By Benjamin Smith

Hand It Over!

A retailer asking for more margin?  Not shocking – or ridiculous.  It’s a free country – you can decide if you want to offer more, or stare them down.  Unless they have no respect for you or  your brand, in most cases, when they ask for more margin they have a good reason.  At the end of the day, it all goes back to the cost of opening / maintaining all those retail stores.

Credit: Wall Street Journal

You have to have faith in free markets that there are limits to what they can justify asking for – otherwise their competition down the street – or increasingly online – will find a way to do more with less.  This is of course reaching critical mass today as retailers like Best Buy see customers come to their store to get educated, then use smart phone apps and web research to compare prices and buy elsewhere.

How does a retailer asking for more margin tie into Retail Leverage?  I’ll illustrate our ideas and provide some suggestions at the end of this article, but the key perspective is that changes at retail present opportunities for a repositioning.  Whether it is a new buyer at your key retailer, a new entrant in your category, or a seismic shift in terms of where consumers purchase, change means you have a chance to gain leverage.

SOS – “Save Our Stores”

A favorite author of mine, Rafi Mohammed, founder of the Pricing for Profit blog, touched on the disadvantages facing brick and mortar stores and proposed a way to save them.  His proposal is called the “Physical Store Equalizer” aka the “PSE”, where manufacturers help compensate physical retailers for the value they bring to the sales proposition.

I’m linking to Rafi’s article “The Pricing Strategy that Can Save Brick and Mortar Stores”, as well as including the key sections here:

The conventional wisdom is that consumers will pay a premium for the convenience and service provided by brick and mortar stores. But as online retailers’ growing market share attests, that CW isn’t holding up. I went online to buy the TV the Sears associate helped me select, and I saved $150. As the sliding value of Best Buy shares confirm, too many shoppers aren’t willing to pay a premium for sales associates, in-person demonstrations, or the ability to get a product right now. The current retailing model, which expects consumers to pay this premium, is starting to look broken.

It’s time for a new system in which manufacturers help compensate physical retailers for the value they bring to the sales proposition. They can do that by offering brick and mortar retailers lower wholesale prices than their web counterparts. I call this discount the Physical Store Equalizer, or PSE.

Retailers’ pitch to manufacturers to try to gain this discount should be straightforward: “As a brick and mortar retailer, we add value and generate higher sales of your product. Our stores increase your brand awareness, provide a venue for people who want to touch and feel the product before they buy it (whether they buy it from us or online), and our sales staff help educate your buyers. We bear costs for these services, so it’s impossible for us to match online prices of your product. To be fair to us, we require a wholesale price that is 10% less than what you are offering web retailers.”

Retail Leverage Takeaways:

Let’s be realistic – the PSE already exists in many different forms.  Different classes of trade have different margin requirements already, and that is just the cost of entry.  Start layering on paying for circular ads, end caps, slotting fees, in-store tv, staff training / access to staff – it adds up.  What Rafi’s “Physical Store Equalizer” is attempting to capture is payment for the advertising effect some retailers provide, even if the customer purchases elsewhere.

And you know what – participating in these extra “advertising” opportunities is one way to gain retail leverage.  Not to mention that many may be truly advertising and come out of a different budget.  I’m not sure what scorecard they keep internally at retailers but it surely doesn’t hurt your buyer if you belly up to the bar on some of the extra opportunities they ask you to participate in.

However that doesn’t get around the central proposal Rafi made, which is to survive, brick and mortar retailers should be asking for/receiving extra margin, above and beyond whatever has been built into the system today.  An overlay if you will.  While I firmly believe all brick and mortar retailers will be increasing their margin demands (maybe with a copy of Rafi’s article attached), I don’t think all will see equal results.  Increasingly manufacturers are going to have to make tougher choices about where & what they sell.  If you don’t know where your retail bread is buttered you’d better figure out quick.

If you’ve got a big brick & mortar business but have little leverage, you may have tough choices to make in terms of what & where you sell online – from amazon.com to your own direct site.  I know – it’s tough – the whole Internet thing isn’t going away anytime soon.  Or you have to be prepared to sweeten your offering to brick & mortar retailers – from exclusive or protected lines/items, to better terms, to more money for in-store marketing/advertising.

And without getting into all the legal pricing issues, there is always a number you can get to that will justify a business case – offer x retailer increased margin with expectation of a y increase in business (from retailer steering more business your direction).

What Do You Think?

Put up or shut up?  We’d love your perspective on this situation, whether you are from the brand, retailer or agency side of the aisle.  Please share your comments in the section below, or share with us on twitter @retailleverage .

Related Reading:

• WTN: Retail business model innovation prediction easier than Super Bowl bet
• WSJ: Phone Wielding Shoppers Strike Fear Into Retailers

By Benjamin Smith

Image courtesy of Engadget

I don’t care whether you are a retailer or a brand marketer, I just know that at some point on Friday November 19, 2010 you wished you had the same idea that some genius(es) at TJ Maxx did.

Imagine you’re sitting in a conference room in the bowels of your corporate office back in June 2010, trying to figure out what your Black Friday strategy and offers are going to be. At a retailer like TJ Maxx, in the past that could have included the sweet deal on a pair of PJ’s or a cashmere glove / scarf set. Settle down, I know the thought is intoxicating.  Mind you, the previous year TJ Maxx didn’t think too much of going bonkers for Black Friday, as you can see the played down Black Friday 2009 on their own facebook page. That person probably got fired.

So the pressure is on the new guy/gal.  What are you going to promote – the same old, or something better.  You’ve got your agency making a proposal for how to spend your dollars.  Do I smell a 2 week media flight of 30 second ads, and they said something about “activating” people via social media?  Well you can probably rest assured you won’t have to worry about any trampling incidents at your store on Black Friday if that is the case.

