2012 100TOP
DRIVECUSTOMERENGAGEMENTAND BUILDLOYALTYToday consumers and businesses rely on smartphones, tabletsand other Wi-Fi enabled ...
WELCOME	                            to the 2012 edition of                   Marcus, Nordstrom all inthe Retail Customer E...
1    AMAZONFor those who remember Amazon as areally cool online bookstore, the viewfrom 2012 shows just how far the re-tai...
pia Snowe called the incentive “an at-     Amazon’s third-quarter profits for 2011     million to “technology and content,...
3     DISCOUNTINGDiscounting dates back to the days ofopen-air bazaars, but the proliferationof e-commerce and smartphones...
Retail sales are expected to grow about10 percent in 2012, a slightly optimisticuptick from the 8 percent expected in2011....
rounds of this fight. M-commerce 6     M-COMMERCE                                                                     may ...
trend toward shoppers using brick-and-mortar locations as showroomsrequires retailers to stock the opti-mal localized asso...
that, over time, iTunes has morphed 9     iTUNES                                                                          ...
Prosper Mobile Insights has found           venient and useful,” while 42 percent          facing QR code acceptance has b...
REED HASTINGSOn the night of Sunday, Sept. 18, 2011, Netflix co-        tumble that erased approximately $12 billion from ...
13      RETAIL CRMThe future of retail CRM — both its potential and pitfalls — is writlarge on the walls of Facebook. Amas...
16      IN-STORE WEB ACCESSIn an effort to draw customers into stores as the primary means of merchandisedistribution, som...
19      TRADER JOE’S                                                               Privately owned Trader Joe’s has been o...
22       COSTCO                              23       NEIMAN MARCUSCostco’s 596 stores provide a great indi-    Like many ...
25      TIFFANY                              26       STARBUCKSAccording to data compiled by Bloom-         Starbucks mark...
RON JOHNSONThe retail world is watching CEO Ron Johnson close-         Vuitton-owned Sephora and Martha Stewart Living,ly ...
28      DISNEY                              29       DIGITAL SIGNAGEFollowing record sales and profit, theWalt Disney Comp...
31      INTERACTIVE STOREFRONT WINDOWSSaks Fifth Ave. and Starbucks were          content, tweets from around the Web     ...
33       GROUPON/LIVINGSOCIAL/ETC.The exploding daily deal industry pioneered by Groupon has spawned,by some estimates, mo...
36      BERGDORF GOODMANOnline merchants are forcing even the highest-end stores to offer up bar-gains to their well-heele...
39        POP-UP SHOPSAlthough pop-ups have moved up in the world, for some the termstill has downmarket connotations. The...
BRIAN DUNNRecent headlines tell a dismal story: “Best Buy’s           zon.com with Best Buy Marketplace, a new serviceDunn...
42       TARGETAfter spending two years preparing to                                                  accounted for more t...
45       AMERICAN GIRL                                                                     Mattel’s American Girl line of ...
48        PUBLIX                             49       DICK’S SPORTING GOODSPublix Super Markets has offered ex-         Di...
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail
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2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail

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2012 Top100 : Retailers, Issues & Trends that are making an impact in Retail

  1. 1. 2012 100TOP
  2. 2. DRIVECUSTOMERENGAGEMENTAND BUILDLOYALTYToday consumers and businesses rely on smartphones, tabletsand other Wi-Fi enabled devices for a wide array of personal andcommercial applications. Now Motorola’s Proximity Awareness& Analytics Solution makes it possible to use these devices toimprove consumer engagement and improve associate productivityin WLAN environments. Use your Wi-Fi infrastructure to captureshopper attention with personalized promotions and in-storecoupons. Enable applications that help drive employee productivityand service delivery. Get the data you need to turn browsing intobuying – and prospects into profits.Learn more at:motorolasolutions.com/shopperengagementMOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLCand are used under license. All other trademarks are the property of their respective owners. © 2012 Motorola Solutions, Inc. All rights reserved.
  3. 3. WELCOME to the 2012 edition of Marcus, Nordstrom all inthe Retail Customer Experience Top 100, sponsored the top 30? And multichan-by Motorola! nel and m-commerce initia- tives, which have been talkedOnce again, our team of retail experts sat down to about for years, are actuallyidentify the hundreds of trends, technologies, brands, starting to happen in mean-strategies and people that are having an impact on re- ingful numbers.tail. They then assigned them numerical votes basedon their influence and impact on customer experi- There has been a lot of fearence, and the resulting rankings are collected in the and uncertainty in retail these past few years, anddocument you’re now reading. more than enough “sky is falling” blog posts about how everything is changed and nothing will ever beThis year’s Top 100 highlights how very different retail the same, retail is dead, the kids these days only buyis today from just a few years ago. Look at the top two things online, yadda yadda yadda. Those kinds of arti-on the list — Amazon has turned bricks-and-mortar cles certainly get a lot of page views – which of courseretail on its ear to the same extent that Apple gutted is the point – but they don’t really add anything mean-the retail music industry. Social media remains a huge ingful to the conversation. We present this Top 100influence, even as it remains a moving target that re- in the hope that it starts any number of meaningfultailers are trying desperately to figure out. Last year’s conversations with your team.No. 1 — the economy — is still in the top five, and stillcasts a shadow over everyone and everything beneath it. James Bickers Senior EditorBut there is a new air of optimism in retail, and we Retail Customer Experiencecan see hints of that in the list as well. Tiffany, Neiman Joseph Grove, executive editor Tom Harper, publisher josephg@networldmediagroup.com tomh@networldmediagroup.com James Bickers, senior editor Kathy Doyle, senior vice president sales jamesb@networldmediagroup.com and marketing kathyd@networldmediagroup.com David Henry, contributor Scott Slucher, account executive Jan Shrode, designer scotts@networldmediagroup.comTop 100 2012 ©2012 Networld Media Group. 13100 Eastpoint Park Blvd., Louisville, KY 40223. (502) 241-7545. All rights reserved. No part of thispublication may be reproduced without the express written approval of the publisher. Viewpoints of the columnists and editors are their own anddo not necessarily represent the viewpoints of the publisher. 3
  4. 4. 1 AMAZONFor those who remember Amazon as areally cool online bookstore, the viewfrom 2012 shows just how far the re-tailer — and the world — has come.What once seemed a promising fad isnow an accepted way of life. Amazon’srevenues more than doubled in thepast four years, from $14 million in2007 to $34 million in 2010, and showlittle sign of slowing down.In the past year, Amazon introducedno fewer than four potentially game-changing products: Amazon Cloud,AmazonLocal, Kindle Fire and thePrice Check smartphone app. Investment Research analysts Brian Amazon rolled out its new line of Kin-Amazon Web Services set the pace for Pitz and Brian Fitzgerald predict it dle readers, and the Kindle Fire tabletthe year in March with an aggressive could capture as much as $2.5 billion in September. The latter was pointedlyrollout of cloud products that included by 2014. positioned as a direct rebuke to theElastic Beanstalk, CloudFormation, iPad 2 and its hefty price tag, as if toAmazon Cloud Player and Amazon In June, AmazonLocal launched, and the suggest that Steve Jobs’ parting gift wasCloud Drive. Users can store music daily deals service with region-specific essentially a $199 device dressed up inand other digital content in the cloud deals delivered by LivingSocial quickly a sleek design and seductive logo. Theand play cloud-hosted music tracks became the sixth most-visited website 7-inch Fire received near-universal ac-via players for the Web and on An- in the U.S., according to comScore. It claim as a fun and versatile, easy-to-droid. Although AWS represents just a racked up 97.1 million unique U.S.- use tablet that links seamlessly withsliver of Amazon’s total business, UBS based visitors in July alone. Amazon’s impressive collection of digi- tal music, video, magazine, and book services. In December, Amazon once again got under the skin of brick-and-mortar merchants by offering discounts to us- ers who took its Price Check app into stores to comparison shop. The deal was that in-store shoppers could earn a 5-percent discount (up to $5) by scan- ning the barcode of an in-store product and then buying it from Amazon. The howls of protest were hardly confined to abused shopkeepers. Senator Olym- 4
