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2012




 100
TOP
DRIVE
CUSTOMER
ENGAGEMENT
AND BUILD
LOYALTY

Today consumers and businesses rely on smartphones, tablets
and other Wi-Fi enabled devices for a wide array of personal and
commercial applications. Now Motorola’s Proximity Awareness
& Analytics Solution makes it possible to use these devices to
improve consumer engagement and improve associate productivity
in WLAN environments. Use your Wi-Fi infrastructure to capture
shopper attention with personalized promotions and in-store
coupons. Enable applications that help drive employee productivity
and service delivery. Get the data you need to turn browsing into
buying – and prospects into profits.



Learn more at:
motorolasolutions.com/shopperengagement




MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC
and are used under license. All other trademarks are the property of their respective owners. © 2012 Motorola Solutions, Inc. All rights reserved.
WELCOME
	                            to the 2012 edition of                   Marcus, Nordstrom all in
the Retail Customer Experience Top 100, sponsored                     the top 30? And multichan-
by Motorola!                                                          nel and m-commerce initia-
                                                                      tives, which have been talked
Once again, our team of retail experts sat down to
                                                                      about for years, are actually
identify 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 based
on their influence and impact on customer experi-                     There has been a lot of fear
ence, and the resulting rankings are collected in the                 and uncertainty in retail these past few years, and
document you’re now reading.                                          more than enough “sky is falling” blog posts about
                                                                      how everything is changed and nothing will ever be
This year’s Top 100 highlights how very different retail
                                                                      the same, retail is dead, the kids these days only buy
is 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 course
retail 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 100
influence, even as it remains a moving target that re-
                                                                      in the hope that it starts any number of meaningful
tailers are trying desperately to figure out. Last year’s
                                                                      conversations with your team.
No. 1 — the economy — is still in the top five, and still
casts a shadow over everyone and everything beneath it.                                                            James Bickers
                                                                                                                   Senior Editor
But there is a new air of optimism in retail, and we
                                                                                                      Retail Customer Experience
can 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.com



Top 100 2012 ©2012 Networld Media Group. 13100 Eastpoint Park Blvd., Louisville, KY 40223. (502) 241-7545. All rights reserved. No part of this
publication may be reproduced without the express written approval of the publisher. Viewpoints of the columnists and editors are their own and
do not necessarily represent the viewpoints of the publisher.


                                                                                                                                                  3
1    AMAZON
For those who remember Amazon as a
really cool online bookstore, the view
from 2012 shows just how far the re-
tailer — and the world — has come.
What once seemed a promising fad is
now an accepted way of life. Amazon’s
revenues more than doubled in the
past four years, from $14 million in
2007 to $34 million in 2010, and show
little sign of slowing down.

In the past year, Amazon introduced
no fewer than four potentially game-
changing products: Amazon Cloud,
AmazonLocal, Kindle Fire and the
Price 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 tablet
the year in March with an aggressive
                                          could capture as much as $2.5 billion      in September. The latter was pointedly
rollout of cloud products that included
                                          by 2014.                                   positioned as a direct rebuke to the
Elastic Beanstalk, CloudFormation,
                                                                                     iPad 2 and its hefty price tag, as if to
Amazon Cloud Player and Amazon            In June, AmazonLocal launched, and the
                                                                                     suggest that Steve Jobs’ parting gift was
Cloud Drive. Users can store music        daily deals service with region-specific
                                                                                     essentially a $199 device dressed up in
and other digital content in the cloud    deals delivered by LivingSocial quickly
                                                                                     a sleek design and seductive logo. The
and 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 with
sliver 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
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 used
and called on Amazon to cancel the         cent to $10.9 billion, powered in part      Amazon’s cash to expand the business
program. “Small businesses are fight-      by the new generation of Kindle book        into the digital domain and invest in
ing every day to compete with giant re-    readers and preorders for Kindle Fire.      backend infrastructure to support all
tailers, such as Amazon,” she said in a    So where did the money go? Amazon           the digital media he expects users to
statement, “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 deals
too far.” Pundits, commentators, late-     thing, Amazon invested nearly $1.6          with Twentieth Century Fox and PBS
night comics and principled consumers      billion — double what it spent the year     to stream movies and TV shows from
warned of a future in which the entire     previous — toward “fixed assets, in-        their vast libraries. (This is in addition
physical 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     APPLE
Despite 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 desktop
computers to the more manageable environment of iOS devices such as the iPad,
hastening the day when general-purpose computers are the province of software
engineers and tech enthusiasts.

The year began with an effort to broaden the iPhone market beyond a single carrier
by terminating Apple’s exclusive partnership with AT&T and announcing that the
iPhone 4 would be available through Verizon. January also saw the launch of the
Mac 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 Peak
data transfer technology under the name Thunderbolt. The iPad 2 came out in
March even as competitors were struggling to deliver an answer to the original.

In October Apple announced a breakthrough set of free cloud services that keep
stored 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 million
iPods, 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 of
Steve Jobs on Oct. 5, the day after Apple introduced the iPhone 4S. Under the guidance of corporate America’s most high-profile
practicing Buddhist, Apple made function not merely inseparable from form, but indistinguishable from it. In Jobs’ hands, the
two truly became one.

                                                                                                                                5
3     DISCOUNTING
Discounting dates back to the days of
open-air bazaars, but the proliferation
of e-commerce and smartphones now
puts the neighborhood boutique in di-
rect competition with the biggest dis-
counts offered by any vendor anywhere
in the world. And vice versa.

The practice is bleeding profits from
traditional retailers, with daily deals
and online rivals inflicting most of the
damage. Best Buy, to cite but one high-
profile example, saw its shares plunge
more than 15 percent after reporting
a 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 Dion
Only 20 percent of new customers lured                                                 of the retail consultant Dionco puts it,
                                            tional strategies that do not make sense
in by daily deals ever return to make                                                  many discount hunters “don’t bother to
                                            for the category and are eroding their
a 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 deals
Despite this, the vicious cycle is per-     While strategic discounting can be an      are never redeemed. “That really leads
petuated by retailers who feel the need     effective quick-fix for moving volume      me to believe that it’s the thrill of the
to promote, “but know that increasing       in a struggling economy, the fix leaves    hunt. For some consumers, it is just
discounts 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
Retail sales are expected to grow about
10 percent in 2012, a slightly optimistic
uptick from the 8 percent expected in
2011. One unpredictable factor that
might lower 2012 sales is the sovereign
debt crisis in Europe, which could keep
markets volatile and consumers con-
cerned about the future. Still, a reliable
disconnect between consumer confi-
dence and actual spending bodes well
for retailers. Sales began to climb in
October 2011, due in large part to a 3.7
percent jump in electronics sales (the
largest monthly increase in two years)
even as confidence fell to its lowest lev-
                                              5     MULTICHANNEL INTEGRATION
el 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 landscape
If the euro crisis spins out of control,
                                             through whatever channel, device, or touchpoint he wants. Such an environment
fear of a new credit crunch may deter
                                             has made multichannel, by default, the new standard operating model for retail.
spending by business owners. Another
factor that could lower next year’s fore-    While it can be argued that mobile devices and multichannel commerce have made
cast is slower-than-expected growth          it easier than ever for retailers to reach customers, they have also made it easier to
of 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 Kees
If lower wages and high unemploy-            De Vos, “rather than focusing on channel-centric approaches. Companies relying
ment 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 customers
growth, 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 behave
order of buyers who are more price-          in a multichannel fashion today,’” he notes. “They say, ‘I’m gonna go online and
conscious 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 Vice
Chairman 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 as
ences 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
rounds of this fight. M-commerce
 6     M-COMMERCE                                                                     may prove to be the salvation of brick
Technology companies and retailers                                                    and mortar after all. Cyriac Roeding,
alike have hailed 2011 as the year of                                                 founder of the location-based mobile
mobile shopping. Consumers are fast                                                   shopping app Shopkick, believes mo-
approaching the tipping point in their                                                bile commerce provides merchants
embrace of smartphones and tablets to                                                 with unprecedented opportunities to
access apps, discounts, price compari-                                                bring personalization and one-on-one
son information, and payment mecha-                                                   personal treatment back to the in-store
nisms. According to Email Marketing                                                   purchase experience.
Reports, mobile devices such as tablets
                                                                                      Jani Strand, a spokeswoman for teen
and smartphones became the highest-
                                                                                      apparel chain American Eagle, said,
selling consumer electronic device cat-
                                                                                      “Our customers are rarely without their
egory in 2011, amounting to 115 million
                                                                                      smartphones, so any engagement that
units 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 their
A much-cited report from comScore                                                     day’s shoppers are so umbilically tied
                                          smartphones to make a purchase while
found that two-thirds of all smart-                                                   to their phones, according to Master-
                                          in a store, according to a less-noted
phone 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 without
phones, 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 the
taking product pictures, or locating a    technology to inflict blows on physi-       phone has become more addictive than
retail store, and that 38 percent have    cal stores. But we are still in the early   the most addictive substance out there.”




