THE BEST OF LUCK TO YOU, NEW PRODUCT! The Orchestrated Solutions model

According to an article published in the Journal of Product Innovation (2013), the failure rate of new products is 41%, although this figure varies depending on the sector (Castellion, G. & Markham, S., 2013).

It is surprising that almost half of all new products fail when, aside from simply allocating resources, companies normally employ well-known processes for innovation, customer insight, marketing and also sales.

There are several causes behind such commercial tragedies, but they all have a certain aspect in common: the majority of companies that launch new products do so on their own, without strategic partnerships with other companies in the sector with the aim of achieving more comprehensive solutions for their customers.

orquestrado1

Another way is possible

Imagine breakfast time on any given day. You open the fridge and pick whatever you fancy: milk, juice, cookies and so on. You sit down to enjoy your breakfast as you read the papers on your tablet.

While this may appear to be a perfectly normal situation, this is not the case for the 8% of the European population who suffer from diabetes. With this group of consumers in mind, in 2013, the mass market manufacturer Calidad Pascual and the pharmaceutical laboratory Esteve decided to launch DiaBalance, a range of everyday food and drink products suitable for diabetics to be sold in supermarkets, as well as a selection of products for exceptional situations, available in chemists. Moreover, they offered advice on their website to help people with the condition.

Each of the two companies contributed their own respective knowledge and experience in their sectors in order to offer a fairly complete solution to people with diabetes, with the objective of making life easier for them.

The boundaries between the food and pharmaceutical industries have been blurred in the project and the companies have managed to offer a full solution to diabetic consumers in a single purchase, a fact that they appreciate (Bröring et al., 2006).

The commercial start-up of the new solution may have been a slow process, but both of the companies are extremely happy with the project and the lessons they have learned from it.

Two other cases: Nike+ and Nespresso

Nike+ iPod were more than just trainers, they were a complete solution achieved through a partnership between Nike and Apple. The shoes enable wearers to monitor and track their physical activity and share their experiences with other users.

Nike’s revenue rose by 10% in the second quarter of 2006, when these trainers went on sale (Angell, 2006). The following quarter saw sales continue to rise by 9%. In less than 6 months, three million pairs of trainers were sold (Nike Inc., 2006).

Due to technological progress in electronics, Nike has now been able to develop this solution without the need for an iPod and, as such, Apple is now longer a necessary partner in the project.

Meanwhile, working together with Miele, Krups, Delonghi and other companies, Nespresso offered its customers a complete solution: a top-quality espresso, highly optimized coffee makers and an extremely well-planned after sales service. All of this was offered with an apparently luxury appearance.

After a slow start, the company’s sales rose by 22% in 2009 in the depths of the recession and the Nespresso Club reached 7 millions members, even with a significantly higher price than the competition.

What underpins these three examples?

Just like Nike+ and Nespresso, DiaBalance is a practical illustration of what is known as convergence. In other words, this is the partnership process between two or more industries that were unconnected up to that point, in a world in which the lines between sectors tend to be blurred (Weaver, 2007).

orquestrado2

Orchestrated Solutions

There is extensive literature on convergence. In 2010, I published an academic article with Katia Premazzi in which we coined the term “Orchestrated Innovative Customer Solutions” (OICS):

  • A network system with permanent and visible horizontal and/or vertical and/or diagonal links, involving companies that complement their key resources (primarily knowledge) in order to offer a complete, innovative, branded solution to end customers, thereby satisfying their needs.

For a partnership with another company to qualify as an Orchestrated Solution, it must fulfil 6 conditions:

  1. It must provide a complete solution to one of the customers’ needs, not a partial solution that ignores part of the problem, avoiding the short-sighted attitude that ‘It is nothing to do with us”.
  2. The response must be truly innovative, not simply an improvement.
  3. To achieve this solution, the participation of third party companies is required (usually from other sectors), which share their know-how and expertise. A flexible partnership process must usually be adopted with a desire to learn, thereby enabling the partners to increase their capacities dynamically (Teece et al., 1997).
  4. The partner companies know the solution that they want to conceptualize and create. It is not simply a case of working with good input suppliers. In addition, all of the partners’ brands are visible to the end customer on the end solution.
  5. Operating as a system, it must involve a new business model, including the visible facets of both the front-end (range, prices, services, customer service and relations, type of sale, website, etc.) and back-end (production, logistics, finance, technical service, etc.).
  6. Long-term contracts must be established between the partners, ensuring a stable relationship between the companies involved (Weaver, 2007). As large-scale investments are required, albeit not always in equal proportions, the contract must run for a long period in order to ensure an effective ROI.

