Shop Talk by Tim Manners

12:19 pm | 0 recommendations | Be the first to comment

Creatures of Retail

The emotional charge of retail is so often underestimated, its potential to connect with people so underrated. In today's New York Times (5/16/08), in the "Escapes" section, there's a story about how people like to stop at the same restaurant, store or even fast-food joint every time they make a routine getaway to their weekender homes.

"It's right before you hit the part of the road that gets wind-y," says Aimee Grove, referring to Ikedas in Auburn, Calif., which she describes as "a funky little store slash hamburger stand slash bakery." She continues: "You get out of the car, and it's usually warm. It feels like summer all of a sudden. It signifies that you're almost at the cabin. It's almost vacation."

Jerry and Judi Lerman understand -- the couple always stop at the Stew Leonard's in Danbury, Conn. during their trek from their Manhattan home to their weekend place in Washington Depot. They always buy the same things -- Caeser salad fixings, peas, carrots, fried rice and a prepared turkey. On the way home they stop again, this time for frozen yogurt cones. "Our kids think we're crazy," says Jerry. "But we're creatures of habit."

Sadly, when such habits are disrupted, it can be devastating. Such was the case with Perry's Nut House, on the way to William Gamble's summer home in Maine. Stopping there was a tradition that began with William's father. "It was full of curiosities, animals that had been stuffed, a giant clamshell which terrified me. We always got fudge, and it was really good," he says.

Perry's closed more than ten years ago, but William still mourns: "It was part of the fabric of going to Maine. You'd get there, and you could see where you were going. It was part of the change in the landscape."

Do you suppose that any of these retailers have fully considered this incredibly powerful dimension of their relationships with these customers? I doubt it. Do you suppose that any of them let these extremely loyal customers know that, hey you are just as meaningful to us as we are to you? Not bloody likely.

That's a missed opportunity of Wal-Martian proportions!

12:29 pm | 0 recommendations | Be the first to comment

The Harlem Shuffle

My daily online missive may be called "Cool News" but sometimes the stories I write about are anything but cool. In fact, every once in a while the news is the opposite of cool.

That was certainly true of a news item I picked up from the May 5th edition of the New York Times. The story was about how the number of supermarkets in New York City is declining even though the need for supermarkets there is growing, specifically in low-income neighborhoods.

That may not sound like the stuff of tragedy to you, but it is a real hardship for Della Dorset, who is in a wheelchair. Della used to be able to scoot across the street to get her groceries. But that store has now been demolished, to make way for a housing development and other types of retail.

So, now, as David Gonzales reports in the Times, Della has to navigate her electric wheelchair "several blocks uphill ... returning home with plastic bags dangling from the handles and nestled between her feet." I mean, can you imagine?

But the issue here is not limited to just Della. Supermarkets are disappearing from low-income neighborhoods because their margins are thin, the rents are going up, and price competition from big-box stores is intensifying.

In many cases, as David Gonzales writes, the supermarkets are replaced by discount stores and pharmacies where the food is processed and the beverages are sugared. No fresh anything in sight. The result, according to Amanda Burden, the city's planning director, is "a health crisis in the city."

At this point I could start to rant about the lack of corporate social responsibility in the supermarket business. But there's no news, cool or otherwise, in that.

Instead, I'll point to another story I found a couple of days later, also in the New York Times, this one by Tracie McMillan, about how some inner-city folks who do not have access to fresh fruit and vegetables in supermarkets are growing their own -- organically.

Among them is Karen Washington, who grew up in Harlem and lives in the South Bronx but dreamed of being a farmer since she was a little girl. She's been realizing that dream since 1985, not only growing her own organic crops in a nearby vacant lot, but in such abundance that she sells her excess at a local farm stand she helped establish.

"It's not about making money," says Karen. "We're selling so that people in our neighborhood have good quality. There's no Whole Foods in my neighborhood." To put it mildly.

As unlikely as Karen's story sounds, it is far from unique: "This urban agriculture movement has grown even more vigorously elsewhere. Hundreds of farmers are at work in Detroit, Milwaukee, Oakland and other areas that, like East New York, have low-income residents, high rates of obesity and diabetes, limited sources of fresh produce, and available, undeveloped land."