HOW TO BUILD AN ATOMIC BLACK FRIDAY PROMO:

Shut the conference room door, dim the lights, and make sure the skittish managers aren’t within earshot.  Now that it is safe, let’s talk about the most sacred of cows, offering a discount on something that is never on sale, expensive, possibly overpriced, yet on everybody’s shopping list. No, I’m not talking about discounting printer ink (you get fired for that).

How about the holy grail of pricing, even by Apple standards: The hot, irresistible IPAD?  What if you carved $1 Million dollars from whatever drek you were going to run to advertise the same boring me-too Black Friday offers, and poured that into a true retail exclusive, an IPAD for only $399, savings of $100 off. The largest savings on the hottest item of the last 2 years. The math is pretty simple:

MARKETING BUDGET:
Take the $1 Million you were going to dedicate to Black Friday advertising / PR / promotions and plow that into offering subsidizing the IPADS.  By the way, this could easily be scaled.  I used $1 Million to make it easy and relatively painless for any brand playing in big box retail.

SUBSIDIZED PRICING:
If you just quietly started acquiring the $499 model IPADS from various authorized resellers, there’d be no discount + an average of 8% sales tax. High end, you’re looking at paying $540. Of course, if you are able to find somebody willing & able to move volume, without alienating Apple or them knowing about it, then you might get a break. Let’s say you get 5% discount, but still have to pay sales tax. Low end you’re in for $513. Split the difference and it is approx. $525/unit. You’ve got to hit a magic price point + high optic of savings, so $100 off it is, to hit $399.
NET SUBSIDY = $125/unit.

NUMBER OF STORES:
You have 900 Stores. Run it in 50% of them. You don’t have to put it in every store – most markets will have more than 1 store, and people are willing to hunt for treasure like this.
Net = 450 stores.

NET IMPACT:
8,000 IPADS ($1M / $125/unit subsidy)
17 IPADS per store (8000 units / 450 stores)

That is a honest to goodness Black Friday promo if I’ve ever seen one, and I don’t care if it is sold out before Black Friday.  Read the fine print in your Best Buy insert this Thursday while you are waiting for your turkey. For some hot products you are lucky to get 10 per store. So 17 per store isn’t out of the question.  And for the nerds who might read this, yes I do know it was supposedly in some Marshalls stores too (owned by same parent company).  Just spread the same units over a larger number of stores, or increase the budget.  Regardless, this is a viable but different promo.

HOW TO MAKE IT GO NUCLEAR:

Well, you gave everybody something to talk about.  You must have been in a cave if you are involved in retail and didn’t hear about this today.

And to push things over the edge, you poked the King. Steve Jobs responded, or at least it sounds like he did. Which got even more people talking.  It doesn’t matter who they got them from, or how they got them, but even commenting on the issue lets you know that this is a big deal.

And whether or not you agree with the adage, there is no such thing as bad press / pr, in this case, you can definitely guarantee TJ Maxx will be on more people’s minds come this Black Friday & Holiday Season than before.  And inside of TJ Maxx, somebody’s career will forever be referenced as Before IPAD, and After IPAD.

FROM THE HORSE’S MOUTH (posted on TJ Maxx’s website):

We have received many inquiries about a particular item recently sold in our stores. A small number of T.J.Maxx and Marshalls stores received a very limited quantity of electronic tablets this week. These were first quality goods sourced from a retailer. They sold out in one day, and they were not advertised in the media.

This speaks to the excitement of our business model to deliver ‘wows’ this season and always. You never know what unexpected deals, designers or hot items you will find as part of the more than 10,000 new items that arrive at every store each week!

Check out their twitter feed:

RETAIL LEVERAGE TAKEAWAYS:

The worst thing is to blend into the crowd of me-too’s, unless you are the market leader.  By definition, since the majority of the market in most cases is not the leader, I am continually amazed that brand marketers and retailers continually anniversary the same promos, or iterate the latest trend.  If you aren’t the leader, rarely will you ever beat the big guys at their own game.  That is why you have to change the game.  We salute you, Mr or Mrs TJ Maxx Black Friday discounted IPAD idea guy/gal, for showing everybody involved in retail how you gain Retail Leverage!

RELATED READING:

• Engadget was all over the story and got evidence early on it was true
• Fortune thinks that TJ Maxx just lost their shot at ever selling Apple products (if that matters)
• The supposed response from Steve Jobs to a consumer who emailed him directly to ask if it was true, from 9 to 5 Mac
• Opinion piece from 9 to 5 Mac with all sorts of conspiracy theories on how $399 Ipads wound up at TJMaxx and what it means to Apple

This article appears courtesy of The Shelf Potato Blog, by Doug Garnett. The article was originally published on July 1, 2010, by Ben Smith.

“From half baked spud to dud in 2 months is no way to go through a life-cycle son.”

Article: “Death of the Microsoft Kin: A Look at the Evidence”

Article: “Microsoft’s Kin smartphone: No, it kin’t”

If you saw the commercials or talked to a rep in store, you probably couldn’t figure out what problems Kin solved or unmet needs it satisfied. The fact that it was pulled from the market so soon by a company with so deep of pockets leaves only a few conclusions and bigger questions.

How bad were sales – did anybody buy it?

Did Microsoft launch something it knew was bad but needed the flop to validate something? Was it a really expensive live focus group?

Article: “Microsoft Kin Gets a Price Cut…Already”

I always have a problem with companies willingness to make price moves once it is too late. Just 2 days ago the phones prices were effectively cut in half. Why not launch at those price points or heck it’s a mobile phone – why not free. At least they might have gained momentum out of the gate and gotten enough in peoples hands to see if it has legs.

