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

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

WATCH THE BIG BOYS:

The next big thing in TV’s, the largest category in Consumer Electronics, isn’t going to be 3D.  So put the dorky glasses down and think about what recent moves by the big boys signify.

• Walmart buys VuDu (streaming movies) (credit: ZatzNotFunny)
  • Walmart spent over $100M to buy the whole cow
• Best Buy Bankrolls Tivo’s Marketing (credit: Davis Freeberg’s Digital Connection)
  • Tivo’s market cap is $1 billion, so Best Buy is renting the cow for now.  They are spending $20M to promote Tivo this year … Tivo itself only spent $5M last year.

THE NEXT BIG THING:

The next battleground for hearts, minds and wallets of consumers will be connected / internet TV.  Don’t get hung up on the idea that these moves by BBY and WMT are solely focused on the consumer demand for the added features that connected TV’s provide.  Here’s how we see things playing out:

Short term: the need to address consumers growing desire for streaming video is important.  Walmart and Best Buy are gaining access to existing relationships & infrastructures to offer their customers access to their own branded digital video services.

Near term: Walmart and Best Buy are already the leading retailer of TV’s.  Best Buy has an obvious opportunity to integrate Tivo capabilities & connectivity into their own Insignia line of TV’s.  It is not a stretch to think that both Walmart and Best Buy persuade leading TV vendors to integrate these services into TV’s for sale in their respective stores.

Long term: the bigger picture of these moves is about more closely connecting the retailer to the consumer in their home.  In a fragmented media world where it is increasingly difficult to reach consumers via traditional means, Walmart and Best Buy are hard wiring themselves to their consumers.  These new platforms enable a retailer to not only offer the obvious of streaming movies & other digital downloads, but also positions them to take advantage of future advances in connectivity and digital offerings, including ones geared around shopping at home.

For more speculation on retailers connected TV & on demand services, check out these articles:

• “Wal-Mart enters the battle of TV vs. the Internet.” (credit: Fortune)
• “Best Buy Betting Big on Tivo” (credit: NewTeeVee blog)

Now that is about as far as I can go without staying from the mission of Retail Leverage. We know that our readers value that we help keep them informed on big picture news that has retail impact, but we aren’t really focused on the product or technology.  The reason I share this article with you is that you don’t have to be selling TVs or set top boxes to walk away with ideas that you can apply in your own brand/business.

HOW CAN YOU ADVANTAGE A PARTICULAR RETAILER?

The key lesson here in the pursuit of Retail Leverage is to ask (and answer) the question – “How can I advantage a particular retailer versus their competition?”

Look at the lengths that Walmart and Best Buy are going to position themselves against each other in the connected TV space.  Walmart’s strategy involves acquiring a company (VuDu), and Best Buy’s strategy involves entering into an exclusive relationship (Tivo).

The real story is the retailers fight against each other.  Get over the battle you are fighting against other brands – THE RETAILER DOESN’T CARE.

Fortunately though, you don’t have to be in a category that is in the cross-hairs of retailer corporate strategy teams to be able to employ the “advantage” strategy.  Simply put, If you want to get the buyer’s attention, bring something to them that strengthens their hand versus their competition.

As assortments narrow and the tentacles of private label expand, brands are being forced to make bigger bets on specific retailers, product lines, and skus. Too often, people wait to make tough decisions until their hand is forced, and sometimes it is too late.  While the “advantage” strategy might not be right for you at this time, you can learn a great deal from the exercise.  Good luck!

By Vincent Young

Kudos to Wichita, Kansas-based INVISTA who recently announced that Lowe’s will become the only major home improvement retailer to offer STAINMASTER(R) carpet — North America’s most recognized carpet brand. The new deal with Lowe’s gives the STAINMASTER Carpet brand access to Lowe’s nearly 14 million shoppers every week.

While the STAINMASTER brand has considerable equity in the home furnishings and flooring industries, the team at INVISTA was able to gain distribution at the world’s second largest DIY/Hardware chain by thinking like a challenger brand and adopting two key strategies to gain Retail Leverage.

Retail Leverage Principle #1: Bring Pent-up Demand to Stores

Since its introduction in 1986, STAINMASTER(R) carpet has revolutionized the industry with its stain and soil protection technology. Historically, however, STAINMASTER(R) carpet styles have only been offered by local STAINMASTER(R) Flooring Centers and aligned dealers in the U.S. and Canada. As a result of this new arrangement, Lowe’s will now become the exclusive DIY Home Supply Retail Chain to carry STAINMASTER branded carpet.

