Two new buzzwords are propelling retail into orbit. A Hub white paper by Rodney Mason of Parago. Online retail is growing, but not as fast as offline brick-and-mortar is contracting. Many retailers are reporting that their customers who shop online don’t come in-store much, if at all, and vice versa. Customers who shop online tend to expect greater selection and cheaper prices than they would find offline, in addition to free shipping, which erodes margins that are already battered by price-match strategies.
All of this change has two new buzzwords — BOPIS (Buy Online; Pickup In-Store) and BISBO (Buy In-Store; Buy Online) — permeating retailer ‘mission control,’ as they work to grow transaction counts and healthier margins. Retail is steeped in traditional ‘markdown’ events, which still work, and which have recently been proven once again necessary. However, many shopping trends are not being closely addressed, and now retail is playing catch-up. Read The Rest of The White Paper.
Brooks Headley is a pastry chef at a four-star restaurant, but doesn’t think of himself that way, reports Jeff Gordinier in The New York Times (9/17/14). "He doesn’t even like that term," says Mark Ladner, executive chef at Mario Batali’s Del Posto, where he works with Brooks, a punk-rock drummer who "never went to culinary school." In his new book, Fancy Desserts, Brooks plays to irony, in that his "desserts at Del Posto are the very antithesis of fancy. Much of the time, he specializes in exploring the old-school, birthday-party partnership between cake and ice cream."
Here’s how he describes his candied carrots: "This recipe is inspired in part by the Looney Tunes episode where Bugs Bunny buys carrots out of a vending machine." The recipe is accompanied by a photo in which "purple, yellow and orange greenmarket delights are shown lying side by side with a roll of Life Savers and a Zagnut bar." His chocolate gelato carries "a slight memory trace of American junk food." "I toss in two types of cocoa powder to make it feel a little chalky — the way a Fudgsicle tastes a little chalky," he says.
Punk rock is a "core aesthetic," in the sense that Brooks believes in deconstructing a dessert, like a song, "down to its raw essence." He also draws on the "rootsy soulfulness of Italian cooking" — he actually "views himself as an Italian grandmother, and he credits women with teaching him everything he knows." When Brooks is not making desserts, he might be found whipping up a Superiority Burger, a veggie burger that created a sensation at a pop-up food fair. Brooks says he’s a humble guy, "except with veggie burgers. This is the best," he says.
Dan Jurafsky has analyzed millions of restaurant menus for linguistic patterns and quirks, reports Jennifer Schuessler in The New York Times (9/17/14). Dan is a linguistics professor at Stanford, and reports his findings in a new book, The Language of Food: A Linguist Reads the Menu. He has also analyzed "more than a million Yelp restaurant reviews." However, Dan — being the linguist that he is — rejects the term Big Data in association with his work, preferring the term "data science" instead.
His observations include "the gradual fading of French as the lingua franca of ‘fancy’ American restaurants. ‘Entree’ has gone all but extinct at the high end, although there are some holdouts like ‘jus’." ‘Caprese,’ he says, "has become such a common word, we can now use it as a metaphor for something else … You can expect your customers to know what it is." Dan also finds that "four-star reviews tended to use a narrower range of positive words, while one-star reviews had a more varied vocabulary."
He also found that one-star reviews tended to "use language much as people do in the wake of a collective trauma," similar to language patterns following the death of Princess Diana and 9/11."They use the word ‘we’ much more than ‘I,’ as if taking solace in the fact that this bad thing happened, but it happened to us together," says Dan, who also found that "reviews of expensive restaurants are more likely to use (racy) metaphors, while the food at cheaper restaurants tends to be compared to drugs."
Innovation in China is "often underrated but nonetheless groundbreaking," reports Andrew Browne in The Wall Street Journal (9/17/14). Conventional wisdom has it that the Chinese are very good at borrowing ideas from others, but not creating anything new on their own. Alibaba, for example, "was an e-commerce idea borrowed from companies like Amazon and eBay." Baidu and Tencent are also seen as "derivatives of American pioneers." Yet "Alibaba has 80% of the e-commerce market in China and Baidu a similar share of search."