What can we learn from Kin?

Don’t launch it if it is flawed.

Know your level of commitment going in. What are you willing to do if your product doesn’t get off to a good start. A powerhouse like MSFT can pull a stunt like this and still get the buyers to return their call. The rest of us don’t have that luxury.

Communicate what you do that is unique or you do better than anybody else – understand and share whatever your value is. I still have no idea what Kin does that you can’t do with an iPhone, droid, or whatever that motoblur feature is. They had an 8 figure budget to tell their story with and still failed.

Fight where you can win. They weren’t going to out apple apple on tv ads – and other players such as htc are running ads that are pretty clear with their value prop. How did anybody at msft or their agency convince themselves that their story would work. Beyond iPhone I am willing to bet the majority of phone choices occur in-aisle. If MSFT truly believed in the product they should have paid to staff demos 40 hours / week in the verizon stores / best buy.

Above all – be realistic.

If you liked this article be sure to check out Doug Garnett’s Shelf Potato Blog.  You can follow Doug on twitter @drtvguru, and of course at www.theshelfpotato.com

By Ben Smith

The term “Couch Potato” has made it into pop culture, with its own wikipedia listing.  So when my friend Doug Garnett mentioned a concept he kept coming back to when describing dud products at retail, “Shelf Potatos”, I knew exactly what he was talking about, and I figure that anybody who is reading this retail oriented blog can start to get the picture.  Here is the concept, in Doug’s own words:

For years I’ve written about a type of retail product that my agency calls a “shelf potato“. It’s a well loved product — loved by the manufacturer, loved by the retail buyer who brought it in, and loved by the consumers who buy it. Except, the product mostly lounges on the shelf instead of rushing out the door.

It doesn’t need to be this way. Communication can bring shelf potatoes alive – especially communication with direct response television. (That’s DRTV – short-form and long form.)

There are many important examples of shelf potato success. Grills identical to the Foreman grill sat on shelves for nearly 20 years before that infomercial brought them to life. The Drill Doctor drill bit sharpener was languishing on retail shelves until our half hour made them into a superstar and a brand. The Kreg Jig sold well to cabinet shops, but came alive at retail once a half hour infomercial showed homeowners what they could do with it.

For more, read my article with tips for finding those shelf potatoes that communication can bring alive. The article was published by Home Channel News on May 5, 2010 as part of their Hardware Show Daily at the National Hardware Show.

Maybe your shelf potatoes can come to life if you put them on the right program for retail fitness.

What do Shelf Potatos have to do with Retail Leverage?  Well if you’ve had experience with Shelf Potatos, you know that they are enemies of gaining leverage at Retail.  They can stop you in your tracks, or set you back to square one, all the while sucking time and resources away from your primary mission, which is to drive growth for retailers and improve your standing at retail.

From time to time, I will syndicate content from The Shelf Potato Blog.  I think you will find it to be retail infotainment!  Let’s be realistic – if you are reading a retail blog, you think about what makes some products fail and some products succeed.  If we can save one spud from being a dud, then it was all worth it.

By Ben Smith

I wanted to provide an update to Vince Young’s prior coverage of Stainmaster carpet’s move to Lowe’s and share an article by Chris Burritt that just appeared in Business Week detailing how the dust has settled.

“Martha Stewart can thank a move by Invista’s Stainmaster unit for her good fortune. Stainmaster had been a major Home Depot carpet brand since 1996. Invista recently dumped the leading home improvement retailer to boost its sales through No. 2-ranked Lowe’s and a string of smaller distributors. Home Depot managers figure Stainmaster was under pressure by its independent carpet dealers, who had trouble competing with the big box retailer’s low prices. “We were selling a lot of carpet at very good prices,” says Gordon Erickson, Home Depot’s senior vice-president for decor. “We were a bit surprised.”

The net is that Martha Stewart now has the featured brand of carpet at the #1 carpet retailer in the US, Home Depot.

Retail Leverage Notes:

In today’s environment it is rare that a brand drops a major retailer. Once the shock wears off, you can see how major moves by competitors, particularly exclusive deals, can create retail leverage opportunities.

The void left by Stainmaster at Home Depot created the opportunity that Martha Stewart (via Shaw Industries) capitalized on. As the old quote goes, “Luck is what happens when preparation meets opportunity.” I’m guessing that both Home Depot, Shaw, and maybe even MSO had thought about this possibility before, although Home Depot was obviously shocked by Stainmaster’s move.

One has to wonder how much better business terms Stainmaster got from Lowes to move there. In addition, Stainmaster must expect to gain a greater share of Lowes carpet business than they had at Home Depot, the #1 carpet retailer.

I expect the case was they offered tangible growth to Lowes, who was eager to steal Stainmaster away from their rival in their own bid for leverage. In turn Lowes is probably doing everything short of guaranteeing a certain percentage of their business. This can be done via shelf space and ad features. That combined with more favorable terms and you can see why Stainmaster would take the leap.

What will be interesting is if the Martha Stewart brand does extend well to carpet at Home Depot. While Stainmaster must be considered more of a “sure thing” in carpet, one could argue there may be upside for Home Depot and Martha Stewart. For now, it is just one more extension of the Martha Stewart brand at Home Depot.

Related Reading:

• http://www.businessweek.com/magazine/content/10_29/b4187020881895.htm
• http://www.bloomberg.com/news/2010-07-01/home-depot-adds-martha-stewart-carpeting-as-stainmaster-pulls-out-of-chain.html
• http://retailleverage.com/2010/03/01/lowes-stainmaster/

By Ben Smith

So I thought I had  come up with this revelation, but apparently I’m not the only one.  The good news is that as you read this you’ll likely realize you’ve had the same thoughts too.  Type A personalities might want to stop reading now.