Retail Leverage Principle #2: Offer Product or Program Exclusivity

Under the multi-year agreement, the strategic alliance with INVISTA will deliver to Lowe’s customers more innovative, stain-resistant flooring options that are both stylish and durable under the STAINMASTER Brand. Quality-conscious, value-seeking consumers looking for the well-known brand will soon find an expanded selection of STAINMASTER(R) carpet in the more than 1,700 Lowe’s stores across the United States and Canada. In today’s economic climate, carpet remains an affordable flooring option, and with 89 percent aided brand awareness, STAINMASTER(R) is the brand most often recognized by consumers.  In addition, INVISTA expects the alliance will continue to enhance the STAINMASTER(R) brand as a result of Lowe’s targeted advertising, merchandising and promotions.

“This is a ‘win-win’ situation for consumers, INVISTA and Lowe’s,” said Steve Griffith, vice president of INVISTA’s residential flooring segment. “Today’s consumers are seeking products and retailers that deliver exceptional value, as well as brands that they know, love and trust. Our high-quality products and trusted STAINMASTER(R) brand is a great fit with Lowe’s commitment to its customers.”

“When shopping for carpet, customers look for products that deliver durability, repellency and soil resistance features,” said Patti Price, Lowe’s senior vice president of merchandising. “When our customers choose STAINMASTER(R) carpet, they know the product will perform in their active household. To further help customers, Lowe’s will feature a STAINMASTER(R) Carpet Gallery to help them choose the right carpet and simplify the shopping experience.”

The STAINMASTER/LOWE’S marriage is a wonderful example of how supplier brands can gain retail leverage by helping the retailer achieve its growth goals (by drawing new, incremental foot traffic into stores that were previously inaccessible by the retailer). Well done INVISTA!

SOURCE:

Press Release on the partnership between Lowes & Invista

By Ben Smith

WHAT IS POWERMAT?

Everybody has cursed a charging cable at some point.  Either you left it at home / in the hotel room / at the office, or you simply lost it.  In turn, I don’t think it is a stretch to think that in this wireless age, you could dream of wireless charging.  I vaguely recall hearing about the power induction technology behind Powermat at CES 2009 but never gave it a second thought.

Then today’s article in Ad Age set off my Retail Leverage radar and provided a perfect opportunity to frame some retail leverage concepts around a hot new product.  Be sure to play the TV spot below.

[youtube=http://www.youtube.com/watch?v=fiCb4l1Hzcw&hl=en&fs=1&autoplay=1]

Have you seen or heard about Powermat yet? If you haven’t yet, you will soon.  You won’t necessarily see the commercial, although they will be running ads like this one.  Where I’m confident you will see it will be in the top retailers in their respective categories.

POWERMAT GETS RETAIL LEVERAGE:

When you start breaking down Powermat’s launch strategy, you’ll realize they are using a hybrid of retail leverage strategies. More importantly, they are doing it on a scale much more relevant to challenger brand marketers used to dealing with 7 figure budgets.

1) Offer Program or Product Exclusivity (sort of)

While I can’t call their launch an retailer exclusive strategy- it is not far from it, as they are focusing their launch efforts in Best Buy and Target.  Best Buy and Target tend to serve different customer types.  On the male / female spectrum they are about as far apart as you can get for consumer electronics purchases.  They both also provide best-in-class opportunities to tell your story to consumers.  Note – we love the power of Walmart and I’m sure Powermat has them in their future plans – but Walmart makes more sense down the line, once this new class of product is better established with consumers.

2) Have Something So Big “They” Can’t Ignore

Albeit on a more modest scale (see financial estimates below)-  they are employing the “Something So Big It Can’t Be Ignored” strategy.  First of all, by concentrating your retail distribution your marketing efforts at those 2 retailers go farther, and in turn the sales are concentrated.  PowerMat will feel BIG to the Best Buy and Target, even if their overall impact at retail is not large.  Secondly, according to Beth Harrison Meyer of Powermat (as quoted in Ad Age),  ”You will not be able to walk into these retailers and miss Powermat.” This is a clear signal that you will see those concentrated dollars in the form of endcaps, special signage, and probably demos too.