Karen is now working on starting a full-blown farmer's market as well as an urban farm school, where she says she hopes kids will learn that tomatoes don't originate from supermarkets.

Now, how cool is that?

08:13 am | 0 recommendations | Be the first to comment

Haute Chipotle

It came toward the end of about an hour of conversation, but it was possibly the best quote I've ever gotten in an interview. We had exhausted a wide range of subjects, and to wrap things up, I said, "So, ultimately, what do you hope to accomplish?"

After a couple of platitudes about serving great food at low prices, Jim Adams, executive marketing director of Chipotle Mexican Grill, replied: "You know, there's no excuse to serve crap. There just isn't any. And too many places serve crap."

I might have thought that I had caught Jim Adams in an Obama moment, saying something he believed to be true, but maybe not choosing the best adjectives. However, I quickly concluded that this wasn't likely because Jim had begun his career as a journalist and then spent many years as a public relations man.

Jim knew exactly what he was saying, and he meant every word of it. Maybe he was even hoping we'd highlight his words on our cover (which we did). Anyone who has ever eaten at a Chipotle knows exactly what he was talking about.

One of the first things you notice about a Chipotle quick-serve restaurant is that it smells really good inside. That’s because they’re actually cooking there. You can see right into the kitchen where they’re mashing the guacamole, grilling the chicken and chopping the cilantro.

You hear music—different, interesting, earthy music. It’s loud enough to notice, but not so loud that it gets in the way. Artsy black-and-white photos and a big, flat, wood sculpture are spotlighted against brightly painted walls, accented with rustic timbers and rough-hewn metal.

A young man with a thick Spanish accent cheerfully helps diners make their choices: “What can I get for you?” A customer responds, and he repeats the order: “Chicken Burrito! Black Beans?” There’s a definite energy and rhythm to it: “Next Please! What can I get for you?”

If it’s your first time at Chipotle, you might find yourself slightly off balance. Sure, you’ve heard all the hype. But you also knew Chipotle was a fast-food place and weren’t quite expecting this. It smells good … it sounds good … it looks good … it feels good.

This is the Chipotle experience: A fast-food restaurant crossed with fine dining. Average ticket: about eight bucks. It is the brainchild of Steve Ells, a graduate of the Culinary Institute of America who opened the first Chipotle as a way to fund a “real” restaurant.

Fifteen years later, Chipotle is arguably America’s most successful restaurant. Its shares doubled in 2007, and while the fast-food category limps along with same-store-sales in single digits, Chipotle’s same-store growth-rate has been in double digits for 10 years running.

Chipotle got there by challenging just about every rule that has governed fast-food success, wrapped in an ethos it telegraphs as “food with integrity.” Apparently, integrity is the best policy.

Nobody enjoys talking about what “food with integrity” means more than Jim Adams who joined Chipotle eight years ago as its public relations director and today presents his title as executive director of marketing and bon vivant.

You can read the entire interview with Chipotle's Jim Adams here.

11:56 am | 0 recommendations | 2 comments

Born-Again Virgin

I recently had a great conversation with Dee Mc Laughlin, the marketing chief for Virgin Megastores. It was a great conversation because Virgin Megastores is growing rapidly (sales up 14 percent in 2007) in the music category, where industry-wide sales for the year were down by a similar percentage.

Not only that, but Virgin is zooming just as one of its main competitors -- Tower Records -- succumbed to the music industry's depression and closed its doors.

How is this possible? Why is Virgin Megastores sailing where others are sinking? According to Dee, the answer is pretty simple: "It's about coming up with easier ways to give our customers what they want."

And how do you do that? Well, here's what Dee has to say about it:

"We observe and then we innovate. For example, HD and Blu-ray are hot right now. We observed that our customers were saying, "what is the difference between the two?" You can tell them what the difference is, but unless they're actually seeing what the difference is, it's not going to help sales.

"So, we've put an HD and Blu-ray wall into all our stores. It's really spectacular looking. Where before we had consumer confusion, which was potentially stifling sales of both systems, now our customers actually can see what the difference is and choose for themselves which format to buy."