In short, the Orchestrated Solutions system is currently the most innovative way to launch new products.

It is a method that demands a lot of input: strategic vision and desire, a firm customer-centred focus and a great deal of internal support in terms of time and money.

However, luckily the benefits to be reaped are great: effective differentiation, preference creation, brand development and bigger margins.

To sum up, this is a great management approach for executives who are striving to transform their business, rather than those who are happy to stay in their comfort zone.

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Bibliography

  • Angell, LC. (2006) “Nike profit boosted by Nike+iPod sales”. iLounge, 21st December
  • Bröring, S. et al. (2006) “The front end of innovation in an era of industry convergence: evidence from nutraceuticals and functional foods”, R&D Management vol. 36. Oxford, Blackwell Publishing Ltd.
  • Castellion, G. & Markham, S. (2013) “Perspective: New product failure rates: Influence of Argumentum ad Populum and self-interest”, Journal of Product Innovation Management, pp. 976-979
  • Martínez Ribes, Lluís; Premazzi, Katia. “Orchestrated innovative customer solutions: an emerging trend to master convergence?”, Finanza Marketing & Produzione, Vol. 28, nº 3-2010, 09/2010, pp. 89-122
  • Nike Inc. (2006) “F2Q07 Earnings Call Transcript”, 20th December
  • Teather, D. (2010) “Clooney’s Nespresso steams ahead with 35.5% sales growth in UK”, The Guardian, 9th April.
  • Teece, D. et al. (1997) “Dynamic capabilities and strategic management”, Strategic Management Journal.
  • Weaver, B. (2007) “Industry convergence. Driving forces, factors and consequences”, Lund, The Institute of Eco

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Lluis Martinez-Ribes

Source: Código 84, number 184
February 2015

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.

A VEGETARIAN RESTAURANT FOR NON-VEGETARIANS. An interpretation of Teresa Carles restaurant

Image provided by Teresa Carles

What is a vegetarian restaurant doing ranking 24th out of 4,600 Tripadvisor restaurants in Barcelona?

If we focus on what is praised as a key element in traditional retailing: “Location, location, location”, Teresa Carles falls short – its location is along a small street, not obvious to passersby.

Its history

Like many other successful businesses, Teresa Carles began in a modest way in 1979. Not in a garage (the City Council wouldn’t give them the zoning permission), but in a narrow street in the old town in Lleida. It is a family company founded by Teresa Carles, the heart and soul of the kitchen, and Ramon Barri, her husband. The original restaurant name was “Paradís” ( or “Paradise” in English) and it was transformed in a Spanish leader of this kind of cuisine.

When the Lleida market was addressed, they decided to carefully expand and in 2006 they opened “Baobab” restaurant in Zaragoza, which was another success.

In 2010, Jordi and Mar, the founders’ children, joined the family enterprise to boost its business capabilities. Mar runs administration, while Jordi, with both a financial and vocational marketing background, runs the company externally. He continuously looks for ways to evolve the business, paying attention to the recent scientific discoveries and social trends.

With Jordi and Mar on board, in March 2011 – in the middle of Spanish economic crisis – they opened their third and largest restaurant in Barcelona. This time with the name of their chef above the door, Teresa Carles. The restaurant serves between 8,000-10,000 dinners monthly – 75% of them to women who come not only from the city, but from all over the world.

Customer segments are vary greatly. Among local customers there are two sub-segments: the office people that dine for workday lunch, and people that go to Teresa Carles to enjoy a different gastronomic experience. The restaurant also has a very prominent segment of tourists. One of the unique characteristics of the Teresa Carles experience is to hear a the many languages spoken amongst the international customers.

As the line-ups continue to grow outside the restaurant, the company is opening a second restaurant in Barcelona.

The back-end matters

At the same time when Jordi and Mar joined the business, the company created the Feel Good Food, a central workshop where they make certain bases for their dishes (sauces, fillings, artisan pasta, bakery, etc.), located in Bellcaire d’Urgell.

