromonitor.
  6. Brodie, J. (2009) “A winning formula for fashion retail”.

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Lluis Martinez-Ribes

Source: Código 84, nº 182.

WE ARE MOBILE. M-commerce from the perspective of neuromarketing

Since the launch of the iPhone (2007) and for the first time in history, as of spring 2014, there are more smartphones in the world than mobile phones (Gartner, 2014).

Meanwhile, shopping using these devices just goes from strength to strength. In 2013, such purchases already made up 15% of distance shopping globally and forecasts for growth over the next few years are extremely high (Faresse, 2013).

A third revealing statistic is that, in 2013, there were two countries in which 43% of smartphone owners had used them to shop: South Korea and China (Online Business School, 2013).
we-are-mobile
Image: Artchandising

I doubt that it has escaped anyone’s attention that e-commerce is experiencing its greatest boom to date.

Digital persuasion

The rise in popularity of smartphones has gone hand in hand with a sub-revolution in terms of analogue dialling. Telephones with keypads are a dying breed, while touchscreen smartphones and tablets have become extensions of ourselves.

To give an example, in Spain, over 60% of users of mobile devices use a smartphone, a figure which is even slightly higher than the European average of 57% (Europapress, 2013).

Therefore, it could be said that mobile commerce, or m-commerce, is set to be one of the key driving forces behind the growth and evolution of digital commerce.

Smartphones form ‘e-bodies’

A total of 96% of smartphone owners have their device within one metre distance from their bodies, 24 hours a day. In fact, the device seems to have transformed into part of their bodies, giving rise to the so-called ‘e-body’. Smartphones have almost become extensions of our limbs.

This phenomenon changes the way in which we socialize, shop and, in short, how we live our lives, converting us into On-Off people. The line between online and offline becomes increasingly blurred, and we interact with our surroundings in whichever way seems most suitable at any given time, without being aware of the mechanism or way in which we do so (Martínez-Ribes, 2013).

Marketing’s new objective

The smartphone is set to become the main way of selling, the e-store. If we consider that now devices are almost part of us, the customers themselves end up becoming the store (Martínez-Ribes, 2013). This means a significant change is required in the way we think about marketing and retailing.

The objective of marketing is no longer simply generating traffic in store, but rather accompanying the customers throughout their everyday experiences, becoming part of their lives, as he or she ‘is’ now the store.

Smartphone apps are the main tool for undertaking this task. Seeing that apps are the main way in which customers access information and use their devices, they should become our main focus.

Strategic neuromarketing as a tool

As we know, the majority of human decisions are taken non-consciously by the limbic system. In order to become part of our costumer’s lives we must become a habit or a custom; ie an action that is performed simply and with no need to streamline processes.

Strategic neuromarketing can help to create habits, offering ways to stimulate the imagination and emotions. For instance, it enables us to orient marketing strategies based on empathy and personalization, taking culture into account and putting ourselves into the customer’s shoes, as we are identifying with them.

Neuromarketing can also contribute towards reducing significantly customer effort, minimizing the need for conscious attention, asking for our attention in a multisensory way (using all of the possible senses) and generating emotions.

Apps that make part of customer’s lives

If you pick up a smartphone and look at which applications are on the bottom menu bar, which are the ones on the main menu and on the other screens, you will notice that they are organized in order of relevance and frequency of use.

It is highly likely that those that are most ‘in view’ are those that are most commonly used and those that are checked every morning as soon as waking up.

There are three fundamental elements involved in making an app being part of customers’ lives and ensuring that the app appears on the first screen.

  1. Personalization: A good app has to adapt to the user, not only in terms of more traditional kinds of customization based on knowing their defining data (age, gender, interests, etc.) but also taking into account the context of use (time and location), being able to offer the most relevant information based on a mental framework. What users need from an app related to consumer goods is not the same whether they are at the supermarket doing shopping or when they are at the gym. This context must therefore be taking into consideration.
  2. The content should not only be adapted to the user-customer, but should also offer them relevant and pertinent information at all times, all of which must be up-to-date and change with suitable regularity.
  3. The user experience must also be enjoyable and as effortless as possible. To this end, design plays a critical role, not only at an aesthetics level but also in terms of usability. The app must be clear, easy and intuitive. In order to create a full experience, it must be emotional, generating involvement and a reason for its use.

