Cutting hours evolves to cutting days

March 9, 2009

DISCUSSION TOPIC

Survival Strategy: Cutting Store Days 3/9/09

TOPIC SUMMARY:

After decades of being open seven days a week, Portland-based retailer Kitchen Kaboodle is closing its doors on Mondays, Tuesdays and Wednesdays in order to survive the downturn. The owners figures that with consumers only buying on sale, the cost savings from closing the doors on those days will enable the company to bring in lower prices on the other four days of the week.

“What our customers want and what everybody wants is lower prices,” John Whisler, a co-owner of the five-unit kitchen appliances chain, told the Portland Business Journal. “We were thinking, if that’s the ‘new normal’ and everybody wants everything on sale, we as a retail business, and locally-owned one, feel we need to get people what they want.”

If the store just slashed prices across all days, it would lose money. Monday, Tuesday and Wednesday have long been the stores’ slowest days. The savings come mostly in labor costs.

Every item is now discounted 10 percent to 50 percent across the store, with lower-margin products getting the smaller discounts. Mr. Whisler said the stores’ prices are now lower than many big chains like Crate & Barrel.

Mr. Whisler admits the idea is a “bold step” but is really a logical reaction to the marketplace.

“I think we all, in any business, get invested in how we’ve done things. You think we’ll just tough it out and trim here and cut here and hold the line on this expense. But after a while in this economy it’s pretty challenging,” he said. “We don’t want to be just limping along. We want to be seen as the place that gives people what they want.”

Discussion questions:  What do think of closing down a store a few days a week to bring in lower prices the rest of the week? Is this just an option for smaller chains or can larger ones benefit from closing doors on slower days?

My post: 

Many retailers and shopping centers are cutting back on operating hours to remove operating costs from non peak hours.  Kitchen Kaboodle is taking this to the next logical step – closing completely on unproductive days.  The people who would normally shop on Monday through Wednesday will be inconvenienced, but their numbers were clearly not material to the business.  It will also be easier to hire and retain a committed workforce who can have a clear work schedule and even have 3 days to consider a second part-time job if they choose.

Having given these positives, the strategy will only work for small chains – most landlords would not tolerate a closed storefront 3 days a week.  The store competes more with higher end stores vs. Walmart so I’m not sure if “price” should be the foundation of their marketing.  This type of product sells due to an inspiring environment and shopping experience.  This will be interesting to watch.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13598

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Employees Forced to buy Panasonic’s Products

February 27, 2009

DISCUSSION TOPIC

Employees Make it, Then Buy it 2/23/09

TOPIC SUMMARY:

While many companies worldwide are debating the wisdom of bonuses for employees at all levels, Panasonic has gone even further. The company is demanding that they give something back by supporting the business with purchases of unsold equipment.

The Times in the U.K. carried a report from its Asia correspondent about the memo sent out to 10,000 Panasonic staff exhorting them to spend the equivalent of £1,000 (U.S. $1,440) each by July. Apparently the policy isn’t new, as executives “have been ‘encouraged’ for years to fill their homes with Panasonic goods as a symbol of corporate loyalty.” As the targets are mostly at management level, a spokesman said that “the company did not expect refusal rates to be high” despite the fact that salary and bonus cuts were also announced.

Discussion questions:  What do you think of policies around encouraging or even requiring employees to purchase company merchandise? Will seeing a company’s employees buying its products encourage shoppers to do the same?

My post: 

The Japanese culture may allow this to transpire without the backlash such actions would have in the US.  However, that doesn’t make it any less wrong.  This action is nothing less than a forced pay cut which will do nothing but harm the individual employee at a time when they are already taking forced salary reductions.  Worst of all, even if the majority of the employees make the forced purchases, it will not be enough to move the needle on Panasonic’s results.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13581

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Starbucks branches out to instant coffee

February 13, 2009

DISCUSSION TOPIC

Starbucks Rolling Out Instant Coffee 2/13/09

TOPIC SUMMARY:

Instant coffee is for amateurs, right? Don’t real coffee drinkers grind the beans from fresh and go to the coffee pot or preferably the French press from there?

Starbucks has built its business around the cachet of drinking gourmet brewed beverages but now the chain is rolling out a soluble (see: instant) coffee under the Via brand name.