These base ingredients for the recipes are sent to the three restaurants daily to be integrated into their kitchens. This way, the company can ensure the maximum continuity of quality and flavor of the recipes, which is traditionally often threatened by high kitchen staff turnover.

Teresa Carles, the chef

Teresa, well-educated in the art of traditional Catalan cuisine, always feels the need to be up-to-date with the most advanced vegetarian cuisine. In 1977, she traveled Europe and the United States to learn more about the different variations of this kind of this unique cuisine.

Teresa then set a goal of applying the vegetarian cuisine techniques to the traditional Catalan and Mediterranean dishes, using the best products to create recipes as tasty as her grandmother’s dishes, but more surprising and healthy.

Teresa is now a leading chef in Spanish vegetarian gastronomy. She not only expresses herself through her gastronomical creations, but also has shared them by writing cooking books such as “The Sky Kitchen, Vegetarian Recipes” (2003).

Teresa Carles’ Philosophy

Teresa Carles wants customers to enjoy tasting their dishes, and at the same time, take care of their health.

For her, the first thing she looks for when creating a dish is to surprise the diner with ingenuity and creativity. Secondly, she ensures dishes taste delicious. And all made with healthy ingredients.

In this way, Teresa Carles is a vegetarian that breaks preconceptions – it doesn’t preach or impose. People like it because of its surprise and creativity, not for flaunting any agenda.

With this particular approach, it’s no surprise that 95% of customers are not even vegetarian. An honest and genuine philosophy that doesn’t contradict the business.

The menu

The stars of the show are Teresa Carles’ dishes, with their menu adapted for breakfast, lunch and dinners. Like in fashion, the menu changes seasonally, twice a year, in favour of seasonal products that are fresher and tastier at that moment of time.

The menu takes into account all kinds of dietary preferences, indicating the dishes adapted to a vegan diet (abstinence from ingredients made of animal products) or a raw vegan (food not cooked in temperatures below 46 degrees). Not forgetting, of course, allergies or food intolerances, offering dishes suitable for celiacs or who are lactose intolerant.

Apart from the standard dishes on the menu, the restaurant offers the possibility of personalize your own salad choosing from a list of ingredients. For workday lunches, there is a changing menu with a fixed price.

Image provided by Teresa Carles

Packaging the Product

These amazing dishes wouldn’t have the same taste without the appropriate packaging: the restaurant itself. Their interior design, done by Cesc Pons, in collaboration with Jordi Barri, brings a pleasant, stress-free, serene, cheerful and genuine mood.

The front of the building is an old majestic house. As soon as you enter, you find the cold slow cooking area where all the salads and fresh products are made. The vegetable colors and stylish interiors incite diners with an instantaneous appetite.

In front of the waiting area stands a display case with products created and ideated by Teresa Carles (jams, oils, wines, nuts, t-shirts, etc.) obviously with her own brand. All the products have a “godfather” that has been in charge of the idea-conception and making of the product.

Those who wrongly use the term “private label” could take a lesson in the possibilities of what a brand can sell directly to the public.
There are three dining rooms – one of them could be used for a private group function. Everything is taken care of, even the smallest details in order to avoid problems with air conditioning access, food smell, etc.

Teresa Carles, the brand

Jordi knows how to transform a great gastronomy restaurant in a brand able to sustain business development. The restaurant not only has their own branded products, but it is managed as a brand.

Nowadays, as customers increasingly use the internet before going to a restaurant, Teresa Carles have a website that not only reflects their design, values and philosophy, but also is very customer oriented. For example, the first thing that appears is the information that most of the people need: phone numbers, as the hours of operation and location. On other pages, the rest of the content is displayed.

From their website, you can also access to Spotify playlist that links to songs that can be heard in the restaurant. Many people may think that it is typical “vegetarian” music, but listen to it and you will see how it contributes to build the brand.

The menu is an iconic element. The explanation of each product is narrated in a very ingenious way. They know the power of storytelling.

Jordi is very aware of the importance of the social networks, such as Tripadvisor or Facebook, and he pays careful attention to it. The restaurant has a very active page where they share recipes, videos, and interesting information about vegetarianism.

The last bite

Let me share two learnings from this unique restaurant-brand:

The first is about the criteria to manage decision-making. When you work in Asia, you can see that many companies tend to balance and equate the criteria. They look to achieve a certain agreement between the criteria, which sometimes complicates clarity for decision-making.