 7     ASSORTMENT LOCALIZATION
As 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 concept
line, big-box retailers are moving to     assortment planning, flow modeling,         of store assortment localization, Seidl
smaller stores to reduce under-utilized   price optimization, promotion opti-         notes that retailers have been able to
space and stay profitable. At the same    mization and size optimization to cre-      boost sales by 40 percent to 50 percent
time, 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 with
chase in-store, shoppers will increas-    their shoppers, they can efficiently ca-
                                                                                      customers as the economy puts more
ingly turn to their mobile devices to     ter to each store’s particular needs.
                                                                                      pressure on retailers to manage their
check for better pricing or selection
                                          John Seidl, a partner at Kurt Salmon        inventories closely. Scott Welty, vice
before making that purchase.
                                          Associates, argues that, as U.S. consum-    president of retail industry strategy for
As a counter to both of these trends,     ers become more diverse, they tend to       JDA Software Group, notes that the

                                                                                                                                8
trend toward shoppers using brick-
and-mortar locations as showrooms
requires retailers to stock the opti-
mal localized assortment range and
maintain appropriate quantities for
each store. “Having the right item in
the right store at the right time helps
maintain and improve customer loy-
alty,” says Welty. “Providing a superior
customer experience by ensuring that
‘available to promise’ meets the de-
mand and geographic location of the
customer, no matter how or where they
ultimately buy the merchandise.”




 8     EXPERIENCE DESIGN
In theory, experience design — or user      UX design is a highly multi-disci-        Emerging trends in UX design include
experience (UX) design — operates           plinary field, incorporating aspects of   designs that can adapt and perform
from the premise that consumers wish        everything from psychology, anthro-       within various media devices, gestural
to 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 increased
ily on the quality of the user experience
                                                                                      the importance and impact of each
rather than functionality. This emerg-                                                customer experience. Because custom-
ing trend in “user-centered” design                                                   er expectations and experiences are
informs the latest in everything from                                                 rapidly shared and distributed between
intelligent buildings to Facebook apps,                                               peers, it is more important than ever
iPhone games and digital equipment.                                                   that retailers engage in meaningful
                                                                                      interactions with customers to make
Mobile 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 Whitney
Applying experience design principles                                                 Hess’s 10 guiding principles can be
to mobile, for example, would strive to                                               applied to both physical and virtual
eliminate clutter while requiring fewer,                                              world projects irrespective of goals,
simpler steps to accomplish a task, thus                                              constraints, or resources. Her first
providing a more streamlined and tar-                                                 principle is: “Stay out of people’s way.
geted experiences.                                                                    Pave the road for an easy ride.”

                                                                                                                             9
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 the
helped set into motion with the unveil-                                                least Apple-like piece of software the
ing of the iPod in 2001. Two years later,                                              company produces. While version 10.5
Apple 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 agree
During the past year, iTunes has faced
                                            Ltd.) in assembling an offering of some    the software must trim down and get
some stepped-up competition from
both 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 its
that lets users buy songs through the       is coming at iTunes from a different       market dominance. Besides Google
Android 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 startup
an upgraded shopping system that al-        more than a million subscribers and a      DoubleTwist and a Seattle-based outfit
lows 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 claim
them directly to their music players.
                                            petitors by issuing frequent upgrades      the hearts and payment methods of
Google 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 COUPONS
According to a study by Group SJR and Liz Claiborne Inc. conducted among                                                 8 0 1
smartphone and tablet owners between the ages of 18 to 64, half said they
planned to scan barcodes more often to get additional information about
a product, suggesting that barcode scanning is poised to go mainstream
within 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-store
purchasing 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 barcodes
will drive new mobile marketing campaign concepts in the next year. The majority of executives surveyed
believe 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
Prosper Mobile Insights has found           venient and useful,” while 42 percent          facing QR code acceptance has been
that a majority of survey respondents       had used their smartphone or tablet to         that most mobile phones do not come
had used their smartphones or tablets       scan a barcodes or present a text mes-         equipped with the requisite scanning
for 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 be
ers 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 the
evolution of the Web, the deluge of user-generated content — from product
reviews and comments posted on news stories, to the glut of unguarded
personal information offered up by users of Facebook, Twitter, YouTube,
et al — amounts to a behavioral marketer’s dream come true. All that
data, freely given, is rich in the sort of detail that behavioral marketers
prize in selecting which advertising messages are displayed to that in-
dividual. The algorithms Amazon developed to suggest items of interest
based on a particular user’s browsing habits and purchasing history may
soon 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
REED HASTINGS

On the night of Sunday, Sept. 18, 2011, Netflix co-        tumble that erased approximately $12 billion from the
founder and CEO Reed Hastings sent an email to             company’s market value.
the company’s 24.6 million subscribers that began: “I
messed up. I owe you an explanation.”                      Hastings ended 2001 by an-
                                                           nouncing he would take a
The blunder had come three months earlier when cus-        33-percent cut in pay, while
tomers who opted for the company’s DVD-by-mail             assuring investors that “we
and 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 option
tained 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 of
henceforth be a separate entity called Qwikster, ac-       The Motley Fool marveled that Netflix shareholders
cessible via its own website for an additional fee —       had seen a remarkable 25 percent surge in the first
a move that drew comparisons to the launch of New          week of the new year. Munarriz speculated that shares
Coke from the instant Hastings clicked “send.” Hast-       had bounced back following some well-deserved
ings was roundly mocked in the business trades and         tax-loss selling, and the company’s revelation that
on Saturday Night Live for his arrogant, if not outright   it logged some 2 billion hours of streaming content
incompetent, disregard for his core customers. He          during the last quarter. Netflix may have received an
even neglected to acquire the @Qwikster handle on          unexpected and counter-intuitive boost when Time
Twitter, which was then being used by a man named          Warner announced a 56-day waiting period (double
Jason Castillo, whose profile pictured the Muppet          the previous 28 days) before offering its DVDs to
Elmo smoking a joint. No word on whether Castillo          rental companies at bulk discount prices. While this
managed 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 rely
went back to the confessional to renounce Qwikster         primarily on physical rentals. Netflix’s emphasis on
as a non-starter. In the meantime, the company(s) had      streaming may yet put Hastings on the shortlist for
shed 800,000 angry subscribers, and saw a 76 percent       Comeback CEO of the Year.



