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Restaurant Technology and the Digital Customer Experience - Panera, Subway, Olive Garden, and Largest U.S. Restaurant Chains Moving to the Leading Edge (PNRA)

Sunday April 13, 2014

What's new and what's news in the restaurant segment of the U.S. retail industry can be generally summed up with one word - technology. Olive Garden (DRI) is introducing online ordering this month. Subway has been testing a smartphone ordering and payment system in 2,000 California restaurants. The CEO of Panera Bread has been showing up in the mass media talking about plans for "Panera 2.0." There's no doubt that the world's largest restaurant chains are working hard to move their businesses up to the leading edge of technology. The question is whether all that digital effort is also moving the world's largest restaurant chains in the direction of the world's best dining and customer experiences.

From tabletop ordering tablets to mobile payments, to real-time digital customer feedback, some of the largest U.S. based restaurant chains like McDonald's, Wendy's, Baskin-Robbins and Buffalo Wild Wings seem to be in a digital race to see who can become the shiniest, the buzziest, and the gadgetiest the fastest. Much like the largest U.S. retail chains that are participating in a similar digital competition, it would be well advised for restaurant chain leaders to consider some fundamental truths about retail technology as they lead their organizations down a fast-moving digital track.

- Technology for technology's sake is of little benefit to anyone.

- The customer experience is not completely defined by their technological experience.

- After the "wow" factor of the technology (quickly) wears off, there will be more customer expectations that need to be met and exceeded.

This month Panera Bread's CEO Ron Shaich has been aggressively and publicly outlining the company's plans for integrating technology into the Panera restaurant experience. Those plans include online and mobile ordering, a "rapid pick-up" system, in-restaurant electronic table locators for food delivery, customized digital ordering, and the ability to save previous orders and payment.

The driving motivation behind Panera's planned technological advancements is enhancing the customer experience in an omni-channel world. In an interview with the Associated Press, Shaich is quoted as saying, "As a CEO, I'm paid to figure out where the world is going, not where it is. Today's consumer wants it their way. They want it customized. We have to have the system for that."

I think Shaich is completely on-point in the assessment that the today's and tomorrow's consumers want what they want when they want it in the exact way that they want and will gravitate towards companies that empower them in that quest. Based on my recent experiences with Panera Bread, though, I think there might be something a little off-point in the understanding about what it is that Panera consumers actually want. Here's a brief account of my two experiences in the same Panera Bread restaurant location in the past two weeks.

About two weeks ago, I went to Panera for lunch and I ordered a You Pick Two combination with a salad, sandwich and apple. My salad had an entire lettuce core in it and no dressing, my sandwich had no condiments, my plate had no knife to use to spread added condiments or cut large things like lettuce cores, and my very small apple had four very large bruises.

I reported the challenges I had with my food order on the customer survey that I was directed to on the bottom of my receipt. I didn't report the lack of toilet paper in the women's restroom, or the number of dining room tables piled with dirty dishes because I figured that was probably a result of more business than anticipated and not enough staff to handle it, which management teams are generally already aware of.

When asked on the customer survey "Would you like someone to contact you about this survey?" I checked "Yes" as I always do because I'm always curious about what that followup will be. Usually my curiosity doesn't get satisfied because nobody - from Panera or any other retail organization - follows up.

Much to my surprise two days later my phone rang and the person who greeted me when I answered was "Lenora," the general manager of the Panera location I had dined in just two days earlier. She told me she was calling because I had requested a follow-up to my customer survey. Her call was so unexpected that I hadn't even thought about what I would say if someone actually did contact me.

My uncertainty didn't matter, because Lenora obviously had a clear intention before she dialed my number. She summarized what she had read in my survey, which assured me that she had actually taken the time to read it. She apologized profusely for what she considered to be an atypical and unacceptable Panera experience, and she assured me that there would be actions taken as a result of my feedback.

Lenora was genuine, she was enthusiastic, she took ownership, she made no excuses and she was obviously committed to excellence. It was not only model service recovery, it was sincere service recovery. It was exactly the kind of response that I - or any disappointed customer - would want to receive. Lenora was a model Panera company representative and deserves kudos for shifting a service failure into a success.

While Lenora was doing all that, it gave me time to compose myself and remember a couple of questions that my latest Panera experience had caused me to wonder about. I had noticed the lack of knives at other Panera locations as well, and wondered if knives were no longer a part of the Panera dining experience. And I also wanted to know how it is that lettuce cores and bruised apples made their way onto my plate, considering that there was both a food preparer and a food deliverer between placing my order at the cash register and the placement of that order on my table.

Again, Lenora made no excuses and reiterated that it was all below standards. She then told me that she had been in a meeting with some members of the Panera management team just that week where they had been talking about standards and consistency. One of the takeaways from that meeting was plans to photograph each dish, so that there would be no mistake in any Panera employees' mind about what the Panera "ideal" was for every dish, every offering, and every plate. It's an idea that is brilliant in its simplicity, and one that all U.S. fast casual restaurants should steal. (Sorry, Lenora!)

I was on the phone with Lenora for about 15 minutes and it was a completely lovely conversation with a completely professional woman who cleaned up all the negative residue from my previous experience at her Panera location. At the end of the conversation, Lenora offered to "make it up to me" with several different options. The option that I chose was to return to the same Panera, and tell the cashier to look for my name in "Lenora's book ." Lenora assured me that I would receive a better experience the next time, and the commitment in her voice gave me no reason to doubt that would be true.

At the time I didn't really think that I would return to that particular Panera, and if I did, I didn't think I would mention Lenora's name. The point of filling out the survey and having the conversation wasn't about getting a freebie for me, although I'm sure Lenora deals with plenty of people who have that as their goal. But I did decide to return and I did decide to mention Lenora and her "book" because I was curious again about what would happen after that.

When I mentioned it, the Panera cashier did know about Lenora's "book" and seemed to know the correct process to be followed when a customer mentioned "the book." She immediately retrieved a manager who accompanied her to the cash register with "book" in hand. He located my name and apologized for my previous experience, and invited me to enjoy a complimentary lunch. Like Lenora, he was sincere and professional, and made a completely positive impression.

Again I ordered the You Pick Two with a salad, sandwich, and apple. The last thing the adorably sweet, smiley cashier said as I left the register was, "We'll make sure to do a lot better with your order THIS time!"

So, THIS time when my food was delivered to my table, there was no whole lettuce core in the salad and an ample amount of dressing. So, in that way, both Lenora's prediction and the cashier's promise came true.

Beyond that, unfortunately there was no difference THIS time. There were no condiments on the sandwich and no knife on the plate for spreading added condiments or for cutting the chunks in my salad bowl that were larger than bite size. The apple was brown and bruised on all sides, again causing me to wonder about the quality standards of all the food on my plate. Again I had to ask for a replacement apple, and received one that was much more edible.

Restaurant Technology Digital Customer Experience Panera Subway Olive Garden Largest US Restaurant Chains Moving Leading Edge

Eight times during my Panera experience THIS time I observed customers removing dirty dishes off a table and wiping their tabletops with the paper napkins that they retrieved from the beverage station. Countless number of times I watched food-delivering employees walk past dirty tables without doing anything about them.

Again, there was no toilet paper in the restrooms. The photo above is the view underneath my table as I sat down, and it was the same view under every table in the dining room as far as the eye could see.