By contrast, Teresa Carles doesn’t see the criteria as having the same importance, but has set up a hierarchy for them:

  1. Surprising.
  2. Organoleptic likability.
  3. And all the previous made taking care of health.

The second comes from the previous one.
If we have a “15 second elevator pitch” to explain what the Teresa Carles restaurant is about, we could say that it is a successful retailer because it has a great product, it’s surprising, and you can enjoy the food while eating healthy at a reasonable price.

But, to be honest, if I said that I would feel like an “old school” marketer. As we know that an overwhelming majority of decisions (for example, “What restaurant are we going?”) are made at a non-conscious level, I prefer to ask myself:

  • Teresa Carles, what do you mean to my life at this moment?

In response, I feel that you are giving me cheerful moments of creativity and gastronomical enjoyment, while I forget about the things that stress me.

When I review what I’ve written, I see that it is evident that Teresa Carles knows how to build a brand. They will go far.
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Lluis Martinez-Ribes

Source: Código 84, nº 174.

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

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

CHRISTMAS NOUGAT: A SIZZLING SUMMER HIT! The paradox – Source of retail innovation

Nougat shop in Sort (company photo)

ABSTRACT

Many companies could leave the crisis behind them if only they could tap customer’s imagination, since, scientifically speaking, imagination is more powerful than reality to boost sales.

__________

This Summer in Sort *, a village of 2,000 inhabitants that nestles in the Catalan Pyrenees, a shop specialized in nougats (turró), opened.

Common sense

This business initiative  lacks of common sense, which has a link to the oldest part of our brain, and where all the knowledge gathered by our tribe throughout the years, lies.  That is the way things are because experience has shown it yields the best results.

Who would eat an elaborated sweet -which is not exactly light- in the middle of the hot summer? In fact, statistics show that nougat sales are stubbornly seasonal. And after all, that is what the figures are for: to listen to them.

So who in his sane mind would open a nougat shop in a bad communicated mountain village, and in summer?

The strange beauty of the paradox

According to the New Oxford American Dictionary, a paradox is “a statement or proposition that, despite sound reasoning from acceptable premises, leads to a conclusion that seems senseless, logically unnaceptable or self-contradictory”. In other words, it breaks with common sense. Taking such risks seems foolhardy in the midst of the current financial meltdown.

Xavier Gabriel, owner of Bruixa d’Or [Gold Witch] -a well known Spanish lottery agency- with his entrepreneurial instinct, thought things could be different.

Instead of selling ice cream and beer in Summer -something that is logical, perhaps too logical- , he thought he could boost ticket sales and at the same time extend the good time his customers have when buying lottery, by giving  them a very nice gift-coupon  to try some free nougat at his recently opened nougat shop, located 12 meters down the street.

His clients are not only French (who eat nougats all year round) but mostly Spaniards. Over 20,000 customers visited the shop this summer. When they come in, they can try seven kinds of nougat for free and wash it all down with a flask of sweet wine. Having a great time is guaranteed, and since the product is of great quality, most of the people end up buying something.

The shop is impeccably laid out and decorated, mime and good vibes are felt, and the shelves are always full. The nougats are complemented with Bruixa d’Or’s merchandise, such as witches brooms and little witches.

Three staff have been hired to run the shop (one in July, one more in August and a third one in September). They are well-paid because the shop opens seven days a week, holidays included. Gabriel takes care of his staff: “Things work when the team is smiling, motivated, well-paid and feels the business as its own”.

Before setting up the shop, Gabriel signed a deal with nougat supplier Turrons Vicens, from Agramunt, who supplies all the assortment and does the stocking.  In this sense, Turrons Vicens more than a supplier, is a business partner.

Learning, not recipes

(1) Is vital to grasp the contexts in which clients are found.

In this case, customers arrive in the Summer (not in nougat season), but they get the coupon when buying Christmas lotto (related with nougats season). In customers’ minds, buying lottery tickets, nougats and cava (Catalan “champagne”) have very strong Christmas connotations. Many companies could leave the crisis behind if only they could tap customers’ imagination, since scientifically speaking, imagination is more powerful than reality to boost sales.