  5. 5. pia Snowe called the incentive “an at- Amazon’s third-quarter profits for 2011 million to “technology and content,”tack on Main Street businesses that were down an alarming 73 percent — up 74 percent. Founder and chief ex-employ workers in our communities,” yet reported revenues went up 44 per- ecutive Jeff Bezos has increasingly usedand called on Amazon to cancel the cent to $10.9 billion, powered in part Amazon’s cash to expand the businessprogram. “Small businesses are fight- by the new generation of Kindle book into the digital domain and invest ining every day to compete with giant re- readers and preorders for Kindle Fire. backend infrastructure to support alltailers, such as Amazon,” she said in a So where did the money go? Amazon the digital media he expects users tostatement, “and incentivizing consum- invested it for the future and appar- consume on their new Kindle Fires.ers to spy on local shops is a bridge ently intends to keep doing so. For one Toward that end, Bezos struck dealstoo far.” Pundits, commentators, late- thing, Amazon invested nearly $1.6 with Twentieth Century Fox and PBSnight comics and principled consumers billion — double what it spent the year to stream movies and TV shows fromwarned of a future in which the entire previous — toward “fixed assets, in- their vast libraries. (This is in additionphysical world would serve as Amazon’s cluding internal use software and web- to deals previously inked with CBS,showroom. site development,” and another $769 Sony, Warner Bros. and others.) 2 APPLEDespite Amazon’s steady march of progress throughout 2011, Apple, true to form,managed to out-dazzle the world’s biggest online retailer every step of the way.The company continued to lure consumers and business users away from desktopcomputers to the more manageable environment of iOS devices such as the iPad,hastening the day when general-purpose computers are the province of softwareengineers and tech enthusiasts.The year began with an effort to broaden the iPhone market beyond a single carrierby terminating Apple’s exclusive partnership with AT&T and announcing that theiPhone 4 would be available through Verizon. January also saw the launch of theMac App Store, Apple’s effort to remake its Mac OS ecosystem in the image of iOS,and thus collect a 30 percent cut of Mac app revenue in the process.In February Apple became the first computer maker to introduce Intel’s Light Peakdata transfer technology under the name Thunderbolt. The iPad 2 came out inMarch even as competitors were struggling to deliver an answer to the original.In October Apple announced a breakthrough set of free cloud services that keepstored data up to date across all devices, including PCs.The company sold 72 million iPhones (nearly double the total for 2010), 32 million iPads, 17 million Macs and 42.6 millioniPods, generating $108 billion in revenue in 2011 — up 66 percent from fiscal 2010.However, Apple’s many marketing, business, and technology achievements through the year were overshadowed by the death ofSteve Jobs on Oct. 5, the day after Apple introduced the iPhone 4S. Under the guidance of corporate America’s most high-profilepracticing Buddhist, Apple made function not merely inseparable from form, but indistinguishable from it. In Jobs’ hands, thetwo truly became one. 5
  6. 6. 3 DISCOUNTINGDiscounting dates back to the days ofopen-air bazaars, but the proliferationof e-commerce and smartphones nowputs the neighborhood boutique in di-rect competition with the biggest dis-counts offered by any vendor anywherein the world. And vice versa.The practice is bleeding profits fromtraditional retailers, with daily dealsand online rivals inflicting most of thedamage. Best Buy, to cite but one high-profile example, saw its shares plungemore than 15 percent after reportinga steeper-than-expected drop in 2011 according to Bob Welch, senior vice discounts — and nothing but discounts.third-quarter profits and margins — president of manufacturer practice Cynthia Jasper, a consumer science pro-the result, Wall Street analysts said, of client solutions at dunnhumbyUSA. fessor at the University of Wisconsin,fierce price competition from Amazon. Meanwhile, he says, “manufacturers warns that pursuing discounts can be- feel that retailers are driving promo- come an addiction. Or as James DionOnly 20 percent of new customers lured of the retail consultant Dionco puts it, tional strategies that do not make sensein by daily deals ever return to make many discount hunters “don’t bother to for the category and are eroding theira full-price purchase, according to a eat what they kill,” citing research find- brand’s equity.”study conducted by Rice University. ings that 30 percent of Groupon dealsDespite this, the vicious cycle is per- While strategic discounting can be an are never redeemed. “That really leadspetuated by retailers who feel the need effective quick-fix for moving volume me to believe that it’s the thrill of theto promote, “but know that increasing in a struggling economy, the fix leaves hunt. For some consumers, it is justdiscounts are eroding category value,” consumers craving ever bigger, deeper scoring the deal.” 4 THE ECONOMY/UNEMPLOYMENT The numbers say the Great Recession ended way back in June 2009. Somebody needs to tell the economy that. Growth isn’t accelerating as it normally would dur- ing a recovery. The U.S. economy in 2012 is expected to grow a scant 2 percent (unchanged from 2011). While 2 percent may keep us from dipping back into re- cession, it won’t make much of a dent in unemployment. It follows, of course, that with more people out of work, fewer people will be buying, and thus the retail sec- tor will decline. Consumer spending, which accounts for about 70 percent of GDP, has been posi- tive but shows no signs of driving a sustainable recovery. The economy will remain vulnerable to possible shocks, such as war, terrorism, oil price hikes, or natural disaster. Any one of these could tip the U.S. into recession. 6
  7. 7. Retail sales are expected to grow about10 percent in 2012, a slightly optimisticuptick from the 8 percent expected in2011. One unpredictable factor thatmight lower 2012 sales is the sovereigndebt crisis in Europe, which could keepmarkets volatile and consumers con-cerned about the future. Still, a reliabledisconnect between consumer confi-dence and actual spending bodes wellfor retailers. Sales began to climb inOctober 2011, due in large part to a 3.7percent jump in electronics sales (thelargest monthly increase in two years)even as confidence fell to its lowest lev- 5 MULTICHANNEL INTEGRATIONel since 2009. It no longer matters, really, whether the customer is always right. The customer is in charge. He decides when, where, and how he will interact with the retail landscapeIf the euro crisis spins out of control, through whatever channel, device, or touchpoint he wants. Such an environmentfear of a new credit crunch may deter has made multichannel, by default, the new standard operating model for retail.spending by business owners. Anotherfactor that could lower next year’s fore- While it can be argued that mobile devices and multichannel commerce have madecast is slower-than-expected growth it easier than ever for retailers to reach customers, they have also made it easier toof personal income, which hasn’t been lose them. Retailers will need to use a combination of channels to attract and con-keeping up with the rise in retail sales. vert consumers going forward, says e-commerce and multichannel consultant KeesIf lower wages and high unemploy- De Vos, “rather than focusing on channel-centric approaches. Companies relyingment persist during the second half of on selling goods and services to their end-customers have to recast their operation-the year, expect retail sales growth to al and technical infrastructures to compete or even survive in the years to come.”slow even further. Best Buy CEO Brian Dunn, for example, is committed to making the chain’s physi-Retailers have the power to drive cal presence “more reflective of all the possibilities that are available to customersgrowth, though. Noting that new eco- today.” That means creating a web of experiences around the customer in all the dif-nomic realities have resulted in a new ferent channels in which he operates. “Customers don’t think, ‘I’m going to behaveorder of buyers who are more price- in a multichannel fashion today,’” he notes. “They say, ‘I’m gonna go online andconscious and careful about the pur- check it out, I’m gonna call and check it out, I’m gonna stop by and visit the store.’”chases they make, Deloitte LLP ViceChairman Alison Paul believes that Early multichannel adopters are now thoroughly vindicated and firmly in the driv-delivering compelling in-store experi- er’s seat. Indeed, multichannel has been so roundly embraced that some, such asences could drive profitable growth for blogger and principal analyst at Forrester Research Brian Walker, argue that mul-retailers in 2012. tichannel is already passé. “Customers no longer interact with companies from a channel perspective,” he says. Customers now interact through touchpoints that in- clude not only channels such as “stores, branches, call centers and websites, but also emerging interactions, including apps, social media, mobile sites, SMS messages and interactive advertising across smartphones, tablets, cars and even appliances.” “It is time for organizations to leave their channel-oriented ways behind,” he says, “and enter the era of agile commerce.” 7