I'm sure before committing $42 million to technology enhancements, Ron Shaich and the Panera leadership team did ample research which revealed opportunities to improve the Panera ordering process, and that they clearly defined the elevated Panera ordering process they wanted to create. I'm not so sure that the same team has complete clarity about the opportunities to elevate the Panera customer experience after the whiz-bang-wow of the new techno ordering system is complete.

Just now, more than an hour after I arrived at this Panera, the adorable]y, sweet, smiling cashier who had taken my order walked past me in her street clothes, obviously done with her shift and ready to enjoy the rest of her Sunday. As she headed for the door she saw me and said, "Good-bye, Barbara. We hope to see you again!"

Not only did she remember my name after an hour, she cared enough to proactively use it when she was off-duty and out of eyesight of any managers she would want to impress. Because of this one brief moment that delightfully surprised me, I am now certain that I will return to Panera another day to give them another chance. Any company who makes a hiring decision that good can't be all bad.

It's really not that my past two experiences at Panera have been "bad," it's just that they have had some notable ups and downs, the sum total of which has created somewhat of a roller coaster experience. For most people, roller coasters and dining don't mix very well. And for most people, given a choice between a technologically-enhanced ordering experience and a consistently excellent dining experience, they would be willing to forego the gadgets in order to divert some of the technology budget towards training and higher food quality standards.

Last year Panera experienced a slowdown in growth and the company has identified the ordering process as the reason that Panera customers have defected to other restaurants. As I type this, the ninth group of customers is clearing someone else's dirty dishes away so that they have somewhere to sit. Another customer is gathering her own food order from the kitchen pass-through counter because she noticed it had been sitting there unattended for a few minutes. Another customer just returned to her table after hunting down soup spoons that weren't included on her family's plates. None of them look particularly happy. And I don't think any amount of digital ordering technology would put a smile on any of their faces right now. I think there might be other reasons beyond the ordering process that have motivated Panera customers to defect.

In an interview with the Associated Press, Shaich said it himself... "Everybody is talking about technology in the restaurant industry. It's the new thing. But technology doesn't matter if it doesn't change the guest experience."

Well said, but unfortunately not completely well done... THIS time...

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GE Capital Is Branded Credit Card Manager of Choice for Largest U.S. Retail Chains with Branded Credit Card and Customer Loyalty Programs (WMT, AEO, DDS)

Tuesday April 8, 2014

Related: Roundup of Branded Retail Credit Card Programs >>

After renewing some long-term agreements with some of the largest U.S. retail chains, GE Capital seems to be the financial institution of choice for private label and co-branded credit cards for the U.S. retail industry in 2014. American Eagle Outfitters (AEO) is the latest retail chain to renew its agreement with GE Capital for management of its branded credit card program. This follows closely behind the biggest of the big retail credit card contract, which was the renewal of the agreement between GE Capital and the Sam's Club and Walmart chains. It's been a pretty good month for GE Capital so far.

But just to prove that there's no room for laurel resting in U.S. financial services, GE Capital also received the bad news this month that Dillard's (DDS) will be handing its credit card servicing business to Wells Fargo later this year.

Prior to this banking change, Dillard's has been offering its private label credit card, which can be used for Dillard's purchases only, and a co-branded Dillard's American Express credit card. Both of those cards are an integral part of the Dillard's customer loyalty "reward program."

In other words, you can only be considered a "loyal" and "rewardabe" Dillard's customer if you are also a credit-worthy credit card user. That's an unfortunate message to send to Dillard's cash-paying customers, but apparently nobody in the Dillard's finance department has figured out how to make an equally accessible rewards program financially feasible without factoring credit card fees into the equation.

Considering the risks associated with credit card security these days, it wouldn't be that surprising if the largest U.S. retail chains just decided to do away with its branded credit card programs altogether. This will be particularly understandable for retailers that do business in California, where legislation is pending that would hold retailers solely responsible for security breaches, and limit the type of "personalization data" that can be collected and stored by retailing companies.

Seemingly it's a commendable thing for California legislators to be concerned about the security of its citizens. The parties being protected by this legislation, however, are the banks. And don't they already have big departments filled with legal people whose primary focus is protecting the interests of the company that signs their paycheck? Perhaps this is an area where the negotiation of contract terms can be sufficiently handled without the need for government regulation.

Despite the threat of the Russian underworld and Ukranian teenage hacking, retail credit cards still have enough financial benefits to be worth the risk to U.S. retailers. In fact, the retail credit card business is healthy, with record low chargeoffs and month-over-month improvements in yield and excess reported by Fitch Ratings.

Another recent positive trend in retail credit cards is the connection being made between digital coupon offers and retail credit/debit card purchases. Coupons.com is facilitating the connection between Visa, MasterCard or American Express and retail companies like Vitamin World, Tilly's, DressBarn, Perfumania, the Body Shop and all of the GAP brands - Piperlime, Athleta, Banana Republic, Old Navy - that are willing to issue and redeem digital coupons.

So consumers who link their Visa, Mastercard or American Express card to their account on Coupons.com can browse through available "card linked" offers on Coupons.com, and "add" them to a credit card. When that "linked" credit card is used to make a coupon-eligible purchase, the amount of the coupon automatically gets deducted from the shopper's credit card, and a text or email communication from Coupons.com is sent to confirm the digital coupon redemption.

This is a win-win innovation except for the double security exposure inherent when both a retailer and a website have data stored that could be stolen by some crafty Russian hacker ring, or an industrious teenager in the Ukraine. According to Verizon Enterprise Solutions, only 11% of merchants that are accepting credit cards have sufficient security standards for credit card transactions. That shouldn't be good enough odds for any retail credit card user, no matter what kind of bribery perks are associated with those credit cards.

It also shouldn't be good enough odds for any U.S. retail chain, no matter how much credit card sales add to the bottom line. It's not just about putting customers at risk. It's about doing the right thing and doing the things you do the right way.

Until branded retail credit card programs can substantially prove that they are committed to doing credit cards the right way, then it's about consumers opting out of the game altogether for their own protection. That will motivate retailers to change faster than any amount of government legislation ever could.

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As Retail and Restaurant Birthday Freebies and Loyalty Club Programs Expand, Marketing Budgets Are Wasted Without Specially Defined Customer Experiences

Monday March 31, 2014

Click here of you just want to access the Complete Index of Retail and Restaurant Birthday Bonuses and Freebies >>

More than 2.5 billion American consumers belong to loyalty clubs in all industries, according to private label discount network Access Development, and 70% of those loyalty club members say they feel a loyalty club helps define their relationship with a company. This is either the cause or the result of the expansion of retail and restaurant loyalty, discount, rewards, and freebie marketing programs in the past few years. But as the number of retail and restaurant loyalty and birthday club options continue to grow, the possibility that marketing budgets are being wasted on me-too customer loyalty marketing programs expands as well. Beyond the Loyalty and Birthday Club offers is the "special" in-store experience for loyalty and birthday club members, which most retailers aren't really using to their best advantage.

I was brainstorming with a client recently about expanding e-mail and social media marketing activities in order to gain exposure with a new audience. Of course there are an infinite number of online and mobile marketing strategies that can be used to attract attention and boost website traffic, but before choosing the best strategies, there was one important question that I felt needed to be answered. "Once you've got them there, what are you going to do with them?"

And that's the question that was also top of mind for me with each birthday freebie that I collected this month. Now that they have me here, what are they going to do with me? Unfortunately, the answer to that question, more often than not, was "Not much."