Tencent, meanwhile, reports "more than 430 million active users of its instant-messaging service, WeChat." Erik Roth of McKinsey & Company in Shanghai says that each of these enterprises has achieved "innovation through commercialization." In other words: "They figured out a way to dominate their markets by adapting existing technologies and business models. That’s not the same as invention. Many of China’s most innovative companies don’t arise from a flash of inspiration. Rather, they evolve in a series of incremental changes."
The result is "uniquely Chinese." For example, "Alibaba’s online shopping platform, Taobao," succeeded because of the insight that few in China "had faith in the Internet to protect their credit card details, or to deliver the promised goods." Alibaba "took those insights and developed its own secure payments system, Alipay, and a returns policy. eBay, meanwhile, left China defeated." The innovation, essentially, was "an architecture of trust." George Yip of the Centre on China Innovation says: "We now think of innovation as a big bang. But it is not." Rather, it is "pragmatic and profitable."
The music industry used to worry that people weren’t buying CDs, but now it worries that they are, reports Ben Sisario in The New York Times (9/16/14). At least that’s the worry in Japan and Germany, where consumers still prefer their music on a disc, not by download or streaming. "While CD sales are falling worldwide, including in Japan, they still account for about 85 percent of sales … compared with as little as 20 percent in some countries, like Sweden, where online streaming is dominant."
Part of the reason is a cultural "love for collectible goods. Greatest hits albums, for example, do particularly well in Japan." Some artists have packaged CDs with concert tickets, leading to multiple purchases. Retailers, meanwhile, create excitement with artist autograph sessions and freebies. Tower Records may be defunct in the US, but in Japan it "still has 85 outlets, doing $500 million in business a year." Meanwhile, a "complex array of companies that control rights to the most popular music in Japan" has stymied downloads and streaming services.
Ironically, all of this has the music industry focused on "turning Japan around." It is, after all, "the world’s second largest music market, after the United States." However, ditigal sales in Japan have eroded "from almost $1 billion in 2009 to $400 million last year." The fear is that "an inevitable decline in CD sales will further damage the industry." A similar fear grips the German market, which also remains "reliant on CD sales." "If Japan sneezes and Germany catches a cold, that’s it — we’re done," says media analyst Alice Enders.
The purpose of a $50 bottle of nail polish, says Christian Louboutin, is "to bring beauty to the side of fine arts," reports Ruth La Ferla in The New York Times (9/11/14). This manifests itself as "a collection of 31 violently colorful nail lacquers, housed in a jewel-like glass bottle, with a conical cap as spiky and tall as a steeple." (link) Christian admits that the design "is not practical," but explains that "just as a high heel may slow your walk, this long cap obliges you to take some time to paint your nails."
For this, Christian is pricing his polish at fifty bucks, "a nervy move conceived to elevate nail polish to an unprecedented lofty terrain." The previous record high for polish was $32, set by Tom Ford. "I couldn’t think about price," says Christian. "There was no reason to add an ordinary product to the beauty category." Bernard Bonneau of Fiabila USA, another polish-maker, agrees: "You are selling what the customer is dreaming about," he says, while admitting that the cost of the raw materials don’t amount to very much.
However, as Christian notes, other costs include "development, the designer of the bottle, the marketing and the cost of meeting industry regulations for purity." Bernard adds: "We are creating a product that’s almost at pharmaceutical levels." And James Slowey of Baralan USA, a manufacturer of polish bottles and packaging, says: "You are selling in some instances, 25 years of a designer’s history." In any case, NPD Research finds that "those shoppers inclined to do the math tend to shrug off markups," and just go with "prestige brands."
In South Korea, Spam "ranks alongside premium beauty products, fine cuts of beef and pricey imported wine," reports Joshua Hall in The Wall Street Journal (9/13/14). This unlikely phenomenon apparently has its roots in the American presence during the Korean War. "Army stores were the only place we could get meat at the time," says Lee Bum-suk, a veteran. "If we could get Spam, it was considered a luxury, something just for the rich." Today, "Spam is the undisputed king of canned foods in Korea. It is on average 30 percent more expensive than other brands of ham in a can."
Spam sales — and that of its imitators — has "increased by 183 percent since 2008, to 360 billion won ($354 million), according to Euromonitor International. The market-research company predicts that sales will grow to 460 billion won by 2018." "Canned ham has seen growth in sales in recent years mainly because of the expansion of one-person households," says Hong Yun-hui, who works for eBay Korea. "People who live alone don’t have time to prepare fresh ingredients and don’t want waste."