  8. 8. rounds of this fight. M-commerce 6 M-COMMERCE may prove to be the salvation of brickTechnology companies and retailers and mortar after all. Cyriac Roeding,alike have hailed 2011 as the year of founder of the location-based mobilemobile shopping. Consumers are fast shopping app Shopkick, believes mo-approaching the tipping point in their bile commerce provides merchantsembrace of smartphones and tablets to with unprecedented opportunities toaccess apps, discounts, price compari- bring personalization and one-on-oneson information, and payment mecha- personal treatment back to the in-storenisms. According to Email Marketing purchase experience.Reports, mobile devices such as tablets Jani Strand, a spokeswoman for teenand smartphones became the highest- apparel chain American Eagle, said,selling consumer electronic device cat- “Our customers are rarely without theiregory in 2011, amounting to 115 million smartphones, so any engagement thatunits in Q3 alone — beating out PC, used their phones to make a purchase connects with them through these de-laptop and netbook figures combined. at least once. In fact, more than one vices tends to be effective.” Indeed, to- in three purchasers have used theirA much-cited report from comScore day’s shoppers are so umbilically tied smartphones to make a purchase whilefound that two-thirds of all smart- to their phones, according to Master- in a store, according to a less-notedphone owners have performed some Card executive Mario Shiliashki, they finding from the same report.sort of shopping activity on their are more likely to leave home withoutphones, including comparing prod- Thus far, e-commerce companies have their wallet or cigarettes. “And I men-ucts and prices, searching for coupons, had the upper hand in using mobile tion cigarettes,” he adds, “because thetaking product pictures, or locating a technology to inflict blows on physi- phone has become more addictive thanretail store, and that 38 percent have cal stores. But we are still in the early the most addictive substance out there.” 7 ASSORTMENT LOCALIZATIONAs consumers continue to trim spend- proactive retailers are utilizing sophis- rebel against the one-size-fits-all retail-ing and do more of their shopping on- ticated communication tools such as ing models. By utilizing the conceptline, big-box retailers are moving to assortment planning, flow modeling, of store assortment localization, Seidlsmaller stores to reduce under-utilized price optimization, promotion opti- notes that retailers have been able tospace and stay profitable. At the same mization and size optimization to cre- boost sales by 40 percent to 50 percenttime, consumers are treating retail ate custom assortments based on each and carve out a solid competitive ad-stores as showrooms where they can store’s local characteristics and demo- vantage for themselves.test-drive merchandise before making graphics. By capturing information Assortment localization can be an ef-a purchase. Whether or not they pur- about the specific buying patterns of fective way to build intimacy withchase in-store, shoppers will increas- their shoppers, they can efficiently ca- customers as the economy puts moreingly turn to their mobile devices to ter to each store’s particular needs. pressure on retailers to manage theircheck for better pricing or selection John Seidl, a partner at Kurt Salmon inventories closely. Scott Welty, vicebefore making that purchase. Associates, argues that, as U.S. consum- president of retail industry strategy forAs a counter to both of these trends, ers become more diverse, they tend to JDA Software Group, notes that the 8
  9. 9. trend toward shoppers using brick-and-mortar locations as showroomsrequires retailers to stock the opti-mal localized assortment range andmaintain appropriate quantities foreach store. “Having the right item inthe right store at the right time helpsmaintain and improve customer loy-alty,” says Welty. “Providing a superiorcustomer experience by ensuring that‘available to promise’ meets the de-mand and geographic location of thecustomer, no matter how or where theyultimately buy the merchandise.” 8 EXPERIENCE DESIGNIn theory, experience design — or user UX design is a highly multi-disci- Emerging trends in UX design includeexperience (UX) design — operates plinary field, incorporating aspects of designs that can adapt and performfrom the premise that consumers wish everything from psychology, anthro- within various media devices, gesturalto engage in a meaningful interaction pology, sociology, computer science, and touch-based interactions, loca-when purchasing a product or service. graphic design and cognitive science. tion/proximity-based mobile experi-In practice, experience design involves Depending on the product, UX may ences, smart real-time user interface,the creation of culturally relevant also draw on content design disciplines and designs that can adapt and per-products, processes, services, events, as varied as communication, instruc- form within various media devices.and environments that focus primar- tion and gaming. The rise of social media has increasedily on the quality of the user experience the importance and impact of eachrather than functionality. This emerg- customer experience. Because custom-ing trend in “user-centered” design er expectations and experiences areinforms the latest in everything from rapidly shared and distributed betweenintelligent buildings to Facebook apps, peers, it is more important than everiPhone games and digital equipment. that retailers engage in meaningful interactions with customers to makeMobile adoption in the retail and fi- them truly empowered participants.nancial sectors is fueling the drive to-ward smoother, more intuitive designs. UX designer and blogger WhitneyApplying experience design principles Hess’s 10 guiding principles can beto mobile, for example, would strive to applied to both physical and virtualeliminate clutter while requiring fewer, world projects irrespective of goals,simpler steps to accomplish a task, thus constraints, or resources. Her firstproviding a more streamlined and tar- principle is: “Stay out of people’s way.geted experiences. Pave the road for an easy ride.” 9
  10. 10. that, over time, iTunes has morphed 9 iTUNES and bloated into an increasingly con-Apple has benefited mightily in the fusing and compartmentalized hodge-past decade from the shift from CDs podge of products jerry-rigged as one.to online music services — a shift it In terms of ease of use, iTunes is thehelped set into motion with the unveil- least Apple-like piece of software theing of the iPod in 2001. Two years later, company produces. While version 10.5Apple launched the iTunes music store brought support for iOS 5 and iCloud,offering songs for 99 cents apiece. as well as some small changes to the Sony Corp.’s music unit and EMI Group user interface, most observers agreeDuring the past year, iTunes has faced Ltd.) in assembling an offering of some the software must trim down and getsome stepped-up competition fromboth Google and Swedish-based Spot- 13 million songs that users can share back into fighting condition in prepa-ify. Google introduced a music service on its Google+ social network. Spotify ration for the coming challenges to itsthat lets users buy songs through the is coming at iTunes from a different market dominance. Besides GoogleAndroid Market, and the European angle than most other sync platforms, and Spotify, iTunes is also facing on-music-streaming startup Spotify offered starting out with a strong inventory, slaughts from San Francisco startupan upgraded shopping system that al- more than a million subscribers and a DoubleTwist and a Seattle-based outfitlows users to purchase entire playlists war chest estimated at $100 million. known as Amazon.com.of MP3s with a single click and sync Thus far, Apple has fended off com- The victor in this struggle will claimthem directly to their music players. petitors by issuing frequent upgrades the hearts and payment methods ofGoogle has partnered with more than of the media-management software a user base that, in the last fiscal year,a thousand record labels (including to thwart third-party iPod synching. generated $6.3 billion. It will be inter-Vivendi SA’s Universal Music Group, One downside of that strategy has been esting to see how Apple does it.10 MOBILE COUPONSAccording to a study by Group SJR and Liz Claiborne Inc. conducted among 8 0 1smartphone and tablet owners between the ages of 18 to 64, half said theyplanned to scan barcodes more often to get additional information abouta product, suggesting that barcode scanning is poised to go mainstreamwithin the next few years. Citing an increase in mobile payment systems,better targeting technologies, and budget-friendly marketing techniques,Juniper Research analysts believe mobile coupons will be key to driving in-storepurchasing with potential for exponential growth that could result in a market worth$46 billion by 2016.According to a survey commissioned by AT&T, 66 percent of respondents agree that mobile barcodeswill drive new mobile marketing campaign concepts in the next year. The majority of executives surveyedbelieve mobile barcodes represent the greatest area of potential for innovation in 2012.SpyderLynk CEO Nicole Skogg believes mobile barcodes “offer unmatched opportunity to increase brand value by adding mea-surable interactive functionality and richer consumer engagement.” 10