So far Baskin-Robbins wins the birthday freebie experience contest because of one simple thing, which is not the mini marshmallows in my birthday scoop of rocky road. What Baskin-Robbins gave me was a birthday greeting which included my first name, pulled from the printed coupon I had to present to get my free birthday scoop. That is such a common sense customer service fundamental that you would expect every retailer to do it as a standard part of giving away free stuff in an attempt to make an emotional customer connection.

But as I often say, just because something makes sense, doesn't mean it's common. (I have no idea if this is an original thought, so feel free to attribute it to another thought leader if I am stealing a quote.)

Imagine my birthday surprise when the sales associate handling my birthday bonus transaction didn't even think to say "Happy Birthday" at one of my customer service favorites - Starbucks. Customer disappointment is even greater when expectations are higher. Reportedly Starbucks adds 80,000 new members to its Starbucks rewards program every week. It's mind-boggling to believe that a company with the service commitment of Starbucks would be handing out millions of birthday freebies every year without taking the time to fashion, communicate, train, and execute a "birthday experience." Talked about missing the moment!

For any retail leaders who are reading this and thinking, "It's free, lady. So what else do you expect?" you might want to consider discontinuing any present or future freebie or loyalty marketing programs and plans immediately. If meeting customer expectations seems like an unreasonable request, then exceeding customer expectations is way out of your reach. You really don't want to do any kind of marketing programs to attract customers - either repeat or new - until you have that all sorted out in your mind and in the execution of your experience.

In actuality, customers have very little to complain about when they are being given something for free. But the lack of customer complaints is a very ineffective measurement of customer satisfaction. Customers rarely complain about small disappointments, but the sum total of a lot of small disappointments leads to one big customer defection. Loyalty programs should be viewed as the opportunity to create the kind of customer delight that leads to fanatic customer loyalty. But that kind of loyalty doesn't happen by itself and it takes more than an annual birthday bribe to win it.

That said, I've probably gotten myself deleted from a few birthday databases. March is the easiest time of year for me to review the trends in U.S. retail industry loyalty club programs since it is the month that my e-mail box is flooded with birthday greetings, discounts, and freebies from my retail and restaurant BFFs. This year, it was quite easy to add a big batch of birthday bonuses to the master list of retail industry birthday club marketing offers. The newest retailers that want to contribute to your birthday celebration this year are:

- Abercrombie & Fitch
- Ace Hardware
- American Eagle
- Auntie Anne's
- Aveda
- Barnes & Noble
- Boston Market
- Carraba's Italian Grill
- Cinnabon
- Del Taco
- Denny's
- Dickey's Barbecue Pit
- Disney
- Dunkin' Donuts
- Famous Dave's
- Famous Footwear
- Fuddrucker's
- Goodwill
- IHOP
- Jason's Deli
- Kmart
- Lone Star Steakhouse
- Noodles & Company
- Orange Julius
- Pick Up Stix
- Qdoba
- Schlotzsky's
- Sephora
- Sonic
- Stir Crazy
- Taco John's
- Uno Pizzeria & Grill
- Wienerschnitzel

That's in addition to the dozens of birthday clubs and loyalty club birthday freebies that were already on the birthday promotion roundup list. Click here for the Complete Index of Retail Birthday Clubs and registration links >>

Clearly the restaurant sector of the retail industry is most actively using the birthday club marketing strategy. What I also noticed this year while reviewing my birthday club options is that fewer retailers wanted me to help me celebrate with freebies, and more of them thought my "special day" would be happier with a free-with-purchase offer. Also I noticed that many of the birthday "month" offers last year had been compressed into birthday "week" offers this year. These trends again indicate that an improvement in the overall "birthday experience" could help retailers with their ROI on birthday bonus marketing programs.

By the time my birthday month rolls around next year, I predict that new birthday freebie options will still be easy to find, that more of them will be discounts and conditional-purchase offers than completely free freebies, and that a majority of birthday coupons will be mobile accessible so that I don't have to fire up the printer that I haven't needed to use since this time last year.

Already there are more birthday freebie offers that any one consumer would want, or be able to redeem each year. It's easy to predict that as technology drives more personalized marketing for birthday marketing programs, birthday freebie offers may eventually become as competitive as Black Friday doorbusters.

No matter how they evolve and how they are executed, there are two reasons why loyalty clubs in general and birthday clubs in particular are are fundamentally a good idea. From a consumer's perspective, it's always happy to get surprises and freebies, particularly on your birthday. And from a retailer's perspective, it's never a bad idea to do something that gives a customer a reason to smile.

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Q1 Store Closings Roundup - Behind Biggest 2014 Store Closing Numbers Is a Significant Retail Evolution and Lack of Creative Leadership

Sunday March 30, 2014

At the end of the first quarter of calendar year 2014, the Q1 roundup of U.S. retail store closings can be described as significant. It's not the total number of planned store closings that have been announced in 2014 that is so significant, especially compared to the downsizing avalanche of the Great Recession. Rather in 2014, it is the story behind the store closing numbers that reveal the fast-moving evolution of the U.S. retail industry and which of the largest U.S. retail chains lack the creative leadership to keep pace.

One of the newest additions to the 2014 U.S. Retail Store Closings list is GameStop, which announced this week that it plans on closing 2% of its stores this year. That's just 128 of GameStop's chain of 6,400 stores, and it's hardly worth talking about. Considering the formidable threat from Wal-Mart's new video game trade-in offering, it's a positive sign that GameStop leaders seem confident that 98% of its chain can remain competitive. So the 128 store closings that put GameStop high on the store closings list, could actually be viewed as a show of GameStop strength.

That's the opposite of the story behind the Dots women's clothing store chain which began the process of liquidating its entire chain of 360 stores at the beginning of the month. When news that the Dots Chapter 11 was going to result in a complete liquidation of the chain, it's likely the reaction from many U.S. retail industry professionals and enthusiasts was "What's Dots?" It's even more likely that customers were unable to answer the same question long before the Dots going out of business sales began.

Reportedly, the Dots market niche was affordable fashions in size 0-24 for women age 25 to 35. "Affordable" meant private label Dots jeans for $10, dresses for $7, blouses for $5, and boots for $12. On paper, this is a viable price-sensitive offering to a clearly defined demographic. That's probably why retailers like Wal-Mart are going after it too. And that's why it probably seemed like a good idea to recruit a Wal-Mart apparel senior manager to be the CEO of Dots back in 2012.

When former Wal-Mart senior VP Lisa Rhodes took over, the Dots retail chain had 420 stores and plans to build to a 1,000 store chain in five years. How is it that in less than two years, Dots expansion plans transformed into Dots liquidation sales? Only Rhodes knows the whole story on that, but there's no justification for the "economy" excuse, and their target market was still buying apparel, just not at Dots. In general we can probably glean the answer by looking at a few other retail chains that have taken a prominent position on the 2014 Store Closings list.

As the first quarter of the calendar year closes, what, if anything, do these retail chains with more than 100 store closings planned have in common?

- Abercrombie & Fitch
- Aeropostale
- Barnes & Noble
- Blockbuster
- Brown Shoes / Famous Footwear
- Children's Place
- Dots
- GameStop
- Jones Group
- Radio Shack
- Sbarro
- Sears
- Staples

Besides the self-inflicted wounds of controversy caused by Abercrombie & Fitch CEO Mike Jeffries, none of these retail chains have done anything "wrong." They just aren't on the right side of today's retail rightness and they aren't keeping up with the fast-changing retail climate that is largely being defined and rapidly redefined by customer empowerment.

