Paul Wallbank – Brilliant Communications

Tag: retail

  • Ominious days for the omni-channel

    Ominious days for the omni-channel

    At the beginning of the year we heard much about Omni Channel strategies as it dawned on retailers like Harvey Norman, David Jones and Myer that this Internet thingummy they’d heard about wasn’t going away.

    When asked at the time what a ‘omni channel’ strategy was, Gerry Harvey admitted he’d had no idea what it was a week before it was announced while Myer CEO Bernie Brooks said late last years it was something about having electronic kiosks and free delivery.

    So it was interesting to hear the CEO of US cloud computing service Netsuite, Zack Nelson, talk about his company’s ‘omni channel strategy’ this week at a lunch in Sydney.

    On being asked what exactly Netsuite’s omni channel strategy was Zack let the cat out of the bag about the holy grail of the omni channel.

    “There are so many channels, there are no channels,” said Zack. “Omni-channel was the only word we could find.”

    So we can safely put the omni-channel myth to rest – the idea businesses can focus on one, two or three channels such as bricks and mortar, the web, iPhone apps or tablet computers was always flawed and risked locking companies into one or two technology platforms at a time when things are changing quickly and in unexpected ways.

    Netsuite’s response is to adopt ‘responsive design’ principles where sites adapt to the device being used rather than spend lots of money building apps for devices that might be redundant in the near future.

    This is true of business in general – we often forget the core role of our businesses, like the retailer’s mission is to get goods into the hands of eager consumers and TV stations or newspapers are ways of delivering advertising. Instead we fixate on the type of delivery vans we use, the background colour of our websites or which apps we are going to develop.

    For retailers there’s a far more fundamental problem which Micheal Hills of CoCo Republic described at the same lunch, “people boast about buying designer labels online at discount prices but still want to go to bricks and mortar stores.”

    That paradox is the sort of problem many businesses have to deal with which aren’t going to fixed by trendy buzzwords.

    In Netsuite’s defense their use of the word ‘omni-channel’ is about offering multiple currencies and languages in the one package rather than selling to customers on different platforms. They aren’t using it as a cover for failing to notice their markets have changed in the last decade.

    The main change in the market place is the good old fashion imperative of getting back to the basics of service and delivering value for money. The days of making money from finance packages or vendor rebates instead of looking after the customer are over.
    Some managers are yet to understand this and their companies won’t have the luxury of indulging in buzzwords over the next decade.

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  • Squandering a reprieve

    Squandering a reprieve

    ABC Radio National’s Background Briefing has a terrific story on the struggles of the Fairfax newspaper empire during the early days of the Internet.

    One of the major themes that jumps out is how Fairfax, like many media and retail organisations, squandered the opportunity presented by the tech wreck.

    The tech wreck was an opportunity for incumbents to claim their spaces in the online world, instead they saw the failure of many of the dot com boom’s over-hyped online businesses as vindication of their view the Internet was all hype.

    As former Sydney Morning Herald editor Peter Fray said “In florid moments you could even think this internet webby thing would go away”.

    For Fairfax the profits from the traditional print based business were compelling. According to Greg Hywood the current CEO, for every dollar earned by the company, 70c were profits – a profit margin of 233%.

    The Internet threatened those “rivers of gold” and media companies, understandably, did nothing to jeopardise those returns.

    Another problem for Fairfax was the massive investment in digital printing presses in the 1990s. These behemoths revolutionised the way newspapers were printed as pages could be laid out on computer screens and sent directly from the newsroom to the press itself which printed out pages in glorious colour rather than with smudgy black and white images.

    Moreover these machines were fantastic for printing glossy coloured supplements and the advertising revenue from those high end inserts kept the dollars rolling in.

    When the tech wreck happened, the massive investments in printing presses were vindicated as the rivers of gold continued to flow while the smart Internet kids went broke.

    Fairfax’s management weren’t alone in this hubris – most media companies around the world made the same missteps while retail companies continued to build stores catering for the last echos of the 20th Century consumer boom.

    In 2008, the hubris caught up with the retailers and newspapers. As the great credit boom came to an end, the wheels fell off the established business models and the cost of not experimenting with online models is costing them dearly.

    Value still lies in those mastheads though as more people are reading Fairfax’s publications than ever before.

    Readers still want to read these publications, one loyal reader is quoted in the story that Sydney Morning Herald should aspire to “being a serious international paper.”

    That isn’t going to happen while management is focused on cutting costs to their core business instead of focusing on new revenue streams.

    Somebody will find that model, had the incumbent retail and media organisations explored and invested in online businesses a decade ago they may well have found that secret sauce.

    Now many of them won’t survive with their horse and buggy ways of doing business.

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  • The real e-myth

    The real e-myth

    The collective gnashing of cavity filled teeth over the demise of the Darrell Lea confectionery chain has given rise to some interesting commentary. If some pundits are to be believed, the lolly maker’s financial woes were due to the evil interwebs allowing Australians to buy choccies from cheap overseas suppliers.

    But if you were to cross the road from Darrell Lea’s flagship Sydney shop you’d be outside one of Apple’s iconic stores that are the most profitable retail outlets on the planet – US Apple stores are 17 times more profitable on a per square foot basis than the average American retailer.

    So retail can be successful. It just depends upon how it’s done and the internet has little to do with many of the retail failures we’re seeing at the moment.

    Darrell Lea being absorbed into the VIP Pet Foods empire has a lot of lessons about retail but they are more about service and the failure to move out of the Twentieth Century, particularly when new competitors like Haigh’s and multinationals like Lindt are entering the marketplace.