                                                                                                                      12
13      RETAIL CRM
The future of retail CRM — both its potential and pitfalls — is writ
large on the walls of Facebook. Amassing more than a trillion page
views per month, Facebook is an immense source of CRM data with
unlimited 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 supercomputers
such as IBM’s “Jeopardy!” champion Watson to applications devel-
oped by CIA-friendly organizations for monitoring potential terrorist
activities. However, with the release of its Gateway for Facebook CRM solution this past summer, retail business analytics leader
MicroStrategy 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 POS
It’s no exaggeration to say that Facebook    Point-of-sale systems have be-
represents an unprecedented leap in          come the true command centers
the history of human interaction. As         of in-store operations, providing
of 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-on
than a trillion page views per month.        purchases, streamline inventory
Facebook 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 soon
a conversion rate of only 1.2 percent,       to use that term — are already facing
suggesting that Facebook also repre-         threats from mobile POS platforms           2011 released by            RIS News
sents the world’s richest source of un-      such as smartphones and tablets. The        Mobile, transaction systems provide
tapped 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
16      IN-STORE WEB ACCESS
In an effort to draw customers into stores as the primary means of merchandise
distribution, some retailers are offering in-store Web access through self-service
kiosks and workstations to engage customers, provide convenience and increase
satisfaction. This past year, JCPenney refined its Findmore technology with 42-inch
interactive plasma-screen kiosks linking shoppers and sales associates to its 250,000
online products. The media-rich kiosks provide editorial content and highlight key
seasonal trends while incorporating social-media-like features, such as permitting
shoppers 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 by
purchasing items online and having them shipped to their home or to the store for
later 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     MILLENNIALS
Finding themselves with more time than money and armed with total pricing transparency and unlimited selection, Millennial
shoppers (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 shopping
trip as a mission. They research online and know exactly what they’re going to buy when they arrive at the store. TechCrunch
sees 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
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 PAYMENTS
According to the Loyalty Marketer’s Associa-          Although U.S. customers
tion, customer loyalty, rather than acquisition,      have been relatively slow
is the key to sustainable growth. Business con-       to adopt NFC-equipped
sulting firm Protiviti ranks customer loyalty as      smartphones or utilize the
the top non-financial business challenge compa-       contactless payment cards
nies will face in 2012. Yet businesses report that    they already carry in their
retaining and engaging customers remain their         wallets, blogger and prin-
greatest challenges. While daily-deal sites such as   cipal analyst at Forrester
Groupon and LivingSocial continue to generate         Research Brian Walker
the greatest buzz, marketers suspect that price-      predicts we will soon see
based strategies are taking focus away from the       customers waving NFC-en-
real prize, customer loyalty. The emerging model      abled smartphones across
for success uses data gathered from loyalty pro-      interactive display ads to
grams to engage with customers across all touch-      automatically add pictured
points 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
22       COSTCO                              23       NEIMAN MARCUS
Costco’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, Neiman
likely to see growth, according to Jeff      Marcus was slow to embrace social
Weidauer at retail industry marketing        media. But in the run-up to the 2011
firm Vestcom International. Hofstra          holiday season, the high-end retailer
University business professor Barry          got into the spirit in a big way by host-
Berman recommends Costco’s strategy          ing a flurry of digital campaigns aimed
of opportunistic buying to any “smart        at boosting its online presence. As of
retailer.”                                   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 which
By 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 customers
seen 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, Neiman
to the wholesale club operator for deals     Marcus launched a Facebook design contest encouraging fans to assemble virtual
on food and necessities. The Issaquah,       outfits from items in the collection. The ensembles were judged by Rachel Zoe and
Wash., 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 the
billion, 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 REVIEWS
Online marketers recognize how effective user-generated content (UGC) can be in
strengthening search engine optimization strategies. According to comScore ARS,
UGC product reviews are every bit as persuasive and effective (if not more so) than
far costlier advertising media, including display and TV. User-generated product
reviews have proven to be one of the most highly effective tools of social media
marketing, allowing marketers to tweak and modify their messages — and help
businesses increase their profits in the process. For retailers, UGC provides unbiased
and unguarded feedback from actual customers. The next logical step for many
marketers involves gleaning data from “micro UGC” — short, low-involvement forms
of user-generated content such as Facebook status updates, “likes,” star ratings on
Netflix 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
25      TIFFANY                              26       STARBUCKS
According 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 and
from the sale of engagement rings            a mobile payment app that has become
alone, helped along by price increases       the early standard for m-commerce
and 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 for
lion 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 of
tion since the Great Depression. The         fuss and a maximum of utility — two
world’s second-largest jewelry retailer      qualities that watchers agree are es-
became a likely takeover target after        sential to supplanting the use of cash
Swatch Group AG terminated its 20-           and cards. Introduced in January 2011,
year watch partnership with the jeweler      the app racked up an impressive three
16 years early. The company reported a       million transactions in its first three
63 percent jump in fiscal third-quarter      months. Additionally, by making its
2010 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 percent
Americas, which accounted for the            step of partnering with a carrier or card   year-to-date gain in December despite
bulk of its 21 percent revenue growth.       brand. Starbucks was also an investor       spiraling coffee prices worldwide.




27       NORDSTROM
Now in its 110th year, Seattle-based Nordstrom continues to
live by its one-sentence doctrine: “Use good judgment in all sit-
uations.” The fourth-generation, family-run department store
is legendary in the retail industry for its emphasis on customer
service above all else. In a 2011 consumer survey forecasting
holiday spending, the upscale specialty retailer came out on
top among department stores in online shopping, more than
doubling its online share from December 2010. Rather than
defining store space by brand, Nordstrom groups merchandise
into so-called lifestyle sections, making it easier for shoppers
to put together outfits, says retail analyst Jennifer Black. As a
result, 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 a
Nordstrom buyers’ meeting. “It was like an invite to the White
House,” he said.

                                                                                                                                     17
RON JOHNSON

The 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-chain
force behind the Apple Store in the relatively stodgy       operations, and — as he did at Target — bringing in
retail environment at JCPenney. The Apple Store con-        exclusive lines from high-end
cept was a success, he contends, because rather than        designers like Michael Graves.
tweaking the traditional model, Apple started from          The retailer is also eliminating
scratch 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 with
sleekest, most-coveted product since Cadillacs came         cents on price tickets in certain
with tailfins.) In a piece written for The Harvard Busi-    cases. For instance, an item that
ness 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 indicate
you 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 retail
in various ways, and Amazon carries them all — and          for Apple — staffed by trained employees who can
doesn’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 the
to 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, ‘How
Since 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 store
brand and increase the retailer’s appeal to younger         that’s going to do $15 million a year?’ They should be
more affluent customers. Toward that end, Johnson           asking, ‘How do we reinvent the store to enrich our
is emphasizing store-within-store formats, partner-         customers’ lives?’”
ing with retailers such as the Moët Hennessy - Louis




                                                                                                                      18
28      DISNEY                              29       DIGITAL SIGNAGE
Following record sales and profit, the
Walt Disney Company, owner of the
namesake theme parks and ESPN sports
network, increased its annual dividend
for 2011 by 50 percent, the most in at
least 20 years. The Burbank, Cali.-based
company, which also owns Marvel
Entertainment and the ABC TV net-
work, is returning cash to investors
through stock repurchases as well,
buying back $5 billion of shares in the
year ended Oct. 1. The Steven P. Jobs
Trust, Disney’s largest shareholder,
will reap $82.8 million, an increase of
$27.6 million based on the 138 million
shares held by the estate of Apple’s late
co-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&M
The world’s second-largest clothing re-     Grecian buttons, and fluorescent mi-         director Karl Lagerfeld in 2004, and
tailer, Hennes & Mauritz AB, recently       cro-minis. H&M creative adviser Mar-         this most recent partnership between
announced its “Versace for H&M” line        gareta van den Bosch sees “design and        the Swedish fashion giant and a luxury
featuring 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 Chief
from $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 to
length “goddess” gowns dotted with          since partnering with Chanel creative        reach $700 million by 2014.

                                                                                                                                  19
31      INTERACTIVE STOREFRONT WINDOWS
Saks Fifth Ave. and Starbucks were          content, tweets from around the Web        all the iPads were able to talk “to each
among those pushing the boundar-            and user-submitted photos with the         other to produce elegant fades and
ies 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 and
San Francisco encouraging holiday
shoppers to make charitable donations
to Toys for Tots by scanning a QR code.
Displays fronting Starbucks stores in
Toronto and Vancouver encouraged
passers-by to assemble their favorite
Tazo teas using gesture controls via a
vinyl screen and projector, while Saks
and Stylelist.com tapped downtown
agency Gin Lane Media to create a
three-window display featuring 64 iPad
2s and nine 27-inch flat-panel Cinema
Displays for the high-end retailer’s
flagship Fifth Avenue store. The display
featured 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
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 $700
million in an initial public offering, generating 30 percent more than
the company originally sought, then saw its value balloon to more
than $16 billion on its first day of trading on the Nasdaq. LivingSo-
cial is Groupon’s most logical competitor. Backed with hundreds of
millions of dollars in funding, primarily from Amazon (for which it
provides the deals for AmazonLocal), the 2-year-old deal-maker says
it 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       YELP
San Francisco-based user review web-          on companies that are generating            wrinkle here is that Yelp relies on these
site Yelp filed to raise as much as $100      losses,” says Tom Taulli, founder of        rivals to send visitors to its site. Google
million in a 2012 initial public offering,    IPOByte.com and author of “Investing        alone accounted for more than half of
seeking to become the latest unprofit-        in IPOs.” “No one knows how long this       Yelp’s traffic in the first nine months of
able Internet company to go public.           window is going to last, so I think Yelp    2011. The search engine’s dual role as
Co-founded by former PayPal Inc. ex-          is going to get out as fast as possible.”   both competitor and ally may put Yelp
ecutive 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 source
reviews created by its 61.1 million           Facebook and Yahoo!, all of which sell      of customers is coming from their
users. “Investors are open to taking bets     online ads to local businesses. The         competitor.”

                                                                                                                                    21
36      BERGDORF GOODMAN
Online merchants are forcing even the highest-end stores to offer up bar-
gains to their well-heeled clientel who are relatively insulated from the job
and housing markets. “At the luxury end, discounting has become very
mainstream because of the Gilts of the world,” said Andrew Sacks of luxury
research firm AgencySacks, referring to Gilt Groupe, the online discounter
for designer fashions. At the height of the 2011 holiday season, Bergdorf
Goodman’s website listed more than 70 pages of discounts on designer
fashions, some marked down as much as 40 percent. Bergdorf Goodman
has 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 design
campaign, it may be the first to board the crowdsourcing bandwagon.