We are in the age of “Good Enough”.

Wired magazine called it “The Good Enough Revolution - When Cheap and Simple Is Just Fine”.

They lead with the example of how in camcorders, the fancy expensive football size gave way to Flip’s pocket sized basic video camera with built-in USB.  The ability to easily upload & share short video clips proved “good enough”.  Of course Flip can’t be feeling too cocky.  One day they’ll be the victim of “Good Enough”.  See the next few examples I’ve supplied and you can probably imagine why …

Cameras (10 years ago)- Film and even one-time use cameras gave way to at the time inferior picture quality point&shoot digital cameras.  The instant gratification of the LCD made the lower quality pictures “good enough”.

Digital Cameras (today) – Sure your digital cameras can take 14 megapixel pictures.  But your mobile phone’s camera – especially starting this year with next generation, led by Iphone 4, for many people it takes good enough (and getting better) pictures and is already connected to the internet.  This seems easily repeatable for video also.

TV’s – do you remember people in the early days of Plasma & LCD’s telling you how your Tube TV had a better picture.  Who cares – I just gained 2 feet deep of space in my living room, and by the way, it doesn’t take 3 guys under the age of 30 to move it around.

Consumer Package Goods- This one is scary because we’ve all thought about buying Private Label products before – the recession just gave enough of us a nudge to try them that they gained critical mass.  Not only does the cereal not cut the roof of your mouth anymore (or you’ve decided the pain is worth the $ gain), but private label in many cases has thrown the price/value equation out of whack.  Private label brands have in their arsenal shiny new packaging, quality that is the same or in some cases better, and ability to price at parity or significantly lower if need be.  Line 2 or 3 weapons up and you have a killer proposition.

Retailers – okay warehouse clubs and Walmart already fit the “good enough” mold for some people who held their noses to make it through a trip for the savings.  But dollar/discount stores – that’s a whole ‘nother story.  See my recent article about why marketers should re-examine their biases against retailers like Dollar General and Big Lots.

Implications To Our World Of Selling Stuff:

Your Value Proposition To Consumers: Can your products take advantage of the “good enough” revolution?  Or are you vulnerable?  How can you reformulate / repackage / reposition what you are already doing to address this?

How You Build Programs To Communicate & Go To Market: For starters, coming up with original ideas and programs is just as valuable if not more than perfecting something.  Yes, I know I am veering dangerously close to 80/20 rule territory, but if that helps drive the point home – so be it.  The armchair marketers in all of us tend to gravitate towards the imperfections in other people’s original work / ideas.  I’m not saying throw the kitchen sink out there, but rather re-frame your expectations.  You might find something that resonates.  Very little in life is one shot only.  If it is “good enough” you will get a chance to refine it.  That is a conundrum in itself – but don’t refine it to perfection – just refine it until it is “Better Enough” – or as the chart that I borrowed from Mr. Scott W. Ambler suggests, is “Just Barely Good Enough”.

What Trumps “Good Enough”?

Not an exhaustive list by far, and I welcome your suggested additions:

• Connectivity.  Everybody wants it – but not every company can offer it.  Those who can are well positioned.  Anything related to mobile phones and convergence.
• Anything that deals with your health or well being and/or safety.  Well except for Universal Healthcare – maybe –  that depends on the government’s definition of “Good Enough”.  And I’m still trying to decide what Toyota’s definition of Good Enough is.

Related Reading / Resources:

• 2009 Wired Magazine Article on “Good Enough” Revolution
• Content about “Agile Modeling” by Scott W. Ambler that coins the phrase “Just Barely Good Enough”, and while written for something technical, is just as applicable to marketing.
• I wanted to credit the header image I am linking to as originating from Scott W. Ambler.

By Ben Smith

We’re not fans of 360 marketing plans here at Retail Leverage – partly because the term is overused, and partly because the terminology leads you to believe that your plan is incomplete if you don’t cover all your bases, spreading your dollars around. For most of us, you have to choose – have a crappy 360 plan, or focus your dollars to own something.

You might think that the big players have seemingly unlimited funds that allow them to execute plans that cover the marketing spectrum, but that doesn’t mean their spend makes sense.

SHARP QUATTRON TV’S

Today we’re focusing on Sharp and the launch of their new line of TV’s branded as “Quattron”. Sharp likely had a big budget to launch – table stakes to market products in the television category are likely in the hundreds of millions. Still though – they aren’t going to out advertise Sony & Peyton Manning, or Samsung & the NFL sponsorship, and their budgets will never come close over multiple quarters.

MOVE OVER SHATTNER – THERE’S A NEW PITCHMAN IN TOWN

Sharp tried to launch with a big bang, most visibly with the TV ads featuring some guy from Star Trek (not the Priceline guy). Note to Star Trek geeks – I know his character was Sulu, and his name is George Takei, but I guess the point I’m making is that it wasn’t Peyton Manning. I’m thinking his Q rating isn’t that high, and for the purpose he serves in the commercials, the generic annoying “WOW” guy from the Staples ads probably works cheaper.

If you’ve seen the ad, hopefully you walked away understanding Sharp’s raison d’etre. If you haven’t seen the ad then the point that they won’t ever out-sony Sony rings true. Well Sharp’s key differentiator is that you supposedly see yellow better. They call the technology “Quad-Pixel”, whatever that means to customers. Of course since you don’t have a Sharp tv with this new technology, it’s kind of hard for them to demonstrate what you are / are not missing. The ads poke fun at this, but I don’t know if somebody outside of the circle of trust would necessarily get the joke.

So here’s what we’ve seen so far from Sharp in this campaign, including the TV ads that I just armchair quarterbacked.