Loss of clear identity. Lack of retail relevance. Stuck in the past. Too big to be nimble. Little engagement in social media spaces. Not enough presence where target markets are looking. No magnetizing customer experience. Not much unique or extraordinary in product offerings. Not much worth talking about. Nothing for fanatically loyal customer advocates to latch onto. These are the troubling threads that connect today's most troubled retail chains.

When retailers cite "competition" as the reason for their retailing challenges, what they're really saying is that they're buried under one or more of today's common retail challenges, and their competitors have found a way to rise above them. In a world of unprecedented consumer access and empowerment, retailers can't be slow about digging themselves out or else they get buried alive. In the most general terms, some version of this story is undoubtedly what happened to Dots.

Last week Toys 'R Us was expected to announce store closings after it reported a $1 billion FY 2013 loss and revealed that 500 jobs worldwide had been cut. But instead, CEO Antonio Urcelay declared that 98% of the Toys 'R Us stores are profitable, so no store closings are planned for 2014. The math of 98% profitability that leads to a $1 billion loss is a little bit hard to figure. But we're willing to give Urcelay and his finance department the benefit of the doubt, and here's why.

When Urcelay announced the job cuts last week he didn't make excuses. He pointed no fingers at the economy, the competition, or the changing demographics in the U.S. Surprisingly, Urcelay publicly admitted the many ways that Toys 'R Us had created its own billion-dollar problems one sloppy retailing failure at a time. In stores, Toys 'R Us customer are complaining about a slow checkout process, disorganized stores, and too many inventory out of stocks. Online, ToysRUs.com customers are complaining about outdated technology and unfavorable shipping terms.

That's a lot of fundamental Retailing 101, and Urcelay was a big enough leader to admit it. How refreshing and how rare! It's no coincidence that such a forthright display of radical responsibility came from a CEO who has only been at the helm of the company for about six months.

One of Albert Einstein's most well-known philosophies is "No problem can be solved from the same level of consciousness that created it." And what that means for the retail chains that are topping the 2014 Store Closings list so far is that it's going to be difficult or impossible to find the way out of the downsizing ditch following behind the same person who led the company there in the first place.

To boil it all down, there are really only two reasons why some of the largest and oldest retail chains are closing stores and closing down in 2014 and both of those reasons are leadership-related. Either there is a lack of understanding about what "retailing" means to today's consumers, or there's a lack of vision about what retailing can become in the future. Even more simply, the root cause behind the most dramatic retail downsizings is a failure in leadership imagination.

To predict how the 2014 Store Closings list will grow over the next three quarters of 2014, there's no need to look any further than the boardroom. Admitting that you have a problem is the first step towards meaningful improvement. Admitting that you ARE the problem is the essential second step. How many leaders in the companies at the top of the 2014 Store Closings list have demonstrated a willingness to do that?

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Retail Brands Lacking Consumer Trust Are Closing Stores - Wal-Mart, Sears and JCPenney Brands Arenít Trusted, Brand Reports Reveal - (WMT, SHLD, JCP)

Sunday March 30, 2014

Either Sephora, In-N-Out Burger and Publix are the most trusted U.S. retail brands or else Amazon, Apple, and FedEx are, depending on which 2014 Most Trusted Brand list you consult and believe. Whether you find the brand ranking report released by Entrepreneur Magazine this week or the brand consumer research results published by Sagefrog Marketing Group last month to be the most trustworthy source for judging the trustiworthiness of brands, it's the largest U.S. retail chains like Wal-Mart (WMT), Sears (SHLD), and JCPenney (JCP) that were absent from both lists that tell the tale about retail brand trustworthiness in 2014.

Comparing the 2014 Most Trusted Retail Brands list from Entrepreneur Magazine with the Sagefrog Most Trusted Brands List, it seems as if the two organizations were measuring different retail industries. There are few U.S. retailing companies that made it to both lists, and those that did are ranked quite differently between the two lists. Is Starbucks the #7 or the #32 most trusted retail brand? Is Whole Foods in the Top Ten of Trustworthiness or not? Does Target rank #15 or #28 in relative trustworthiness and considering its credit card security breach fiasco, how is it that the Target brand managed to be associated with "trust" at all?

That's an especially good question when looking at the list of the largest U.S. retail chains that didn't find their way onto either Trusted Retail Brands list at all. Sears, JCPenney, Best Buy, RadioShack, Sbarro, Aeropostale, Walgreens are not high on anybody's trustworthy list. And perhaps it's a coincidence that these are the same chains that have a prominent presence on the 2014 Store Closings and Retail Job Cuts list, but perhaps it isn't a coincidence at all.

The makers of both Most Trusted Brand lists would take the "no coincidence" position, since "trust" is considered to be a key indicator for brand loyalty, and loyalty is something that tends to keep retail chains off store closing and layoff lists. But considering the disparity between the Entrepreneur and Sagefrog lists, can any study that purports to measure the trust of a brand really be trusted?

How much you believe that brand attributes can be reliably measured depends on how much stock you put into the concept of something as intangible as a "brand" to begin with. When the CoreBrand consultancy publishes its annual rankings for the Most Powerful Brands, it attempts to quantify and compare "familiarity" and "favorability" for both company and product brands from all U.S. industries. Again, depending on how "real" you consider branding to be, this might seem like another attempt to measure the unmeasurable.

Seemingly the most credible brand research each year can be found on the Most Valuable Retail Brands list, which is derived from the BRANDZ Top 100 Global Brands list created by MillwardBrown Optimor. This research agency actually dares to assign a dollar value to the most well-known brands that it judges to also be the most valuable brands. That seems definitive. But the complicated formula used to calculate the brand value numbers requires quantifying things like branded intangible earnings, customer loyalty, and brand equity. Again, it all seems quite elusive and subjective.

So why do we bother to pay attention or talk about brand comparison lists at all? Well, there is such a thing as the value of a brand, which is either an asset or a liability to products and companies, depending on whether the perception of the brand is positive or negative in any given moment in time. Retail companies probably don't need to worry so much about where they fall on any particular brand ranking list, but it should be a cause for concern when some of the oldest U.S. retail chains are not considered to be worthy of inclusion on a "best" list of retail brands.

Besides top executives like Mike Jeffries who overvalue their brand and lose sight of retail reality, most retail leaders are well aware that your brand is only as good as your last customer transaction. By the time a retail brand falls off a best practices recognition list altogether, it's safe to assume that there has already been a critical mass of "last customer transactions" that have been less than wonderful.

It's not that the Sears, JCPenney, Best Buy, RadioShack, Sbarro, Aeropostale, and Walgreens brands are in trouble. It's that the relationships between Sears, JCPenney, Best Buy, RadioShack, Sbarro, Aeropostale, and Walgreens and their customers are in trouble. The absence of these retailers on the latest brand ranking lists is both a result and a reflection of that trouble. Uncovering that trouble is why brand research is worth paying attention to. And improving things for the customers whose brand opinions are being measured is one of the big reasons why brand research can be considered to be valuable, no matter how unmeasurable their measurements may be.

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U.S. No Longer Leads the World in Consumer Demand - Largest Global Retailers Finding New Fertile Retail Markets in Africa (WMT)

Saturday March 29, 2014

A report released earlier this month reveals that the country with the most voracious appetite for consuming and acquiring stuff is not the United States of America. The rest of the developed, consuming, capitalistic world may find it shocking to hear and difficult to believe that the U.S. is not that the place where consumer demand is strongest or where 60-90% of the consuming population expressed a strong desire to "buy more things."   But reportedly it's true and that's why the largest global retail chains are focusing new attention and finding new fertile retail markets in Africa.