  11. 11. Prosper Mobile Insights has found venient and useful,” while 42 percent facing QR code acceptance has beenthat a majority of survey respondents had used their smartphone or tablet to that most mobile phones do not comehad used their smartphones or tablets scan a barcodes or present a text mes- equipped with the requisite scanningfor some type of shopping behavior. sage or promo code to a cashier. Forty capabilities, although marketers ex-Of the 348 smartphone and tablet us- percent had made a purchase directly pect that 2D barcode readers will beers surveyed, 67 percent agree that on a mobile device, and 36 percent had standard issue for smartphones begin-location-based coupons are “very con- scanned a QR code. A major hurdle ning in 2012. 11 BEHAVIORAL TARGETING As yet another example of how the Amazon model continues to shape theevolution of the Web, the deluge of user-generated content — from productreviews and comments posted on news stories, to the glut of unguardedpersonal information offered up by users of Facebook, Twitter, YouTube,et al — amounts to a behavioral marketer’s dream come true. All thatdata, freely given, is rich in the sort of detail that behavioral marketersprize in selecting which advertising messages are displayed to that in-dividual. The algorithms Amazon developed to suggest items of interestbased on a particular user’s browsing habits and purchasing history maysoon permeate the entire Internet. The challenge is to find the appropriate opportu-nities without seeming too invasive or behaving like a virtual stalker. 12 ZAPPOS Seeking to drive home the point that Zappos offers “more than shoes,” the online retailer last summer launched a uniquely inter- active print ad campaign that invited consumers to dress naked models using QR codes. The ads depicted naked models (mostly women) doing outdoor activities, such as jogging or riding a scooter through Manhattan locations, with strategically placed censor bars emblazoned with the campaign’s tagline. The QR codes lead the user to a website where a video shows how the sce- nario depicted in the ad plays out. Consumers can then choose an outfit for the model and go to Zappos to buy it. While some Zap- pos brands declined to participate in the campaign, fearing the photos were too risqué, Nathalie Binda, marketing vice president for women’s active wear manufacturer of Lolë, did not hesitate to sign on, calling the campaign “gutsy” and “very Zapposesque.” “If there’s one brand out there that can do it,” she said, “it’s Zappos.” 11
  12. 12. REED HASTINGSOn the night of Sunday, Sept. 18, 2011, Netflix co- tumble that erased approximately $12 billion from thefounder and CEO Reed Hastings sent an email to company’s market value.the company’s 24.6 million subscribers that began: “Imessed up. I owe you an explanation.” Hastings ended 2001 by an- nouncing he would take aThe blunder had come three months earlier when cus- 33-percent cut in pay, whiletomers who opted for the company’s DVD-by-mail assuring investors that “weand streaming services learned that their subscription are done with pricing chang-rates would jump by as much as 60 percent if they re- es.” An SEC filing revealed that Hastings’ stock optiontained both. allowance for 2012 will be $1.5 million, half of what he received for 2011, and his salary will remain $500,000.Hastings’ mea culpa also included the bubbly news In a January 2012 posting headlined “Reed Hastings:that the company’s DVD-by-mail service would 2012’s CEO of the Year?” Rick Aristotle Munarriz ofhenceforth be a separate entity called Qwikster, ac- The Motley Fool marveled that Netflix shareholderscessible via its own website for an additional fee — had seen a remarkable 25 percent surge in the firsta move that drew comparisons to the launch of New week of the new year. Munarriz speculated that sharesCoke from the instant Hastings clicked “send.” Hast- had bounced back following some well-deservedings was roundly mocked in the business trades and tax-loss selling, and the company’s revelation thaton Saturday Night Live for his arrogant, if not outright it logged some 2 billion hours of streaming contentincompetent, disregard for his core customers. He during the last quarter. Netflix may have received aneven neglected to acquire the @Qwikster handle on unexpected and counter-intuitive boost when TimeTwitter, which was then being used by a man named Warner announced a 56-day waiting period (doubleJason Castillo, whose profile pictured the Muppet the previous 28 days) before offering its DVDs toElmo smoking a joint. No word on whether Castillo rental companies at bulk discount prices. While thismanaged to cash in on the urgent offers to buy his will hamper the DVD-by-mail side of the business,handle (“idk who to trust,” he tweeted) during his the same constrictions apply to its chief rivals Block-three-week window of opportunity before Hastings buster and Coinstar’s Redbox which continue to relywent back to the confessional to renounce Qwikster primarily on physical rentals. Netflix’s emphasis onas a non-starter. In the meantime, the company(s) had streaming may yet put Hastings on the shortlist forshed 800,000 angry subscribers, and saw a 76 percent Comeback CEO of the Year. 12
  13. 13. 13 RETAIL CRMThe future of retail CRM — both its potential and pitfalls — is writlarge on the walls of Facebook. Amassing more than a trillion pageviews per month, Facebook is an immense source of CRM data withunlimited potential, but it appears in an unwieldy mix of text, graph-ics, geospatial and other formats that, thus far, retailers have been un-able to wrap their arms around. In the past couple of years, the indus-try has been aswirl with rumors of impending CRM breakthroughs,with speculation ranging from artificial intelligence supercomputerssuch as IBM’s “Jeopardy!” champion Watson to applications devel-oped by CIA-friendly organizations for monitoring potential terroristactivities. However, with the release of its Gateway for Facebook CRM solution this past summer, retail business analytics leaderMicroStrategy has positioned itself as first-mover in what some observers have already dubbed the “Facebook CRM era,” poten-tially the biggest development in retail technology and marketing since the invention of the Web.14 FACEBOOK 15 MOBILE POSIt’s no exaggeration to say that Facebook Point-of-sale systems have be-represents an unprecedented leap in come the true command centersthe history of human interaction. As of in-store operations, providingof September 2011, Facebook has more a host of applications that lever-than 800 million active users, with age customer search histories,more than 50 percent of those logging generate cross-selling recom-on in any given day and amassing more mendations to prompt add-onthan a trillion page views per month. purchases, streamline inventoryFacebook traffic to retail sites increased functions, schedule employees and al-an incredible 92 percent year-over-year locate store resources. Yet “traditional”for August 2011, yet that traffic showed POS technologies — if it’s not too soona conversion rate of only 1.2 percent, to use that term — are already facingsuggesting that Facebook also repre- threats from mobile POS platforms 2011 released by RIS Newssents the world’s richest source of un- such as smartphones and tablets. The Mobile, transaction systems providetapped CRM data (see No. 13 above). migration to mobile is particularly a way for retailers to reduce checkout evident at independent restaurants lines without adding expensive check- and start-ups, where less-expensive out counters or staff. Automated sys- options are more readily embraced, tems that use mobile computers and says Greg Buzek, president of research printers add speed, security and pro- and services firm IHL Group. Adopt- fessionalism to transaction-processing ing mobile devices within a POS sys- operations. The results are greater cus- tem requires a lower initial investment tomer satisfaction and fewer carts and offers a “cool” factor for custom- abandoned by customers who leave the ers. According to Store Systems Study store discouraged by long checkout lines. 13