• TV ads
• National FSI insert
• Front page Retail Circulars ad
• Full page Retail Circular ads
• Web site
• In-store displays
• Demo days / staffing

I give them credit for consistent messaging and purpose throughout the campaign. It looks and feels very professional. They are upfront that their goal is to get people in the stores. I can’t argue with getting people in the stores – after all, regardless of the stat you choose to reference, a great deal of purchase decisions occur in the aisle. However – that is where I sour on their campaign.

SHARP MINDS, DULL STRATEGY

Let’s go back to where most decisions are made – particularly in this category. Even if it is not a fair comparison, have you ever watched people shopping for tv’s? Heads craned, scanning up and down the wall. They stare at TV’s that are all tuned to the same picture (on purpose), and customers and associates alike try to divine which “picture” they like better. The decision is made in-aisle.

My guess is they are spending all this money on TV ads that MIGHT drive some people in the stores. And maybe they lock up the Trekkies. What if there isn’t somebody there from Sharp to assist the sale. The customer has to find the Sharp TV’s and then most important – buy into this whole “I can see yellow” key differentiator. Otherwise, there is a decent shot that once customers get to the stores, they’ll walk out with another brand, or no purchase at all.

DULL & INVISIBLE

Sure Sharp said that demo days were part of their strategy. While they can check that box off on the 360 strategy chart, I’d be shocked if demos were the 2^nd or 3^rd highest line item in their budget. Focus group of 1, but I’ve yet to encounter a Sharp rep yet myself, and unfortunately I enjoy going to Best Buy multiple times per week, every week, just to see what’s going on in the aisles. Multiple stores. Different states.

CAN I SUGGEST AN ALTERNATIVE?

All I can think of is that all that money they spent on TV ads could be wasted. From an article in TWICE online, a Sharp representative is quoted saying that the ad budget “is in the tens of millions of dollars, and is consistent with campaigns we’ve run in the past.”

While it would be daring – if you have something that you think needs to be demonstrated in person, I’d sink the overwhelming majority of my dollars on demo staffing. Let’s assume they will spend $30M on TV ads between the mid-April launch and the end of the year (which by the way, pales in comparison to the multiples Sharp’s budget that Sony & Samsung spend). What kind of difference could you make in-store with $30M?

DEMOS ON STEROIDS

How about covering the top 800 Best Buy’s, along with 100 high volume HH Gregg’s/ Sears / BrandSmarts?

TOTAL: 900 high traffic retail stores.

How about covering them 40 hours per week, for 26 weeks (of the 36 remaining weeks they are on-shelf), and assume that you’ll pay a marketing firm an average of $32/hour for demo coverage.

TOTAL: $33,280 per store covered.

Side benefit – I think those Blue shirts / associates might pick up a little of Sharp’s selling story by osmosis. In basketball there is the 6^th man; for the Seattle Seahawks football there is the 12^th man; in retail, there is the demo rep. Their impact is felt beyond the time they actually spend in store. Not to mention it adds credibility when the retail associate can tell your story, versus the rep paid by the brand.

NET: $30,000,000. Mission accomplished.

RETAIL LEVERAGE TAKEAWAYS

From 30,000 feet:

While it was easy for me to re-route Sharp’s $30M (hypothetically estimated) ad budget, it wouldn’t be that easy in real life. Factors such as reliance on agencies for marketing strategy and 360 plan creation, as well as unwillingness of managers to make bold moves that break from past campaigns. Life is short though.

Begin your strategy with the End in Mind. When the dust settles, will the traditional 360 plan have made any significant impact. Will you out-sony your Sony? Peyton Manning isn’t walking through that door anytime soon.

On the flip side, what do you have to lose if you depart from the traditional 360 like strategy? Unless you were using the campaign as a band-aid to keep from getting thrown out, you probably won’t lose much. Leave the 360 plans to the big guys to inefficiently spend their fat budgets. Compete where you can win.

From the ground:

Beginning With The End in Mind is also relevant when you think about the consumer’s purchase. How are products sold in your category? Where does the consumer make their decision? Can they be swayed at point of purchase?

In the case of Sharp, so I’m saying you could cover the top selling Consumer Electronics stores, on the weekends and in the evenings, for all but the really slow weeks the rest of the year. You’d never see an ad, but you now have a shot at sniping the customers that are already in the stores shopping for TV’s, showing them something that nobody else can show them. Sowing those seeds of doubt that if they don’t choose your brand, somehow the picture just won’t look the same – especially in yellow.

WHAT DO YOU THINK?

What would you do if you were Sharp? Do you think you can win by driving customers to the stores alone? Or do you win by converting customers that are already in the store by locking down the aisle? How did Sharp get to their strategy? Do you disagree with my thoughts or can you add to them? I’m not looking to prove I’m right – I just wanted to show an alternative “Retail Leverage” path. Let me know. I’m posting this to our LinkedIn group and will be tweeting the article to solicit input. Add a comment below, email me at retailleverage@gmail.com, or tweet me @retailleverage . Thanks!

Related Reading / Sources:

• http://sharpsdss.com/AboutSharp/NewsAndEvents/PressReleases/2010/March/2010_03_18_QuadPixel.aspx
• http://www.twice.com/article/450431-Sharp_Launches_Aquos_Ad_Campaign.php
• http://www.brandweek.com/bw/content_display/news-and-features/technology-finance/e3i56ed42b9a46f8554b0d59a45d917055e
• http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=124645

By Ben Smith

In physics, momentum defined as the product of the mass and velocity of an object (p = mv).  In life, momentum is when things are going good and keep on getting better.  In sports, when teams go on a winning streak, it is often referred to as “The Big Mo”.  However you define it – once you’ve got it, you want to keep it.  And when you lose it, you may have to work twice as hard to regain it – if you are ever lucky enough to get momentum again.