 37      AT&T WIRELESS                           38       REI
The collapse of AT&T’s $39 billion bid for      REI has teamed up with U.S. Bank to make credit card approval easier and faster
T-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 to
challenge market leader Verizon Wireless.       instantly be approved for the REI Visa card and begin using their reward points
T-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,” says
to cover 97 percent of Americans. How           Dominic Venturo, chief innovation officer of the bank payment service division at
AT&T will make up that difference isn’t         U.S. Bank. REI was deemed the best fit to try out the mobile credit card application
yet known, but AT&T needs to act quick-         process because of the company’s mission. “Eliminating paper was important to
ly, 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 app
with 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 spectrum
assets that would have still been available
to AT&T are now off the table. Its remain-
ing options are time-consuming, expen-
sive and risky, says Cowen & Co. analyst
Colby Synesael. AT&T can either seek
to buy spectrum from another company,
wait for the government to auction more
frequencies or try to squeeze more capac-
ity out of its current airwaves.

                                                                                                                                   22
39        POP-UP SHOPS
Although pop-ups have moved up in the world, for some the term
still has downmarket connotations. The first generation of pop-
ups often consisted of little more than shelving and a cash register
in empty mall space. In recent years, retailing stalwarts breathed
new life into the format. Procter & Gamble, for example, operated
a 4,000-square-foot pop-up on 57th Street in Manhattan that drew
14,000 visitors in the 10 days it was open. The store had no cash
registers because everything was free — including a full CoverGirl
makeover or a Head & Shoulders wash and blow dry. The P&G
pop-up — the company’s marketing executive Nataraj Iyer prefers
the term “interactive experience” — represents a new iteration in
the 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 company
retailing itself. Strictly speaking, deal-   was acquired by Amazon.com in 2010
of-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 similar
and 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 offers
pre-sell this excess inventory in hopes      tory updates. It wasn’t until such sites    could grow from $873 million in 2010
of 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       IKEA
Ikea is developing its website to have       product and then figuring out how to        stores in North America by 2013. Ikea
a 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 growth
tomers to select items they want in          it to produce items at less cost. Ikea,     in the second-largest economy, says
the store and have them delivered to         which updates its collection of about       CEO Mikael Ohlsson. The expansion
their home without having to gather          10,000 products with more than 2,000        in China will also allow the company
them from the outlet’s warehouses.           new items a year, will continue invest-     to reduce its reliance on Europe, which
The world’s largest furniture retailer,      ing in products and enlarging stores        is suffering from a slump in consumer
known for setting a price point for a        in the coming year, adding 50 more          confidence.

                                                                                                                                 23
BRIAN DUNN

Recent headlines tell a dismal story: “Best Buy’s           zon.com with Best Buy Marketplace, a new service
Dunn Should Be Next CEO Fired” wrote Douglas                meant to challenge the world’s largest e-commerce
A. McIntyre on 24/7WallStreet.com. Then, just a few         company. The effort addresses challenges shared by
weeks 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-mortar
contributor Larry Downes, that garnered some 15,700         operations while simultaneously
Facebook 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 Marketplace
Recent 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 Best
assumed the CEO mantle in June 2009. Throughout             Buy’s plans to overhaul itself. Despite Dunn’s upbeat
his reign, Downes charges, Dunn has pursued a strat-        assurances to the contrary, Amazon.com has badly
egy 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 two
years. Margins, however, sank, with net income drop-        years, while Amazon’s are up 39 percent, and the S&P
ping by 29 percent. For the quarter ending May 28,          500 is higher by 12 percent over the same period. The
2011, the firm posted a sales increase of only 1 per-       market’s stunned response to Best Buy’s third quarter
cent 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’s
nearly enough to keep up with Amazon, which con-            tenure may have come just days before Christmas
tinues 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
42       TARGET
After spending two years preparing to                                                  accounted for more than half of the
take control of its website from Ama-                                                  major outages on the top 100 sites in
zon.com, a prominent link (“learn all                                                  the U.S. by revenue, according to Web
about what’s new”) on Target’s home                                                    monitor AlertBot. Still, e-commerce
page 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 made
ning. Three weeks later, the release of                                                the right move. “The complexity of
a collection from Italian fashion house                                                building a large-scale e-commerce site
Missoni brought a rush of visitors that                                                is really difficult,” he said. “But, at the
crashed the site for most of the day. A    sentence statement that Target.com          end of the day, Target made the right
month later, the site went down again      president Steve Eastman had left the        decision. Amazon is a competitor, and
during peak shopping hours. Later          company to “pursue other opportu-           you don’t want them controlling your
that day, Target announced in a one-       nities.” All told, Target.com crashes       e-commerce business.”




43       LULULEMON                         44       TABLET COMPUTERS IN-STORE
Vancouver-based athletic apparel com-      An estimated 25 percent of all tablet       learning curves for new hires, more
pany 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 help
that sent its competitors stumbling        of those enterprises were retailers. Re-    customers in more store departments
over 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 computing
winning strategy, Nike’s Salvation         solutions connect retail sales associates
chain of athletic-wear stores intro-       with a wealth of knowledge, including
duced $64 training capris featuring a      product information, learning tools,
yoga-studio format and similar logo.       real-time product inventory, customer
Gap’s Athleta stores began selling $60     reviews and ratings, updated price and
women’s yoga tops and offering free        promotional information, as well as the
yoga classes — another Lululemon in-       ability to print or email any of these.
novation.                                  Unlike other business solutions that
                                           require a great deal of infrastructure
Nordstrom’s Zella line, dedicated to       and integration efforts, tablet comput-
yoga attire, went so far as to hire a      ing solutions require minimal impact
Lululemon alum to launch the effort.       on existing systems and are often more
Since opening its first store in the       reliable than other solutions. In-store
United States in 2003, Lululemon’s ag-     tablet computing systems provide re-
gressive strategy has paid off with rev-   tailers with consistent sales processes
enues 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
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/CAREMARK
Reversing two years of decline, CVS/          new contract wins. Furthermore, chief         up for grabs. With 43 percent of CVS
Caremark expects 2012 profits to grow         rival Walgreen Co. has failed to replace      stores located within one mile of a
11 percent to 15 percent based on its         its contract with employee-benefits           Walgreens (85 percent are within five
acquisition of Universal American             manager Express Scripts. Valued at            miles), CFO Dave Denton expects to
Corp.’s Medicare Part D business, a deal      more than $5 billion in annual drug           pick up as many as 23 million of those
with 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 SECRET
Victoria’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 direct
ed 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. In
respect to our brands, no obvious im-                                                       March, the company introduced three
mediate close competition.” The Co-                                                         versions of its “Incredible” bra, a super-
lumbus, Ohio-based specialty apparel                                                        soft push-up that is more comfortable
retailer posted a 12 percent gain in                                                        than earlier versions. An accompany-
comparable sales for the 11 months                                                          ing Incredible fragrance is a mixture
through December 2011. While Lim-                                                           of magnolia, pear and sandalwood and
ited 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 busts
with U.S. stores registering a comp sales                                                   by as much as two cup sizes.

                                                                                                                                      26
48        PUBLIX                             49       DICK’S SPORTING GOODS
Publix Super Markets has offered ex-         Dick’s Sporting Goods dates back to 1948 when Richard Stack (father of current
ceptional 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 namesake
nomic downturns in history without           stores in 42 states and 81 Golf Galaxy stores in 30 states. Dick’s still has abundant
laying off a single employee. Publix is      top-line growth opportunity with plans for 400 more stores over the next several
the country’s largest employee-owned         years to build out its presence on the West Coast. Dick’s has succeeded where other
supermarket and the fourth-largest           big-box sporting goods efforts have failed by catering to serious enthusiasts who
operator 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 within
the company — launched his service-
oriented supermarket in 1930 and im-
mediately embarked on an expansion
effort that has yet to abate. Publix con-
tinues to grow at a time when many
other businesses are stagnating. The
retailer’s latest growth efforts include a
hybrid store that melds its GreenWise
organic format with its more conven-
tional stores. Publix’s second-quarter
2011 net income rose 9.7 percent, to
$382.4 million. Total sales increased
5.8 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
51       LEGO
The 76-year-old, family-owned Dan-
ish toy maker topped $1 billion in U.S.
sales for the first time in 2010 and was
on track to repeat that performance in
2011. The snap-together plastic brick
empire has grown and evolved dramati-
cally to include robotics, films, video
games, theme parks — even a business
consultancy to foster creative think-
ing — but all focused on boys. On New
Year’s Day 2012, Lego introduced Lego
Friends, a full line of 23 different prod-
ucts aimed at girls aged 5 and up. “This
is the most significant strategic launch
we’ve done in a decade,” said Lego
Group CEO Jørgen Vig Knudstorp.
                                              52      HIGH-TECH DRESSING ROOMS
“We want to reach the other 50 percent       Shoppers at San Francisco’s Industrie Denim no longer need to venture outside the
of the world’s children.” The company’s      fitting room to ask friends (or strangers) if the jeans they’re trying on make their
commitment is evidenced by a $40             butts look big. Nor do they have to take anyone else’s word for it. They can see for
million global marketing push behind         themselves using the closed-circuit “Booty Cams” installed in the retailer’s dress-
the launch.                                  ing rooms. (Store manager Rob Jolin is quick to assure shoppers that the process is
                                             completely private.) Some of luxury retailer Prada’s dressing rooms employ plasma
                                             mirrors similar to the Booty Cams, as well as doors that go from opaque to trans-
                                             parent. A growing number of clothing retailers are using such gee-whiz technology
                                             to entice customers into trying on clothes and get them excited about shopping.
                                             Consumer psychologist, Kit Yarrow, said the high-tech dressing-room tools are as
                                             much about customer assistance as they are marketing. “What it tells consumers,”
                                             she says, “is that a store is trying and they’re thinking.”




