Wednesday, January 30, 2008

Will Starbucks's $1 cup o' joe help or hurt?

So by now of course everyone has heard that after besting Starbucks in the taste category (according to Consumer Reports, at least), McDonald's is planning to bring barristas and high-end coffee machines to a good number of franchise locations this year and next. Gearing up for the new competition, Starbucks has decided on a decidedly low-tech approach: compete on price. While the company has always offered an off-menu "short" coffee (what everyone else would just call "small") for those who knew to ask, they'll now be pushing the product for a mere dollar or so as a test in a number of key locations. As Visual Store tells us:

"The test will be conducted in many of its Seattle-area stores, though the retailer did not say how many stores are part of it, whether it’s considering a similar promotion for any other products or whether any new test markets are on the horizon.

"A Starbucks spokeswoman said the test 'is not indicative of any new business strategy.' Among its rivals in the suddenly heated-up coffee wars, McDonald’s sells a 12-ounce cup of premium roast for $1.07 and Dunkin' Donuts sells a 10-ounce cup for $1.39. Starbucks' normal price for the 'short' cup had been $1.50.

"'Testing is a way of life for us, as we are constantly looking for new ways to connect with the customer and provide the best Starbucks experience,' the spokeswoman said."

Considering that McDonald's is known for low-cost fare (on top of having great-tasting coffee, apparently, I wonder if this approach is something that could actually work for Starbuck's. On the plus side, their product has virtually zero marginal cost -- I mean, how much can a few ounces of plain ol' coffee cost to make, especially when the company controls the entire supply chain and manufacturing process.

On the other hand, though, as many people go to Starbucks for the atmosphere and image as they do to feed their caffeine addictions. For them, making the shops extra-crowded with lines full of people waiting for their $1 cups might make the trip less enticing.

Having started out upmarket, my guess is that trying to grab a larger slice of the low-end market is at best not going to generate a lot of additional income, and at worst could alienate their core customer demographic or even sully their finely-honed brand image.

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Monday, January 28, 2008

Remodel your living space, Apple style

I saw this article at Advertising Lab and had to share: apparently the folks at oobject investigated a number of the products in-use at many Apple stores, tracked down the suppliers that made them, and put together a list on the web for those of us with slightly less free time :) If you're planning to remodel soon and have tastes that skew towards neo-Scandinavian minimalism, this might be a good source of ideas for you.

Of course, it's also possible that just a few of those Baleri Italia chairs will be enough to break the bank :)

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Wednesday, January 16, 2008

IBM touts tech as the key to customer experience

Via David Polinchock at Brand Experience Labs comes a new research paper published by IBM entitled "how immersive technology can revitalize the shopping experience." Given IBM's role in providing back-end software, POS systems and interactive kiosks to a huge swath of retailers across the globe the insights from the paper are not exactly startling (technology -> better personalization -> improved customer experience). But one line I found particularly noteworthy was:
"Truly immersive experiences—which connect with shoppers on an
emotional level through personalized dialogues and give them greater
control over the shopping experience—are the new frontier in retailing.
After all, that can pretty much be done without any (modern) technology. In fact, the best examples of an emotional connection, personalized dialogs and immersive environments that I've experienced have all come from interactions in small shops that don't use high-tech gadgetry and in some cases don't even have an electronic cash register. Of course, that experience doesn't typically translate well into the modern retail era of huge megamarts and suburban sprawl, and that's certainly where IBM is focusing its attention with this report. One thing I will agree with, though, is that retailers must continue to evolve their experience if they want to stay relevant and competitive. As IBM notes:
"Walt Disney said, 'whenever I go on a ride, I'm always thinking of what's wrong with the thing and how it can be improved.' Disney knew: you must constantly improve the experience in order to stay relevant."
The particular tenet holds true regardless of a retailer's size -- the mom & pop shop has to continually refine their experience to keep customers loyal and happy, just as the big box guys and department stores do. IBM's take, of course, is that with the right technology, even the biggest retailers can create the same kind of personalized environment and custom-tailored atmosphere that small retailers use to their advantage to woo shoppers looking for some added attention.

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Wednesday, January 09, 2008

More retailers discover the benefits of in-store TV

Promo magazine has put together a piece that focuses on a handful of retailers and their experience with in-store TV. According to the article, "About 630,000 TV screens are now housed in 97,000 U.S. retail stores, estimates PowerPact, a consumer marketing agency. That number is projected to grow by 20% a year."