  14. 14. 16 IN-STORE WEB ACCESSIn an effort to draw customers into stores as the primary means of merchandisedistribution, some retailers are offering in-store Web access through self-servicekiosks and workstations to engage customers, provide convenience and increasesatisfaction. This past year, JCPenney refined its Findmore technology with 42-inchinteractive plasma-screen kiosks linking shoppers and sales associates to its 250,000online products. The media-rich kiosks provide editorial content and highlight keyseasonal trends while incorporating social-media-like features, such as permittingshoppers to add items to an online “dressing room” and email their choices to them-selves or friends. Customers also can use Findmore to finalize the sale, either bypurchasing items online and having them shipped to their home or to the store forlater pickup, or by printing out a receipt and purchasing an online item at an in-store register. 17 DIGITAL PRODUCTS Representatives from major music labels EMI, Universal, and Sony have, at the time of this writing, all declined to comment on claims from various music industry insiders that they all have timetables in place for phasing out their production of physical CDs by the end of 2012. While no one is stepping up with such bold predictions on when the last movie theater will shutter its doors, a steadily growing number of viewers are con- tent to stream movies online, with Netflix alone reportedly accounting for 30 percent of all evening Internet traffic. Newer devices can handily stream movies on ever-larger and less expensive TV screens. The demand for deluxe edition CDs (and vinyl sets) loaded with extras is expected to remain for the foreseeable future, as are venues for projecting the occasional must-see, special-effects-laden blockbuster. The fate of any products capable of being delivered digitally seems clear. The handwriting has been on the wall ever since the first MP3 was posted to Napster back in mid-1999. 18 MILLENNIALSFinding themselves with more time than money and armed with total pricing transparency and unlimited selection, Millennialshoppers (those born between 1980 and 2000) are taking Depression-era frugality to a whole new level. In the process, Millen-nials are pushing retailers to learn new tricks. According to a study from Deloitte, Web-savvy Millennials treat each shoppingtrip as a mission. They research online and know exactly what they’re going to buy when they arrive at the store. TechCrunchsees in this trend the “Death of the Impulse Shopper,” while Bloomberg hails the “Rise of the Surgical Shopper.” Whether re-tailers see the glass as half-empty or half-full, the trend increases the importance of every customer who comes in their stores.Retailers can no longer rely on impulse buying to pay back the cost of loss-leader promotions, and rewards for store loyalty.Efforts, instead, must be dedicated to converting every shopper into a buyer. 14
  15. 15. 19 TRADER JOE’S Privately owned Trader Joe’s has been on an expansion binge over the past three years, continuing to build on its near-cult status by providing healthy, organic and locally produced food to shoppers on a budget. The company has expanded at a steady pace, opening some 40 new stores a year and moving well beyond its Southern California stronghold to the delight of awaiting customers in markets such as New York, Chicago, and Des Moines. The expansion comes as many retailers are eye- ing Trader Joe’s success and experimenting with smaller-format stores that can slide easily into urban areas with lower rents. In 2010, the company pulled in an estimated $8 billion in sales, roughly on par with chief rival Whole Foods Market.20 LOYALTY PROGRAMS 21 MOBILE/CONTACTLESS PAYMENTSAccording to the Loyalty Marketer’s Associa- Although U.S. customerstion, customer loyalty, rather than acquisition, have been relatively slowis the key to sustainable growth. Business con- to adopt NFC-equippedsulting firm Protiviti ranks customer loyalty as smartphones or utilize thethe top non-financial business challenge compa- contactless payment cardsnies will face in 2012. Yet businesses report that they already carry in theirretaining and engaging customers remain their wallets, blogger and prin-greatest challenges. While daily-deal sites such as cipal analyst at ForresterGroupon and LivingSocial continue to generate Research Brian Walkerthe greatest buzz, marketers suspect that price- predicts we will soon seebased strategies are taking focus away from the customers waving NFC-en-real prize, customer loyalty. The emerging model abled smartphones acrossfor success uses data gathered from loyalty pro- interactive display ads tograms to engage with customers across all touch- automatically add picturedpoints at all stages of the customer life cycle. items to their online carts, making immediate trans- actions on their phones, or walking into a store with the resulting offer. More than 7,000 Subway restaurants across the U.S. are installing new Tap & Go Payment Readers to accept contactless payments through the MasterCard PayPass platform. Subway diners will be able to pay for their meals simply by tapping a PayPass-enabled card or device at the register. As more and more consumers interact with these devices, Walker expects that their expectations and buying habits will quickly change. 15
  16. 16. 22 COSTCO 23 NEIMAN MARCUSCostco’s 596 stores provide a great indi- Like many other luxury players con-cator of where different products — from cerned about protecting their care-milk and eggs to diamond rings — are fully cultivated brand images, Neimanlikely to see growth, according to Jeff Marcus was slow to embrace socialWeidauer at retail industry marketing media. But in the run-up to the 2011firm Vestcom International. Hofstra holiday season, the high-end retailerUniversity business professor Barry got into the spirit in a big way by host-Berman recommends Costco’s strategy ing a flurry of digital campaigns aimedof opportunistic buying to any “smart at boosting its online presence. As ofretailer.” mid-December, the retailer had nearly 500,000 fans on Facebook and 50,000 followers on Twitter. The campaigns included a Foursquare scavenger hunt called “Clutch me if you can,” in whichBy focusing on prices and maintaining Nancy Gonzalez clutch bags were hid-a 17-percent profit margin, Costco has den in 15 of its 41 stores and customersseen its profitability grow during the had to check in via Foursquare to receive clues about where to find them. In an ef-economic downturn as shoppers turned fort to create buzz for the launch of celebrity stylist Rachel Zoe’s collection, Neimanto the wholesale club operator for deals Marcus launched a Facebook design contest encouraging fans to assemble virtualon food and necessities. The Issaquah, outfits from items in the collection. The ensembles were judged by Rachel Zoe andWash., company reported that its fiscal the chain’s fashion director Ken Downing, with the winner receiving a private meet-2011 net income rose 12 percent to $1.46 ing with the two judges plus a $2,500 Neiman Marcus gift card. So what caused thebillion, or $3.30 per share, while revenue sudden shift in attitude? Research showing that 77 percent of Neiman Marcus cus-climbed 14 percent to $88.92 billion. tomers own a Web-enabled mobile device and 60 percent are on Facebook. 24 UGC, PRODUCT REVIEWSOnline marketers recognize how effective user-generated content (UGC) can be instrengthening search engine optimization strategies. According to comScore ARS,UGC product reviews are every bit as persuasive and effective (if not more so) thanfar costlier advertising media, including display and TV. User-generated productreviews have proven to be one of the most highly effective tools of social mediamarketing, allowing marketers to tweak and modify their messages — and helpbusinesses increase their profits in the process. For retailers, UGC provides unbiasedand unguarded feedback from actual customers. The next logical step for manymarketers involves gleaning data from “micro UGC” — short, low-involvement formsof user-generated content such as Facebook status updates, “likes,” star ratings onNetflix or Amazon, location-based check-ins, “you may also like” recommenda-tions and pictures posted on Tumblr. The logic of UGC’s effectiveness is simple:Like-minded people trust the opinions of their peers above the hype of paid shills. 16
  17. 17. 25 TIFFANY 26 STARBUCKSAccording to data compiled by Bloom- Starbucks marked its 40th year in busi-berg, Tiffany nearly tripled its value ness with the rollout of a new logo andfrom the sale of engagement rings a mobile payment app that has becomealone, helped along by price increases the early standard for m-commerceand sales in the Asia-Pacific region. success by demonstrating that custom-It boosted its market capitalization to ers will adopt mobile payments at the$8.6 billion in 2011, up from $3.1 bil- point of sale. Eschewing fancy tech forlion in June 2009, when the U.S. econo- relatively pedestrian barcodes, the Star-my emerged from the longest contrac- bucks app operates with a minimum oftion since the Great Depression. The fuss and a maximum of utility — twoworld’s second-largest jewelry retailer qualities that watchers agree are es-became a likely takeover target after sential to supplanting the use of cashSwatch Group AG terminated its 20- and cards. Introduced in January 2011,year watch partnership with the jeweler the app racked up an impressive three16 years early. The company reported a million transactions in its first three63 percent jump in fiscal third-quarter months. Additionally, by making its2010 earnings as every geographic seg- mobile payments closed-loop and keep-ment saw double-digit sales growth, ing the transactions on its own systems,including a 17 percent increase in the Starbucks bypassed the complicating favorite in 2011, delivering a 35 percentAmericas, which accounted for the step of partnering with a carrier or card year-to-date gain in December despitebulk of its 21 percent revenue growth. brand. Starbucks was also an investor spiraling coffee prices worldwide.27 NORDSTROMNow in its 110th year, Seattle-based Nordstrom continues tolive by its one-sentence doctrine: “Use good judgment in all sit-uations.” The fourth-generation, family-run department storeis legendary in the retail industry for its emphasis on customerservice above all else. In a 2011 consumer survey forecastingholiday spending, the upscale specialty retailer came out ontop among department stores in online shopping, more thandoubling its online share from December 2010. Rather thandefining store space by brand, Nordstrom groups merchandiseinto so-called lifestyle sections, making it easier for shoppersto put together outfits, says retail analyst Jennifer Black. As aresult, competitors have rushed to copy the Nordstrom model,and brands vie for invitations to win shelf space. Shoe entre-preneur Steve Madden recalls the first time he was asked to aNordstrom buyers’ meeting. “It was like an invite to the WhiteHouse,” he said. 17