 53       QUICKRESPONSE (QR) CODES
At first glance, QR codes seemed a sure bet to be the next big thing. So why aren’t they? They’re everywhere: on billboards,
magazine ads, business cards, T-shirts, shop windows, every variety of signage — even on trees and playground equipment in
public parks. Yet, according to a recent survey conducted by Archrival research group, nearly 80 percent of college students
across the U.S. had no clue how to scan a sample QR code when presented with one. No clue and little interest. Nearly 75 percent
said they were unlikely to scan a QR code in the future. Go off campus and QR’s prospects are a little brighter. A recent survey
by Prosper Mobile Insights found that nearly one-third of general-population smartphone and tablet users have scanned QR
codes to access in-store coupons. But unless someone comes up with an application that will catch fire with the cool kids, the
only place you may see those now-ubiquitous do-hickeys — often described as barcodes on steroids or a checkerboard on LSD
— will be in the next millennium edition of Trivial Pursuit.

                                                                                                                                28
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

  • 2. DRIVE CUSTOMER ENGAGEMENT AND BUILD LOYALTY Today consumers and businesses rely on smartphones, tablets and other Wi-Fi enabled devices for a wide array of personal and commercial applications. Now Motorola’s Proximity Awareness & Analytics Solution makes it possible to use these devices to improve consumer engagement and improve associate productivity in WLAN environments. Use your Wi-Fi infrastructure to capture shopper attention with personalized promotions and in-store coupons. Enable applications that help drive employee productivity and service delivery. Get the data you need to turn browsing into buying – and prospects into profits. Learn more at: motorolasolutions.com/shopperengagement MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license. All other trademarks are the property of their respective owners. © 2012 Motorola Solutions, Inc. All rights reserved.
  • 3. WELCOME to the 2012 edition of Marcus, Nordstrom all in the Retail Customer Experience Top 100, sponsored the top 30? And multichan- by Motorola! nel and m-commerce initia- tives, which have been talked Once again, our team of retail experts sat down to about for years, are actually identify 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 based on their influence and impact on customer experi- There has been a lot of fear ence, and the resulting rankings are collected in the and uncertainty in retail these past few years, and document you’re now reading. more than enough “sky is falling” blog posts about how everything is changed and nothing will ever be This year’s Top 100 highlights how very different retail the same, retail is dead, the kids these days only buy is 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 course retail 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 100 influence, even as it remains a moving target that re- in the hope that it starts any number of meaningful tailers are trying desperately to figure out. Last year’s conversations with your team. No. 1 — the economy — is still in the top five, and still casts a shadow over everyone and everything beneath it. James Bickers Senior Editor But there is a new air of optimism in retail, and we Retail Customer Experience can 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.com Top 100 2012 ©2012 Networld Media Group. 13100 Eastpoint Park Blvd., Louisville, KY 40223. (502) 241-7545. All rights reserved. No part of this publication may be reproduced without the express written approval of the publisher. Viewpoints of the columnists and editors are their own and do not necessarily represent the viewpoints of the publisher. 3
  • 4. 1 AMAZON For those who remember Amazon as a really cool online bookstore, the view from 2012 shows just how far the re- tailer — and the world — has come. What once seemed a promising fad is now an accepted way of life. Amazon’s revenues more than doubled in the past four years, from $14 million in 2007 to $34 million in 2010, and show little sign of slowing down. In the past year, Amazon introduced no fewer than four potentially game- changing products: Amazon Cloud, AmazonLocal, Kindle Fire and the Price 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 tablet the year in March with an aggressive could capture as much as $2.5 billion in September. The latter was pointedly rollout of cloud products that included by 2014. positioned as a direct rebuke to the Elastic Beanstalk, CloudFormation, iPad 2 and its hefty price tag, as if to Amazon Cloud Player and Amazon In June, AmazonLocal launched, and the suggest that Steve Jobs’ parting gift was Cloud Drive. Users can store music daily deals service with region-specific essentially a $199 device dressed up in and other digital content in the cloud deals delivered by LivingSocial quickly a sleek design and seductive logo. The and 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 with sliver 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. 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 used and called on Amazon to cancel the cent to $10.9 billion, powered in part Amazon’s cash to expand the business program. “Small businesses are fight- by the new generation of Kindle book into the digital domain and invest in ing every day to compete with giant re- readers and preorders for Kindle Fire. backend infrastructure to support all tailers, such as Amazon,” she said in a So where did the money go? Amazon the digital media he expects users to statement, “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 deals too far.” Pundits, commentators, late- thing, Amazon invested nearly $1.6 with Twentieth Century Fox and PBS night comics and principled consumers billion — double what it spent the year to stream movies and TV shows from warned of a future in which the entire previous — toward “fixed assets, in- their vast libraries. (This is in addition physical 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 APPLE Despite 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 desktop computers to the more manageable environment of iOS devices such as the iPad, hastening the day when general-purpose computers are the province of software engineers and tech enthusiasts. The year began with an effort to broaden the iPhone market beyond a single carrier by terminating Apple’s exclusive partnership with AT&T and announcing that the iPhone 4 would be available through Verizon. January also saw the launch of the Mac 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 Peak data transfer technology under the name Thunderbolt. The iPad 2 came out in March even as competitors were struggling to deliver an answer to the original. In October Apple announced a breakthrough set of free cloud services that keep stored 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 million iPods, 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 of Steve Jobs on Oct. 5, the day after Apple introduced the iPhone 4S. Under the guidance of corporate America’s most high-profile practicing Buddhist, Apple made function not merely inseparable from form, but indistinguishable from it. In Jobs’ hands, the two truly became one. 5
  • 6. 3 DISCOUNTING Discounting dates back to the days of open-air bazaars, but the proliferation of e-commerce and smartphones now puts the neighborhood boutique in di- rect competition with the biggest dis- counts offered by any vendor anywhere in the world. And vice versa. The practice is bleeding profits from traditional retailers, with daily deals and online rivals inflicting most of the damage. Best Buy, to cite but one high- profile example, saw its shares plunge more than 15 percent after reporting a 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 Dion Only 20 percent of new customers lured of the retail consultant Dionco puts it, tional strategies that do not make sense in by daily deals ever return to make many discount hunters “don’t bother to for the category and are eroding their a 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 deals Despite this, the vicious cycle is per- While strategic discounting can be an are never redeemed. “That really leads petuated by retailers who feel the need effective quick-fix for moving volume me to believe that it’s the thrill of the to promote, “but know that increasing in a struggling economy, the fix leaves hunt. For some consumers, it is just discounts 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. Retail sales are expected to grow about 10 percent in 2012, a slightly optimistic uptick from the 8 percent expected in 2011. One unpredictable factor that might lower 2012 sales is the sovereign debt crisis in Europe, which could keep markets volatile and consumers con- cerned about the future. Still, a reliable disconnect between consumer confi- dence and actual spending bodes well for retailers. Sales began to climb in October 2011, due in large part to a 3.7 percent jump in electronics sales (the largest monthly increase in two years) even as confidence fell to its lowest lev- 5 MULTICHANNEL INTEGRATION el 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 landscape If the euro crisis spins out of control, through whatever channel, device, or touchpoint he wants. Such an environment fear of a new credit crunch may deter has made multichannel, by default, the new standard operating model for retail. spending by business owners. Another factor that could lower next year’s fore- While it can be argued that mobile devices and multichannel commerce have made cast is slower-than-expected growth it easier than ever for retailers to reach customers, they have also made it easier to of 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 Kees If lower wages and high unemploy- De Vos, “rather than focusing on channel-centric approaches. Companies relying ment 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 customers growth, 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 behave order of buyers who are more price- in a multichannel fashion today,’” he notes. “They say, ‘I’m gonna go online and conscious 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 Vice Chairman 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 as ences 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. rounds of this fight. M-commerce 6 M-COMMERCE may prove to be the salvation of brick Technology companies and retailers and mortar after all. Cyriac Roeding, alike have hailed 2011 as the year of founder of the location-based mobile mobile shopping. Consumers are fast shopping app Shopkick, believes mo- approaching the tipping point in their bile commerce provides merchants embrace of smartphones and tablets to with unprecedented opportunities to access apps, discounts, price compari- bring personalization and one-on-one son information, and payment mecha- personal treatment back to the in-store nisms. According to Email Marketing purchase experience. Reports, mobile devices such as tablets Jani Strand, a spokeswoman for teen and smartphones became the highest- apparel chain American Eagle, said, selling consumer electronic device cat- “Our customers are rarely without their egory in 2011, amounting to 115 million smartphones, so any engagement that units 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 their A much-cited report from comScore day’s shoppers are so umbilically tied smartphones to make a purchase while found that two-thirds of all smart- to their phones, according to Master- in a store, according to a less-noted phone 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 without phones, 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 the taking product pictures, or locating a technology to inflict blows on physi- phone has become more addictive than retail store, and that 38 percent have cal stores. But we are still in the early the most addictive substance out there.” 7 ASSORTMENT LOCALIZATION As 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 concept line, big-box retailers are moving to assortment planning, flow modeling, of store assortment localization, Seidl smaller stores to reduce under-utilized price optimization, promotion opti- notes that retailers have been able to space and stay profitable. At the same mization and size optimization to cre- boost sales by 40 percent to 50 percent time, 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 with chase in-store, shoppers will increas- their shoppers, they can efficiently ca- customers as the economy puts more ingly turn to their mobile devices to ter to each store’s particular needs. pressure on retailers to manage their check for better pricing or selection John Seidl, a partner at Kurt Salmon inventories closely. Scott Welty, vice before making that purchase. Associates, argues that, as U.S. consum- president of retail industry strategy for As a counter to both of these trends, ers become more diverse, they tend to JDA Software Group, notes that the 8