Conclusions

A few years ago, it was unthinkable that we could buy anything that we want just by clicking on a little button in our hand palm. Smartphones have become part of our bodies and, as a result, customers have turned into a store themselves.

The key to the digital world involves being able to create customer habits, ensuring that the information on the devices is useful, clear and intuitive. Our apps have to be capable of residing in the limbic system and making customers put them on the first screens of their phone. In order to do this, these apps must give relevant and personalized information that is easily accessed without any effort and, above all, in a fun and enjoyable way.

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Bibliography

Andersen, A. and García, J.M. (2013) “¿Cuáles son las claves de éxito de una app?”. La Vanguardia, Tecnología, 15th April.

Europa Press (2013) “Mirar el móvil por la mañana, tan necesario para los jóvenes como vestirse”, 13th December. Available on: www.europapress.es

Europa Press (2013) “España lidera en Europa en uso de smartphones con un 66% de tasa de penetración”. 20 minutos, 21st May. Available on: www.20minutos.es

Farese, A. (2013) “xAd Mobile Stat of the Day: M-commerce is driving overall e-commerce sales”. Available on: www.info.xad.com

Gartner (2014) “Gartner says annual smartphone sales surpassed sales of feature phones for the first time in 2013”. Available on: www.gartner.com

Martínez-Ribes, L. (2013). “Un nuevo ser, la persona OnOff”. Código 84, Congress special edition.

Mingote, N. (2011) “Investigación revela que los usuarios revisan iPhones antes de levantarse de la cama”. Available on: www.appleweblog.com

Online Business School (2013) “La compra vía smartphone asciende en España a 2.500 millones de euros en 2012”. Available on: www.euractiv.es

Online Business School (2013) “El M-Commerce despega en España y mueve 2500 millones de euros”. Available on: www.centrodeinnovacionbbva.com

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Lluis Martinez-Ribes

Source: Código 84, nº 181.

Things won’t stay this way. An interpretation of Costco in Spain

On 15th May 2014, the American chain Costco opened the doors of its first store in Spain, in the former ‘City of the Image’, Seville. The store is a warehouse club, a retail format in which customers form part of a kind of shopping association.

To fill the 140 employment positions at the Seville store, “148,000 candidates applied to the selection process”, says the director of Costco Spain, Diane Tucci (Ramírez, 2014). Before opening this first store, Costco had already directly created over 245 jobs in Seville and 60 in Madrid.

That day, not only were there thousands of curious onlookers observing the aisles of enormous shelves filled with products embracing American formats, but also queues of people waiting to pay the annual subscription of €30 that would allow them to start shopping there. Even before opening day, over 16,000 people had already become paid-up members.

Image: Artchandising

All about Costco

Costco is not just any old company. In Deloitte’s 2014 league table, it ranked as the third leading retail company in the world (US$105.2 billion in 2013), with just Walmart and Tesco ahead of it. Its evolution and growth has been remarkable. Last year, it was the USA’s second biggest chain, and the sixth in the world, according to Deloitte.

James Sinegal, Costco’s former CEO, and Jeffrey Brotman, the company’s current chairman, co-founded the company in 1982. Sinegal was one of the brains and driving forces behind the concept of warehouse clubs.

On 15th September 1983, Costco opened its first warehouse club in Seattle and, in 1993, the company merged with Price Club. This union gave rise to PriceCostco, with 206 sales outlets across the USA and annual sales of 16 billion dollars. In 1997, all of the stores changed their name to Costco and, a year later, they launched their online sales platform, costco.com.

What is a warehouse club?

A warehouse club is a store of a size similar to a hypermarket (around 13,000m2) that offers a wide variety of product categories (food, homeware, electrical appliances, books, beauty, etc.), but with a very limited number of items per category. In total, they do not tend to have more than 4,000 lines of items, far fewer than an average hypermarket. Another key feature is the extremely low prices, almost at wholesale levels, as it is a no-frills store that aims to sell in bulk with margins no higher than 15%. However, not everybody can shop within this type of retail structure, only those that pay an annual membership fee.