  18. 18. RON JOHNSONThe retail world is watching CEO Ron Johnson close- Vuitton-owned Sephora and Martha Stewart Living,ly to see if he can replicate his success as the creative adding more brand names, streamlining supply-chainforce behind the Apple Store in the relatively stodgy operations, and — as he did at Target — bringing inretail environment at JCPenney. The Apple Store con- exclusive lines from high-endcept was a success, he contends, because rather than designers like Michael Graves.tweaking the traditional model, Apple started from The retailer is also eliminatingscratch and “re-imagined everything.” (Of course discount signs for in-season mer-it helps if the thing you’re selling happens to be the chandise and doing away withsleekest, most-coveted product since Cadillacs came cents on price tickets in certainwith tailfins.) In a piece written for The Harvard Busi- cases. For instance, an item thatness Review “Online Forum” just weeks into his ten- costs $19.99 will now be $20.ure at Penney, Johnson conceded that Apple products Johnson has brought on a number of former col-do indeed pull people into stores, but added, “How do leagues from Apple and Target, which would indicateyou explain the fact that people flock to the stores to that his plans include high-level structural changes.buy Apple products at full price when Walmart, Best He’s also planning a Penney’s version of the Apple Ge-Buy and Target carry most of them, often discounted nius Bar — a concept he created as the SVP of retailin various ways, and Amazon carries them all — and for Apple — staffed by trained employees who candoesn’t charge sales tax!” People come to the Apple offer advice and tips. The challenge, he says, is con-Store for the experience, he says, “and they’re willing ceptually similar to the ones Steve Jobs faced with theto pay a premium for that.” iPhone. “He didn’t ask, ‘How do we build a phone that can achieve a 2 percent market share?’ He asked, ‘HowSince announcing his departure from Apple, John- do we reinvent the telephone?’ In the same way, re-son has been on a mission to revitalize the JCPenney tailers shouldn’t be asking, ‘How do we create a storebrand and increase the retailer’s appeal to younger that’s going to do $15 million a year?’ They should bemore affluent customers. Toward that end, Johnson asking, ‘How do we reinvent the store to enrich ouris emphasizing store-within-store formats, partner- customers’ lives?’”ing with retailers such as the Moët Hennessy - Louis 18
  19. 19. 28 DISNEY 29 DIGITAL SIGNAGEFollowing record sales and profit, theWalt Disney Company, owner of thenamesake theme parks and ESPN sportsnetwork, increased its annual dividendfor 2011 by 50 percent, the most in atleast 20 years. The Burbank, Cali.-basedcompany, which also owns MarvelEntertainment and the ABC TV net-work, is returning cash to investorsthrough stock repurchases as well,buying back $5 billion of shares in theyear ended Oct. 1. The Steven P. JobsTrust, Disney’s largest shareholder,will reap $82.8 million, an increase of$27.6 million based on the 138 millionshares held by the estate of Apple’s lateco-founder. Presented with so many attractive buying options, consumers often gravitate to- ward the lowest price, which they usually find online. Thus, retailers have been searching for new engagement strategies, such as interactive digital signage. By dis- playing targeted eye-catching content that can easily be customized according to the context and the audience, digital signage is helping brick-and-mortar retail- ers attract — and hold — the attention of the same customers that many feared were just stopping in to check prices before making an online purchase. Described by one retailer as being “like having a giant smartphone in your store,” interactive digital signage delivers some of the online world’s most appealing capabilities and functions in a real-world environment, replete with attentive sales associates.30 H&MThe world’s second-largest clothing re- Grecian buttons, and fluorescent mi- director Karl Lagerfeld in 2004, andtailer, Hennes & Mauritz AB, recently cro-minis. H&M creative adviser Mar- this most recent partnership betweenannounced its “Versace for H&M” line gareta van den Bosch sees “design and the Swedish fashion giant and a luxuryfeaturing apparel and accessories de- celebrity collections as crucial to estab- designer will give the Italian label glob-signed by Gianni Versace SpA, ranging lishing the fashion authority of H&M al visibility, according to Versace Chieffrom $17.95 zebra-print underwear to as a brand.” H&M has been marketing Executive Officer Gian Giacomo Fer-$299 studded leather jackets and floor- limited-edition designer collections raris, with targeted sales expected tolength “goddess” gowns dotted with since partnering with Chanel creative reach $700 million by 2014. 19
  20. 20. 31 INTERACTIVE STOREFRONT WINDOWSSaks Fifth Ave. and Starbucks were content, tweets from around the Web all the iPads were able to talk “to eachamong those pushing the boundar- and user-submitted photos with the other to produce elegant fades andies of interactive storefront displays to #StylelistatSaks hashtag. Running a na- control what device should display,”captivate passers-by in high-traffic lo- tive iPad application built specifically said Gin Lane’s Digital Creative Direc-cations. EBay introduced interactive for the installation on a local network, tor Dan Kenger.store windows in New York City andSan Francisco encouraging holidayshoppers to make charitable donationsto Toys for Tots by scanning a QR code.Displays fronting Starbucks stores inToronto and Vancouver encouragedpassers-by to assemble their favoriteTazo teas using gesture controls via avinyl screen and projector, while Saksand Stylelist.com tapped downtownagency Gin Lane Media to create athree-window display featuring 64 iPad2s and nine 27-inch flat-panel CinemaDisplays for the high-end retailer’sflagship Fifth Avenue store. The displayfeatured original imagery, streaming 32 SMALLER STORE FORMATS As consumers continue to do more shopping online, big-box re- tailers are attempting to stay profitable and reduce under-utilized space by moving to smaller store formats. Safeway and Walmart are among the latest to follow the trail blazed by Tesco’s Fresh & Easy Neighborhood Market. The advantages of smaller formats include greater flexibility, proximity to local markets, a quicker shopping experience, new store development options, solutions for recycling older units, and lower break-even points. According to Marketwise, 62 percent of Walmart’s newest stores are small-format Walmart Express, most of them in underserved rural and urban areas. The chain’s small-format Walmart Express stores typically carry between 11,000 to 13,000 items, compared with the more than 100,000 items found in a Supercenter. “Small stores are going to be a very good growth opportunity for us,” says William S. Simon, president and chief executive of Walmart’s domestic business, “because they allow us to get access in places we are not in today.” 20
