Forget #FakeNews - We Now Have #FakeRetail

static1.squarespace.jpg

#FakeRetail

Buyer Beware

Have you been breezing through your social feed and seen a picture of an item of clothing that looks great & offered at a price you couldn't possibly turn down?  So you go and order it only to find a manila package with Chinese writing on it in your mailbox two weeks later?  After opening the package, you think  "this isn't what I ordered?  There must be some mistake?"  The smell of cheap polyester almost knocks you out and the cut and style are eerily similar to what you wanted, but just not right.  Welcome to #FakeRetail.  Fake products are being advertised on social networks linking to a site that carries no inventory, has no staff, and simply passes the order to be drop shipped directly from China.  

Next time you see an ad that is "too good to be true" - it probably is.  Nobody is selling a Moncler vest for $49 or those impossible to get Yeezy's for 80% off.   

Screen-Shot-2017-04-14-at-14.24.46-796x395.jpg
  • Facebook, Google, etc are aware of this, why are they allowing this?  (Ad spend $)  These platforms are partially to blame by featuring them in their feed. 
  • If these sites are using other photos, why aren't the IP owners shutting this down with the help of the Ad Networks? 
  • As time passes and more customers are victims of this deceptive advertising, does that push consumers to more known brands?  Is this good for established retailers in the long run, but a short term problem?
  • Does this make it harder for new D2C brands to cut through the noise and establish themselves as legitimate?
  • Shouldn't influencers be held accountable for the brands they "represent?"

#FakeRetail Recommended Reading

The Atlantic: The Strange Brands in Your Instagram Feed
The Fashion Law: Should Social Media Platforms Do More to Curb Sponsored Ads for Counterfeits?
Racked: The Fake News of E-Commerce

Brand Mash Ups that make you say "Whaa?"

Lox and Merino?

Big fan of both separately.  Together?  TBD.

Allbirds teams up with LA shops to make their own products.  Strangest one - Wexler's Deli.  I guess the lox colored sole is the tie-in.  (Gotta say I love the lox there, though.  Also my fave pair of shoes.)  Link

Lululemon entering the home decor arena for teen girls with PBTeen.  Obviously brands today are reaching far and wide.  Link

Not a mashup, just a brand extension... Casper makes a lounge chair.  Looks good since it's manufactured using similar techniques and processes as mattresses.  Sold exclusively through Target.  This is sure to be a winner at this price point.  Link

Best Reads of the Week

Can we bring manufacturing back to the states?  More specifically, Los Angeles?  link

We all try to define luxury.  Here's a take.  link

Reality - only better.  The coming promise of AR.  link

The pot calling the kettle black.  Forever 21 says somebody ripped THEM off.  link

Here's what Made in the USA really means.  link

Retail Trends for 2017 link

  • Will Amazon become the world's largest apparel retailer?
  • Will this finally be the year of AR?

Is Hollywood as we know it finally over?  link
 

What I'm Reading

It's finally becoming clear what Apple's purchase of PrimeSense is being put towards - mobile AR glasses.  600 engineers in Israel working on the sensor, Carl Zeiss on the specs.  link

Nobody is getting paid like they used to in the record business.  link

This is not the first time technology has come after our jobs.  The Luddites fought against 19th century automation.  link

Is this really the end of the department store?  Maybe just as we know it.  link

More deceptive pricing to combat the too-price-conscious shopper.  link

 

Algorithims are Designing Furniture?!

So many know that I'm a huge fan of automation...but when it affects others, not me.  Now this is starting to affect me.  Uh oh.

All joking aside, this chair is great looking and seems like a viable design alternative to the everyday chair design.  Not only is this extremely complex to build, but the creativity to create it is also far beyond the capabilities of most furniture designers (myself included.)  

The days of custom manufacturing according to your specifications at a reasonable cost with a decent turnaround are getting closer.  

LINK: SO.  ALGORITHMS ARE DESIGNING CHAIRS NOW

 

DO CUSTOMERS REALLY FALL FOR THIS STUFF? APPARENTLY SO...

Last month, Restoration Hardware instituted a pay-to-play model for it's new loyalty program in lieu of holding sales.  This is being called the Grey Card.  For $100 annually, customers enjoy 25% off plus some extra perks.  This works out if a customer is planning on spending upwards of $400, as they'll save the $100 fee.

I'm a huge fan of Amazon Prime & Fresh, and the yearly fee is nothing in comparison to the ease and joy we get out of shopping online.  But we don't belong to many pay-to-play platforms, basically just Amazon and Costco.  Bringing this into the mainstream retail channels looks good now, but how many people will want to sign up for another subscription based service?  I see this having a short term gain and long-term not paying dividends as customers fight the pay loyalty programs.

But the bigger point is: who believes they'll actually be getting a 25% discount?  Wouldn't anybody simply assume they're pricing the goods to move at 25% off?  Anybody who pays extra is buying something under $400 and getting ripped off, and anybody buying more than $400 is paying what was just called "Retail" in Feb (assuming they've joined the loyalty program.)