This retail format is typically North American, with two large chains dominating the playing field: Costco, the market leader, and Sam’s Club, owned by Walmart.

The Costco formula and the challenges it presents

The definitive features of this formula are as follows:

  • Really low prices. Costco often operates with a margin of just 10% (compared to the standard 20-30%), which is not popular with some of its shareholders, who believe that prices could be raised. This fact could deepen the price war in mass market retail in Spain (and particularly in a city as price sensitive as Seville), which is still reeling from the impact of Mercadona’s latest price drop this spring. Competitors will have to be extremely creative, strategically speaking, and even more so considering that the Spanish retail sector is one of the least productive in Europe.
  • Their product range consists of known, reputable brands alongside their carefully developed own label (Kirkland Signature), which accounts for 15% of the product lines and 20% of sales. In fact, it is a ‘private brand’ (in other words, the product brand is not the same as the chain’s) but, just as in the case of Hacendado, it is linked to the brand in the customers’ minds, and it is greatly valued, with its reputation spreading by word of mouth. As such, advertising becomes less relevant.
  • The fact that the product range within a category is fairly narrow is not a serious issue, if the lines available are relevant to the customers. A number of studies indicate that this minimizes confusion and avoids the categorization effect (Mogilner, Rudnick, & Iyengar, 2008). However, as food is a deeply cultural product, Costco will have to adjust its range to local tastes, which may initially limit not only its biggest selling point but also its economies of scale, as it will have to open itself up to new suppliers.
  • A quarter of the range changes constantly, as is the case with Privalia and similar websites, in the form of special offers that are only valid for a limited period. These promotions focus on aspirational products, even to the extent of diamond rings. This involves the use of significant resources in terms of neuromarketing in retail: surprise and management of the imagination. Customers are drawn into the game of imagining what bargain they will be able to get their hands on next time they go.
  • Two segments co-exist: the main segment of the general public, plus a secondary segment of small businesses. It is no surprise that this in particularly worrying for two chains (Carrefour and Macro), as it represents a direct challenge to them.
  • In the USA, Costco sells to customers with higher purchasing power that Sam’s Club. In Seville, they will be faced with an official unemployment rate of 35% and a population that have become a lot poorer as a result of the economic crisis. In many countries facing economic difficulties, the public tend to buy in small amounts (for instances, two cigarettes), despite the unit price being significantly higher than if they bought in bulk, such as the formats sold in Costco. Nevertheless, there is the option of sharing a box of twelve units among several people.
  • It takes great care of its clientele (facilitating the returns and complaints processes) and its employees, with salaries and benefits above the sector average. This policy was promoted by Jim Sinegal, who was convinced that paying workers well was a key factor of successfully executing Costco’s strategy (Thomson, 2009).
  • This is not a matter of a type of store, but rather a business model. Costco earns 75% of its profit from its membership fees and 2% from its turnover, above the net margin of many Spanish retail chains. In other words, it starts the financial year with most of its profit already earned.
  • Paying for the ‘right to shop’ may seem like an obvious obstacle to success, but the practice has two benefits: a) It differentiates the store from the crowd, helping to overcome the great similarity that reigns in the sector; b) If a customer pays to shop, this membership fee becomes a stimulus to go back: “I have already paid, I should take advantage of it”. There are two facts that validate this theory. Firstly, in the USA, the membership renewal rate is 90%. Secondly, Amazon Prime increases sales to customers who have paid for that service.
  • However, front end cannot work with out an effective back end. Costco asks Spanish suppliers to adapt to the American way of doing things and, in some cases, different product formats. This results in inefficiency, complexity and, therefore, additional cost for suppliers, who have to work out whether it is worth bearing this extra burden for the chance of having a customer of this scale.

Costco is not an opportunistic company, but rather it steadily opens stores on a constant basis, with a long-term strategy, allocating resources wherever they may be needed, and with a great deal of patience. The initial losses that the company will face in Spain, due to its learning curve in a new market, are unlikely to concern the company’s executives in my opinion, or even Wall Street. At the heart of the matter, Spain is a rolling target, a step on route to the overall goal of Europe.
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Bibliography

Mogilner, C.; Rudnick, T. & Iyengar, S. (2008) “The Mere Categorization Effect: How the presence of categories increases choosers’ perceptions of assortment variety and outcome satisfaction” Journal of Consumer Research, Vol. 35: pp 202 – 215.

