Retailing

Have you ever noticed that, almost always, if you want to buy some milk from a convenience store, medium sized supermarket or a huge superstore, the milk is usually stored against the back wall.

In my local Asda, Tesco and Morrison’s, the milk is right at the back. In the Sainbury’s, it’s in an aisle close to the back.

Milk is a popular item and it is something that many people buy. You’d have thought that, for convenience, a shopper friendly store would have a refrigerator quite close top the entrance so that people who only want milk can grab it quickly. [continue reading…]

I received an email from someone who wanted to own a shop but she didn’t know how to start a retail business.

I thought this was a common enough problem to make it worth blogging about my advice.

The lady who asked the question already knew what type of shop she wanted. If you’re a budding retail entrepreneur but you’re not sure about what to sell, you need to decide the broad category first.

General Thoughts About Retail Businesses

Setting up a business can be a great idea but it can also be a way of losing a lot of money, especially in retail.

I feel that the first thing you both need to do is to read two or three books about retailing and what makes one shop successful whilst others struggle.

Here is a link to amazon.co.uk or amazon.com for retail books in the business section.

As well as learning more about how to start and manage a shop, I think several aspects are particularly important. [continue reading…]

The full title of this short book by Scott McKain is

“Digging Wells and Building Fences: Discover the Steps to Combat Showrooming, Converge Physical & Digital Retailing, and Create Customers for Life“.

In my review at Amazon.co.uk, I gave the book a Four Stars rating. This means I consider the book to be in the range of good to very good.

Here is my book review.

A very useful book to help you to think about retail showrooming

Have you ever seen something you like in a retail store, taken out your phone and gone to Amazon? I have. I’d probably justify it, if challenged, by saying I wanted to read the reviews but I can’t help but notice the price too.

This is the problem of showrooming. It’s defined as using a physical retail store to find products you want but buying on the Internet. It’s a significant issue for the retail chains bearing the costs of the physical stores and service staff but not receiving any of the revenue to compensate. [continue reading…]

June 24th was a quarter day and that means in the UK, rents became due for the next three months and it created a wave of insolvencies among big retailers like Jane Norman, Habitat, TJ Hughes and Moben. Allegedly other retailers are under severe financial pressure like Clinton Cards and HMV. Even the giant electrical stores are struggling.

But why is there so much blood on the high street?

I believe we need to return to the five pathways to profit identified in my free report, The Profit Tipping Point for an understanding.

Those five pathways are:

1. Attractiveness of the market
2. Rivalry among competitors
3. Competitive advantage (and I’m particularly focused on differentiation of course)
4. Management skills in planning and controlling the business
5. The inner game – while I normally think of this as an issue for entrepreneurs, the inner game for big groups is almost inevitably weaker. Even with a charismatic, driven and passionate leader, the motivating force is lost through the layers of the organisation and the bureaucracy.

Attractiveness of the Retail Markets

We have to say it is a bit mixed.

I’ve been astonished at just how quiet it is in Birmingham city centre on a Saturday morning. Few shoppers mean plenty of empty shops and even emptier tills.

I hear we are in a time of austerity brought on by massive public expenditure cuts. The truth is very different at the moment as the government continues to pump huge amounts of borrowed money into the economy (April & May 2011 borrowing at record levels).

I’m not denying that there haven’t been cuts but such was the cash splurge by the last government, that the cuts are a drop in the ocean. It can’t continue for too long, or we’ll see ourselves in a Greece style crisis.

It’s also true that some sectors of the economy have been forced to adapt to huge volume changes. GDP is rising slowly after dipping by a few percentage points in the recession but the housing market is extremely depressed with volumes less than half the historic norms. No wonder Moben who sold replacement kitchens got in trouble.

Inflation is too high, partially caused by the VAT increase at the beginning of the year, partially caused by food shortages (from both droughts and floods in different parts of the world) and partially due to the weakness of sterling – €1.10 to £1 is astonishing when the Euro is in crisis.

The cause of sterling weakness should be keeping consumer spending high.

That’s the low interest rates with the bank base rate stuck at 0.5% when the UK norm is considered to be about 5%. This creates a huge subsidy from savers to borrowers and millions of households are benefiting from very low mortgage rates. The worry is that the squeeze will get bigger when interest rates rise.

Unfortunately the tendency in the debt ridden naughties was to spend all the money you earned plus a bit more because credit was so easily available. The day of reckoning was inevitable.

Competitive Rivalry

The High Street stores are being squeezed by two different types of competitors.

First, Tesco, Asda and the other supermarkets are taking advantage that we have to buy essentials and while we are in the stores, we can be sold other stuff because of the convenience of one stop shopping.

Second is the growth of online ecommerce stores. Amazon is the obvious example for the impact it is having on HMV and other music stores which is compounded by the digitalisation of the product which allows downloads of music. eBay has made it easier to promote both new and second-hand stuff.

Competitive Advantage

For the consumer, there are two parts to shopping – the buying itself and the fun of the experience.

Unfortunately a lot of the fun and interest has gone from shopping.

The growth of the giant retail chains at the expense of the independents has led to a commoditisation of the High Streets.

The brutal truth is that many are the same – the same stores selling the same stuff in the same way.