    Service is an integral part of this story. While the service at Darrell Lea stores wasn’t terrible it also wasn’t particularly notable and neither was the value of many of the products, leaving the customer underwhelmed.

    A similar story of poor service is behind the failure of the Allans Billy Hyde chains – the comments on the Smart Company story about the music stores’ collapse indicate how customers found service lacking while the prices and range were ordinary. There was no real reason to shop there.

    The business models of Darrell Lea and Allans Billy Hyde are locked into a 1980s way of doing business where one or two chains dominate a segment and attempt to charge duopoly prices while exercising their market power to screw suppliers.

    A duopoly model works for Woolworths and Coles simply because of their scale. If you’re a smaller chain selling non-essential, non-perishable goods then customers will either not buy them or find better deals and service offshore.

    Staff, of course, are a nuisance – after all they only serve customers and customers don’t matter when you have the market locked up – so staff are treated as a cost to be ruthlessly minimised while being paid the minimum that the well-paid management can get away with.

    That contempt for retail staff is exacerbated by management’s reluctance to train them, which locks the stores into a downward service spiral as knowledgeable and experienced shop assistants find a job where their skills are valued.

    Despite the scorn poured on Apple’s staff training policies, the core of their retail success is that you will get a passionate, knowledgeable person helping you at one of their stores while their competitors will leave you wandering the aisles unless they think there’s a fat commission to be had.

    This contempt for suppliers, staff and customers is the real malaise for Australian retail and it’s an opportunity for smart new entrants into the marketplace.

    While many of those new entrants might be online, the ecommerce side has little to do with the fundamental problems of lousy service and overpriced products.

    Interestingly, while Darrell Lea had an online strategy, the new owner doesn’t. Any customer visiting the VIP Pet Foods site has no chance of finding where they can buy the products, let alone order them through the website.

    While it would be nice to know where you can buy their products, the owners of VIP probably don’t care as their business model is based upon distributing their products to retailers and those stores can do their own advertising.

    So retail still matters and the high hopes we had in the late 1990s that ecommerce would drive the middle man out of business was just as wrong-headed as the old-school managements of our dying retailers.

     

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  • Goodbye to the electronics store

    Goodbye to the electronics store

    “Can Electronics Stores Survive?” asks the Wall Street Journal.

    The future doesn’t look good with the liquidation of Circuit City in the United States and the exit of Australian giant Harvey Norman from the electronics markets.

    Yet Apple Stores are growing and while it’s tempting to dismiss their sales training as brainwashing the truth is their staff are among the most profitable retail employees on the planet.

    The real problem is the Big Box category killer store featuring wide product lines but poorly trained staff motivated only by commissions is a business model whose time has passed.

    Customers can now go online, research website that are far more informative and honest than the staff at the megastore then get the appliance delivered and often installed for less than the shelf price at the mall.

    The earliest industry this has affected is the computer sector – long ago companies like Dell and Gateway changed how people shopped for PCs.

    Given the economics, it’s surprising the low margin big box stores survived as long as they could and the main reason they did was because appliances were an ideal channel for pushing profitable finance plans and extended warranties.

    Often the store and sales assistant made more money out of the “interest free 72 months” deal, the three year warranty and the connector cables than they did from selling a top end laptop or plasma TV.

    Now the easy credit era is over, those add-ons aren’t so profitable and with Amazon leading an army of e-commerce retailers changing customer expectations, those businesses locked into Big Box, easy credit way of doing things have to rethink how and what they are selling.

    Harvey Norman’s founder Gerry Harvey said recently that people would still buy big items from his store. The reality is they are moving across to sites like Winning Appliances where they can choose the items, have them delivered installed and the old appliance taken off, a godsend when you’re dealing with a 50Kg washing machine or fridge.

    Apple’s success shows retail does have a future. It just doesn’t lie in the low service, Big Box model that grew out of the easy credit and cheap energy economy of the late twentieth Century.

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  • Empathy and the genius salesman

    Empathy and the genius salesman

    One of Apple’s great successes has been in delivering services through its stores. Tech site Gizmodo managed to get a peak at Apple’s training manual for their in-store ‘Genius’ technicians.

    A word that keeps popping up in the manual is ’empathy’ – as Gizmodo says;

    The term “empathy” is repeated ad nauseum in the Genius manual. It is the salesman sine qua non at the Apple Store, encouraging Geniuses to “walk a mile in someone else’s shoes,”

    While the Gizmodo writers and many of the site’s readers seem surprised or cynical about this, it’s not surprising for anyone who’s worked in sales or tech support, and the Apple Store Geniuses are doing both.

    Empathizing with the customer or caller gives them confidence and builds trust. For someone in sales, listening and emphasizing is how one finds out what the customer really want. On the support desk, putting yourself in the customer’s position makes it easier to diagnose the problem.

    That empathy a real return on investment – US Apple Stores earn 17 times more per square foot than the average retail store. The next most profitable retailer is Tiffany & Co who only boast have the revenue.

    What Apple again show is that training matters. Every surly computer store assistant, every grumpy flight attendant or bored call centre worker can, with the right training and incentives, be just as effective as an Apple Store genius.

    Sadly too many businesses, particularly retailers, see training as a cost and their employees as naughty children. Those businesses have a serious problem.

    Without empathy – the ability to put yourself in your customers’ shoes – your business is working with a distinct disadvantage.

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