National Retail Federation (2012) Top 100 retailers 2013.

Costco’s website: www.costco.com / www.costco.es

Ramírez, V. (May 2014), “Costco inaugura su primer centro en Europa”. Available on: diariosevilla.

Thomson, A. (2009) “Costco Wholesale Corporation: Mission, Business Model and Strategy”. McGraw Hill Case Studies.

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Lluis Martinez-Ribes

Source: Código 84, nº 180.

HANDS THAT SPEAK.Interpretation of Do It Yourself

From 25th to 27th April 2014, 20,000 people visited the Handmade Festival Barcelona, an event exclusively dedicated to activities performed by hand. The 150 exhibiters welcomed a constant flow of enthusiasts who were highly involved in pursuits such as patchwork, machine sewing, scrapbooking, urban gardening, cookery, knitting, furniture assembly, game creation, drawing, decorating, among others.

All the activities are leisure pastimes and have something in common: the consumers are the creators of the product, at least partially. Judging by the faces at the event, someone could tell they were deeply absorbed, involved and happy.

Image: Artchandising

The origins of DIY

The phenomenon of DIY (Do It Yourself) has evolved over time. Its origins date back to the mid-19th Century, fostered by the artistic school of arts and crafts, which was closely related to William Morris, an all-round creator (craftsman, printer, poet, activist, designer, etc.) who rejected emerging forms of mass production.

Moving on to the 20th Century, in the 1950s, there was a great resurgence in DIY after the Second World War, particularly in Central Europe, largely due to high levels of unemployment. This revival involved a wave of home improvements and repairs. This ranged from construction and gardening activities to the creation of all sorts of objects (clothing, furniture, paintings, cushions, etc.).

When unemployment decreased, DIY remained popular as a hobby, as a way to spend free time in an active way.

More than just a low cost alternative

While DIY was already on the rise, the deep economic crisis of 2008 made it even more popular, with lots of new enthusiasts taking up crafts to save money.

However, reducing costs, in terms of money but not time, ended up being a secondary motive for doing things oneself. Interpreting the DIY phenomenon solely in terms of being a low cost alternative would, at the very least, be an incomplete and one-sided assessment.

Types of DIY

In a study of the evolution of DIY, Paul Atkinson (2006: 3-6) divides the activities involved into 4 categories:

  1. Proactive DIY: activities that involve creativity, self-governance, design and skilful manipulation of various types of materials. The motivation behind this kind of DIY may either be personal fulfilment or earning income from selling it.
  2. Reactive DIY: pre-arranged activities in the form of templates, collectable items or kits which involve assembling components. Such DIY pursuits are ways to spend free time, with the resulting personal enjoyment.
  3. Essential DIY: home maintenance activities (cleaning, small repairs, etc.) that are performed out of financial necessity or lack of access to suitable professionals. While such tasks may also involve certain amounts of creativity and personal fulfilment, the main motivation behind them is necessity.
  4. Lifestyle DIY: home improvement or building activities that are performed out of choice rather than necessity. In such cases, this hobby may eventually become a way to make a living.

As you can see, the motivations and purposes for DIY and the approaches to it are extremely varied, but there is an underlying common thread that unites them all: the quest for personal fulfilment through manual work.

The ‘IKEA effect’

There are few things more satisfying that living in a house that you designed yourself, giving a loved one a gift that you have made with your own hands, or telling friends that you knitted the jumper they have just complimented you on yourself.

Manual activities also have a clear therapeutic effect. Not only they generate satisfaction but they also help to improve self-esteem and sense of personal value.

This sense of satisfaction is not only experienced on completion of the project but throughout the entire creation process. Self-created objects are more highly valued because of the personal experience that they embody and the opportunity of taking part in their creation, even if that is only in terms of part of the process and not in its entirety. This phenomenon is known as the ‘IKEA effect’ (Norton, Mochon and Ariely, 2011).

The ‘expert amateurs’

People who do DIY are known as ‘expert amateurs’ (Kuznetsov and Paulos, 2010). The term includes anybody who performs any type of creation, modification or reparation of objects with no professional help and without the underlying intention of selling their creations. While they may end up doing so, selling is never the primary objective or motivation.