Powermat will feel big to the consumers when they are most engaged – in the store on a shopping trip.  Finally, they have to be banking on capturing the attention of buyers at other retailers who will feel like they are missing out on something big.  After all – a buyer can only take so many consumer requests, store requests, and more important – demands from the boss that they get this product in-store ASAP in 2010.

MORE DETAILS ON POWERMAT’S LAUNCH:

From the Ad Age article: “The push breaks in the U.S., U.K. and Italy on Oct. 5, with an integrated campaign that includes everything from airport signage and installations to a four-page insert in Wired magazine and full-page print ads in other publications, and a series of humorous 15- and 30-second commercials intended to show people’s reactions to the new technology.”  The article also estimated their spend for the first phase of the launch campaign to be between $10M and $15M.

POWERMAT(H) – BREAKING DOWN THEIR BUDGET:

I’d like to give you a better idea of how I think their budget breaks down, to get it to numbers that marketers focused on the US market can relate to from their own budgets.  They mentioned a range of $10M – $15M for their launch budget for the initial phase, which I assume is Q4 (Oct – Dec).  They referenced launching in US, UK and Italy.    I’m betting a 60/30/10 split between US, UK and Italy.    Let’s assume for round numbers that the launch campaign is $10M, and the launch period is Q4 (Oct – Dec).    Let’s zero in on the US.  How far does that $6M go?  (note – even if I was on the low side assuming $6M for the US and it turns out to be $9M, you’d just add 50% to each of the estimates above).

BUDGET ESTIMATE BY LAUNCH COMPONENT:

TV: $3M (50% of total)

That covers production and a modest TV campaign.  Here’s hoping the production is a lot closer to $500K than $1M.  A $2M campaign hardly makes a dent, so expect something concentrated and on cable.  Interestingly  & from personal experience – if they went the infomercial route which could have also been a viable strategy, that same spend would feel HUGE.

In-Store / Retailer Marketing: $2.4M (40% of total)

You could easily spend $1M+ on premium shelf space, incremental displays and fixturing between Best Buy and Target for Q4 alone.  Then add a demo program that ramps up the last 6 weeks and you could burn another $1M.  Demos are highly effective but expensive (600 stores, 15 days of demos/training, 4 hours per event, $30 per hour = 7 figures).

Print Media, Airport Ads, PR: $600K (10% of total)

Who knows about the mix here – or cares for that matter.  I probably am under-estimating the spend here but I feel like these levers are more strategic and also smells of the dreaded 360 campaign compulsion.  They probably got a recommendation to spread their dollars across multiple vehicles and to target business travelers or something like that.  I do think their PR budget should go a long way as they shouldn’t have to fan the flames too hard to get coverage of this product.  As Vince from Shamwow would say, “It sells itself.”  No word if the Germans make it – cause you know they make good stuff.

TAKEAWAYS:

Once you start to zero in on Powermat’s launch strategy you can see a pretty focused “looks bigger than it really is” type of program.  I’m not sure how much the TV campaign will get them outside of the buyer’s meeting, but for starting out in only 2 retailers they are launching with a bang.  With over 40 years of challenger brand marketing experience, the crew here at Retail Leverage is used to doing more with less so that is why Powermat’s launch is so interesting to us.  Anytime you have the ability to launch a brand new product and brand for that matter, you are starting with the proverbial clean slate.  An exercise that Retail Leverage advocates is to think like a start-up, imagine you’ve just been given several million dollars and start ideating on what you’d do.  Priorities can emerge pretty quickly when you are forced to allocate the dollars.  With limited dollars, it is clear that Powermat started with the end in mind, which is in-store at the point of sale.  They worked backward from there doing what it takes to get 2 leading retailers to buy-in and support their launch.  In effect, they are launching with Retail Leverage.  That is a great place to be as long as the sales back up the expectations.  If Q4 is a success, you can bet they will expand their leverage to other retailers,  If they fail, you could say they BLEEPED up by putting all their eggs in just a few baskets.  We’ll check back in once we get an indication of their results!

By Vincent Young
Hats off to the marketing and sales teams at Rosetta Stone Software (RST). Earlier this week, Office Depot formally announced plans to become the exclusive office product superstore to offer Rosetta Stone’s  award-winning Rosetta Stone computer-based language learning system. This move expands Rosetta Stone’s number of major retailer store-doors by nearly 1,200. Office Depot plans to prominently merchandise Rosetta Stone on a special dedicated endcap with many different Rosetta Stone skus (language-learning products in Spanish, French, Italian, Chinese, Japanese, Russian, German, Arabic and English).