So, the key words for today are: "observe" and "innovate." The result, says Dee, was not only a more entertaining and engaging shopping experience, but most important, an increase in sales. If you'd like to read the rest of my conversation with Dee Mc Laughlin, you can find it at http://hubmagazine.com

05:15 pm | 0 recommendations | 2 comments

Fresh & Bumpy

"Arrogant" is probably about the worst invective you could throw at anyone purporting to be in the business of building brands. After all, creating a brand is supposed to be premised on supreme respect for your customers. But, shockingly, "arrogant" is the adjective-of-choice Richard Guha and Kevin Price applied to Tesco's long-anticipated entry into the U.S. market with its Fresh & Easy Neighborhood Markets.

"Tesco would have done better to have copied from Trader Joe's and simply updated and improved," say Richard and Kevin in an analysis posted (here) on their website. "Sadly, the company seems to have had an attitude of arrogance and decided to show the unwashed colonials the benefits of civilization, which will backfire."

Yowch. I haven't had the opportunity to visit a Fresh & Easy store yet (I live on the East Coast and apparently the Brits decided they might have better luck if they launched their attack from the West Coast this time). But I know Richard and Kevin, and don't doubt the sincerity of their opinions. They were just as excited as I was before the stores opened that Tesco was going to bring something truly remarkable to our shores -- a small-format grocery store, with high quality goods, at reasonable prices, with excellent customer service.

That expectation was based on Tesco's outstanding reputation in the U.K., as well as its extensive research into the American market before it opened its doors. Tesco's C.M.O., Simon Uwins told me all about it in an interview in The Hub late last summer:

"I've been into countless homes over the last couple of years," he told me. "I'm a great fan of what you would generally call ethnographic research. I think it gives you far more insight than just doing the more traditional sort of focus-group research. In the end, it manages to combine two things -- what people say, and then looking around in their pantries and refrigerators you actually see what they are really buying. That allows you to have a much deeper conversation with them."

He also said this: "We very much believe that everyone is welcome at Fresh & Easy. That's a basic belief of our business -- that we should love everybody." (full interview here)

That doesn't sound like arrogance at all; it sounds like a really enlightened view of peace, love and understanding at retail. Richard and Kevin describe a litany of issues, however, up to and including "bare steel shelves," "cracked concrete floors", "a lack of distinctive, interesting prepared fresh foods," and a general lack of asthetics in product packaging. They describe thes store's logo as "muddy" and the packaged meat as looking "swollen." Yuck-o.

Their take: "While Tesco may have spoken about researching the market, it has clearly gone in with a set of unshakeable assumptions which management did not even realize they had. The UK heritage in the stores is clear, but they seem to have transferred that from the UK which is unattractive to US consumers and not that which would be. They have ended up with a store which would be as unappealing to UK consumers as US ones, albeit for different reasons."

It may be a bit too harsh to accuse Tesco of arrogance, exactly, but it does sound like some very serious mistakes have been made with its Fresh & Easy venture. Given the allure of Tesco's original promise -- a store that fills a gaping void in the American grocery landscape, my hope is that they will correct their course quickly (and certainly before they land here in New England, where the locals have a history of turning back unwelcome invasions).

01:35 pm | 0 recommendations | 5 comments

Unintended Consequences

Wal-Mart's chief marketing officer, John Fleming, recently told the HUB magazine that Wal-Mart’s biggest challenge is its size. The comment was a little surprising because Wal-Mart's owes its success to its size, which, among other things, gives it the clout it needs to guarantee those low, low prices.

Not anymore, apparently. These days, says Mr. Fleming, Wal-Mart is basically a very big company that needs to find a way to look smaller: "The challenge is to keep what made us what we are -- which is very local," he says.

Feel what you might about Wal-Mart, John Fleming is dead right about that. He deserves credit for reasserting what made Wal-Mart so successful in the first place, and for having the good sense to at least recognize that maybe being so big isn't what it used to be.

Certain other marketers don't profess quite the same sensitivity when the factors driving their success start to cut the other way. Certain other marketers like Apple Computer, for instance. In Apple's case, it's not size but rather design qualities that both drive success and threaten to bring it down. Yes, the exquisitely designed iPod lets us listen to whatever we want, whenever we want. It is the coolest-looking electronic device on the planet.

But Apple won't let us do what is ultimately the most important thing. It won't let us easily change the damn battery when it dies.