  21. 21. 33 GROUPON/LIVINGSOCIAL/ETC.The exploding daily deal industry pioneered by Groupon has spawned,by some estimates, more than 700 copycats. And who can blame them?Barely three years after its founding, Groupon raised more than $700million in an initial public offering, generating 30 percent more thanthe company originally sought, then saw its value balloon to morethan $16 billion on its first day of trading on the Nasdaq. LivingSo-cial is Groupon’s most logical competitor. Backed with hundreds ofmillions of dollars in funding, primarily from Amazon (for which itprovides the deals for AmazonLocal), the 2-year-old deal-maker saysit expects to generate revenues of $1 billion in 2012. 34 GAMIFICATION OF RETAIL Boosted by the success of Facebook-supported games such as Farmville and Mafia Wars, gamification is the latest innovation retailers are banking on to improve customer en- gagement, build loyalty, strengthen their brand, and incentivize employees and business partners for better productivity. Gamification is defined as the process of integrating game thinking and game mechanics into marketing activities to solve problems and en- gage users. According to Gabe Zichermann, CEO of Gamification Company, the key to gamification’s success is drugs — “One important drug — dopamine,” he explains. “It’s what we secrete in response to challenge and achievement. It is part of the core group of behaviors that makes gamification and games powerful in changing influence and behavior.” Data released by M2 Research set the current worth of the gamification market at $100 million, with a projected value of nearly $2.8 billion by 2016. Gamifica- tion vendors predict 197 percent growth through 2012, representing an increase of 42 percent over 2011. 35 YELPSan Francisco-based user review web- on companies that are generating wrinkle here is that Yelp relies on thesesite Yelp filed to raise as much as $100 losses,” says Tom Taulli, founder of rivals to send visitors to its site. Googlemillion in a 2012 initial public offering, IPOByte.com and author of “Investing alone accounted for more than half ofseeking to become the latest unprofit- in IPOs.” “No one knows how long this Yelp’s traffic in the first nine months ofable Internet company to go public. window is going to last, so I think Yelp 2011. The search engine’s dual role asCo-founded by former PayPal Inc. ex- is going to get out as fast as possible.” both competitor and ally may put Yelpecutive Jeremy Stoppelman in 2004, the in a difficult position in the future, ac-website features more than 22 million Yelp faces competition from Google, cording to Taulli. “Their main sourcereviews created by its 61.1 million Facebook and Yahoo!, all of which sell of customers is coming from theirusers. “Investors are open to taking bets online ads to local businesses. The competitor.” 21
  22. 22. 36 BERGDORF GOODMANOnline merchants are forcing even the highest-end stores to offer up bar-gains to their well-heeled clientel who are relatively insulated from the joband housing markets. “At the luxury end, discounting has become verymainstream because of the Gilts of the world,” said Andrew Sacks of luxuryresearch firm AgencySacks, referring to Gilt Groupe, the online discounterfor designer fashions. At the height of the 2011 holiday season, BergdorfGoodman’s website listed more than 70 pages of discounts on designerfashions, some marked down as much as 40 percent. Bergdorf Goodmanhas also turned to digital and social-media programs in recent months,launching campaigns aimed at building the brand’s presence online, in-cluding a contest inviting its Facebook fans to design a Fendi handbag.While Bergdorf isn’t the first luxury retailer to try a user-generated designcampaign, it may be the first to board the crowdsourcing bandwagon. 37 AT&T WIRELESS 38 REIThe collapse of AT&T’s $39 billion bid for REI has teamed up with U.S. Bank to make credit card approval easier and fasterT-Mobile USA leaves the second-largest for consumers shopping in-store via an iPhone application. By promoting a down-U.S. mobile carrier with few options to load of the REI Visa app at point of purchase, the retailer can enable customers tochallenge market leader Verizon Wireless. instantly be approved for the REI Visa card and begin using their reward pointsT-Mobile’s spectrum assets would have al- immediately. “The app also moves the customer application process out of the ser-lowed AT&T to expand its LTE footprint vice lane to more of an in-store experience that connects with the brand,” saysto cover 97 percent of Americans. How Dominic Venturo, chief innovation officer of the bank payment service division atAT&T will make up that difference isn’t U.S. Bank. REI was deemed the best fit to try out the mobile credit card applicationyet known, but AT&T needs to act quick- process because of the company’s mission. “Eliminating paper was important toly, as Verizon has already blanketed some REI because it is an environmentally conscious group,” Venturo said.190 markets and 200 million Americans “REI also has a very strong customer following with their existent iPhone appwith LTE. While AT&T was focused on and wanted to try something new.”winning regulatory approval for the take-over, rivals were negotiating their own air-wave deals. As a result, several spectrumassets that would have still been availableto AT&T are now off the table. Its remain-ing options are time-consuming, expen-sive and risky, says Cowen & Co. analystColby Synesael. AT&T can either seekto buy spectrum from another company,wait for the government to auction morefrequencies or try to squeeze more capac-ity out of its current airwaves. 22
  23. 23. 39 POP-UP SHOPSAlthough pop-ups have moved up in the world, for some the termstill has downmarket connotations. The first generation of pop-ups often consisted of little more than shelving and a cash registerin empty mall space. In recent years, retailing stalwarts breathednew life into the format. Procter & Gamble, for example, operateda 4,000-square-foot pop-up on 57th Street in Manhattan that drew14,000 visitors in the 10 days it was open. The store had no cashregisters because everything was free — including a full CoverGirlmakeover or a Head & Shoulders wash and blow dry. The P&Gpop-up — the company’s marketing executive Nataraj Iyer prefersthe term “interactive experience” — represents a new iteration inthe evolution of the pop-up. The goal was not to move merchan-dise but to build brand loyalty.40 DEAL-OF-THE-DAY (WOOT, ETC.)The “daily deal” concept is as old as phenomenal success — the companyretailing itself. Strictly speaking, deal- was acquired by Amazon.com in 2010of-the-day sites are similar to job lot — combined with extremely low bar-discounters. They take unused capacity riers to entry inspired a slew of similarand sell it at a discount. The difference deal-of-the-day sites with quirky prod-is that businesses use social media to uct descriptions and real-time inven- spending on deal-of-the-day offerspre-sell this excess inventory in hopes tory updates. It wasn’t until such sites could grow from $873 million in 2010of luring new customers. Pioneered by began offering deals for local shops and to $3.9 billion in 2015. The same fore-Woot in 2004, deal-of-the-day websites restaurants that the industry truly took cast also estimates there are 178 U.S.started out selling mostly electronics off. BIA/Kelsey released a forecast in cities with deal-of-the-day sites reach-and tech gear at deep discounts. Woot’s March 2011 indicating that consumer ing 102 million people. 41 IKEAIkea is developing its website to have product and then figuring out how to stores in North America by 2013. Ikeaa broader geographic reach and offer make it, will cut prices by 1.5 percent expects to triple its pace of store open-more services, such as allowing cus- this year as its increased scale allows ings in China to capture faster growthtomers to select items they want in it to produce items at less cost. Ikea, in the second-largest economy, saysthe store and have them delivered to which updates its collection of about CEO Mikael Ohlsson. The expansiontheir home without having to gather 10,000 products with more than 2,000 in China will also allow the companythem from the outlet’s warehouses. new items a year, will continue invest- to reduce its reliance on Europe, whichThe world’s largest furniture retailer, ing in products and enlarging stores is suffering from a slump in consumerknown for setting a price point for a in the coming year, adding 50 more confidence. 23
  24. 24. BRIAN DUNNRecent headlines tell a dismal story: “Best Buy’s zon.com with Best Buy Marketplace, a new serviceDunn Should Be Next CEO Fired” wrote Douglas meant to challenge the world’s largest e-commerceA. McIntyre on 24/7WallStreet.com. Then, just a few company. The effort addresses challenges shared byweeks later, “Why Best Buy is Going out of Business all retailers committed to main-… Gradually” topped a 3,000-word screed by Forbes taining large bricks-and-mortarcontributor Larry Downes, that garnered some 15,700 operations while simultaneouslyFacebook shares, 17,500 tweets, and a blunt response trying to flank Amazon online.from Dunn himself titled “My Thoughts on Best Buy’s Although Best Buy MarketplaceRecent Media Coverage,” albeit without mentioning substantially increases the selec-either McIntyre or Downes by name. Best Buy has tion of products and brands available at BestBuy.com,posted a string of poor quarterly results since Dunn Wall Street appears to be losing patience with Bestassumed the CEO mantle in June 2009. Throughout Buy’s plans to overhaul itself. Despite Dunn’s upbeathis reign, Downes charges, Dunn has pursued a strat- assurances to the contrary, Amazon.com has badlyegy of protecting market share over profit. In the quar- damaged Best Buy’s earnings and its future projects.ter ending November 30, 2011, store sales increased 1 As evidence of investor reaction to the CEO’s tenure,percent — marking the retailer’s first increase in two Best Buy’s shares are off 43 percent over the past twoyears. Margins, however, sank, with net income drop- years, while Amazon’s are up 39 percent, and the S&Pping by 29 percent. For the quarter ending May 28, 500 is higher by 12 percent over the same period. The2011, the firm posted a sales increase of only 1 per- market’s stunned response to Best Buy’s third quartercent to $10.9 billion. EPS fell by 3 percent to 35 cents. 2011 results and forecasts resulted in shares plummet-Online revenue rose only 10 percent in the U.S., not ing more than 15 percent. A decisive blow to Dunn’snearly enough to keep up with Amazon, which con- tenure may have come just days before Christmastinues to grow more than 50 percent per quarter. when the world’s largest consumer electronics retailer announced that it would be unable to fill an undis-Dunn maintains that his company is well positioned closed number of holiday orders placed online.to poach significant online market share from Ama- 24