As I type this, I am fairly certain that somewhere on one of my 1,483 TV channels there is an advertising appeal from Feed the Children or some similar charity telling me that poverty, disease, famine and dirty water are killing millions of children each year and that for just $1.00 a day I can save the life of a child on the same continent where The Boston Consulting Group report tells me that consumers can't get enough brand label clothing, footwear and accessories. It's a bit of a mental disconnect.

This is not to say that both scenarios can't be true on a continent with a land mass that's the same size as the U.S., China, India, and most of Europe put together. It's just that the disparity between the parts of Africa where mothers are concerned about the status represented by their baby's attire and the parts of Africa where mothers are concerned about whether their baby will live to be a toddler is hard to grok.

There's got to be at least a small concern among the largest global retail chains that making and taking profits on a continent that is the home to the ten poorest countries in the world could have a negative effect on brand value. It would probably be a good idea for international retail chains that are already expanding their African retail operations like Wal-Mart, Zara, Topshop, Forever 21 and H&M to include highly visible charitable and community support projects in their African retail expansion plans.

The voracious consuming appetite of African consumers is making it an attractive destination for these global retail chains, and in turn the growing presence of the largest retail chains in the world is quickly changing African consuming trends. For example, in the past, South Africa was considered to be at least two years behind the rest of the world in fashion trends. While that might have made it a good dumping ground for the unsold inventory worldwide, these days global retailers are increasingly replicating trends from abroad, and updating the taste and demand of Africa's fashion consumers.

Seemingly it wouldn't be too difficult for international retailers to influence consumers in a relatively unsophisticated African retail market where using crates to display merchandise is not an artistic choice, and where some of the largest Africa-based chains like Mr. Price cater to preteens shopping for miniskirts and sensible professionals looking for business attire all under one roof. This is the kind of fashion competition that motivated Woolworth's to open both a Witchery fashion store and a Mimco accessory store in South Africa this month, and why it has plans to open more than 40 of these stores in Africa in the near future.

But as is true with opening shop in any foreign market, it doesn't always work for retailers to be too different too fast. The Wal-Mart (WMT) owned Massmart chain was forced to succumb to pressure from African shoppers who were unhappy with their higher than average prices, and has since lowered the cost of some goods. As it moves forward, the Wal-Mart parent company is straying away from its typical hypermarket format and is currently piloting a series of smaller Massmart stores in areas like Nigeria. If all goes as planned, 89 of these new smaller format Massmart stores will be opened up throughout Africa.

On a continent as big as Africa, it's important for international retailers to know the best place to land. According to the first A.T. Kearney African Retail Development Index (ARDI) for Market Opportunity report released this month, there are four things that both domestic and international retail chains need to consider when choosing the best African country for retail presence and expansion. Those four key considerations are fairly fundamental - market size, market saturation, country risk, and long-term opportunity.

Based on those four criteria, the ARDI research concludes that the best opportunities for retailers on the continent of Africa can be found in these twenty countries:

1 Rwanda
2 Nigeria
3 Nambia
4 Tanzania
5 Gabon
6 Ghana
7 South Africa
8 Botswana
9 Mozambique
10 Ethiopia
11 Benin
12 Angola
13 Zambia
14 Senegal
15 Congo
16 Sierra Leone
17 Uganda
18 Cameroon
19 Gambia
20 Kenya

In general, country risk and long-term opportunity are still big, volatile unknowns in most African countries. But even beyond that, one of the biggest barriers to international retailing in Africa is the business conditions that are neither inviting nor accommodating. For instance, clothing retailers looking to create a presence in the African retail industry face high import duties which can add as much as 45% to the price of their fashion merchandise.

Basic infrastructure like navigable roadways is sometimes nonexistent, supply chain logistics can be difficult or impossible, and a study released by MasterCard this week revealed that African consumers still don't trust the safety of Internet retailing. But despite all the challenges, the risk will probably be worth the reward for the largest global retail chains that are willing to start establishing a brand image and get a retailing foothold even before African markets are ready.

And even if it doesn't make sense on paper, after struggling to compete in saturated and shrinking consumer markets at home, a huge continent with an ever growing desire for material goods is hard for any retail chain anywhere to resist.

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Dominoís Franchisee Violation of U.S. Employment Law and Dominoís Pizza Corporate Values No Birthday Gift for Dominoís Founder Tom Monaghan (DPZ)

Friday March 28, 2014

Domino's franchisees violated both U.S. employment law and Domino's Pizza corporate values, according to a lawsuit settlement that was announced by the New York State Attorney General today. Domino's Pizza franchise employees were cheated out of nearly $500,000 in wages and job-related reimbursements in 23 New York stores when they were denied minimum wages, overtime, and delivery expenses, according to the settlement. So far there's no official comment from Domino's corporate offices, and no reaction from Domino's founder, Tom Monaghan, who celebrated his 77th birthday this week.

Even though Monaghan officially ended his relationship with the worldwide pizza empire he founded ten years ago when he sold the last of his Domino's Pizza (DPZ) stock, remnants of Monaghan's highly principled leadership remains with the company. It can hardly be a happy birthday present to Monaghan to know that any franchisee representing the Domino's Pizza brand would ignore the Domino's Guiding Principles which include "Team members are treated fairly," and "Team members are recognized and rewarded based on ability and merit for their contributions."

As the second largest pizza chain in the world, the actions of the Domino's franchisees in 70 different countries aren't completely under the control of the Domino's Pizza parent company, as Domino's officials have reminded the media when asked for a comment about the New York State settlement. But consumers tend to associate anything that happens with a brand name back to the parent company, so when they see a Domino's Pizza logo attached to an avalanche of news stories about unfair wage practices, it's just not good for the Domino's Pizza brand value or the Domino's Pizza brand image.

Before this negative brand blow, Domino's had been creating a considerable amount of positive momentum. Domino's reported that its international same store sales had grown 7% for the fourth quarter of 2013, which was the 80th quarter in a row that the company has produced positive increases in international sales. That's 20 years worth of unrelenting positive international sales growth, an enviable record that any of the largest U.S. retail companies would like to be able to report.

Domino's future plans for international expansion include an additional 2,800 stores, with half of those being focused in the top four pizza markets - United Kingdom, India, Mexico and Australia - where Domino's currently has approximately 500 stores already. Surprisingly, although pizza growth throughout the world is fueled primarily by U.S. based pizza restaurant chains, North America is not at the top of the Global Pizza Market Share list for 2013. That honor belongs to Western Europe, where $51.9 billion worth of restaurant pizza was consumed, compared to $44.2 billion in North America.

According to estimates by PMQ Pizza Magazine, of that $44.2 billion in North American pizza sales, $37.4 billion was spent in the United States. Among the largest U.S. pizza chains, Pizza Hut finished first, with 15.33% of total pizza restaurant sales, and Domino's was a somewhat close second, with 9.37% market share. The Papa John's and Little Caesar's chains are third and fourth largest, with 6.53% and 4.5%, respectively.

Globally, pizza restaurant sales in 2013 topped $131 billion, and is expected to continue growing in 2014. To continue its success both abroad and at home in an increasingly crowded and competitive restaurant industry niche, Domino's is aggressively improving both the digital and in-store experience of its customers both in the U.S. and abroad.