Obviously, this is good news. But even more interesting is the fact that "hipper" stores like Borders (whose in-store TV developments we wrote about in early December), Ecko Unltd and Limited Too are following in the steps of Wal-Mart, who already has 120,000 screens according to Promo. It's even more reassuring that these retailers are working to develop unique content for the in-store TV's instead of just settling for glorified versions of late-night infomercials.

According to the article, "Ecko Unltd teamed up with Channel M to launch 'ecko TV' last October. It uses short-form content -- everything from sports and shout-outs from celebrities -- to 'stop people in their tracks,' says Eric Hebel, president and COO of Channel M."

This is exactly the kind of approach that all companies should take when developing in-store TV project plans: make it eye-catching and entertaining above all else. If a customer stops to watch a video because they are genuinely interested in its content, there's a better chance of the content's message being imparted (rather than if the customer is aware that they are shamelessly being sold a product and decide not to even glance at the screens).

The article also gives lip service to a critic of this kind of advertising: "'It is an intrusion,' says Susan Linn, the group's co-founder. 'This is part of a targeted device by corporations to get brands in our face 24 hours, seven days a week. It may benefit marketers, but it doesn't do the rest of us a lot of good.'"

I don't buy this argument. After all, we are talking about in-store advertising here, so I don't know how that aims to keep "brands in our face 24 hours, seven days a week." Nobody is ever forced to walk into a store. The only time I'd be exposed to in-store TV from Wal-Mart or Borders is if I make the conscious decision to give them my time.

Once a customer is in a store, should it not be the goal of any retailer to enforce their brand and make a sale while they have our attention? Moreover, isn't it better for all of us (customers and retailers) if the store projects an attractive and possibly even entertaining atmosphere? If in-store TV can accomplish both tasks, then why should retailers back off of it? It seems to me like Ms. Linn has a beef with advertising in general and merely looks at this as an illustration of the increasing pervasion of ads.

On the off-chance that you're not familiar with in-store TV networks (which is the subject of one of our other blogs, Digital Signage News), I recommend you check out WireSpring's digital signage primer, and specifically the section on Retail TV.

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Tuesday, January 08, 2008

Circuit City to experiment with small-format stores?

TWICE, This Week in Consumer Electronics, reports that Circuit City may begin testing smaller stores in an effort to catch up with industry-leader Best Buy. While not exactly boutiques, the stores, dubbed "The City" will be about a third smaller than typical stores, or 20,000 sq.ft. instead of the usual 33,000 sq.ft.

While the stores will be a bit smaller, they'll still be packed full of merchandise. In fact, the ever-shrinking size of today's consumer electronics products was actually cited as one reason why smaller stores might work well. You're probably wondering why Circuit City thinks their approach will work. TWICE says this:

What makes The City different? It's 20,000-square-foot size,
for one. Tests showed that the smaller footprint is more productive
than the chain's typical 33,000-square-foot box, Pappas said, thanks to
shrinking product dimensions. The new stores are also merchandised more
efficiently, with narrower but deeper assortments of best-selling,
high-margin products. Modular fixtures allow The City stores to quickly
alter the mix as demand changes, and greater integration with online
inventory allows in-store customers to choose from 1 million SKUs and
have their purchases delivered free of charge.

innovations include prepackaged product bundles, and high-tech tools
like wireless tablet PCs, which sales associates or "partners" use to
check inventory, schedule Firedog appointments and walk shoppers or
"guests" through the sales encounter. The tablets' "guided selling
application" helps identify products and services appropriate for each
customer by drilling down through a hierarchy of circumstances,
explained Brian Leach, The City's regional VP. This allows associates
to cover multiple categories ("You'll never hear 'It's not my
department,'" Leach said), while addressing the training issues
associated with non-commissioned sales staffs.

So in large part it sounds like the smaller format is part of a bid to improve both perceived and actual customer service by making service personnel more knowledgeable (or at least giving them more/better access to information) and more efficient by un-tethering them from their sales registers. After this Christmas shopping season, I'll be the first to say that better customer service would be a very welcome change, as both Circuit City and Best Buy gave me some headaches while trying to buy a few high-margin (I'm sure) items. didn't, so ultimately they got my money, even though the bricks-and-mortars guys gave me the opportunity to actually try out the kit I was shopping for.

While Circuit City will continue opening new stores in their regular format this year, Steve Pappas, the firm's Small-Stores President, noted that most of the new stores built this year would be of the smaller "The City" variety.

The idea has some merit, but will this be enough to improve their less-than-stellar image? And if the service enhancement portion of the changes work well enough to deploy into a bunch of new stores, why doesn't Circuit City deploy them to their existing (large) stores as well?

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