Pop-up retailers: the next big thing

Pop-up retailers are tipped as being a huge contributor to the retail sector, as much as £2.1bn over the course of 2014.

The pop-ups occupy empty spaces, setting up temporary shops or fixtures for a brief period of time before moving on. These temporary retailers have been among the fastest growing sectors in the retail sector this year.

A study by EE, the digital communications business and CEBR, the economic consultancy returned staggering results for the growth of these mobile retailers, forecasting growth of 8.4% for next year, notably higher than the 3.4% growth expected for the high street.

However, these results also beg the question: coupled with the expectation of average consumer spending to grow from £110 to £120, could pop-up retailers be just what the high street needs to provide that welcomed boost as the warm weather that drove sales this summer will begin to fade? There are already 9,400 pop-up stores in existence in the UK but it’s likely that this number will rise over the course of 2014 and into 2015.

Do your sales people talk about “convincing” their customer?

We often hear from sales people that they need to “convince” the customer to buy. The Oxford Dictionary defines “to convince” as “causing someone to believe firmly that something is true, to persuade someone to do something, to talk into, talk round, win over or cajole”. This all sounds very much like the old days of door to door double glazing selling and it makes you stop and wonder just how the buyer feels and what type of conversion rate this will generate.

The buying experience should be a rewarding one. The buyer should be able to clearly see how the solution helps them achieve their needs and if this is delivered in a compelling and relevant way by the seller there is significantly little “convincing” to be done. This takes less effort by the seller and leaves the buyer’s door open to having future conversations. Are your buyers’ doors being left partially open or closed?

Selling is at the heart of winning with customers and must become a way of thinking for all commercial teams rather than a baton handover between them. The role of all functions is to consistently and repeatedly create better value for their customers so that they chose your products and services over the alternatives.

Unless selling direct to the consumer, the customer is your gatekeeper to them and therefore all functions would benefit from being more customer focused. For example, marketers around the world believe that their brand/product is relevant for all customers and often say as much when talking with sales. The reality is often very different driven by the skill and will of customers towards that category for example. The organisation’s interaction with a high skill/will customer should therefore look very different to one with low will/skill but this is rarely understood beyond the sales function and sometimes not within it. In our experience, sales teams know more about brands than branded marketers know about customers and when this imbalance is redressed it can be great catalyst for growth.

If you need more information on selling capability, call Sonia Johnson at The Quantic Group on +44 1252 616100.

Selling is not just for ‘sales’

Research (1) has found that the majority of sales teams are left on their own to prepare for new product launches with static marketing collateral and no sales training. Only 38% receive a structured immersion into new products with selling practice only accounting for 3% of the immersion. Most sales teams learn the material themselves leaving the organisation open to huge variability in messaging.

The survey also revealed a lack of sales coaching – only 18% were offered coaching on a monthly or bi-monthly basis. 32% indicated they never received any sales coaching to support the launch of new products. This seems a massive miss when we know that functional coaching is THE tipping point to reducing the time to competency and therefore maximising the return on training investment.

This is evidence of a critical gap in an organisation’s ability to sell. Marketing and sales teams need to come together to find a way to bring competence and confidence to the sell, so that there is the maximum opportunity to secure “yes”.

Who’s selling in your organisation? One function called “sales” or all functions?

(1) Corporate visions

If you would like to discuss sales training please contact Sonia Johnson at The Quantic Group on SJohnson@thequanticgroup.com +44(0)1252 616100 http://www.thequanticgroup.com/team13.htm

Part II of Are you maximising all your ‘clicks’ to sales?

PART I of this article on e-commerce dealt with the history of the emergence of e-commerce and its growing importance. PART 2 looks at the best approach to maximize your share, revenue and profits.

After the ‘.com’ bubble burst over 10 years ago, there was relatively slow growth in e-commerce as companies consolidated and reconsidered their positions. In the last two years, particularly however, there has been a massive resurgence and forecasts are for a massive growth of e-commerce globally and across all product fields including ‘fresh’. This growth has been fuelled by faster and more secure technology, ease of access (m-commerce), more customer friendly user interfaces, competitive pricing, faster delivery and wider choice.

Many companies now no longer regard e-commerce as an ‘add on’ and incorporate e-commerce into an ‘omni channel’ strategy to maximize sales opportunities. In addition, many have completely restructured their organisations internally to address the importance of D2C. There are still companies, however, including global multinationals, who still have not sufficiently addressed its rapid emergence.