Approximately 90% of all of Domino's business is transacted via the internet or over the phone, according to a report by the Motley Fool. More importantly, in a Bloomberg interview, Domino's CEO Patrick Doyle revealed that "customer satisfaction when they order digitally is far higher" than when they order with a phone call.

Those are two key statistics behind the recent marketing campaign for the Domino's Pizza chain, which actually features how bad the telephone ordering experience at a busy Domino's location can be. Domino's has generated quite a lot of positive success in the recent past by shining a bright spotlight on its own faults, and using that as a springboard to introduce new products and services designed to address those faults. It's a seemingly transparent, genuine, and fresh advertising approach that appeals to U.S. consumers who are growing increasingly immune to traditional marketing hype and spin.

Overhauling its in-store experience is another visible change that Domino's wants its customers to see. Built as a delivery-based restaurant system, it's safe to say that there are some long-time loyal Domino's customers who have never stepped foot inside of a physical Domino's restaurant location. But the day that a special price for carry-out pizza was promoted throughout the Domino's system is the day that all changed. By actively inviting its customers inside its stores, Domino's was forced to take a good hard look at what customers were seeing once they walked through the door. I've been inside Domino's stores across the U.S. and let's just say the average Domino's in-store experience that I've observed isn't exactly brand-enhancing.

That's why flatscreen televisions, dining room seating, open kitchens, grab-and-go prepared menu items, and visually appealing interiors are part of the new Domoino's "pizza theater" concept stores, which are being built and renovated both in the U.S. and throughout the world. Looking to expand its Malaysian market, Domino's Pizza plans to open 25 new pizza theater style stores in the region which will also include free Wi-Fi and Domino's FM Radio.

Regardless of its global expansion orientation, Domino's also knows how valuable winning in the U.S. market will continue to be to the continued success of the company. Americans eat about 350 slices of pizza per second, which works out to be an average of 100 acres of pizza per day, according to estimates by FranchiseHelp.com. That's a big pizza pie, but the number of U.S. pizza restaurant chains that are challenging Domino's for their piece of that pizza pie continues to grow.

The Blaze Pizza chain was started last year by the founders of Wetzel's Pretzels. The Live Basil Pizza chain was launched by the founders of the wildly successful Smashburger chain. These are not restaurant leaders who play small, and it's doubtful that they had small intentions before launching new chains in the highly competitive pizza niche. The bankruptcy filing of Sbarro earlier this month is a preview of how brutal the pizza competition is likely to become in the U.S.

Which brings us full circle to where this article began. In a niche with so many strong players fighting to gain or keep their share of the pizza pie, pricing is always a sensitive competitive component. Along with pricing pressures comes the pressure to decrease overhead in order to stay profitable. The need to keep labor costs low while keeping service levels high leads some restaurant leaders to make bad decisions which land them in court and end up costing them much more in lost reputation than any balance sheet could measure.

Similar to the seeming endless string of Wal-Mart employee class action lawsuits, there is a point at which competing with price will become an unsustainable business model for Domino's franchisees and all retail pizza restaurant operators. Competitive pricing can only go so low and after that, the largest and most aggressive pizza chains are going to need to establish a competitive advantage that is based on unique product offerings and a superior customer experience, not on price.

Seemingly that's what the Domino's parent company is attempting to do. And seemingly, that's what the Long Island Domino's franchisees who found themselves on the losing side of an employee lawsuit didn't understand. Undoubtedly, today's settlements helped make a true and sustainable competitive strategy a little more clear to those franchisees and also to other unit owners in the largest U.S. franchise systems as well. If you have to break employment laws in order to make a retail business work, then there's something broken that cutting overhead costs will never fix.

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How Advance Auto Parts Is Building a Successful Future Based on Founder Arthur Taubman's Vision in the Past - Retail Leadership Inspiration (AAP)

Sunday March 16, 2014

Twenty years ago, the U.S. retail industry lost an important leader and the world lost a significant humanitarian when Arthur Taubman passed away at his home in Boca Raton at the age of 92. Taubman is not as well-known as legendary retail leaders like Ray Kroc, Sam Walton, and James Cash Penney, but that doesn't mean he is any less significant. As founder of the retail chain that is now the publicly traded Advance Auto Parts (AAP) company, Taubman had an original vision for the retail auto parts niche that has thrived longer than any other auto parts retail chain in the U.S.

Beyond his positive contribution to automobile-owning consumers, Taubman deserves recognition for an accomplishment that is unrelated to retailing, but significant for leaders in every industry. During World War II, Taubman assisted approximately 500 Jews to escape from Europe and immigrate to the U.S. Reportedly Taubman filed paperwork claiming that each of the immigrants was one of his relatives. When questioned about this by immigration officials, reportedly he told them that any Jew facing death in a Nazi-occupied country was his "first cousin."

It's not surprising, then that the character of the founder has lived on in the character of the company, which is still operating with the mission, vision, and values that Taubman established. That is, to inspire employees, to serve customers, and to grow the business with both profitability and integrity. Leaders who intend to leave a lasting legacy in any industry would do well to consider the difference between growing a business, and growing a business with both profitability and integrity.

So, on the anniversary of his passing, how would Arthur Taubman feel about the company that he founded and its prospects for the future?

By all recent financial reports, Taubman would be pleased about the present and the future of Advance Auto Parts. With the completion of its acquisition of General Parts International in January, Advance Auto Parts became the largest automotive after market parts provider in North America in terms of annual sales. That's a big jump for AAP since it was ranked #409 on the 2013 Fortune 500 and its biggest competitor, AutoZone, was ranked #306.

Since the acquisition of General Parts International, "do-it-for-me" services have become an important revenue producing strategy for Advance Auto Parts. Its on-site auto repair services are now generating more than half of the company's total sales. This new direction seems to be working for Advance Auto Parts since its most recent earning report beat consensus estimates for the fifth time in a row, and its year-over-year share return has increased by about 60% since 2013.

But numbers alone aren't a sufficient measure of success for any of the largest U.S. retail chains, and they certainly wouldn't have been enough for a leader with great character like Taubman proved himself to be. Inspiring employees was and still is a foundational value for Advance Auto Parts, and I think it's safe to assume that Taubman would be disappointed with how uninspired his employee team seems to be.

According to public reviews on Glassdoor.com, the average employee rating of their jobs at Advanced Auto Parts is just 2.9 out of a possible 5.0. Granted, employee satisfaction in the retail auto parts niche seems to be generally low. AutoZone employees give their jobs a slightly lower rating of 2.7 and O'Reilly Auto Parts employees give their jobs a slightly higher rating of 3.1. So, for the niche, working at Advanced Auto Parts is not that much worse, and not that much better than any of its major competitors.

I don't think Taubman would be content with that, but I think what would be even more disturbing to him is the approval ratings of the current CEO, Darren Jackson. According to Glassdoor, only 47% of employees approve of their leader, and that approval rating is the lowest of the three major auto parts chains. AutoZone's CEO has a 52% approval rating, and 66% of O'Reilly's employees approve of their CEO. Taubman seemed to understand that a retail chain with unhappy employees who don't have a high opinion of their leader is a company missing a vital piece of its success formula.