WHAT IS RETAIL MOMENTUM?

Now look at momentum from a retail perspective.  Here at Retail Leverage, we’re defining Retail Momentum as when your sales velocity reaches critical mass. The definition works at all levels – it can occur in a single store, category, retailer, channel, or the entire market.  Of course getting your sales to a high level and sustaining them is easier said than done.

This is probably a good time to tell you this article isn’t about how to achieve a high level of sales and gain momentum.  It’s about understanding Retail Momentum and ideas to keep from losing momentum.

Note – this article is written through the lens of a consumer electronics marketer, and it proudly reflects the scars of insanely short lifecycles, ridiculous promotions, merciless partners, and painful paths to profit.  I think the concepts shared and ideas we are trying to generate will apply across multiple consumer segments, but I wanted you to know where they came from.

RETAIL MOMENTUM – USE IT OR LOSE IT:

Frankly at some point everybody and every brand has their moment in the sun.  There are enough levers you can pull that it is possible to get virtually any product to a high level of sales for a period of time.  That’s not the problem.  It’s not about being #1, it’s about sustaining it.  Well – that doesn’t tell the whole story.  So far everything I’ve said is from the brand perspective.  Me Me Me.  Us Us Us.  Here at Retail Leverage we continually argue that selling at retail is not about your own product or brand – it’s ultimately all about the retailer.  Them Them Them.

So what is the key thing you need to understand?

Your products are ultimately a profit delivery mechanism for the retailer. The sooner you recognize it, the better.  You are feeding a beast.  If you don’t feed the beast, somebody else will.  If you are feeding the beast successfully, and the beast wants more – you have to find a way to keep feeding it.  Even in the short term, you can gain Retail Leverage by helping the retailer become somewhat dependent on you.  As long as you keep feeding the beast.  As long as you keep the momentum.

If you could give some retail truth serum to a veteran of retail sales or marketing, I expect you’d be able to get an admission that one of their biggest regrets revolves around when whatever they were selling had momentum, but due to certain actions (or lack of) they lost that momentum.  Just for the sake of honesty, to get you to open up, I’ll admit that I’ve got my own personal list of 4 or 5 times where what I was selling/marketing had momentum and let it slip away.  I’m not sharing the specifics here because the who what when where aren’t important, but recognizing past failures is important to making sure you don’t repeat those same mistakes.  I’m pretty sure I’m not the only one reading this – I’m sure you can easily identify similar situations in your own retail life.

IDEAS TO KEEP (OR NOT LOSE) MOMENTUM AT RETAIL:

The 4P’s are as good of a place as any to start.  Here’s the list, with some background on each.

1. Keep exact PRODUCT alive as long as possible.
2. Keep your PRICING and PROMOTION consistent.
3. Keep in PLACE support for your existing distribution.

Keep exact PRODUCT alive as long as possible.

Imagine a product that has finally broken through at retail.  You got close with several previous products, but this time you have set your world on fire.  The stores can’t get seem to get enough, customers come in asking for it, and the store staff describe it with that classic line “it sells itself”.  So why would you want to stop a good thing?  Do you blindly follow the product roadmap (designed long before your product hit the shelves and then flew off them)?  If you still have the ability to keep the manufacturing lines going – do so.

You will likely know what you have on your hands well in advance of any critical decisions such as with manufacturing or retail resets.  Don’t you hate it when the old adage “a bird in the hand is worth two in the bush” is true.  In this case it can be.  The roadmap wouldn’t matter if the replacement was going to be late anyway, which is proof enough that you can try keeping the existing product going longer than initially planned.

Keep your PRICING and PROMOTION consistent.

Have you ever been in a car where the driver speeds up, then slams on the brakes. Speeds up again.  Slams the brakes again.  Or even worse, when the driver gets upset, they pull over to the side of the road, yank the keys out and throw them on the dash.  Now imagine this in retail terms.  If you use promotions to drive sales, and that is what has gotten you to the promised land where you have Retail Momentum, it doesn’t make sense to immediately turn them off.  Nothing leaves a buyer’s head spinning faster than the brand who used to come in slinging guns and then puts their hands up.  The buyer doesn’t care why you do what you do, as long as you do it and are consistent.  More to the point – the buyer doesn’t care if your pricing and promotions aren’t sustainable as long as you are driving sales for them.

Keep in PLACE support for your existing distribution.

Now is not the time to get greedy.  If you’ve ever heard the term “dance with the one who brought you”, think about that in retail terms.  So you’ve got this great product/brand that everybody wants a piece of.  That’s a great problem to have.  But remember where you came from and who got you there.  Focus on keeping the existing beast fed before you start to open up new retailers / channels.  Proceed with caution.  The less track record you have, the more important this ideas is.  I always wonder what is more memorable in a buyer’s mind – if your product sells but you supported them well; or if your product was hot but you always disappointed them with out of stocks, missed shipments.  Buyers have long memories, and they move around often.  So even if it might not come back to bite you in your current position, it could in the future.

CALL TO ACTION: SHARE YOUR IDEAS TO KEEP MOMENTUM AT RETAIL:

I got the conversation started, but since we’ve been so honest throughout this article, I kept it pretty basic.  The 4P’s are great for Marketing 101, but there are nuances to every category and segment of retail that you can’t wrap up with a pretty bow.  So I challenge our readers to share their ideas on how to keep momentum at retail.  I’ll compile the ideas I get via comments, tweets, and email and update this article in a few days.