(2) Every business model has a part hidden from the customer, such as the  suppliers’ policy. Instead of taking a ‘Dutch Auction’ approach with suppliers (who are forced to cut their profits to the bone), if they are treated as partners, they become allies. For example, what would Mercadona supermarket chain be without its supplier policy?

(3) Take a calculated risk when innovating. It is worth to allocate all the required budget to ensure the pilot shop fully embodies and validates the concept. If the R&D project fails, the amount lost should not threaten the company’s survival. Therefore, there should not exist the fear of failure.

Manager’s development can go through three stages:
1) Learn the rules of the game.
2) Find out how to win the game.
3) Re-invent the game.

Many who reach the second stage, move to a mental retirement.

Xavier Gabriel, is one of the enterprising souls who has reached the third stage. He has just launched his book “Nada es imposible” [Nothing is impossible] (2011, collection Alienta, 168 pp.), which sets out 111 “rules” and approaches that he uses in his entrepreneurial activities. This book is full of paradoxes.

 

(*): Translator’s note: ‘Sort’ also happens to mean ‘luck’ in Catalan. Add to this the fact that several highly publicised lottery-winning tickets have been sold at the Bruixa d’Or and it becomes clear why the agency draws punters from all over Spain. ‘The Gold Witch’ also uses the Internet to sell.
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Lluis Martinez-Ribes

Source: Código 84, October 2011, pages 212-213 (Burbujas de Oxígeno)

VALENTINE INNOVATION: ‘ERROR-FREE’ SALES_Why do more and more companies want to be in retailing?

valentine

ABSTRACT

Selling directly to end customers allows controlling the entire purchasing process. This means you can create the perfect mix of commercial and marketing strategies to differentiate yourself and sell without restrictions. In addition, retailing allows companies to make branding by giving customers the chance to experience with their five senses what the brand means. Those firms entering retailing with an innovative business formula manage to stand out and avoid price wars. Continue reading “VALENTINE INNOVATION: ‘ERROR-FREE’ SALES_Why do more and more companies want to be in retailing?”

WHAT’S AT STAKE BETWEEN RYANAIR AND TRAVEL AGENCIES

ABSTRACT

The debate between Ryanair and the Travel agencies is not simply a mean to achieve media coverage, but a ferocious fight to preserve the feasibility of a business model, which requires selling directly to the public.

maletas

From August 25, Ryanair will only accept bookings made directly via their own website, rejecting all the reservations made by travel agencies.

Legal considerations aside, this decision, aired by the airline with its usual rude verbosity (it described travel agencies as “sector parasites” and “dead wood”) has triggered considerable debate involving consumer associations and Public Administration, even though the latter do not seem to be in a hurry to take a stand.

Travel agencies say that many customers do not feel comfortable shopping online, and thus are happy to pay for the services provided by the agencies.

What’s this not about?

This is not a debate among online companies, since half of the sales made by accessing Ryanair’s website are made by travel agencies that also use other trading channels.

It is also nothing new that a third party without prior agreement sells one company’s products, such as, for example, Hacendado tissues at petrol stations..

Then, travel agencies do not demand any margin or commission fee (which they did with Iberia and Spanair), as they find it completely normal to charge a fee for their services.

And some may even think that this is all too much hassle about nothing, as sales made by travel agencies do not even reach 1% of Ryanair’s overall turnover.

So, what’s all the fuss about then?

This is basically guerrilla warfare between companies based on virtually identical business models, based on three key issues:

First, they all sell comprehensive travel solutions including flight, accommodation, car rental, insurance products, etc.

Second, they all follow Lebowitz’ theory (the benefits of online presence): the more customers a company has, the more benefits each customer can enjoy —this is what Movistar states. The company that attracts many customers (for example, offering cheap flights) can redirect their customers to other companies that are willing to pay commission fees or bonuses for induced sales. Thus, all extra income is essential for the financial feasibility of any such company. And what travel agencies are precisely doing is to jeopardize Ryanair’s said key extra income!

And thirdly, they need to sell directly to the public. That is, by selling tickets via travel agencies, Ryanair loses customer knowledge and decreases their “sell-ability”.

However, the airline is at a disadvantage: their website does not sell competitors’ flights. Therefore, the options they offer are limited, even if they include hotels, insurance products, etc.

This business models requires large volumes and thirsts to become the leading reference. This is precisely what is at stake here.

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Lluis Martinez-Ribes

Source: Expansion

19 August 2008