But for the customer service part of the Advance Auto Parts mission, I think Taubman would be mostly pleased. Taubman was dedicated to servicing customers better than the competition, and it's obvious that the chain is working hard to do that today. In-store services at Advance Auto Parts brick-and-mortar stores include:

  • Free testing of your electrical system including battery, starter and alternator
  • Free windshield wiper installation with the purchase of new blades
  • Free ASE Certified experts for DIY consultation
  • Free loaner tools to help customers complete their DIY projects
  • Free installation with the purchase of a battery
  • Free oil and battery recycling whether you purchase your oil or battery at an Advance Auto Parts store or not. (According to the Advance Auto Parts website, that resulted in the recycling of 5.6 million gallons of oil, and 109,000 tons of lead acid batteries in 2013.)

Obviously focus has been given to creating a helpful and satisfying in-store experience for Advance Auto Parts customers, and that customer experience focus also extends to to AAP's multi-channel integration as well. With an exceptinal ship-to-store option, customers can buy merchandise on AdvanceAutoParts.com and pick up their purchase from an AAP retail store of their choice within 30 minutes. Advance Auto Parts also has a clever customer referral program on its website that retailers in every niche should seriously consider copying.

The Advance Auto Parts mobile app was also designed with customer needs in mind. It includes a store locator, DIY videos, how-to Instructions for common auto maintenance tasks, and in-store coupons. Where the AAP mobile strategy falls short is with its Apple app, which doesn't seem to exist. There are still a surprising number of retail companies with no Apple apps, but that's hardly a club that I think Taubman would be proud to belong to.

Taubman would probably be quite happy with how his company is servicing its customers in social media, however. The Advance Auto Parts Facebook page has 1.24 million likes (compared to AutoZone's 813,000 likes and just 381,000 for O'Reilly Auto Parts). And it's not just its presence on Facebook, Google+, Twitter, YouTube, Pinterest, Instagram and its DIY Garage blog that is of great service to its social media oriented customers, it's the fact that the Advance Auto Parts social media strategy includes a unique purpose for each social media channel so that there is a clear benefit to the customers who like, tweet, pin and connect with them.

According to the annual Interbrand Most Valuable Brand list, the AutoZone brand is far more valuable than the Advance Auto Parts brand. But I don' t think that would bother founder Taubman as much as the annual Temkin Best Customer Experience ranking list where AutoZone was most recently ranked #29, compared to the #72 ranking for Advance Auto Parts.

Today's financial performance is just a small indicator of tomorrow's success, and Taubman seemed to be keenly aware of that. When taking a holistic view, which is the kind of view that Taubman seemed to have about everything, Advance Auto Parts today seems to have both strong competitive advantages and weak links that have the potential to start a bad chain reaction and threaten Advance Auto Part's success in the future.

But there doesn't seem to be anything going on at Advance Auto Parts that's so big or so bad that it's not fixable. If the character of today's AAP leaders is anything like the character of AAP's founder, they won't back down from any challenge, and they'll stick with the original vision, which is broader than just selling car parts at a profit.

On this noteworthy day, if Taubman was able to give advice to today's Advance Auto Parts leadership team, I think he would remind them to make choices for the future that have a meaningful purpose and, above all else, to act with integrity. Because at the end of the day or the end of a life, evidence of your values is what you want to leave behind, and meaningful choices are what you want to be remembered for.

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Amazon Prime Class Action Lawsuit Latest Customer Disservice - All Retail Consumers Pay Higher Prices After Frivolous Legal Actions (AMZN)

Friday March 14, 2014

The Amazon Prime customer class action lawsuit that was launched in February started getting a lot of buzz this week when debate about the lawsuit made its way into the mainstream media. The alleged "breach of contract" that Amazon (AMZN) has committed with millions of its Amazon Prime customers seems to be just another frivolous legal action in a long line of frivolous consumer legal actions that are filed daily in the U.S. legal system.

Like all other frivolous lawsuits launched against the largest U.S. retail chains, it seems the Amazon Prime class action will do a disservice to all Amazon consumers who will end up paying a higher price for products and services in the future because of consumers and lawyers chasing quick and dirty out-of-court settlements in the present.

Some other recent examples of the flimsy and frivolous feuds in the court of customer causeless claims involve some of the largest U.S. restaurant chains. One customer is suing Jimmy John's for sproutless sandwiches, and another customer claims to have suffered life-altering trauma in an alleged argument over an extra napkin at McDonald's. And then there is the perennial customer- favorite burnt-by-hot-drink litigation that is being played out this time with hot apple cider and Dunkin' Donuts.

CONSUMER ALERT: Hot drinks are hot. Transporting them in a moving vehicle increases the likelihood that they will spill. If the risk is too great or the responsibility too overwhelming, please opt for water - no ice.

The Amazon Prime lawsuit seems like just one more lawsuit where consumers are suing a company because they're mad at themselves for being stupid. In fact, that's the common theme with the seemingly endless stream of frivolous consumer lawsuits flooding the U.S. legal system. "Who can I try to blame so that I don't have to take responsibility for my own cluelessness?"

The apparent consumer cluelessness in the Amazon Prime case seems to be directly related to a fundamental lack of understanding about the definition of retailing. The litigants in the case feel they have been wronged because allegedly the costs of the Amazon Prime marketing program are being recouped by Amazon and its vendors through higher product prices and fees. Seriously. Senseless. Suit.

So, apparently there is a need for some clarification about how retailing works. A product is produced at a cost. Retailers distribute products from the products' producer to the end consumer at a cost. Retailers add all the production and distribution costs together, and then add a little something on the top for themselves, which is commonly referred to as a profit margin.

Cost + Profit Margin = Retail Price

It's an oversimplified explanation and formula, of course, but apparently there are some consumers and lawyers who need a refresher in retailing basics.

So, of course any product or service that is presented as "free" in retailing is being paid for by someone. And, of course, that someone is the consumer. Now or later, in some way at some time, consumers always pay every bit of the costs for producing and distributing a product along with a retail profit margin. Now or later, consumers pay.

That is the nature of the consumer-retail relationship. If retail customers don't like that, they can either manufacture their own material goods, or knock on the doors of Chinese and Bangladesh factories to negotiate a one-off factory-direct price every time they want to purchase a large-screen TV, a smartphone accessory, or a fast fashion t-shirt. The third option, of course, is to stop consuming altogether. That would probably also mean growing your own food because you know the world's largest supermarket chains are retailers too. That means that the cost of grocery store coupons, promos, and "freebies" are recouped with product pricing strategies as well. It's just how the retail game works.

But let's talk specifically about the Amazon Prime system and the seemingly misguided customers who believe they have been cheated by the "free" shipping offer. Both the consumers and the legal team in the Amazon Prime class action suit seem to be confused about what Amazon Prime does and doesn't offer.

Unless I am misreading the Amazon Prime Terms & Conditions, there is no promise of "free shipping" of every product to every Amazon Prime member with every purchase. There is a promise of an upgrade to two-day shipping at no additional charge for "eligible products." Those eligible products may or may not be shipped for free. In other words, what Amazon Prime members get in exchange for their membership fee is speedier shipping, not a blanket offer of "free shipping."

The claim by the Amazon Class Action lawsuit is that the price of at least some of the the "eligible products" are being raised to make up for the revenue lost in the Amazon Prime free two-day shipping upgrade. Yes, of course they are. That's how retailing works. The only thing that makes this lawsuit actionable is if Prime Members are being charged a higher price while non-prime members are being charged a lower price. That would be a scenario that would be problematic for Amazon to defend.

Maybe I am the clueless one, but charging Prime members a different price that non-Prime members would be difficult or impossible for Amazon since it's not a requirement to sign in to Amazon or even have an Amazon account in order to shop, check prices, and put merchandise into the Amazon shopping cart.