Spam makes a dandy gift, too: "Last week, in the final days before Korea’s Chuseok fall holiday period, crowds rushed into department stores to buy gift sets for relatives and colleagues — and one of the most popular choices was spam." It is also popularly served "with fried eggs and rice" for breakfast and in a "rice and vegetable roll wrapped in a dried layer of seaweed." It is not exactly the same as the US version, however. It is "a more uniform block of pink" because Koreans don’t like having "tendons, tiny bones and blood vessels" in their Spam.
The future of shopping is in the ‘transactive memory’ between shoppers and brands. A Hub White Paper by Liz Crawford of Match Shoplab. Socrates was against writing things down because he believed that it was a crutch, and that people would never remember anything as a result. Socrates was a great philosopher, but as Clive Thompson argues in his recent book, Smarter Than You Think, he was wrong about this.What Socrates overlooked was that when you store certain information somewhere else, the result is a greater capacity to remember more important things.
This concept applies in a big way in today’s world, where so much of what we can’t remember on our own is stashed away somewhere in the digital universe. Thompson sees in this a huge opportunity for collaboration between people and machines, which is obvious to anyone who has ever done a quick Google or Wikipedia search to answer questions both trivial and profound. This ability effectively makes us smarter and able to perform on a higher level. Read the Rest of the White Paper.
New York City’s "food-truck culture" is celebrated with the Vendy Awards, reports Jackie Bischof in The Wall Street Journal (9/12/14). The popularity of food trucks is, of course, a relatively recent phenomenon, but The Street Vendor Project actually "staged its first culinary competition inside an East Village garage" 10 years ago. Back then, "food carts — to many New Yorkers — meant a cup of joe or a hot dog." Today, the Vendy Awards have spread to Philadelphia, New Orleans and Los Angeles, and into a spectrum of cuisine.
"That first year we had to convince vendors to come," says Sean Basinski, who sold burritos from a food card before going to law school and founding the Street Vendor Project in 2001." Not so anymore: "The Street Vendor Project has seen its membership rise to more than 1,800 individual food truck, cart and table vendors, up from 200 in 2005." Sean says he got the idea after watching the Grammy Awards. "Honestly, it didn’t take a genius to put together the idea to have a street food competition."
Jesse Vendley was inspired to bring "his family’s carne asada cookouts to city streets with one of his brothers while they were eating at the first Vendy Awards. Today, the Vendleys own the popular Mexican chain Calexico." "We weren’t professional chefs, we’re self taught … cooking family recipes," says Jesse, but having carts was "a great way to test and develop products." He adds that he doesn’t think they would have been noticed had they simply opened a restaurant, noting that a cart "is like a billboard that also has a tasting component."
Malls may be in decline, but Sam Shalem sees his latest creation as a "temple for shoppers," reports Anne Kadet in The Wall Street Journal (9/15/14). If nothing else, his Mall at Bay Plaza is a "$300 million, 780,000 square-foot" affair, "complete with a Cinnabon." Sam describes the mall’s look as "art deco," but "with its tan-and-gray color scheme, spiky plants and classic atrium design … it’s a new mall that looks old." The idea was "that shoppers from the Bronx and Yonkers" would find the mall "comfortable and familiar."
However, architect Ronald Altoon of Altoon Partners "says the development avoids some common mistakes made in the past. Malls built in previous decades featured amoeba-like floor plans that swallowed shoppers whole, but the Mall at Bay Plaza is as simple as a shoebox … Some older malls, meanwhile, struggled because shoppers avoided the third floor." That problem was solved "by putting entrances to the three-level parking garage on every story."
The food court is also on the top floor, and "is rather large and spectacular, featuring a 35-foot-high arched, beamed ceiling and glass wall overlooking the Hutchinson River Parkway and Co-op City." The hope, says Ronald, is that it will create some good word-of-mouth, with shoppers telling others about it. The mall is 80 percent leased, with rents in the $100-$200 per square foot range. It’s a good bet this mall will succeed, as the locals won’t have to drive to Westchester to go to a mall anymore.