Why? Because making the battery easily changeable might interrupt the iPod's beautifully seamless contours (more cynically, it might also interfere with Apple's schedule of new product introductions). Sadly, it took a class-action suit by angry iPod owners before Apple finally agreed to offer a battery replacement service for $65.95 plus tax. You still can't change your own battery (you have to ship your iPod back to Apple) but at least now it can be replaced.

Hate to say it, but Apple's sense of customer relations should be half as elegant as its sense of product design. This is not the stuff of which undying customer loyalty is made. They have needlessly left themselves vulnerable to any competitor able to design something of comparable aesthetics and smart enough to let the consumer have life-and-death control over its battery. Lucky for Apple, no one else seems to be able to design stuff in the consumer electronics business. At least, so far.

It's equally painful to talk about the soft underbelly of one of my favorite enterprises, Netflix. Like Apple, Netflix is nearly impossible not to like because it put an end to the many aggravating aspects of renting movies from Blockbuster. Sorry to say, one of the key features that made Netflix so appealing -- its "unlimited rentals" policy -- is beginning to look like its Achilles heel.

The famous Netflix promise is that you can rent as many movies as you want each month for a flat fee. Well, not exactly. Netflix recently acknowledged that it slows down the rate at which it fills the orders of its heaviest users, a practice critics call "throttling." As reported by the Associated Press, Netflix revised its policy and it now "specifically warns that heavy renters are more likely to encounter shipping delays and less likely to immediately be sent their top choices."

As with Apple, it took a class-action lawsuit before Netflix would publicly acknowledge that it is giving preferential treatment to its newest -- and least loyal -- customers. The strategy presumably is designed both to protect profits and stimulate Netflix's already stunning growth. Unfortunately, it is also designed to give rival Blockbuster a second chance at a first impression.

A strategy that punishes one's most loyal consumers is hardly sustainable. Wal-Mart's John Fleming certainly sees it that way: "Our challenge is managing our size while staying close to the customers," he told the HUB. "It's about keeping that relationship with the customer in the local communities and cultivating that." Those are words to live by, whether or not Wal-Mart itself actually lives up to them.

At the very least, both Apple and Netflix are undermining their own "word-of-mouth" marketing strategies. It is downright weird that these companies, both of which are built on the kind of "evangelism" that most marketers would kill to have, seem oblivious to the fact that buzz can cut both ways. It feels like arrogance, which is not exactly a fundamental principle of good marketing.

Okay, so in neither of these cases is the "soft underbelly" likely to be the company's undoing. Yes, we still love Apple and Netflix, even though they've let us down in significant ways. That enduring loyalty speaks to the relative strengths of the value propositions of each of those companies, which clearly outweigh their relative weaknesses.

But their stories also speak to the big risks inherent in big ideas, as well as the importance of sensitivity in dealing with the negatives that can be the unintended consequences of otherwise brilliant marketing strategies. Both Netflix and Apple are reacting by taking for granted -- and alienating -- the very consumers who are at the heart of their successes.

They might ask John Fleming about that one, too.

08:36 am | 0 recommendations | 21 comments

Wal-Mart vs. Costco

The differences between Wal-Mart and Costco provide one of the most interesting studies in contrast going today. For any number of reasons, it seems that Wal-Mart is regularly (and maybe justifiably) villified while Costco is routinely (and maybe unjustifiably) praised.

Two articles -- one each on Wal-Mart and Costco -- recently caught my eye. The Wal-Mart article, an op-ed piece in The New York Times by Pankaj Ghemawat and Ken A. Mark took the contrarian view that because Wal-Mart paid its employees less, it is able to deliver more value to it shoppers -- and primarily those shoppers are in rural, impoverished locales. So, in other words, Wal-Mart is the best friend a poor person could ever hope to have.

The Costco article, a "news" story in the New York Times by Steven Greenhouse, was all about how Wall Street was not happy with Costco CEO Jim Sinegal because he pays his people an average of $17 per hour, which is about 42 percent more than the average Wal-Mart employee. The article also noted that Costco's average shopper has a household income of $74,000. So, in other words, Costco is the best friend a rich person could ever hope to have.

What are we to make of this?