I suppose in the name of "customization," Amazon could use cookies or some other cyber spy technology to identify me as a Prime or non-Prime customer even before I login. But my own unscientific research didn't yield any evidence that dual pricing is occurring with Amazon Prime and non-Amazon Prime members, however.

I just happened to have purchased and received a product from Amazon.com this week which was offered with "free shipping." I am not an Amazon Prime member and wasn't signed into my Amazon.com account while shopping, so I can only assume that the "free shipping" was being offered to anyone who landed on that product sales page that day.

I just did a search for the same product on the computer of an Amazon prime member. In this particular case the pricing in my non-Prime product and the pricing of the product for the Prime member was exactly the same. This is not to imply that I tested all 77 skillion products sold on Amazon.com for pricing discrepancies. That'll be the frivolous job of the crack legal team who filed this meritorious legal action. We'll all be interested to see if their millions of Prime vs. non-Prime product comparisons yield any results.

(By the way, the non-prime price of my product was less than the manufacturer's website, which also charged shipping. So, in my case, Amazon won the price game and got the sale fair and square.)

In the absence of any evidence that Prime prices are different than non-Prime prices, Amazon's defense to this class action suit can be summed up in one word. "Retailing." Fulfillment By Amazon (FBA) vendors raise their retail price to offset Amazon fees? Amazon offsets their Prime Member shipping charges by collecting more commissions and fees from FBA vendors? It would be shocking if they didn't. Amazon and its sellers aren't running a Prime charity service.

Consumers always have and always will pay the costs for any marketing promotion because marketing is a cost of doing business. The words that best describe retail companies that aren't able to recoup their marketing costs are Circuit City, Borders, and Sears.

So, in the absence of any more evidence to the contrary, it seems that the instigators of this Amazon Prime legal action, like so many consumer legal actions, don't really want justice or their day in court. Rather they seemingly just want their out-of-court settlement deposited into their bank account.

To bring this discussion full circle, I think it would be good to point out that one of the biggest costs associated with retailing that is factored into the price of retail products these days is... wait for it... we all know the answer... Legal fees! The costs associated with defending or settling consumer lawsuits eventually hits the balance sheet and gets passed right back to consumers in the price of the products and services they purchase.

No matter what the outcome of this Amazon Prime class action suit - along with the outcome of the Jimmy John's Sprout Scandal, the McDonald's Napkin Nightmare, and the Dunkin' Donuts Cider Spill - future customers will pay for it. Whether you participate in it or not, whether you agree with it or not, whether you profit from it or not, in the future you will be paying more at Amazon, Jimmy John's, McDonald's and Dunkin' Donuts because of the consumers who are intent on launching their own something-for-nothing self-promotion projects in civil court.

If you want to focus on what's unfair about U.S. retailing, get mad at that.

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New High-Tech Retail Gimmicks and Low-Tech Retail Innovations Equally Significant for US, UK, Canada, Germany, and China Flagship Stores

Friday February 28, 2014

Technology was the common thread that connected the opening of new sporting goods, home interior, and designer fashion flagship stores in the U.S., UK, Germany, Canada, and China in February. Bur surprisingly the low-tech, low-cost innovations of the newest global flagship stores are equally significant to the future of retailing as the high-priced, high-tech gadgets and gimmicks that are considered to be on the cutting edge of retail technology.

If you're not sure which high-priced, high-tech gadgets are considered to be on the cutting edge of retail technology these days, you can step into the new Sport Chek Flagship store in Canada's Edmonton Mall to see just about all of them. In one 77,000 square foot store you will see 800 screens with 200 channels, 250 computers, 80 tablets, 1,200 square feet of digital projection, interactive touch screens, RFID technology, and simulators. And no, this is not a consumer electronics retailer.

The Sport Chek flagship store is where sports and technology were merged in an effort to transform a space that retails the same kind of sports shoes, clothes, and equipment as any sporting goods store in the U.S. The goal was to create a new kind of retail space where consumers can "experience sports," in a way that is exciting and motivational, according to the president of Canadian Tire Corporation, which owns the Sport Check retail brand.

While the screens and projections create the wow, it's the golf simulator, the running gait analyzer, the ski and snowboard-tuning machine, the jersey customizing kiosk, the virtual reality trainer for trying out bikes, and the vertical treadmill for trying out climbing gear that really connects customers with sports in an engaging and meaningful way. The gimmicky gadgets will undoubtedly bring people through the doors. But as with every brick-and-mortar store, there's still some good, solid retailing that's still going to be needed in order to transform interest into sales after that.

The convergence of sports and technology can also be experienced at the Nike Flagship store in Berlin which features the Nike+ econsystem, Nike+ running analysis, and the Nike+ FuelBand SE. Technology is also an important part of the new Karl Lagerfeld flagship store in the UK, which uses iPad minis on the display racks to provide customers with the ability to browse the entire Karl Lagerfeld collection online.

Even 200 year-old UK retailer Debenhams is embracing technology in its Oxford Street flagship store, as evidenced by the $42 million makeover which included lots of high-tech enhancements there. Does it take video walls, 65" displays, and ever-changing digital content to sell clothes, kitchenware, and perfume at the world's largest department stores these days?

With the predictions about the "death of the department store" buzzing around the retail industry, it might not take high-tech gimmicks to keep department stores relevant, but it probably doesn't hurt either. Kudos to Debenhams for its willingness to transcend its history and move into 21st century of retailing. The wow factor of its flagship techno displays may not be unique enough for long enough, but it's the willingness to keep trying that is likely to give Debenhems another century or two of retailing.

There's no denying that technological flash has captured attention and headlines with the new flagship store openings around the world in February. But it's not just the big chains with the big flash and the big technology that are positioned to create the big flagship store results.

The Charles Phillip shoe boutique chose to showcase the opposite of high-tech flash in its new flagship store that opened in Shanghai, China this month. Instead of being assaulted by larger-than-life digital images of high fashion footwear in famous runway shows, shoppers at the Charles Phillip Shanghai flagship will be able to watch their customized shoes being handcrafted by cobblers inside the glass walls of their fully functional workshop. It's not just bespoke products, it's also a bespoke experience that Charles Phillip is working to create for its upscale Shanghai customers.

The global retail industry will have another example of a simple, low-tech experiential strategy when the fifth Pirch retail showroom opens as an Oakbrook, Illinois flagship store early next month. Shoppers who are looking at Pirch cooktops will be able to actually cook on them. Shoppers looking at Pirch ovens will actually be able to bake in them. Refrigerators will be refrigerating, grills will be grilling.

Even the showers, sinks, and bathtubs at the new Pirch flagship will be fully functional and demo-ready for shoppers who think it only makes good sense to try before you buy the appliances and fixtures for the most expensive rooms in youe home. There's no amount of video or techno flash that could take the place of fully functional appliances and fixtures. It's such an obviously logical experiential retail offering, it makes you wonder how any brick-and-mortar home store anywhere dares to try to sell its major kitchen or bathroom wares in any other way.

The 3D Virtual Reality Cat Walk Show at the Topshop flagship in the UK definitely created a memorable retail experience for its shoppers. But the styling experts at the Warehouse flagship not too far away will be working to do the same. The important thing for the flagships of the future will be to not just choose the strategies that are the most entertaining to shoppers, and to not overlook the strategies that will actually engage shoppers in the buying process. That buying part is, after all, kind of the point.

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