The future of spending is an exchange that swaps out different currencies to get the best deal, say Edward Catronova and Joshua A.T. Fairfiled in a New York Times op-ed (9/10/14). This future is made possible by the advent of the digital wallet "loaded with your dollars, credit and loyalty points." This means that "virtual assets of all sorts — traditional currencies but also Bitcoin, airline miles, cellphone minutes — are interchangeable, opening up enormous purchasing power for consumers."
For example, suppose "you want to buy an audiobook from Best Buy. It costs $16, or 1,000 My Best Buy points, or MBBPs. Your wallet contains several hundred dollars and 200 Best Buy points. The wallet software automatically determines that, at the current exchange rate … it is better to buy using the points." If you don’t have enough MBBPs, the system … finds someone — call her Hannah — with enough MBBPs for the transaction. It buys the audiobook with her points and sends it to you, and sends Hannah dollars from your account."
The killer app, then, is "frictionless exchange." Some companies will benefit by "issuing their own currencies for advertising or data-tracking purposes, or even just because the creation of a successful virtual currency or digital wallet lets companies make money by making money." Others may suffer, as they "lose value in their loyalty programs." Governments will be challenged as they lose central control over currency, but of course they will be able to "see the trades passing through our wallets," even if they "can’t compel or block them."
Delta and United have put an end to the loyalty gaming known as the "mileage run," reports Josh Barro in The New York Times (9/14/14). You’ve certainly heard about certain enterprising souls who rack up frequent-flier miles by buying cheap tickets for long flights. This effectively gamed the loyalty-points system, which traditionally has awarded benefits based purely on the number of miles flown. However, Delta and United have now changed their terms so that points are awarded based on dollars spent, not miles flown.
The whole concept of awarding points for miles "never made much economic sense for the airlines. The purpose of a frequent-flier program is to build loyalty and retain customers who generate a lot of profits. Mileage runners aim to buy tickets with the lowest cost per mile and extract as many points as possible for them; this is not high-margin behavior the airlines should want to encourage." That’s why the two airlines "blew up the definition of ‘frequent-flier mile" so it no longer has anything to do with distance."
Similarly, bonus miles are "based on dollars spent, not miles traveled," although "for achieving elite status, ‘miles’ still means miles traveled." Gary Leff, an air-travel blogger, says it had already been getting harder to find the kind of cheap tickets ideal for mileage running, and bonus-mileage promotions are scarcer, too. American Airlines will continue to award "frequent-flier miles in exchange for actual miles flown." However, this may only be because of its "ongoing merger with US Airways" and a reluctance to change anything until things quiet down.
How shoppers pay is the inflection point of a connected retail experience. A Hub White Paper by Sharon Love of TPN. The phrase ‘brick-and-mortar’ came into the lexicon in late 1999 and early 2000, duringthe first Internet bubble. In some camps, it came across as a bit of a put down. "Oh, they are just a brick-and-mortar play." There was an outcry from young businesspeople at the time — why did these companies need actual buildings or production facilities to drive commerce? They believed that the sustainable business model of the future was pure-play digital. We now know that the answer isn’t that black-and-white.
Clearly the brick-and-mortar model continues to have a significant role in driving sizable sales. It has not gone away. The term, however, has spawned many more iterations to account for different types of business models and trends — bricks-and-clicks, site-to-store, showrooming and now, webrooming. These models are built on the need to infuse traditional shopping with digital solutions that meet the expectations of today’s shopper, and also more recently evolved buying experiences. Those expectations have been shaped, in large part, by Amazon, the company that, at least until recently, never entertained the idea of having a brick-and-mortar presence. Drones, sure, but not a physical store. Read The Rest of The White Paper.
Minecraft succeeded by running in the opposite direction of other game companies, reports Nick Wingfield in The New York Times (9/11/14). It’s a more than $2 billion success story, now that Microsoft has decided to buy Mojang, Minecraft’s parent company, in "an acknowledgement that gaming is central to people’s lives." But its real success is at least partly because it broke down the "generational and gender boundaries that usually carve the games business in to separate categories."
Indeed: "Girls are among the most avid players of Minecraft, and it is one of the few games that parents play with young children." Joel Levin discovered Minecraft’s charms in 2010 while playing it "with his daughter, who was then 5 years old. Although his family had no backyard of its own in the city, she constructed a tree house in Minecraft." He says she "even learned to spell her first word … HOME so that her avatar could teleport back to her treehouse." Joel, a second grade teacher, began using Minecraft "as a teaching tool."