Although these pursuits are also becoming increasingly popular with men, such DIY enthusiasts are mainly professional women between 25 and 40 years old with a university education. For these women, DIY is a way to find personal satisfaction by doing things themselves, as well as disconnecting and enriching themselves.

In his book ‘High Tech/High Touch’ (2001), John Naisbitt develops a theory that explains that the more time we spend working on a computer, the more our leisure activities tend to be more sensory and tactile. This is a way of giving free rein to creativity and imagination for people who do not have the opportunity to develop these qualities in their everyday working lives.

Technology as an accelerator

Many people share their creations and advices, whether at conferences and craft fairs or on the Internet and social networks.

The emergence of a large number of blogs, tutorials and exchange and support websites on the Internet has given a great boost to DIY. Social networks also play a key role by letting enthusiasts share pictures and advices, particularly on the more visual platforms such as Instagram or Pinterest.

A perfect example of the online DIY boom is the website ‘The Crafty Days’, a practical guide that lets users delve into the handmade universe, with information on workshops, cafés, open-air spaces and shops of all kinds where manual crafts can be enjoyed. These venues are not only places to buy the materials, but also meeting points for people with common interests where they can create and share their problems together.

Finding a purpose

There is an element of customization in DIY that is also very satisfying. According to research conducted by Kuznetsov and Paulos (2010), one of the main motivations behind creating something with your own hands is the opportunity that this activity gives you to be creative, providing a channel of self-expression.

In a world in which there are an increasing number of identical products, DIY lets you differentiate yourself, creating unique objects with a personal touch. People can build their own identity through the creation of objects that have a personal significance.

There is also an important stress-reducing aspect to DIY, letting us disconnect and find a quiet corner, a haven from the accelerated pace and anxiety of life. This enriching leisure option lets us escape from our problems, exercise our minds and tackle new challenges.

“However, the most important aspect of all, in my opinion, is that it gives people a purpose” (Trias de Bes, 2014). This meaning takes the place of myths and values, giving significance to certain moments in the lives of those involved.

Leaving your mark

To sum up, DIY is a form of self-expression that lets people differentiate them, generating a broad range of positive feelings and emotions for those who take on projects.

As some are already doing, suppliers and retail chains can take advantage of customers’ clear desire to customize and participate in the creation of products and objects. Rather than providing a completely finished product, this means offering something that can be customized and finished by each customer, with a higher or lower commitment of time and effort, thereby letting them leave their mark on it.

In the majority of sectors, mass customization is already a reality that is here to stay.

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Bibliography

Atkinson, P. (2006) “Do it Yourself: democracy and design”. Journal of design history, 19(1), pp. 1-10.

El Costurero. (2012) “¿Por qué lo llaman ‘crafts’ cuando quieren decir ‘manualidades’?” (Available here).

Kuznetsov, S. & Paulos, E. (2010) “Rise of the expert amateur: DIY projects, communities and cultures”. NordiCHI’10 – Proceedings of the 6th Nordic Conference on Human-Computer Interaction, Extending Boundaries, pp. 29-304.

Naisbitt, J. (2001) “High tech/High Touch. Technology and our accelerated search for meaning”. Nicholas Braely Publishing.

Norton, M., Mochon, D. & Ariely, D. (2011) “The ‘IKEA Effect’: When Labour Leads to Love”. Harvard Business School. Working Paper, 11-091.

Trias de Bes, Fernando (2014) “De los mercados a los significados”. La Vanguardia, 20th April.

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Lluis Martinez-Ribes

Source: Código 84, nº 179.

A SUGARY INTERNATIONAL RETAIL CHAIN. Interpreting Papabubble

San Francisco, marzo 2014. La nueva tienda de San Francisco, que debía ser abierta ese mes, era el principal foco de interés de Alejandro Siniawski, CEO de Papabubble, una persona tan humilde y simpática, como profesionalmente sabia.

Pese a que cada vez lo tenemos más sistematizado, cada apertura es una caja de sorpresas. Igual acabaré escribiendo un libro”.