By Ben Smith

Retail leverage comes in many forms.  In its purest form, it may be attainable only by those brands in a position to dictate terms to their customers.  For many brands it can be as simple as decreasing their reliance on existing customers.  I demonstrated this concept of decreasing reliance on existing customers in an article I recently wrote about “Blue Ocean” retail strategies, which highlighted the pursuit of alternative channels as a way to gain Retail Leverage.

I offered my own definition for “Alternative Channels,” which is means of distribution outside of those you’d traditionally expect for a given product / service to reach customers.  I provided examples of Alternative Channel successes such as Nintendo Wii Fit in Sports Authority, or OfficeMax branded office supplies in Safeway grocery stores. Pursuing alternative channel opportunities might be difficult and cause extra work, but I doubt they cause any brand marketers move out of their comfort zone, or to lose sleep at night over risking the perception of their brands by the company they keep.

This article explores pushing the boundaries of your own retail comfort level and looking at channels that aren’t necessary alternative, because they are already selling products from your category.  I’ve got 2 great examples of retailers in this story – and as the title suggests – they might hold the key to big dollar and lots of leverage in general!

HOW FAR ARE YOU WILLING TO GO TO FIND THE ANSWER?

Signing up for extra work and the challenge of going where others haven’t gone before is one thing.  Good for you if you take the challenge on.  Can I suggest another strategy that involves going somewhere that is in plain sight but that you’ve probably avoided going before?  The answer is right in front of you.

Let’s face it – in the current environment more power has shifted to retailers, in part due to consolidation, but also due to the big names pursuing and/or expanding private label in their stores.  At the same time, these same conditions have allowed other retailers to raise their profile by improving the  company they keep.  These retailers have been welcoming bigger brands with open arms – brands that in some cases that would have looked at those retailers as last resort options in the past.   Two prime examples of retailers in plain sight that can help you gain Retail Leverage are hidden in the title of this article: Dollar General and Big Lots!

BIG LOTS!

Big Lots! has done a great job of positioning themselves as the top of mind outlet that manufacturers must turn to if they “accidentally” make too much of their own goods.  Breaking news – just like the merchandise sold at outlet mall stores, what they sell isn’t always there by accident.  The proud results of your treasure hunt are likely just some marketing / sales executive’s channel strategy.  So even though you and I know the truth, but let’s not spoil the consumers fun.  Nothing illustrates the message they are sending consumers better than this 2008 Big Lots! tv commercial I’m sure you will recall seeing:

RECESSION & RECOVERY MEAN BEST OF BOTH WORLDS FOR BIG LOTS!

It’s not hard to imagine how the recession can help retailers with a value/discount positioning.  However this recent article in the Wall Street Journal illustrates why a recovery isn’t the end of the boom for Big Lots!:

“While the recession has played right into Big Lots’ business model of helping manufacturers clear their warehouses of discounted and overproduced goods, Cooper said a strong economy is also an inducement for consumers to come through its doors.  ”A better economy means better [product] availability,” Cooper said. “Manufacturers are more prone to change,” to get new goods out to consumers, and Big Lots benefits by getting more merchandise.  At the same time, Big Lots is well positioned because it carries mostly discretionary merchandise and consumers are going to remain cautious even as economic conditions get better, Cooper said. “There has been a shift towards value and we believe that shift is permanent.”

DOLLAR GENERAL:

One reason that retailers like Dollar General fly under the radar (beyond the fact they are often in “flyover country”) is that few sales and marketing executives have probably been in the store, let alone shop there.  I’m sure Walmart was that way for many of us back in the 80’s or even 90’s for some.  But Dollar General – that is one of those stores where the poor rural people shop right?  Can I say that – were we considered poor and rural in Sturgis, Kentucky (pop 2,030)?

Today it is increasingly hard to argue with any retailer that continues to chug through the recession, posting sales gains.  In their own words, here is how Dollar General describes itself on their website: “With more than 8,800 stores in 35 states, Dollar General has more retail locations than any retailer in America. In addition to high quality private brands, Dollar General sells products from America’s most-trusted manufacturers such as Procter & Gamble, Kimberly-Clark, Unilever, Kellogg’s, General Mills, Nabisco, Hanes, PepsiCo and Coca-Cola.”

In many ways Dollar General feels like a cousin of Walmart, in a Hot Tub Time Machine sort of way.  Go back 15-20 years, and take a retailer that is delivering strong results with discount positioning.  Start polishing the assortment by increasingly adding name brands, and as more manufacturers look for growth the brands keep getting better.  Seemingly overnight (again, 15-20 years), the retailer’s brand has improved in part due to the company it keeps.  So maybe it is a little early to put Dollar General on equal footing with Walmart in terms of perceived brand and  a place where people are willing to shop – but the current recession sure hasn’t hurt that.

RETAIL LEVERAGE TAKEAWAYS:

I could have easily written this article about other similar retailers in sectors that don’t have the same appeal that the mainstream players have.  Dollar General and Big Lots simply served a purpose to illustrate the idea that you can gain Retail Leverage by showing a willingness to do what others aren’t willing to do, or go where others aren’t willing to go. Of course this article assumes that you will find a business model that works for retailers beyond where your current distribution is today.  Once you take a walk down those “strange” aisles, upon closer inspection, you’ll often find that one of your competitors has already figured out a way to make it work

The current recession has shown a shift (or expansion) in how and where consumers shop – with potentially long term impact.  Aptly put by Mike Duff of BNET, “Scarred by the Great Recession and embracing frugality, the new consumer is different from the one retailers knew and loved way back in, oh, 2006.” Consumers have re-examined their shopping strategies.  Don’t immediately write off retailers because you’ve never sold there or it failed in the past.  I encourage you to take another look at where you COULD be selling today.