"People were ready for a game like Minecraft whose purpose is creation instead of destruction," says Joel, who went on to found TeacherGaming, which makes Minecraft games for the classroom. The game’s creator, Markus Persson, says that’s exactly the kind of thing he had in mind: "No fake doors that don’t lead anywhere, no trees you can’t cut down, and no made-up story being told to the player to motivate them," he says. "Instead, the player would make up their own story, and … decide for themselves what they want to do.’
Pinball games peaked in the ’70s but are now adapting to the Internet age, reports John W. Miller in The Wall Street Journal (9/11/14). Pinball actually "grew out of an 18th-century French variation of billiards known as bagatelle." Forty years ago it was "a fixture in arcades and malls. Players controlled flippers to whack around steel balls, racking up points by hitting targets. But with the emergence of videogames in the 1980s, pinball faded in popularity, kept alive by a cult following of fans."
To some degree, pinball kept its ball rolling by borrowing ideas from videogames, "adding LED displays, intricate music tracks and features … They also designed games with more flexibility, allowing tournament organizers to set up tougher competitions. They waxed the playing surface and raised the machine’s back legs to steepen the incline," along with other modifications to make the games more challenging. They developed software to let players shake the machines a bit without ending the game — issuing warnings instead.
The Internet provided perhaps the most important new wrinkle, as it enabled groups like the International Flipper Pinball Association (IFPA) to begin "ranking players online … based on their placements in leagues and tournaments." "Suddenly, thanks to the Internet, we could compare players in Chicago with players in Denmark," says IFPA president Josh Sharpe. This fed interest in tournaments.Today’s hi-tech pinball machines "retail for $5,000 to $10,000," but one thing hasn’t changed: "the ball is still 2.8 ounces of steel and 1-1/16 inches in diameter."
Growing male demand for fancy shoes is changing the face of shopping in New York City, reports Jane L. Levere in The New York Times (9/10/14). "A lot of people in the market say men are shopping for shoes more like women, who want a lot of variety in their shoe wardrobe," says Mimi Fukuyoshi of Bergdorf Goodman. Fashion consultant Robert Burke concurs: "There’s a pattern with men: They want to enjoy luxury watches, Scotch, good shoes and tailored clothing." He adds that they don’t care much what it costs.
NPD Group, the market research firm, supports such assertions, reporting that "dollar sales of men’s footwear in the United States grew eight percent in the last two years, twice the growth rate of dollar sales of women’s footwear in the same period." Such opportunity is a boon to the "John Lobb store on Madison Avenue," where men "order bespoke shoes and boots, made from leather and exotic skins like lizard and crocodile." Shoes start at "$8,000 and can climb to $25,000."
Following in those footsteps, Louis Leeman, "based in Florence, plans to open its first store in December at 793 Madison Avenue," which "will resemble a Parisian apartment, with a fireplace, and a cobbler will take orders." The store is also a departure in that most men’s retailers used to be located "near shoppers’ Midtown offices." Kelli Duggan of John Lobb says the arrival of her store and others will change the game for male shoppers. "It creates a kind of centralized luxury men’s shopping experience," she says.
A museum exhibit of high-heeled shoes takes aim at clearing "the footwear’s bad rap," reports Jessica Dawson in The Wall Street Journal (9/10/14). "We all know the overarching vision of high heels and what the perception of them is," says Lisa Small, curator of the Brooklyn Museum, host of the exhibit, Killer Heels: The Art of the High-Heeled Shoe. The charges, of course, include "among other things, objectifying and hobbling its wearers." The exhibit "includes contemporary and historic footwear."
Shoes were selected, says Lisa, "from an aesthetic, design and material culture standpoint." This can cut both ways, she says. "A lot of the shoes in the show are … difficult aesthetically or meant to be making different kinds of statements." The shoes are exhibited "alongside a selection of paintings and design objects that resonate" with them. The show will also "debut six short films by artists invited to riff on the heel," including work by Zach Gold, who compares fashion to music videos.