How is it that a relatively small $250 million Rosetta Stone brand is able to gain distribution, assortment, branding, and merchandising leverage against a $15 billion retail giant who controls the access to the consumer? By following many of the challenger brand go-to-market strategies espoused by the writers of this blog! Last week, I highlighted Five Ways to “Unleash ‘Pent-up Demand’ at Major Retailers.” The recent success that Rosetta Stone has had with Office Depot offers tangible examples of how to implement such strategies and is a marketing model that many challenger brands could learn a great deal from. How did Rosetta Stone gain retail leverage:

1. Direct-response selling – The Rosetta Stone brand and installed base were built initially via a direct sales model (broadcast, print, on-line, telesales, and direct-to-government).  For those who understand the fully-burdened costs associated with moving goods through most major retailers, an efficient direct response model can actually produce a lower cost-per-order despite the scale efficiencies that large retailers sometimes provide.

2. Launch exclusively with specialty/boutique retailers – According to reports, Rosetta Stone’s 145 retail kiosks (located in airports and malls) accounted for 22% of consumer revenues and sales to boutique retailers accounted for another 21% of consumer revenues. The bulk of boutique retailer sales were to Apple (AAPL), Barnes & Noble (BKS), and Borders (BGP).

3. Launch exclusively with one major retailer – Of the retailers who sell significant volumes of reference or productivity software, Office Depot represents the first “major retail” partner for Rosetta Stone. Other major retailers such as Staples, Office Max, Best Buy, and even Walmart are sure to desire a piece of the Rosetta Stone action that Office Depot will own for some period of time. If (and when) Rosetta Stone decides to expand to other major retailers, it will do so with much greater leverage as the other retailers will seek to neutralize Office Depot’s unique/exclusive offering.

Rosetta Stone is already the market leader in the $5.5 billion U.S. language-learning industry. I don’t see that changing anytime soon as Rosetta Stone continues to grow its franchise into retail through smart, challenger-savvy go-to-market approaches.

By Ben Smith

Tivo and Best Buy recently announced a partnership that will change how both DVR’s and TV’s are sold.  I won’t bore you with all the details but the summary is that both Best Buy and Tivo are giving and getting something big.

In Tivo’s case, they will be getting favored real-estate to display their product, with an increased focus from the Blue Shirts.  This kind of vote of confidence from a retailer like Best Buy is gold at retail.  Combine this with their coming wave of DVR’s via partnerships with DirecTV and Comcast, they have a story to tell and great place to tell it.

On Best Buy’s side, they are already a leading retailer of TV’s, and also a leading TV advertiser among retailers (almost $400 million in 2008).   However, once the customer gets home with their brand new TV, Best Buy is in the same boat as other advertisers when it comes to trying to reach the consumer.  The Tivo partnership will provide Best Buy with a platform to stay connected to customers who buy special Tivo boxes from Best Buy, as well as their house brand TV sets (Insignia, Dynex).  This platform is expected to operate on top of the renowned Tivo interface.  You can bet that Best Buy will use this tool to reinforce to its customers that it is the destination for technology, and provide offers and opportunites to learn more about their products and services.

So what did Tivo give up to gain leverage at Best Buy?  Frankly not much.  Instead of giving up more margin, or spending MDF dollars to buy premium merchandising, Tivo has created something new that they are basically giving away to Best Buy (and perhaps other retailers in the future).

Tivo is breaking new ground with this retailer specific platform that it can deploy via its boxes, or software embedded in TV’s.  The real question is what can Tivo gain?  They’ve been waging a losing war as of late as consumers take the generic DVR’s from their cable/satellite providers, and in many cases either think of it as, or refer to it as, a Tivo.  If the Best Buy partnership can help consumers make the choice to go with Tivo instead of blindly taking their providers DVR, Tivo is back in business.

UPDATE:

More details are coming out on the communications platform that Best Buy is getting from Tivo.  The platform may be coming on TV sets beyond just the Best Buy house brands (Dynex, Insignia).  LG and Samsung are rumored partners to deploy the Best Buy Tivo interface on their sets sold at Best Buy.

If the Tivo interface is anything like a storefront presence, you can guarantee that other key vendors at Best Buy will want to find ways to get their brands/products featured there.   If it is important to Best Buy, it better be important to you if you want to sell TV’s there or any products for that matter.

Stay posted.