Part II discusses where a company might be in the e-commerce development life cycle and suggests what next steps need to be taken to turn ‘Clicks to Sales’

One possible methodology is to divide into three specific levels of e-commerce development:

• Level 1 Development (EC1): companies who recognise the opportunity but have taken no steps to consider e-commerce.
• Level 2 Development (EC2): companies who have an e-commerce site operated from within or have their products on multiple third party sites, probably offer physical delivery only and do not have the site integrated into either their channel strategy or their whole company ethos and philosophy. Site ‘efficiency’ and profitability is not measured, consumer profiles are not compared with retail buyers and SKUs are the same as those in retail traditional channels and consumer feedback is not monitored or acted upon.
• Level 3 Development (EC3): companies for whom e-commerce is already part of the internal channel strategy, (indeed e-commerce may have its own channel strategy), have an established company site or regularly monitor performance against competitors (not just Amazon) on third party sites, profitability is discussed at board level and there is a programme to continually upgrade via for example, HTML5 and ensure multi format access for smart phones, tablets as well as laptops and home PCs. SEO and MEO is de rigeur and specialists are employed to keep the internal site that way and advise retail partners.

Consider the following real global examples.

Company A, in 2011, a major German homeopathic company with well established brands was selling into retail stores across Germany.  It was losing share, both to Amazon and specialist German and other EU e-commerce sites selling health foods offering the same generic product at a cheaper price. These sites also had free next day delivery to Germany.  Company ‘A’ was an ‘EC1 level’ company. They were advised by one of their non-executive directors on their board to hire specialist e-commerce consultants to:

• Design and build a ‘front end’, to map out the range strategy for the new e-store.
• Ensure measured SEO was in place.
• Sub-contracted the setting up of multiple payment systems to a specialist.
• Established a north and south fulfilment system for the whole of GSA, plus guaranteed one day delivery everywhere in Germany.
•  E-store prices were reviewed, taking into account the increased margin generated by selling B to C, in store prices were revised to reflect the changes and new SKUs were developed specifically for the e-store.
• Company A’s own brands were even placed on Amazon and the competitive e-commerce sites

Within six months, their share of market has been restored and additionally, sales in Bavaria, which had few retail outlets jumped 32% year on year.

Company ‘B’ was an ‘EC2 level’ multinational Australian retail chain selling video games with a ‘state of the art’ e-store offering B2C physical delivery on day of launch, special editions, multiple payment platforms, a ‘loyalty programme’ and had reduced the number of clicks to existing registered members to a maximum of three except where the credit card needed an additional check. Company ‘B’ prospered, gained market share, integrated their strategy between retail and e-store and even competed with lower priced imports.

Company ‘C’, an Australian competitor, however,  was only a ‘Level 1‘ company but retailed not only video games but Blu Ray and DVDs, digital cameras, PCs and laptops, mobile phones,  accessories and books and ‘cheat guides’ about the branded products.

Company ‘C’ hired local e-commerce Melbourne consultants and converted themselves to beyond ‘Level 2’ in seven months. The first move was to build a consumer friendly in-house e-commerce site that offered the choice of digital downloads or physical delivery on PC games and digital tokens for Xbox Live and PlayStation store games. This resulted in not only physical prices becoming more competitive, as the margin on digital increased  by 38%,  but  enabled instant delivery and pre ordering and downloading. Secondly, branded camera goods were ranged on the site. Meta data from the manufacture was included in multiple languages and demonstrated on the site, with tips and suggestions for interested buyers. Delivery was offered to the home or by in store pick up.  Six other major enhancements were built in including instructions for some products in Mandarin where it was identified that > 20%   of the mobile phone purchasers  actually had Chinese as their first language.

Company ‘C’ now not only have the largest market share in video games but have increased turnover in Australia (retail and e-commerce combined) by 28% and profitability (direct operating income (DOI) a % of gross sales) by 16%.

Company ‘D’, a major US blue chip global consumer products company were already an ‘EC3’ level’ Company. They had both internal e-commerce sites and monitored and advised third parties on the optimisation of selling the company’s products on the third party sites.

They had foreseen very quickly the emergence of e-commerce but additionally, the importance of ‘digitisation’ of the all the divisions internationally of the company and the value of a direct relationship with the end user.

No stone was been left unturned in engaging with consumers on their comments received on both their own sites and third party vendor sites. The objective was to maximise the number of consumers clicking and buying, not just clicking. Even ‘Bayesian’ analysis was used to monitor the ‘consumer pulse’ and iPads adopted in production plants to follow the predicted path of the product to the consumer. Not only to the consumer in the USA but even as far as the Philippines and Japan.