"Instead of looking at a 12-inch album cover to get the visual communication for that record, you’re looking at a 3-½ minute film," says Zach. "It changed everything." Zach created a 5-minute video called Spike for the exhibit. Another video, by artist Marilyn Minter, features a 210-pound, tattooed dancer, "traversing molasses-like puddles of silver paint." "It’s the anti-glamour video," she says. "I would never make something to glorify the heel." She does, however, plan to wear heels to the exhibition’s opening.
The late Truett Cathy got his start making sandwiches from chicken rejected by Delta Airlines, reports Kim Severson in a New York Times obituary (9/8/14). The only thing wrong with the chicken was that the pieces "were either too large or too small for the airline’s food trays." So, Cathy "began experimenting, frying breaded chicken in a cast-iron pan with a lid, the way his mother used to," and making a simple sandwich of it, on a "soft, white buttered bun with nothing more than a couple of pickles for garnish."
He named his creation "so that a nation just falling in love with fast-food hamburgers might better understand his product: Chick-fil-A was meant to suggest a chicken steak. As malls came to the south, Cathy opened a Chick-fil-A at the Greenbriar Mall in Atlanta. It was a pioneering effort to put fast food in shopping centers." In so doing, he became "one of a handful of Southern entrepreneurs who in one lifetime took small, hometown companies to a global level." As of 2013, "Chick-fil-A had more than 1,800 restaurants."
If Cathy is famous for something other than his chicken sandwiches, it is his Christian faith, and the extent to which it guided his business practices — "he was at once a hero and a symbol of intolerance. Many admired him for closing his outlets on Sundays and speaking out against same-sex marriage. Others vilified the chain as a symbol of hate." The company has since stopped "funding most of the groups that were at the center of the storm," but continues to provide "for scholarships, camps and foster care." Truett Cathy was 93.
Jim Dyke is marketing bottles of wine like candidates for political office, reports Jennifer Steinhauer in The New York Times (8/27/14). Clearly, we haven’t come very far from the days when it was roughly the other way around. (image). Jim is a former Republican Party spokesman who maintains a consulting practice that included a winery. This led to a connection with Gustavo Gonzalez, "then the head red-winemaker at Robert Mondavi, and the two thought about building a winery."
The challenge wasn’t so much creating "a portfolio of distinguished wines," but rather making sure people knew about it. "Just because you have a fantastic candidate doesn’t mean you can win," says Jim, using a likely metaphor. "My misunderstanding was I believed the quality of the product alone would take care of itself and that there really wasn’t much to do but have people taste it," says Jim. "The reality is that distributors are already carrying products that are already well known."
To overcome this, Jim went to his inside-the-beltway connections, placing his wine at popular eateries like the Capital Grille. But his ultimate play was a stunt based on a report that wine ages differently when stored under the waves — something about the consistent, cold temperatures and gentle rocking. Supposedly this breaks down "tannins more quickly," producing a kinder, gentler wine. Whether that’s for real is a question, but it has gotten Jim’s wine — called Mira — some name recognition, and case shipments are headed up.
New eBay research aims at understanding the role of music in online shopping, reports The Economist (8/23/14). "Some 1,900 participants were asked to simulate online shopping while listening to different sounds. Some results were unsurprising … Chirruping birds encourages sales of barbecues but not blenders or board games" while "classical music and restaurant buzz caused them to overestimate the quality of goods on offer and pay more than they should."
eBay conducted the study because it "wants consumers to avoid such unhealthy influences when shopping online. It has blended birdsong, dreamy music and the sound of a rolling train — thought to be pleasant but not overly seductive — to help them buy more sensibly." (watch video) How music affects shopping behavior has been of interest since "the 1930s," when Muzak "started serenading patrons of hotels and restaurants … Without the throb of a synthesizer or a guitar’s twang, shoppers would sense something missing."
Mood Media purchased Muzak in 2011 and the "embarrassing brand name was dropped in 2013." These days, apparel retailers like H&M tend to use "trendy, up-tempo music" while "grocery stores, with a broad following, play top 40 hits. The tempo tends to be slower in the mornings, when shoppers are sparser and older, and becomes more allegro as the day goes on." Mood Media is now testing an inaudible ‘audio tag,’ embedded in store soundtracks, that "activates an app on shopper’s phones" that push discounts and product information.