Papabubble, que empezó en 2008 -el inicio de la crisis económica en España- con la primera tienda en la calle Ample, en el barrio antiguo de Barcelona, ya está en 13 países.

Imagen: Papabubble

Alejandro Siniawski

Alejandro, Licenciado en publicidad y comunicación de empresas por la Univ. del Salvador en Buenos Aires, ha dedicado toda su vida profesional a los dulces, primero en Cadbury Stani (Argentina), y luego en Chupa Chups y Arcor.

En 2008 vio una tienda especialista en caramelos que dos australianos de Melbourne, atraídos por Barcelona, habían abierto en el 2004. Negoció, la compró y la convirtió en cadena internacional, después de perfeccionar la gestión del front-end y del back-end.

Reinterpretando los caramelos

La calidad y originalidad de sus caramelos, tanto en sabor como en forma, son uno de sus rasgos diferenciales. Alejandro es escrupuloso demandando una extrema calidad en las materias primas. Igualmente, si en el proceso artesanal algún lote no resulta perfecto, se descarta sin pestañear.

En Papabubble son expertos en aplicar la creatividad a los caramelos, reinventándolos y reimaginándolos permanentemente. Para ellos el desarrollo del producto es una parte fundamental de su modelo de negocio. Dedican mucha inversión y tiempo al descubrimiento de nuevos aromas, sabores y formas, así como a la mejora e innovación en técnicas de elaboración.

El resultado son unos caramelos muy originales, de sabores auténticos, hechos con artesanía y mucho mimo. Unos caramelos premium.

Una experiencia para los sentidos

Alejandro tuvo siempre claro que sus caramelos no tienen sentido en un lineal de supermercado convencional. Precisan ser comprados en un taller artesanal. No se vende nada que no haya sido producido artesanalmente en la tienda, a la vista de los clientes.

De esta forma la compra se convierte en toda una experiencia para los sentidos: un baile de colores, procesos y texturas, el olor del azúcar derritiéndose, el sonido de la mezcla al removerse, para finalmente poder tocar y probar los productos, en los que la fresa, realmente sabe a fresa, o el kiwi a kiwi.

Un espectáculo sensorial: la “experiencia Papabubble”.

Las tiendas son conscientemente como un packaging neutro, para que los caramelos y su colorido sean los protagonistas. Todas tienen una parecida distribución en planta en la que destacan un espacio de taller y otro de exhibición, ocupando un total de 45 m2 aproximadamente.

Los caramelos no son sólo cosa de niños

Parece obvio que unos caramelos premium tengan como principales clientes a personas de entre 25 y 35 años, no necesariamente con niños. Suelen comprar los dulces para disfrutarlos o para regalar a otros adultos.

Tanto la forma de los productos -muy distinta a la de los caramelos normales-, como su enmarcado -la tienda y el taller- generan emociones, sorpresa, deseo de descubrir nuevas sensaciones, estimulan la imaginación y los recuerdos.

Los caramelos evocan en esa clientela un viaje hacia la niñez. Se estimula sobretodo la memoria episódica y de largo alcance, apelando a remotas experiencias personales anteriores, que suelen ser positivas, lo que genera esa emoción en el momento del recuerdo (Zurawicki, 2010). Ésta es la base biológica de la experiencia Papabubble.

En un entorno alterado como el actual, estos caramelos creativos, que avivan los sentidos y generan unas emociones positivas, resultan una válvula de escape a un coste relativamente bajo.

Imagen: Martínez-Ribes

El modelo de negocio

Su crecimiento básicamente es vía franquiciados individuales. Tienen dos tiendas propias, que actúan tanto de laboratorio de I+D, como de escuela para nuevos franquiciados.

El sistema de franquicia ha propiciado un desarrollo internacional con 23 tiendas en más de 19 ciudades como Tokio, Amsterdam, Nueva York, Qatar, Taipei, Lisboa, Los Ángeles, etc. El objetivo es finalizar el año 2014 con casi 40 tiendas.

El franquiciado o franquiciada ha de invertir unos 150.000 €, y el contrato firmado es por 6 años, seguido de prórrogas de 4 años. Cada nuevo franquiciado realiza un aprendizaje de tres meses en su academia.