The ‘EC3’ Level 3 however needs to continually upgraded and there are now specialised e-commerce consultants on hand to guide them to get to the ultimate goal of tracking profitability through both the company’s own sites and the partner third party retailer sites.  The most advanced, consumer friendly, fastest access technology, the continual  monitoring of the clicks to purchase, the identification of the consumer groups most likely to purchase on which site, the brand most likely to sell on line compared to in store; the list is endless and still evolving.

E-commerce is now very deep and advanced, it is something that can bring instant results as in the case of the German homeopathic product company, it can enable a company to ‘leap frog’ another as in the Australian example, or can transform a multinational USA company’s philosophy.

Like a modern car, however, the fan belt cannot be changed without first connecting with the laptop, getting to ‘Level 1, 2, or 3’ requires a specialist adviser. As with the new automobile technician, the investment in his or her specialist knowledge will pay off in a very short time.

In the digital era, instantly.

Ignore e-commerce, or give it just lip service, at your peril.

So, what level does your company operate at with regards to e-commerce?

EC1? Where it is hardly recognised or has been difficult to get through corporate red tape?

EC2? Where e-commerce is an important part of your business, it is recognised corporately and has a ‘division’ working on it but still is not 100% integrated in to the fabric of the company?

EC3? Where not only e-commerce but digital marketing has changed the way the company does business, indeed the whole structure of the company and its marketing and sales philosophy.

We would be interested to hear from you, listen to your own experiences and happy to help.

Written by D Turnbull and D Reeves of The Quantic Group

Part I of Are you maximising all your ‘clicks’ to sales?

Part I (of a two part article on the accelerating importance of eCommerce and what actions to take)

It started in 1997 as the ‘Dot Com Bubble’,  when in March 2000,  the NASDAQ peaked at 5132.52 as ‘dotcoms’ were seeing their stock prices shoot up if all they did was add an ‘e prefix’  to their name and a ‘.com’  at the end. The combination of rapidly increasing stock prices and general market confidence led investors to believe that these new internet based companies would turn vast profits and those with the money were willing to overlook traditional measures such as P/E ratios in favour of companies possessing technological advances.

The bubble, however, burst in 2001 with some companies such as ‘Pets.com’ failing completely. Others initially lost a large part of their market capitalization but eventually remained relatively stable and profitable. Cisco’s stock sky rocketed at first but then plummeted 86%. Some like Amazon.com actually flourished with the stock going from $107 during the boom period of 2001 down to $7 per share but a decade later recovered to over $200 per share.

Consumers and shoppers were slow to adopt and adapt to the new technology but that has all changed. Companies are now following the shoppers rather than the reverse, and if your e-commerce site is not on your company’s board’s ‘favourites list’, then it may be already too late to catch the massive wave of on-line shopping across all consumer goods categories.

B2C Business*	Grocery Products	% delivered         B2C	All Consumer Products	%delivered B2C
2011	€ 27   bn	4%	€ 690 Bn	5%
2013	€ 42   bn	6%	€ 1 trillion	7.3%
2015	€ 70   bn	10%	€ 1.7 trillion	12.5%
2017	€ 98   bn	14.5%	€ 2.5 trillion	18%
2018	€ 110 bn	16%	€ 3 trillion	22%

* Global estimates

Sources: IMRG & Kantar plus The Quantic Group estimates and interpolations.

Growth estimates vary. As the above shows, research companies have been quoted as predicting the consumer products on-line business to reach €3 trillion, or 22% of all consumers’ spending  by the end of 2017.  Within this, grocery products could reach €110 billion or 16 % by the same point in time. Given empirical evidence on the effect of global increased broadband penetration and speeds on other commercial businesses such as the physical and digital delivery of music and DVDs, once a critical mass is reached, this 16% may explode even faster.

It is not just in the developed Western markets that this is the case; in fact, B2C delivery has been important and growing in many major Eastern markets for a long time. Delivery by a moped makes a very economical and consumer friendly way to obtain and retain new customers. Aramex, delivering to consumers’ doors for cash on delivery in the Middle East, report that their business has grown > 100% in 2012.

Whilst B2C digital delivery, such as that for music, movies and video games can be up to 40% more profitable than selling to the retail trade, because no physical product and ‘price protection’ are required anymore, B2C physical delivery is also estimated to increase net margins by close to 20% if the e-commerce site, the payment systems, logistics, fulfilment and customer service are all in place.