I applaud RH for not pushing the boom and bust cycle of constant sales.  They've obviously done their research and feel that customers would prefer to get a consistent 25% off, but when do customers stop falling for these discounts where they're unable to be competitively matched against a like product, since their product is proprietary?  25% off of what?

People still need the discount - but is the RH brand so strong as it will be able to withstand the on-the-floor discount the consumer desires?  Or will sales suffer since the customer will never feel like they're "stealing it?"  If there's anybody in the home furnishings business, they're the ones who are consistently re-writing the playbook... 

Ron Johnson tried a one-price policy at JCP.  He ended up unemployed.  (Not that he needed the job.)

Get Paid for Your Work

Here is a hilarious video poking fun at the RFP Process, except not with agencies but with regular folk being asked to do the same thing that agencies are asked to do on a daily basis.  Here a customer (acting as the agency) is asking a personal trainer, chef, architect, and others to provide work for free, and if the spec work fits, he will make them a proposal and promises to discount the work in the future - if they win the business.  All creatives are asked to work for free - but here is a funny look at how ridiculous it really sounds.


The Roll of Ecomm in the Luxury Market

"Only the US & China will account for more sales in the luxury industry than collective ecomm by 2025."  Originally McKinsey had predicted 2% of sales by 2015, but in actuality it has reached closer to 6%.  This is an interesting predicament.  While most opined (myself included) that the middle market goods are the first to be "disrupted" (unspecialized goods like books, electronics, etc) the real opportunity really seems to be in the highly specialized luxury space.  This only leads brands to have to advertise and create even more of a connection with their users.  If people are shopping for luxury online, I would imagine that they are mainly buying from companies who have earned their trust.

Luxury shoppers are more digital and more mobile, so they might not be able to make it into the store of their choice, but can certainly still get the goods they desire.  

When breaking down luxury even further - affordable luxury generates 8% of sales and 3.5% is attributed to "extreme luxury."  People obviously know what they want and they're searching it out and trying to find the best buying experience they can - whether online or in-store, however many of the largest brands are investing heavily in blurring those lines.

Luxury branding won't be stopping anytime soon.  Luxury shoppers carry around five brands in their minds when browsing - so the entire goal for the luxury market is to get into the customer's Top 5.  This is not for the smaller retailer, but only the richest and largest companies will be able to afford this positioning.  This will drive the larger brands to be more and more prevalent in the smaller retailers' establishments, as they will have to use the brand equity of their products to help push their own sales, as their ability to market non-branded items becomes less and less of a return.

LINK: ECOMMERCE TO ACCOUNT FOR 17% OF LUXURY SALES BY 2025: MCKINSEY

 

 

Customers Like to Buy When They Feel Like They're Stealing It..

A friend and very good retailer and I were discussing the difficulties of selling to the retail public during non-sale periods.  He said "people only like to buy when they feel like they're stealing from you."  I have seen evidence of this over and over again during the feasts of annual sales and the famines of non-sale periods.  Ron Johnson tried to institute a "one price" policy at JC Penney only to find a string of disappointing sales and earnings.  Now sales are crashing at Jos. A. Bank after the retailer killed the main reason men shopped there - free suits.  Their main sales pitch during their largest sales have always been "Buy One, Get X Free!"  Their second quarter disappointed with same store sales (stores open for more than one year) dropping 9.4% YOY.  

Customers are making a statement that they are ready to shop differently and expect nothing but value.  But what comes of retailers who put an honest everyday price on their goods and are then beat out by marketing bogus sales and inflated pricing with the sole intention of discounting from there?

JOS A BANK SALES ARE CRASHING AFTER THE RETAILER KILLED THE MAIN REASON MEN SHOPPED THERE

 

How Does McDonald's Combat Increasing Employee Related Costs? Customization.

McDonald's is rolling out a tablet-like kiosk system that will allow customers at specific locations to customize their Big Mac any way they like.  Customization is key, but really who wants to mess with a Big Mac?  Although I feel this idea is great, I believe a real driver for this is to increase automation in-store.  I can't remember the last time I ordered a Big Mac (but I do remember it being wonderful), but I would have to imagine that the person standing at the register didn't add tremendous value to the transaction.


I see this a move in the direction to fix a certain portion of their employee related costs.  By introducing kiosk based ordering, the customers can quickly order what they want easily.  At the same time, McDonald's is able to reduce their overhead by a drastic margin and that number is only increasing.  Health care, insurance, salary ($15 min wage in CA coming up soon) - it doesn't take long for a system like this to pay off and save the company millions in the long run.

While I certainly won't miss ordering from a human at McDonald's anytime soon, I do wonder what will happen when that entire section of the workforce is replaced by machines.  How will that affect our economy?  On one hand this will limit potential inflation in costs of necessary items, but on the other - will there be enough people to afford those items?  While a rhetorical question, I have a feeling issues like this will be popping up in the 2020 Presidential election as a shrinking workforce will be a growing political and economic issue.

The FREE SHIPPING Effect

What you charge for shipping as a line item really matters to the end consumer.  By offering free shipping e-commerce stores can expect:

  • a 15-20% increase in orders
  • Over half (55%) of customers are likelier to abandon their shopping cart if free shipping isn't offered.