The new instant coffee seems like a departure from Starbucks core identity but, according to three unidentified executives interviewed by AdAge.com, it will clearly differentiate from instant brands including Folgers, Sanka and Brim.

“It’s a breakthrough in soluble coffee,” a person identified as being “close to the project” told AdAge.com.

The development of Via is said to be the brainchild of Starbucks CEO Howard Schultz and is expected to get strong marketing backing from the company. The product, which is scheduled to be introduced at Starbucks’ annual meeting on March 18, will initially be sold in the chain’s cafes. There is no word if it will eventually migrate to grocery stores.

Discussion questions:  Will entry into the instant coffee category dilute the Starbucks brand or is it the right product for current economic times?

My post: 

Most will claim this just the latest stumble by Schultz and another nail in the coffin of their eventual demise.  I disagree.  First, the move into another aspect of their core product category is smart marketing.  Second, there are many reasons for using instant coffee that has nothing to do with “the perfect cup of coffee”:  An ingredient for recipes, quick coffee while traveling, and more.  Finally, there is a huge instant coffee business out there for people who actually make instant coffee every day in their homes.  A percentage of these will certainly be willing to pay a premium for this brand name.  My only criticism will come if it is launched only in the cafes.  It belongs in the grocery store along with Starbucks whole and ground bean coffee, ice cream, and bottles of Frappuccino.  The stock may have stumbled and their mystique has become a bit damaged, but there are still long lines at most Starbucks stores I frequent.  I predict they will be just fine, and will have the last laugh as the economy improves and even before.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13551

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Apple stumbles

February 7, 2009

DISCUSSION TOPIC

Apple Goes Soft in Fourth Quarter – 2/4/09

TOPIC SUMMARY:

Apple Stores open at least a year saw customer traffic fall off 1.8 percent in the December quarter and sales drop 17.4 percent, according to Charlie Wolf, a hardware analyst with Needham.

Mr. Wolf said that visitors to Apple Stores during the holidays “were not in a spending mood.”

This has to be a concern to Apple, which a Barron’s article points out, sells computers and other gadgetry that tends to be more expensive than competitive products on the market.

A falloff by Apple has to be a concern to mall owners and managers since the chain has consistently attracted consumers and registered sales that Mr. Wolf said were “undoubtedly the highest among retail chains in the country.”

Discussion questions:  Is there cause for concern for Apple Store operations? Where do you see opportunities for Apple to benefit during the economic downturn?

My post: 

Despite the universal falloff in retail spending across all categories, including luxury retailers, it will shock many to see Apple participate in the malaise.  To this point their focused vision, gorgeous stores, innovative products and flawless execution have enabled them to deliver stunning results and to this point defy the economic downturn. 

I believe that this is not a major long term concern for Apple.  It is merely the reality that consumers are cutting back on all but the essentials, including iPods and other cool Apple products.  The relatively small drop in visits (-1.8%) shows that people still love the product but just can’t part with the money at the moment – but will be back to buy as their confidence in their financial situation improves.  Apple has the financial strength to weather this storm – which for them will be relatively brief compared to the majority of boring me-too retailers out there.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13529

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50 Years to Leave the Retail Scene?

January 24, 2009

DISCUSSION TOPIC – 10/17/08

TOPIC SUMMARY:

At the SAP Retail Forum in Las Vegas last week, author Michael Treacy stated what he saw as the ultimate paradox in retailing: everything done in early years of a company’s life sows the seed of its eventual destruction. In fact, he said, “most retailers last 30 to 50 years, and then die.” Mr. Treacy offered this solace: it could be worse! The “casual dining” business lifecycle is 20 years.

Mr. Treacy attributed retailers’ demise to what he called “the science of backsliding,” or putting it more bluntly, “companies lose their mojo.”

“Top-down planning followed by diligent execution is killing us,” said the author. “Companies typically bland it down by over-analysis, planning and execution strategies.” The result is that they limit their ability to react to the dynamic, unpredictable business environment. Mr. Treacy stated that one-third of all the business plans that he’s been asked to advise on were “dead wrong.”

Discussion question:  Do you similarly see a 30-to-50 year lifespan in general for retailers? If so, what factors inevitably cause a retailer’s eventual decline? If a primary issue is strategic planning, is the main problem relying on a top-down approach? Or is it fractured planning processes?