  • 9. trend toward shoppers using brick- and-mortar locations as showrooms requires retailers to stock the opti- mal localized assortment range and maintain appropriate quantities for each store. “Having the right item in the right store at the right time helps maintain and improve customer loy- alty,” says Welty. “Providing a superior customer experience by ensuring that ‘available to promise’ meets the de- mand and geographic location of the customer, no matter how or where they ultimately buy the merchandise.” 8 EXPERIENCE DESIGN In theory, experience design — or user UX design is a highly multi-disci- Emerging trends in UX design include experience (UX) design — operates plinary field, incorporating aspects of designs that can adapt and perform from the premise that consumers wish everything from psychology, anthro- within various media devices, gestural to 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 increased ily on the quality of the user experience the importance and impact of each rather than functionality. This emerg- customer experience. Because custom- ing trend in “user-centered” design er expectations and experiences are informs the latest in everything from rapidly shared and distributed between intelligent buildings to Facebook apps, peers, it is more important than ever iPhone games and digital equipment. that retailers engage in meaningful interactions with customers to make Mobile 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 Whitney Applying experience design principles Hess’s 10 guiding principles can be to mobile, for example, would strive to applied to both physical and virtual eliminate clutter while requiring fewer, world projects irrespective of goals, simpler steps to accomplish a task, thus constraints, or resources. Her first providing a more streamlined and tar- principle is: “Stay out of people’s way. geted experiences. Pave the road for an easy ride.” 9
  • 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 the helped set into motion with the unveil- least Apple-like piece of software the ing of the iPod in 2001. Two years later, company produces. While version 10.5 Apple 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 agree During the past year, iTunes has faced Ltd.) in assembling an offering of some the software must trim down and get some stepped-up competition from both 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 its that lets users buy songs through the is coming at iTunes from a different market dominance. Besides Google Android 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 startup an upgraded shopping system that al- more than a million subscribers and a DoubleTwist and a Seattle-based outfit lows 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 claim them directly to their music players. petitors by issuing frequent upgrades the hearts and payment methods of Google 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 COUPONS According to a study by Group SJR and Liz Claiborne Inc. conducted among 8 0 1 smartphone and tablet owners between the ages of 18 to 64, half said they planned to scan barcodes more often to get additional information about a product, suggesting that barcode scanning is poised to go mainstream within 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-store purchasing 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 barcodes will drive new mobile marketing campaign concepts in the next year. The majority of executives surveyed believe 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. Prosper Mobile Insights has found venient and useful,” while 42 percent facing QR code acceptance has been that a majority of survey respondents had used their smartphone or tablet to that most mobile phones do not come had used their smartphones or tablets scan a barcodes or present a text mes- equipped with the requisite scanning for 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 be ers 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 the evolution of the Web, the deluge of user-generated content — from product reviews and comments posted on news stories, to the glut of unguarded personal information offered up by users of Facebook, Twitter, YouTube, et al — amounts to a behavioral marketer’s dream come true. All that data, freely given, is rich in the sort of detail that behavioral marketers prize in selecting which advertising messages are displayed to that in- dividual. The algorithms Amazon developed to suggest items of interest based on a particular user’s browsing habits and purchasing history may soon 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. REED HASTINGS On the night of Sunday, Sept. 18, 2011, Netflix co- tumble that erased approximately $12 billion from the founder and CEO Reed Hastings sent an email to company’s market value. the company’s 24.6 million subscribers that began: “I messed up. I owe you an explanation.” Hastings ended 2001 by an- nouncing he would take a The blunder had come three months earlier when cus- 33-percent cut in pay, while tomers who opted for the company’s DVD-by-mail assuring investors that “we and 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 option tained 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 of henceforth be a separate entity called Qwikster, ac- The Motley Fool marveled that Netflix shareholders cessible via its own website for an additional fee — had seen a remarkable 25 percent surge in the first a move that drew comparisons to the launch of New week of the new year. Munarriz speculated that shares Coke from the instant Hastings clicked “send.” Hast- had bounced back following some well-deserved ings was roundly mocked in the business trades and tax-loss selling, and the company’s revelation that on Saturday Night Live for his arrogant, if not outright it logged some 2 billion hours of streaming content incompetent, disregard for his core customers. He during the last quarter. Netflix may have received an even neglected to acquire the @Qwikster handle on unexpected and counter-intuitive boost when Time Twitter, which was then being used by a man named Warner announced a 56-day waiting period (double Jason Castillo, whose profile pictured the Muppet the previous 28 days) before offering its DVDs to Elmo smoking a joint. No word on whether Castillo rental companies at bulk discount prices. While this managed 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 rely went back to the confessional to renounce Qwikster primarily on physical rentals. Netflix’s emphasis on as a non-starter. In the meantime, the company(s) had streaming may yet put Hastings on the shortlist for shed 800,000 angry subscribers, and saw a 76 percent Comeback CEO of the Year. 12
  • 13. 13 RETAIL CRM The future of retail CRM — both its potential and pitfalls — is writ large on the walls of Facebook. Amassing more than a trillion page views per month, Facebook is an immense source of CRM data with unlimited 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 supercomputers such as IBM’s “Jeopardy!” champion Watson to applications devel- oped by CIA-friendly organizations for monitoring potential terrorist activities. However, with the release of its Gateway for Facebook CRM solution this past summer, retail business analytics leader MicroStrategy 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 POS It’s no exaggeration to say that Facebook Point-of-sale systems have be- represents an unprecedented leap in come the true command centers the history of human interaction. As of in-store operations, providing of 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-on than a trillion page views per month. purchases, streamline inventory Facebook 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 soon a conversion rate of only 1.2 percent, to use that term — are already facing suggesting that Facebook also repre- threats from mobile POS platforms 2011 released by RIS News sents the world’s richest source of un- such as smartphones and tablets. The Mobile, transaction systems provide tapped 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. 16 IN-STORE WEB ACCESS In an effort to draw customers into stores as the primary means of merchandise distribution, some retailers are offering in-store Web access through self-service kiosks and workstations to engage customers, provide convenience and increase satisfaction. This past year, JCPenney refined its Findmore technology with 42-inch interactive plasma-screen kiosks linking shoppers and sales associates to its 250,000 online products. The media-rich kiosks provide editorial content and highlight key seasonal trends while incorporating social-media-like features, such as permitting shoppers 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 by purchasing items online and having them shipped to their home or to the store for later 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 MILLENNIALS Finding themselves with more time than money and armed with total pricing transparency and unlimited selection, Millennial shoppers (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 shopping trip as a mission. They research online and know exactly what they’re going to buy when they arrive at the store. TechCrunch sees 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. 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 PAYMENTS According to the Loyalty Marketer’s Associa- Although U.S. customers tion, customer loyalty, rather than acquisition, have been relatively slow is the key to sustainable growth. Business con- to adopt NFC-equipped sulting firm Protiviti ranks customer loyalty as smartphones or utilize the the top non-financial business challenge compa- contactless payment cards nies will face in 2012. Yet businesses report that they already carry in their retaining and engaging customers remain their wallets, blogger and prin- greatest challenges. While daily-deal sites such as cipal analyst at Forrester Groupon and LivingSocial continue to generate Research Brian Walker the greatest buzz, marketers suspect that price- predicts we will soon see based strategies are taking focus away from the customers waving NFC-en- real prize, customer loyalty. The emerging model abled smartphones across for success uses data gathered from loyalty pro- interactive display ads to grams to engage with customers across all touch- automatically add pictured points 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. 