  25. 25. 42 TARGETAfter spending two years preparing to accounted for more than half of thetake control of its website from Ama- major outages on the top 100 sites inzon.com, a prominent link (“learn all the U.S. by revenue, according to Webabout what’s new”) on Target’s home monitor AlertBot. Still, e-commercepage failed to work when the site went analyst Colin Sebastian at Robert W.live in August. That was just the begin- Baird & Co contends that Target madening. Three weeks later, the release of the right move. “The complexity ofa collection from Italian fashion house building a large-scale e-commerce siteMissoni brought a rush of visitors that is really difficult,” he said. “But, at thecrashed the site for most of the day. A sentence statement that Target.com end of the day, Target made the rightmonth later, the site went down again president Steve Eastman had left the decision. Amazon is a competitor, andduring peak shopping hours. Later company to “pursue other opportu- you don’t want them controlling yourthat day, Target announced in a one- nities.” All told, Target.com crashes e-commerce business.”43 LULULEMON 44 TABLET COMPUTERS IN-STOREVancouver-based athletic apparel com- An estimated 25 percent of all tablet learning curves for new hires, morepany Lululemon Athletica has caught computers purchased in 2011 were engaging and knowledgeable sales as-fire with yoga enthusiasts to a degree bought by enterprises, and 25 percent sociates, sales associates’ ability to helpthat sent its competitors stumbling of those enterprises were retailers. Re- customers in more store departmentsover themselves in pursuit of custom- tailers are putting tablets to work as and a more pleasant and efficient buy-ers willing to spend $98 on stretchy digital catalogs, signage and in-store ing experience for customers.yoga pants. Mimicking Lululemon’s information kiosks. Tablet computingwinning strategy, Nike’s Salvation solutions connect retail sales associateschain of athletic-wear stores intro- with a wealth of knowledge, includingduced $64 training capris featuring a product information, learning tools,yoga-studio format and similar logo. real-time product inventory, customerGap’s Athleta stores began selling $60 reviews and ratings, updated price andwomen’s yoga tops and offering free promotional information, as well as theyoga classes — another Lululemon in- ability to print or email any of these.novation. Unlike other business solutions that require a great deal of infrastructureNordstrom’s Zella line, dedicated to and integration efforts, tablet comput-yoga attire, went so far as to hire a ing solutions require minimal impactLululemon alum to launch the effort. on existing systems and are often moreSince opening its first store in the reliable than other solutions. In-storeUnited States in 2003, Lululemon’s ag- tablet computing systems provide re-gressive strategy has paid off with rev- tailers with consistent sales processesenues growing from $40.7 million in that can be promoted across all stores,2004 to $711.7 million in 2010. increased sales, significantly reduced 25
  26. 26. 45 AMERICAN GIRL Mattel’s American Girl line of dolls, accessories, books, and (more recently) movies, has dominated the big and expen- sive ($95) doll market for a quarter-century by building its brand with unwavering focus on its core customers (girls, their mothers and their grandmothers), an ability to identify and fill gaps in the market for their customers and a com- mitment to connecting with its customers beyond the ac- tual sale. Since its first mail-order catalog debuted in 1986, American Girl has sold more than 20 million dolls and 135 million books that tell the stories of its dolls representing dif- ferent periods in American history.46 CVS/CAREMARKReversing two years of decline, CVS/ new contract wins. Furthermore, chief up for grabs. With 43 percent of CVSCaremark expects 2012 profits to grow rival Walgreen Co. has failed to replace stores located within one mile of a11 percent to 15 percent based on its its contract with employee-benefits Walgreens (85 percent are within fiveacquisition of Universal American manager Express Scripts. Valued at miles), CFO Dave Denton expects toCorp.’s Medicare Part D business, a deal more than $5 billion in annual drug pick up as many as 23 million of thosewith health insurer Aetna Inc., better sales, the lapsed contract will put ap- prescriptions, which would boost prof-drug pricing, and billions of dollars in proximately 90 million prescriptions its by as much as 11 cents a share. 47 VICTORIA’S SECRETVictoria’s Secret is all about differentia- increase of 12 percent, benefiting from Bra and the Gorgeous Bra. The com-tion, according to Stuart Burgdoerfer, the wide array of its assortment, which pany also registered an 8 percent rev-CFO of Victoria’s Secret parent Limit- includes major third-quarter launches enue increase in Victoria’s Secret directed Brands Ltd. “We really have unique such as Showstopper Bra, PINK, the channel, driven primarily by PINK,products, a leading position [and] with Heartbreaker Bra, the Unforgettable sleepwear, panties and knit clothing. Inrespect to our brands, no obvious im- March, the company introduced threemediate close competition.” The Co- versions of its “Incredible” bra, a super-lumbus, Ohio-based specialty apparel soft push-up that is more comfortableretailer posted a 12 percent gain in than earlier versions. An accompany-comparable sales for the 11 months ing Incredible fragrance is a mixturethrough December 2011. While Lim- of magnolia, pear and sandalwood andited registered revenue growth across described as “fruity, feminine and sur-all of its major brands, Victoria’s Secret prisingly clean smelling.” The bra’s pre-was the major growth driver for Q3, decessor, “Miraculous,” boosted bustswith U.S. stores registering a comp sales by as much as two cup sizes. 26
  27. 27. 48 PUBLIX 49 DICK’S SPORTING GOODSPublix Super Markets has offered ex- Dick’s Sporting Goods dates back to 1948 when Richard Stack (father of currentceptional customer service for more CEO Edward Stack) opened a bait-and-tackle store in Binghamton, N.Y. When Ed-than 80 years, operating 1,000 loca- ward took over as CEO in 1984, only two stores were in existence. Today Pittsburgh-tions through one of the worst eco- based Dick’s is the largest sporting goods retailer in the country, with 474 namesakenomic downturns in history without stores in 42 states and 81 Golf Galaxy stores in 30 states. Dick’s still has abundantlaying off a single employee. Publix is top-line growth opportunity with plans for 400 more stores over the next severalthe country’s largest employee-owned years to build out its presence on the West Coast. Dick’s has succeeded where othersupermarket and the fourth-largest big-box sporting goods efforts have failed by catering to serious enthusiasts whooperator of traditional supermarkets want a big selection and an engaging in-store experience. Each Dick’s location fea-overall, behind Kroger, Supervalu, tures stores within the store, such as the Golf Shop, the Lodge and Perfect Season,and Safeway. George Jenkins — or Mr. which highlight whatever sport is then in season.George, as he is still known withinthe company — launched his service-oriented supermarket in 1930 and im-mediately embarked on an expansioneffort that has yet to abate. Publix con-tinues to grow at a time when manyother businesses are stagnating. Theretailer’s latest growth efforts include ahybrid store that melds its GreenWiseorganic format with its more conven-tional stores. Publix’s second-quarter2011 net income rose 9.7 percent, to$382.4 million. Total sales increased5.8 percent, to $6.6 billion, with same-store sales up 4.2 percent. 50 BUILD-A-BEAR WORKSHOP The interactive entertainment retailer Build-A-Bear Workshop invites guests to create their own customized stuffed animals. Digital Signage Today named Build-A-Bear’s new Digital HearMe Sound Stations one of the top 10 coolest digital signage deployments of 2011. The self-ser- vice kiosk is highly visible, located near the entrance and “ChooseMe” area where guests first select their “new friends.” The stations bring a new experience to the customers while reducing time to market for new sounds — automatically linking the sound purchase to a POS system and improving personalization through a record-your-own sound module. Digial Signage Today rates the experience as “fun for kids and easy to understand for grandma.” 27

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