My post: 

The unfortunate reality of the last few decades in retailing is a combination of age-old management hubris and the advent of public companies and the requirement to hit short term financial hurdles. The combination is deadly. Management hubris creates missed opportunities and decisions away from the customer. Short term financial focus further separates decision making from the customer. In both cases, the customer loses and eventually votes with their wallet to kill the retailer.

The answer isn’t easy but as long as these factors exist, we’ll always see the cycle of brilliant retail ideas launching, capturing the customers’ interest and creating significant success and growth. Eventually the natural desire for personal wealth growth pushes that retailer into public filings or a private equity grab. From there, the inevitable slide to oblivion begins. Let’s see what the current financial collapse does to this cycle. It should be interesting to watch.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13308

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The Psychology of Consumer Sentiment

June 28, 2008

DISCUSSION TOPIC:  P&G CEO Advises Candidates to Stay Positive

TOPIC SUMMARY:

Procter & Gamble’s chairman and chief executive A.G. Lafley wants the future President of the United States, whomever that may turn out to be, to remember that there is a psychological component to economic performance and that it’s important now that Senators John McCain and Barack Obama are running for the nation’s top office that they remember to stay positive about the underlying strength of the American economy.

“You know we are in a business where psychology matters – even in the staples business – and in the economy psychology matters,” Mr. Lafley told the Financial Times. “It could go negative on the economy, that could be a problem … We will talk ourselves into a worse recession.”

Discussion questions:  How critical is the psychological component to consumer spending? Is a strong retailing environment a by-product of consumer optimism and, conversely, are periods of weak sales created by shopper pessimism?

My post:  This is such an important topic.  The crisis of faith in the American economy today is a combination of real issues, perceived issues, and the basic mistrust of our current president and his government’s ability to tell the truth and/or do anything meaningful to make a positive difference.

The new president (I believe it will be Obama) will have an incredible opportunity to demonstrate trustworthiness and speak with clarity and power of his vision of an improved American economy and place in the world.  I am quite optimistic that after 8 years of a disaster presidency, that our new president (again, likely Obama) will lead us to both perceived and actual improvements in our economy and our faith in our individual and collective futures and the place America will have in the world economy.

It is perfectly OK for Lafley to publicly ask our next president to work the psychology of consumer sentiment and build a vision for a better future.  Kennedy did it, Reagan did it – watch Obama do it next!

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13058    

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Kids learning to be thrifty?

April 22, 2008

DISCUSSION TOPIC:  Kids Without Cash

TOPIC SUMMARY:

In the past it has seemed as though teens had an inexhaustible supply of cash. Whether it was from part-time jobs, money from the Bank of Mom and Dad, birthday, graduation, gifts, etc. – kids were out and spending.

Now, it seems, even indefatigable teens and their wannabes (tweens) are cutting back due to a lack of funds. The costs of products that kids buy are going up with everything from gas to a slice of pizza to jeans at prices this generation has never seen before.

According to a piece by USA Today, teen hiring has been down five percent since March of last year. The same report noted that some economists believe this could be the worst year for teen spending since the early 1990s.

Same-store sales at retailers targeting teens were down 0.5 percent last year compared to increases of 3.3 percent in 2006 and 12.1 percent in 2005, according to figures from the International Council of Shopping Centers and UBS.

Discussion questions:  How acutely affected are teens and tweens by the current state of the economy? How important are teen and tween dollars to retailers? How should retailers be adapting to current conditions to maintain the link they have with these consumers?

My post:

How parents communicate to their kids impacts those kids’ reaction to all societal topics:  drugs, sex, violence, and certainly the economy and responsible financial decision-making.  The current economic situation provides parents with a terrific opportunity to teach valuable life lessons regarding thrift, savings, value, and prioritization. 

Certainly the simple fact that parents have cut back allowances and other funding methods has led to less teen spending.  The lower the family is on the economic ladder, the more acutely this is felt.  Those lost dollars are of great import across many parts of the retail landscape including convenience and grocery stores, quick-serve restaurants and of course, teen and tween apparel and accessory stores.  Retailers must focus on their own value proposition, be it price, quality, service, social networking, etc., and should not start focusing on price if that hasn’t been their calling-card.  Stick to your niche – this economic valley too shall pass.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12908    

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