RELATED READING / RESOURCES:

• “Discounter Big Lots Expects Boon From Economy’s Recovery“
• “Portrait of the New Consumer: Smart and Scared”
• “Dollar General Looks For Big Growth This Year”
• “Dollar General Flexing Its Discount Muscle”

By Ben Smith

I never pass up a good analogy to help myself understand a complicated story, and spice up a boring one. The growing use of private brands (or private label) by retailers has become the key story of this new era in retail marketing. There are so many different stories and perspectives floating around, I think what gets lost in the buzz is the underlying reason of why retailers have turned to private brands. So what does retailer’s private brand strategy have to do with the NFL?  On the eve of the NFL draft, I will help you look at retailer’s private brand strategy from a new & more fun perspective.

LOOK AT AMERICA’S GAME:

In hindsight, the NFL probably truly became America’s game somewhere between the baseball strike (‘94) and the rise of online fantasy football leagues (‘99-01). Now of course the Superbowl has long been the dominant tv event, but as we all know, a large number of people tune in just for the commercials and the experience. Regardless of how it got there, the NFL rose to the top of american sports (and culture), and eventually found itself in a position that anybody who gets to the top of their field struggles with – staying #1, and continuing to grow.

WHAT FUELED THE NFL’S GROWTH?  TV!

In the spirit of Michael Scott of “The Office”, I’ll quote Wikipedia – because if it is on Wikipedia it has to be true (and in this case it is): “The television rights to broadcast National Football League (NFL) games are the most lucrative and expensive rights of any American sport. It was television that brought Professional Football into prominence in the modern era of technology. Since then, NFL broadcasts have become among the most-watched programs on American television, and the fortunes of entire networks have rested on owning NFL broadcasting rights.”

WARNING – RETAIL PARALLEL COMING:  Think about how the NFL’s relationship with its TV networks has similarities to Retailers relationships with the branded manufacturers whose goods they sell in their stores. Don’t get hung up on who makes & who sells – just stay with me here. Without the TV networks, or without the branded goods, neither the NFL or retailers would be in their positions of power – each needs the other. Would the NFL be where it is today without the TV networks? Would Walmart have gotten where they are today without finally breaking through the public’s perception that Walmart carried the same quality branded goods as other retailers?

FOLLOW THE MONEY / DRIVEN BY GROWTH:

Like anyone else who makes it to the top of their field, being #1 is not enough.  Staying #1 is the challenge, and growth is the fuel that you need to do it.  While I am sure the NFL was grateful for the various networks role in their success, they started thinking in the spirit of what have you done for me lately?  In 2003 the NFL, in a dramatic step, launched the NFL Network, in effect the NFL’s own private brand.  In one fell swoop, albeit over the last 7 years, the NFL Network has delivered growth to an already large pie, provided additional control and influence over their product, and increased their leverage for future broadcast contracts.  Here are some examples:

Increased The Value of Their Own Product

• Turned the NFL draft from an afterthought to an event, and starting this year, a prime time event, adding Thursday night and Friday night.
• Creating something out of nothing by turning the NFL schedule release into an event.
• Turned the season kickoff into a big Thursday event on NFL Network.
• Flexible scheduling – more control over late season schedule also means they can deliver better games for NFL Network late season games.
• Raised the stakes in the pre-game show arms race on all networks by securing top talent for their own pre-game coverage.
• Ultimately turned the NFL into a 24/7/365 story.  The other sports have 1 season.   The NFL is year-round.

Expanded Distribution / Grew An Already Large Pie:

• Added Thursday night football on NFL Network , now up to 8 games starting in early November.
• Added a thanksgiving day game on NFL Network.
• Expanded preseason games coverage.
• Made NFL Network a must-have offering from cable providers, which they in turn have to pay NFL for
• Created the NFL Redzone channel – an additional premium offering on game days, powered by content from the NFL / NFL Network

There is no denying the NFL Network has had a huge impact on fueling additional growth and success for the NFL.  Obviously the NFL has total control over their product, but imagine if retailers can scratch the surface of what the NFL has done with the NFL Network – you can see why retailers are pursuing private brands with such vigor.

RETAIL LEVERAGE TAKEAWAYS:

A key principle that Retail Leverage advocates brand marketers understand that it is about the retailer’s fight, and not your own; the brands that win will be the ones who can offer the retailer financial growth, not a mere redistribution of the same amount dollars. The key reasons that retailers are increasingly leveraging private brands is that brands didn’t satisfy the retailer’s need for financial growth, and they got hung up on their own fights. So the retailers decided to take control.

The NFL apparently concluded that the opportunity for additional financial growth via the existing networks was not enough.  The NFL saw opportunities to increase the distribution of their product, and improve the quality of their offering.  The NFL Network has achieved both of those goals and continues to do so. At the same time, I believe the other networks have raised their game since the NFL Network came into existence.  Thanks to the rising popularity of the NFL, fueled by TV, it is a WIN-WIN-WIN-WIN;  for the NFL, for the original networks, for the cable/satellite providers, and for consumers/fans of the NFL.  I thank you; my wife – not so much.

When I look at how the NFL used the NFL Network to gain leverage, I have a greater appreciation for how retailers are using private brand strategy to improve their own fortunes.  If anything, it should make brand marketers work harder at providing value (and growth) to retailers – and the brands who get it have an opportunity to gain Retail Leverage in their own right.  And perhaps the greatest point – the next time my wife complains about how much football I watch, I can just tell her I’m studying retail strategy!

Related Reading / Resources:

• Christopher Durham’s “My Private Brand” Blog – great resource for what retailers are doing with private brand
• Vincent Young’s previous article for Retail Leverage on licensing to gain control
• Wikipedia: NFL Network
• Wikipedia: NFL on TV