Why now? What is driving this rapid movement to buying on-line? Everybody has their own reason and personal anecdotes of course but the underlying drivers are:

•  Increased connectivity:  internet access and broadband penetration is estimated to reach 50% of the world’s population by 2015.
• Anywhere, anytime access: consumers now access on-line sites from smartphones and tablets as well as laptops and desktops. B2C sites have adapted to this with HTML5.
• Ease of price comparison: many on-line sites offer price comparisons for a typical shopping basket on a daily updated basis. Barcode scanners that can pinpoint the cheapest place to buy an item on-line in the consumer’s country are now available.
• Time saving: click and your item arrives on your doorstep the same day. (Of course IT glitches and frozen PCs sometimes turn this into ‘perceived’ time saving.)
• Guaranteed availability: how many high street shops has one person visited to buy that special brand of shampoo? The ‘in stock’ flash on the on-line site is comforting and pays rich dividends.
• Focuses the mind on what you really need: how many times have you dropped that tin of chopped tomatoes into the trolley only to discover it one year later still in the pantry? Budgets are tight, buying only what you really need is essential.
• The ‘favourites’ list: more time saving – the site has your shopping list ready and waiting.
• Petrol prices: an ‘out of town’ supermarket means ‘out of town’, getting in the car, not walking across the road to the off license. With B2C this cost disappears for the consumer.

And, of course, the emergence of the Social Networks. A mention on Facebook of a product and it is often 2-3 clicks and two hours away from being yours.

Naturally shopping on-line is not for all and there are eventual barriers. Will you be at home?  Does the world have enough delivery drivers? (Of course, those at the cutting edge of e-commerce are at the cutting edge of reducing this possibility, viz the Amazon tie up in Japan with 7 Eleven for pick up, Co-op  the same in the UK and Staples in the USA. Personal locker collection in central locations activated via Pin Codes have mushroomed in the last six months.

Or, maybe you simply like ‘browsing’ in a shop to get a personal shop assistant recommendation or the internet connection is down.

It can only get bigger.

However, it is here to stay and is not going to get smaller.

The big question therefore is: as a Company, are you prepared for the growth and, at the extreme, like HMV and Blockbuster in the UK or Circuit City in the USA, are you even going to survive with no integrated on-line/digital strategy and roll-out plans for the management of e-commerce?

Consider these questions:

• In your Company, do you regularly discuss e-commerce as a key component of your multichannel strategy? (Or, as it is now referred to, your ‘Omni channel’ strategy.)
• Do you know intimately the on-line shoppers’ expectations, triggers and barriers to your own category? (Did you know that frozen food sells for times as fast on-line as offline? Do you know that branded goods, on average, sell three times as fast as ‘in house/own’ brands)?
• Are all your products correctly represented, placed and priced on ‘e-commerce sites’? (A recent client study by the The Quantic Group showed that on one typical major retailer site most major brand items across blue chip vendors scored less than 4/10 when assessed for correct pricing, correct description and packaging, had a key benefit mentioned and were less than three clicks away from purchase.). Two clicks would represent the ‘holy grail’.
• Do you design specific on-line action plans for your brand ranges or leave the most junior product manager to handle?
• Do all your key functional directors speak credibly and confidently about the company’s on-line offering?

If the majority of your answers are ‘no’ to the above then it is either too late or the company needs a call to action to identify the opportunity, map out an on-going  three year plan and start to execute the plan without delay.

 

The danger of having your head in the sand.

It is no exaggeration that some companies will wither and die, some will lose share to their more agile on-line competitors, some will ‘tick the box’ of on-line and do no more. Getting aligned internally and having a common company attitude towards on-line purchasing is the key. Digital marketing through social network systems (SNS) aimed at influencing consumers directly and on-line delivery, both physical and digital, will transform organisations, whether this is through their own e-commerce site or through a third party retailer’s site.

Departments within companies will have to become multifunctional and multi skilled rather than work in silos and be mono skilled in finance, operations or marketing for example. Marketing takes on a whole new meaning. Which SNS is best to get my consumers to my site and which one gets them to buy and buy my brand regularly?

The traditional sales forces will have to ‘re-train’ and include on-line technology within their skill set. ‘Nano learning’ will become no longer a buzz word but a necessity. Where these challenges exist, however, means an equal number of opportunities. First movers within FMCG giants are already reorganising to address these opportunities, the question is: ‘is your Company doing the same today?’

The e-commerce opportunity is massive from a market share and profit point of view for ALL companies. It will represent a disproportionate share of your growth over the next few years.  The profit opportunity is there. However, some companies still are not getting it right as many are investing in the wrong things at the wrong levels and so have a worse profitability. It takes careful, well thought out plans in conjunction with e-commerce professionals to get the investment balance in perspective.

What immediate steps, therefore, should a company take to exploit the obvious   growth opportunity?  It will depend on the company of course and the extent that e-commerce is recognised and developed already.

Part II of this article to follow.  Please follow our blog to receive the concluding part.

Written by D Turnbull and D Reeves of The Quantic Group