We used to go to different towns for “a day out” and we’d browse around the shops and buy if something caught our fancy.

But there’s little point if a town centre or shopping centre is full of the national brands.

We’ve just come back from a short holiday in North Wales and it was lovely to see the absence of the chain stores. I don’t think we even saw a Starbucks but we did see lots of independent coffee shops, cafes and tea rooms… and a few pubs!

It’s not just that the stores are all the same in the different towns and cities, the products seem to be the same or very similar between stores which again takes away the fun from browsing.

Management Skills

Retailing is a science and an art. Some things work predictably and sometimes there’s just a certain, je ne sais quoi that makes you go into a shop.

It’s interesting to watch Mary Portas on Mary Queen of Shops . You may not like her personality but she gets results.

The troubles on the High street are partially caused by a rush to expand – 200 shops are better than 100 is the logic – the myth is broken if the stores are losing money.

Inner Game

It has to be tough being positive when you see so little happening around you but entrepreneurs have a huge advantage over the national chains. They can adapt quickly to local conditions and build personal relationships with key customers.

I’m getting on a bit, but in my day you used to get to know shop assistants and they’d get to know you.

The Opportunity For Independent Retailers

Retail is tough at the moment but often opportunity comes from adversity.

Landlords need to face up to reality – quarterly rental payments and upward only rent reviews smack of the good times when demand for retail space was higher than supply. You can walk around virtually any town centre or shopping centre now and know that’s not true.

But there is hope.

I don’t think the desire to shop has gone away.

It’s just that consumers need to get excited by the idea of shopping again.

I can see the chains retrenching which creates opportunities for the independents.

I’ve heard it said that differentiation and commoditisation go in cycles. When markets get too fragmented, the opportunity for consolidation opens up as brands create trust and bigger businesses mean more buying power and lower purchase prices – giving stores the choice between discounting or pocketing the extra margin.

But when things go too far – as they have done now – the opportunity is for the independents to reclaim the High Streets and give back each town centre a unique shopping experience.

If I wanted to move into retail, I may not be ready to rush back just yet – landlords need to feel more pain to relax their terms – but I would be on the look out for opportunities and working on my concept.

Unfortunately there is a network effect – High Streets are only going to feel different when there are enough independents – so towns and shopping centres that experienced some commoditisation but not total would be where I’d be looking for opportunities.

What do you think about the future of the High Street?

I intend to focus on companies and brands which have secured a special place in markets and as it is about to pass its fortieth anniversary, Starbucks is a good place to start.

The first store opened in Seattle on March 30, 1971.

40 years later, over 17,000 locations in 55 countries and nearly $11 Billion of sales shows that there is something very special to turn the coffee house experience into such a big business with so many raving fans.

I don’t get it.

I’m told that people either love Starbucks or hate it.

I’m indifferent.

The coffee is OK if overpriced, I don’t understand the language so I’m not comfortable buying and I always find myself looking around wondering what all the converts see in Starbucks that I don’t.

The intention is to expand the Starbuck’s brand away from the coffee houses and into the supermarkets and away from coffee and towards other products too. It’s to become a lifestyle. I wish it luck but I suspect that it is a mistake.

Starbucks is in danger of losing its positioning in people’s minds – changes to the Starbucks logo.

It has successfully built up the brand as the third place – the one that is neither home or work. Again I don’t get it. In the UK, we have the pub and in Europe the pavement cafe bars which serve coffee and alcoholic drinks.

I believe Starbucks has benefited from the Friends TV show with Rachel, Monica, Phoebe, Ross, Chandler and Joey because they spent too much time in Central Perk. I’m even watching the repeats in the UK because I’ve decided that I hate the ongoing misery of Eastenders.

It looks warm, cosy, fun and friendly.

But that’s not how I feel when I very occasionally visit a Starbucks – usually if I’m meeting someone who is a fan.

There’s no denying the vast number of Starbucks fans and their passion for the brand.

Facebook has a Starbucks page with over 20 million people who have “liked” it. Mind you Facebook is another brand I don’t get and perhaps I should just accept that I’m an old fuddy-duddy.

The Starbucks following on Twitter is more modest, just 1.33 million.

Can you help? Let me know what you love or hate about Starbucks and what you think about the planned changes going forward.

It may be that I don’t have a very local Starbucks and therefore I don’t get the community feeling. There’s no denying that we all like to feel that we belong and the more you go and the more you see people you know, the stronger the feeling of community.

Differentiation Strategies in Use By Starbucks

1. Speciality coffee – in locations where there were already traditional cafes, Starbucks offered unique drinks
2. Funny language – you have to be one of the insiders to know what to get at Starbucks
3. Variety of seating – from coaches to armchairs to bar stools

If you want to know more about Starbucks, take a look at the Wikipedia entry.

In the UK a department store called John Lewis has used a famous slogan “Never knowingly undersold” for 82 years to reassure customers that the best deals can be found at John Lewis.

If customers found the exact product cheaper elsewhere, then John Lewis would guarantee to match the retail price and refund the difference.

John Lewis did regular price checking and, where lower prices were discovered, they lowered their prices to match or beat the competition. [continue reading…]