22 COSTCO 23 NEIMAN MARCUS Costco’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, Neiman likely to see growth, according to Jeff Marcus was slow to embrace social Weidauer at retail industry marketing media. But in the run-up to the 2011 firm Vestcom International. Hofstra holiday season, the high-end retailer University business professor Barry got into the spirit in a big way by host- Berman recommends Costco’s strategy ing a flurry of digital campaigns aimed of opportunistic buying to any “smart at boosting its online presence. As of retailer.” 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 which By 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 customers seen 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, Neiman to the wholesale club operator for deals Marcus launched a Facebook design contest encouraging fans to assemble virtual on food and necessities. The Issaquah, outfits from items in the collection. The ensembles were judged by Rachel Zoe and Wash., 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 the billion, 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 REVIEWS Online marketers recognize how effective user-generated content (UGC) can be in strengthening search engine optimization strategies. According to comScore ARS, UGC product reviews are every bit as persuasive and effective (if not more so) than far costlier advertising media, including display and TV. User-generated product reviews have proven to be one of the most highly effective tools of social media marketing, allowing marketers to tweak and modify their messages — and help businesses increase their profits in the process. For retailers, UGC provides unbiased and unguarded feedback from actual customers. The next logical step for many marketers involves gleaning data from “micro UGC” — short, low-involvement forms of user-generated content such as Facebook status updates, “likes,” star ratings on Netflix 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. 25 TIFFANY 26 STARBUCKS According 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 and from the sale of engagement rings a mobile payment app that has become alone, helped along by price increases the early standard for m-commerce and 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 for lion 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 of tion since the Great Depression. The fuss and a maximum of utility — two world’s second-largest jewelry retailer qualities that watchers agree are es- became a likely takeover target after sential to supplanting the use of cash Swatch Group AG terminated its 20- and cards. Introduced in January 2011, year watch partnership with the jeweler the app racked up an impressive three 16 years early. The company reported a million transactions in its first three 63 percent jump in fiscal third-quarter months. Additionally, by making its 2010 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 percent Americas, which accounted for the step of partnering with a carrier or card year-to-date gain in December despite bulk of its 21 percent revenue growth. brand. Starbucks was also an investor spiraling coffee prices worldwide. 27 NORDSTROM Now in its 110th year, Seattle-based Nordstrom continues to live by its one-sentence doctrine: “Use good judgment in all sit- uations.” The fourth-generation, family-run department store is legendary in the retail industry for its emphasis on customer service above all else. In a 2011 consumer survey forecasting holiday spending, the upscale specialty retailer came out on top among department stores in online shopping, more than doubling its online share from December 2010. Rather than defining store space by brand, Nordstrom groups merchandise into so-called lifestyle sections, making it easier for shoppers to put together outfits, says retail analyst Jennifer Black. As a result, 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 a Nordstrom buyers’ meeting. “It was like an invite to the White House,” he said. 17
  • 18. RON JOHNSON The 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-chain force behind the Apple Store in the relatively stodgy operations, and — as he did at Target — bringing in retail environment at JCPenney. The Apple Store con- exclusive lines from high-end cept was a success, he contends, because rather than designers like Michael Graves. tweaking the traditional model, Apple started from The retailer is also eliminating scratch 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 with sleekest, most-coveted product since Cadillacs came cents on price tickets in certain with tailfins.) In a piece written for The Harvard Busi- cases. For instance, an item that ness 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 indicate you 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 retail in various ways, and Amazon carries them all — and for Apple — staffed by trained employees who can doesn’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 the to 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, ‘How Since 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 store brand and increase the retailer’s appeal to younger that’s going to do $15 million a year?’ They should be more affluent customers. Toward that end, Johnson asking, ‘How do we reinvent the store to enrich our is emphasizing store-within-store formats, partner- customers’ lives?’” ing with retailers such as the Moët Hennessy - Louis 18
  • 19. 28 DISNEY 29 DIGITAL SIGNAGE Following record sales and profit, the Walt Disney Company, owner of the namesake theme parks and ESPN sports network, increased its annual dividend for 2011 by 50 percent, the most in at least 20 years. The Burbank, Cali.-based company, which also owns Marvel Entertainment and the ABC TV net- work, is returning cash to investors through stock repurchases as well, buying back $5 billion of shares in the year ended Oct. 1. The Steven P. Jobs Trust, Disney’s largest shareholder, will reap $82.8 million, an increase of $27.6 million based on the 138 million shares held by the estate of Apple’s late co-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&M The world’s second-largest clothing re- Grecian buttons, and fluorescent mi- director Karl Lagerfeld in 2004, and tailer, Hennes & Mauritz AB, recently cro-minis. H&M creative adviser Mar- this most recent partnership between announced its “Versace for H&M” line gareta van den Bosch sees “design and the Swedish fashion giant and a luxury featuring 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 Chief from $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 to length “goddess” gowns dotted with since partnering with Chanel creative reach $700 million by 2014. 19
  • 20. 31 INTERACTIVE STOREFRONT WINDOWS Saks Fifth Ave. and Starbucks were content, tweets from around the Web all the iPads were able to talk “to each among those pushing the boundar- and user-submitted photos with the other to produce elegant fades and ies 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 and San Francisco encouraging holiday shoppers to make charitable donations to Toys for Tots by scanning a QR code. Displays fronting Starbucks stores in Toronto and Vancouver encouraged passers-by to assemble their favorite Tazo teas using gesture controls via a vinyl screen and projector, while Saks and Stylelist.com tapped downtown agency Gin Lane Media to create a three-window display featuring 64 iPad 2s and nine 27-inch flat-panel Cinema Displays for the high-end retailer’s flagship Fifth Avenue store. The display featured 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. 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 $700 million in an initial public offering, generating 30 percent more than the company originally sought, then saw its value balloon to more than $16 billion on its first day of trading on the Nasdaq. LivingSo- cial is Groupon’s most logical competitor. Backed with hundreds of millions of dollars in funding, primarily from Amazon (for which it provides the deals for AmazonLocal), the 2-year-old deal-maker says it 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 YELP San Francisco-based user review web- on companies that are generating wrinkle here is that Yelp relies on these site Yelp filed to raise as much as $100 losses,” says Tom Taulli, founder of rivals to send visitors to its site. Google million in a 2012 initial public offering, IPOByte.com and author of “Investing alone accounted for more than half of seeking to become the latest unprofit- in IPOs.” “No one knows how long this Yelp’s traffic in the first nine months of able Internet company to go public. window is going to last, so I think Yelp 2011. The search engine’s dual role as Co-founded by former PayPal Inc. ex- is going to get out as fast as possible.” both competitor and ally may put Yelp ecutive 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 source reviews created by its 61.1 million Facebook and Yahoo!, all of which sell of customers is coming from their users. “Investors are open to taking bets online ads to local businesses. The competitor.” 21
  • 22. 36 BERGDORF GOODMAN Online merchants are forcing even the highest-end stores to offer up bar- gains to their well-heeled clientel who are relatively insulated from the job and housing markets. “At the luxury end, discounting has become very mainstream because of the Gilts of the world,” said Andrew Sacks of luxury research firm AgencySacks, referring to Gilt Groupe, the online discounter for designer fashions. At the height of the 2011 holiday season, Bergdorf Goodman’s website listed more than 70 pages of discounts on designer fashions, some marked down as much as 40 percent. Bergdorf Goodman has 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 design campaign, it may be the first to board the crowdsourcing bandwagon. 37 AT&T WIRELESS 38 REI The collapse of AT&T’s $39 billion bid for REI has teamed up with U.S. Bank to make credit card approval easier and faster T-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 to challenge market leader Verizon Wireless. instantly be approved for the REI Visa card and begin using their reward points T-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,” says to cover 97 percent of Americans. How Dominic Venturo, chief innovation officer of the bank payment service division at AT&T will make up that difference isn’t U.S. Bank. REI was deemed the best fit to try out the mobile credit card application yet known, but AT&T needs to act quick- process because of the company’s mission. “Eliminating paper was important to ly, 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 app with 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 spectrum assets that would have still been available to AT&T are now off the table. Its remain- ing options are time-consuming, expen- sive and risky, says Cowen & Co. analyst Colby Synesael. AT&T can either seek to buy spectrum from another company, wait for the government to auction more frequencies or try to squeeze more capac- ity out of its current airwaves. 22