La gama de caramelos varía según las tiendas. La mitad de referencias son iguales para todos, reflejando así el ADN y personalidad de la cadena. Pero luego Papabubble da a sus franquiciados una notable libertad para ajustar la otra mitad de la gama a su zona y país; por ejemplo, caramelos con sabor a Wasabi o té verde en Japón.

Es muy destacable la comunicación interna horizontal entre franquiciados. Tienen un club de best practices, donde comparten métodos exitosos o nuevos productos.

El CEO es plenamente consciente de que su modelo de negocio no es registrable, por lo que resulta de hecho copiable. De aquí que sus dos principales elementos de defensa sean:

  1. Lo que la marca Papabubble evoca en la mente de los clientes, más su saber hacer.
  2. El esfuerzo continuado por crear novedades, sorpresa e innovación.

Alejandro Siniawski cree que dichos elementos aportan el “65%” y el “35%” respectivamente del éxito de su cadena.

Propuestas personalizadas

Cada tienda también ofrece caramelos Papabubble con diseños personalizados para eventos familiares, pero sobretodo para empresas y hoteles: caramelos con el logotipo de la empresa, o de formas específicas para campañas promocionales.

De esta forma, esta cadena de retail (b2c) logra una notable fuente de ingresos vendiendo a otras empresas (b2b). El porcentaje de venta no-retail, que en algunos casos llega al 70% de la facturación del franquiciado, suele ser inversamente proporcional al tráfico peatonal del lugar donde esté la tienda.

¿Un desliz?

Papabubble acepta que en una ciudad donde ya exista una tienda consolidada, su franquiciado abra un córner de unos 6-8 m2 en un lugar comercialmente atractivo, obviamente sin taller artesanal. Alejandro es consciente que en ese lugar la ”experiencia Papabubble” no es completa, porque no existe producción artesanal. Se intenta compensar poniendo un vídeo en el que se muestra el proceso de creación en la tienda.

Seguro que habrá lectores que dirán: si esos córners venden, bienvenidos sean. Otros dirán que ese tipo de “máquina de vender” no desarrolla la marca, porque al caramelo le falta la experiencia completa Papabubble; sólo aumenta la notoriedad. Supongo que usted intuye mi punto de vista: la marca es el principal activo en el balance de una buena empresa.

El regusto final

Papabubble puede entenderse desde la vertiente comercial (una cadena de retail internacional que crece en franquicia) o desde la vertiente de neuromarketing (una marca en retail cuyas raíces están en el más intenso sistema límbico).

A nivel de estrategia de empresa resulta altamente interesante ver cómo una muy bien gestionada cadena de retail permite entrar con credenciales -y sin excesiva complejidad- en el negocio b2b. Todo director de finanzas lo vería con buenos ojos.

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Bibliografía

Zurawicki, L. (2010) Neuromarketing: Exploring the brain of the consumer. Springer edit.

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Lluis Martinez-Ribes

Fuente: Código 84, nº 178.

TO BE TAKEN ONCE EVERY THREE YEARS. Interpreting Euroshop 2014

If you are interested in retail, at some point, you are sure to have made a pilgrimage to Euroshop, the first-rate international trade fair held in Düsseldorf every three years. Which gives us an opportunity to take the pulse of international retail.

With the sector currently in the throes of a profound transformation, perhaps comparable to the introduction of self-service, it may well be a good idea to share our feelings about this year’s edition (from 16th to 20th February). I use the verb ‘to feel’ because it is more inextricably linked to the brain than verbs such as ‘to see’, ’to hear’ or ‘to touch’.Consolidated aspects

 

To understand what is going on now, one method that is often useful is comparing the latest developments with trends that were detected some time ago. We can then identify aspects that were previously at the embryonic stage that have now matured. Take these four examples:

  1. LED lighting is no longer a left-field sideline, but rather a mainstream leader in terms of the majority of uses. It has advanced so much technologically that many of the technical obstacles have been resolved and its price has been kept lower. Its ascendency not only improves sustainability in environmental terms, but also economically. The lower consumption it offers is a key aspect, as retail businesses tends to consume high levels of electricity.
  2. Another former newcomer that is now a big league player is the multimedia screen. Not only has their definition been enhanced and their price lowered, but they have also spread throughout all areas. Ranging from screens with simple one-way communication with the customer to those showing information about the display, and from functional screens to those used at the checkouts, their interactive use as touchscreens is now omnipresent.
  3. Another factor that has been consolidated is the multisensorial aspects of physical stores. It seems that, finally, even the discounters have realized that beauty sells. I have seen a new model of the Primark store that is more pleasant and looks less like a cold warehouse. The results can be huge when all the senses are integrated with a blend of the lighting arrangement, textures, sounds that are more than suitable for a public place, and smiles on the faces of the sales assistants. Aromas still remain somewhat of an untamed beast, as I am yet to see them reined in and used in a controlled way.
  4. Back-office tools have taken root and spread like wildfire, attracting a significant amount of interest from visitors. Retail requires large helpings of productivity, functionality, rigour, automation and cost control, although these aspects are not witnessed by customers. Fortunately, there are several companies that take on these challenges. Such aspects include fraud prevention, semi-automated picking carts for internet orders, more sustainable refrigeration systems, performance monitoring, IT integration, etc.

The next big thing

Certain other aspects are all set for generalized adoption, such as the following three features:

  1. The growing presence of NFC technology continues to spread throughout more areas. However, it does not yet seem to have reached critical mass (or the famous tipping point). Nevertheless, it can increasingly be found in more and more places, applied to makes payments easier.
  2. Another aspect that is primed for take off in terms of retail is virtual reality, above and beyond its use solely for entertainment, as a practical tool for enhancing customers’ imagination by helping them to visualize the end result of their purchase.
  3. Customer traffic counters are now all set for widespread implementation, whether this involves sensors that detect the movement of human bodies or, more efficiently, antennae that capture smartphone IPs. I would predict that the latter system would see the biggest growth. In both cases, privacy is guaranteed and we can learn how customers interact with the store.

Newly emerging trends

Certain aspects, such as the following pair, were practically nowhere to be seen in the last edition, three years ago:

1) Multi-channel has a strong presence and is widely discussed. In fact, it has steadily become the main ‘hot topic’ at international retail congresses over the last three years. Complete hardware and software solutions are now on offer, which enable customers to buy a product that is not currently available in stores. Alternatively, they can order from the comfort of their sofa using their tablet (e-shop).

However, I get the sensation that this multi-channel approach is generally conducted from the physical store, rather than placing the customer at the centre. For instance, there were a lot of interactive screens to be used in-store, as though they were large tablets.

But there were not many solutions to be seen that are developed from the starting point of the customer looking for a piece of furniture on the internet, for example, who then checks it out at the store before finally making the purchase away from the store.

2) One of the biggest surprises has been to see how several companies are playing a type of ‘game of Lego’, mixing various pieces, none of which are new, but which, when arranged together, achieve some really interesting results. For example, resolving a key challenge: how can customers get more detailed information, when they want it, above and beyond the simple trinomial of brand, model and price. This has been achieved in an extremely practical way by interlinking elements from very different sources: sensors (RFID, movement, etc.) placed on products, multimedia screens on the displays, databases with multimedia content, social networks and e-mail connections, links with the CRM for the customer card, in-situ payment methods, etc.

 

Shared concerns

On the flight home, two main doubts came to my mind.

The first was a concern that, with so many tools to grab attention at the point of sale, are we not in danger of tiring out the cortex, creating an ‘enlightened commotion’, a more attractive sensory contamination, efficient at that instant but ineffective in the long run?

Research has shown us that customer loyalty is achieved more through the reduction of effort than the ‘wow’ effect (Dixon, Freeman & Toman, 2010). We also know that the human brain is suited to habits and making non-conscious purchase decisions. Not much has been seen from this perspective.

The second concern was that, with amazon.com making headway in so many sectors, as invisibly as it is convincingly, is it not the case that Euroshop and we ourselves are focusing too much on improving physical stores, rather than creating On-Off type integrated systems without gaps? The online sales departments of retail chains will probably tend to vanish from the organization chart, to become just another service offered by the store.
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Bibliography

Dixon, M.; Freeman, K.; & Toman, N. (2010) Stop Trying to Delight Your Customers.
Harvard Business Review. July Issue.
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Lluis Martinez-Ribes

Source: Código 84, nº 177.