  • 23. 39 POP-UP SHOPS Although pop-ups have moved up in the world, for some the term still has downmarket connotations. The first generation of pop- ups often consisted of little more than shelving and a cash register in empty mall space. In recent years, retailing stalwarts breathed new life into the format. Procter & Gamble, for example, operated a 4,000-square-foot pop-up on 57th Street in Manhattan that drew 14,000 visitors in the 10 days it was open. The store had no cash registers because everything was free — including a full CoverGirl makeover or a Head & Shoulders wash and blow dry. The P&G pop-up — the company’s marketing executive Nataraj Iyer prefers the term “interactive experience” — represents a new iteration in the 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 company retailing itself. Strictly speaking, deal- was acquired by Amazon.com in 2010 of-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 similar and 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 offers pre-sell this excess inventory in hopes tory updates. It wasn’t until such sites could grow from $873 million in 2010 of 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 IKEA Ikea is developing its website to have product and then figuring out how to stores in North America by 2013. Ikea a 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 growth tomers to select items they want in it to produce items at less cost. Ikea, in the second-largest economy, says the store and have them delivered to which updates its collection of about CEO Mikael Ohlsson. The expansion their home without having to gather 10,000 products with more than 2,000 in China will also allow the company them from the outlet’s warehouses. new items a year, will continue invest- to reduce its reliance on Europe, which The world’s largest furniture retailer, ing in products and enlarging stores is suffering from a slump in consumer known for setting a price point for a in the coming year, adding 50 more confidence. 23
  • 24. BRIAN DUNN Recent headlines tell a dismal story: “Best Buy’s zon.com with Best Buy Marketplace, a new service Dunn Should Be Next CEO Fired” wrote Douglas meant to challenge the world’s largest e-commerce A. McIntyre on 24/7WallStreet.com. Then, just a few company. The effort addresses challenges shared by weeks 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-mortar contributor Larry Downes, that garnered some 15,700 operations while simultaneously Facebook 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 Marketplace Recent 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 Best assumed the CEO mantle in June 2009. Throughout Buy’s plans to overhaul itself. Despite Dunn’s upbeat his reign, Downes charges, Dunn has pursued a strat- assurances to the contrary, Amazon.com has badly egy 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 two years. Margins, however, sank, with net income drop- years, while Amazon’s are up 39 percent, and the S&P ping by 29 percent. For the quarter ending May 28, 500 is higher by 12 percent over the same period. The 2011, the firm posted a sales increase of only 1 per- market’s stunned response to Best Buy’s third quarter cent 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’s nearly enough to keep up with Amazon, which con- tenure may have come just days before Christmas tinues 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. 42 TARGET After spending two years preparing to accounted for more than half of the take control of its website from Ama- major outages on the top 100 sites in zon.com, a prominent link (“learn all the U.S. by revenue, according to Web about what’s new”) on Target’s home monitor AlertBot. Still, e-commerce page 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 made ning. Three weeks later, the release of the right move. “The complexity of a collection from Italian fashion house building a large-scale e-commerce site Missoni brought a rush of visitors that is really difficult,” he said. “But, at the crashed the site for most of the day. A sentence statement that Target.com end of the day, Target made the right month later, the site went down again president Steve Eastman had left the decision. Amazon is a competitor, and during peak shopping hours. Later company to “pursue other opportu- you don’t want them controlling your that day, Target announced in a one- nities.” All told, Target.com crashes e-commerce business.” 43 LULULEMON 44 TABLET COMPUTERS IN-STORE Vancouver-based athletic apparel com- An estimated 25 percent of all tablet learning curves for new hires, more pany 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 help that sent its competitors stumbling of those enterprises were retailers. Re- customers in more store departments over 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 computing winning strategy, Nike’s Salvation solutions connect retail sales associates chain of athletic-wear stores intro- with a wealth of knowledge, including duced $64 training capris featuring a product information, learning tools, yoga-studio format and similar logo. real-time product inventory, customer Gap’s Athleta stores began selling $60 reviews and ratings, updated price and women’s yoga tops and offering free promotional information, as well as the yoga classes — another Lululemon in- ability to print or email any of these. novation. Unlike other business solutions that require a great deal of infrastructure Nordstrom’s Zella line, dedicated to and integration efforts, tablet comput- yoga attire, went so far as to hire a ing solutions require minimal impact Lululemon alum to launch the effort. on existing systems and are often more Since opening its first store in the reliable than other solutions. In-store United States in 2003, Lululemon’s ag- tablet computing systems provide re- gressive strategy has paid off with rev- tailers with consistent sales processes enues 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. 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/CAREMARK Reversing two years of decline, CVS/ new contract wins. Furthermore, chief up for grabs. With 43 percent of CVS Caremark expects 2012 profits to grow rival Walgreen Co. has failed to replace stores located within one mile of a 11 percent to 15 percent based on its its contract with employee-benefits Walgreens (85 percent are within five acquisition of Universal American manager Express Scripts. Valued at miles), CFO Dave Denton expects to Corp.’s Medicare Part D business, a deal more than $5 billion in annual drug pick up as many as 23 million of those with 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 SECRET Victoria’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 direct ed 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. In respect to our brands, no obvious im- March, the company introduced three mediate close competition.” The Co- versions of its “Incredible” bra, a super- lumbus, Ohio-based specialty apparel soft push-up that is more comfortable retailer posted a 12 percent gain in than earlier versions. An accompany- comparable sales for the 11 months ing Incredible fragrance is a mixture through December 2011. While Lim- of magnolia, pear and sandalwood and ited 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 busts with U.S. stores registering a comp sales by as much as two cup sizes. 26
  • 27. 48 PUBLIX 49 DICK’S SPORTING GOODS Publix Super Markets has offered ex- Dick’s Sporting Goods dates back to 1948 when Richard Stack (father of current ceptional 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 namesake nomic downturns in history without stores in 42 states and 81 Golf Galaxy stores in 30 states. Dick’s still has abundant laying off a single employee. Publix is top-line growth opportunity with plans for 400 more stores over the next several the country’s largest employee-owned years to build out its presence on the West Coast. Dick’s has succeeded where other supermarket and the fourth-largest big-box sporting goods efforts have failed by catering to serious enthusiasts who operator 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 within the company — launched his service- oriented supermarket in 1930 and im- mediately embarked on an expansion effort that has yet to abate. Publix con- tinues to grow at a time when many other businesses are stagnating. The retailer’s latest growth efforts include a hybrid store that melds its GreenWise organic format with its more conven- tional stores. Publix’s second-quarter 2011 net income rose 9.7 percent, to $382.4 million. Total sales increased 5.8 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
  • 28. 51 LEGO The 76-year-old, family-owned Dan- ish toy maker topped $1 billion in U.S. sales for the first time in 2010 and was on track to repeat that performance in 2011. The snap-together plastic brick empire has grown and evolved dramati- cally to include robotics, films, video games, theme parks — even a business consultancy to foster creative think- ing — but all focused on boys. On New Year’s Day 2012, Lego introduced Lego Friends, a full line of 23 different prod- ucts aimed at girls aged 5 and up. “This is the most significant strategic launch we’ve done in a decade,” said Lego Group CEO Jørgen Vig Knudstorp. 52 HIGH-TECH DRESSING ROOMS “We want to reach the other 50 percent Shoppers at San Francisco’s Industrie Denim no longer need to venture outside the of the world’s children.” The company’s fitting room to ask friends (or strangers) if the jeans they’re trying on make their commitment is evidenced by a $40 butts look big. Nor do they have to take anyone else’s word for it. They can see for million global marketing push behind themselves using the closed-circuit “Booty Cams” installed in the retailer’s dress- the launch. ing rooms. (Store manager Rob Jolin is quick to assure shoppers that the process is completely private.) Some of luxury retailer Prada’s dressing rooms employ plasma mirrors similar to the Booty Cams, as well as doors that go from opaque to trans- parent. A growing number of clothing retailers are using such gee-whiz technology to entice customers into trying on clothes and get them excited about shopping. Consumer psychologist, Kit Yarrow, said the high-tech dressing-room tools are as much about customer assistance as they are marketing. “What it tells consumers,” she says, “is that a store is trying and they’re thinking.” 53 QUICKRESPONSE (QR) CODES At first glance, QR codes seemed a sure bet to be the next big thing. So why aren’t they? They’re everywhere: on billboards, magazine ads, business cards, T-shirts, shop windows, every variety of signage — even on trees and playground equipment in public parks. Yet, according to a recent survey conducted by Archrival research group, nearly 80 percent of college students across the U.S. had no clue how to scan a sample QR code when presented with one. No clue and little interest. Nearly 75 percent said they were unlikely to scan a QR code in the future. Go off campus and QR’s prospects are a little brighter. A recent survey by Prosper Mobile Insights found that nearly one-third of general-population smartphone and tablet users have scanned QR codes to access in-store coupons. But unless someone comes up with an application that will catch fire with the cool kids, the only place you may see those now-ubiquitous do-hickeys — often described as barcodes on steroids or a checkerboard on LSD — will be in the next millennium edition of Trivial Pursuit. 28