While I understand why a customer would want free shipping in a process that isn't true brick & mortar and there is time and distance between the customer and the product, I can't quite wrap my head around the psychology here.  This suggests that customers actually believe that the shipping is FREE.  Nothing is free, it's just built into the cost of the good and is not fully transparent as to the cost/value of the products being bought.

As the freight factor rises (% of freight on the total bill) and items become larger and more complex to move around, the less likely people will be offering free shipping.  But I'm still amazed that the majority of customers today still believe that they are able to get something (shipping) for nothing - which is never the case.  

I'd feel more comfortable knowing the true breakdown of costs and make any decision from there.  Shipping is a cost that doesn't have a tremendous amount of wiggle room if done properly, so any company of scale should be able to offer a compelling value with transparent freight costs.  Either way, it all works out to basically the same thing...

LINK: NINE E-COMMERCE STORES THAT ARE KILLING IT WITH FREE SHIPPING

Why is this FIFA News New?

Many people have known over the years that FIFA is one of the most corrupt organizations on the planet.  Yet people seem to be surprised by the Zurich raids this week.  See below where John Oliver had a field day blasting the organization last year.

Wasn't it evidence enough to know of the bribery when QATAR got the World Cup?  It's virtually impossible to think of that as a viable location without massive amounts of money involved.  My only hope is that they strip the World Cup from Qatar and bring it to another country that is capable of scaling up and hosting the world cup in that "short" period of time.  Perhaps the USA?

LINK: Confused by the FIFA corruption news? John Oliver explained it last year


The Future of Manufacturing - No Jobs?

What's with everybody thinking that manufacturing will actually return to the USA anytime soon?  I, for one, believe this to be the case.  However, I don't believe that jobs will follow.

Fast Co has references a new McKinsey report that hypothesizes the next evolution in manufacturing (Manufacturing 4.0) will rely on sensors and IoT.  Instead of robots simply building metal into a component for a car, the sensors will be able to scan the sheet to spot imperfections and then transform that component into a body.

We currently build cars in this country due to automation.  A standard automobile manufacturing line used to be 100% made up on humans.  Now it's all KUKA robots building those bodies.  Humans were still used to do simple QA/QC, but with the rise of these sensors - could humans be pushed out of the entire process?

  • Computers house all the data to know their inventory levels and adjust those levels based on supply/demand algorithmically.
  • KUKA robots do most assembly
  • Sensors along the path will inspect for errors

Great to know that we'll be making more products in the states and that will have a positive impact on our national GDP, and a more effective use of cash.  However what happens to all of those people who are no longer needed?  People are so excited about manufacturing coming back, but it'll be a shock to most to know that the jobs won't follow.

LINK: THE FUTURE OF MANUFACTURING: SENSORS, 3-D PRINTERS, AND DATA SCIENCE

 

AI is here and it's going to be HUGE

Baidu, the Chinese company, is banking big on Artificial Intelligence.  After looking at over 1,000,000 pictures, Baidu's supercomputer successfully sorted the photos into 1,000 categories with only a 4.58% margin of error.  This is basically similar to a human's margin of error, effectively saying that what was being done by a human just last year can now be done by a computer. Get ready to see this reverberate throughout the entire world and eliminate jobs by the handful in the upcoming years.  

For great background and a peek into our (potentially scary) future - see Jeremy Howard's TED - The wonderful and terrifying implications of computers that can learn

LINK: BAIDU LEADS IN ARITIFICIAL INTELLIGENCE BENCHMARK

Brands Dominating Retail in 2015 and Beyond

12279076393_0bfe60834b_o.jpg

Even though smaller retailers are currently threatening traditional retail powerhouses, large brands are still expected to dominate retail landscapes according to Goldman Sachs.  These brands are most influential with Millennials, the most powerful group of consumers.

Apple, Nike, Lego, & Disney - these are all stores that years ago had no retail presence themselves.  Now they are poised to be some of the largest retailers in the world.  As they say in showbiz: "Content is king."

Personally, i haven't seen enough Lego stores and I (and by I, I mean by 5 year old son) will be very excited to see one open close by.

LINK: 4 BRANDS THAT WILL DOMINATE RETAIL FOR 2015

 

Selling Value instead of Price

According to a new study 52% of retailers use more than 10 pricing strategies.  These include discounting, bundling, and dynamic pricing.  Based on the results, discounting continues to be the most popular pricing strategy, with 97% of retailers saying they employ the strategy.

Discounting focuses the consumer on price and forgets about value.  When we create a beautifully crafted piece of furniture with the finest woods, lost wax cast brass hardware, and superb proportions - the focus should be on the quality of the piece and allow a consumer to make their own judgement on what they are willing to spend on the item.  By creating an anchor of value in their mind (the comparison price) and discounting from there, the customer is now focused on the best price they can get rather than understanding the intrinsic value that the piece holds.  What happens to the discounted price if an item is manufactured in the USA vs Asia?  It's possible (and probable) that the Asian product is better made, yet due to the labor costs, it costs less.   If the American made item has a higher artificial MSRP and is sold at a greater discount, yet still above the price of the Asian product, is the discounted-focused customer truly getting a better deal?  This customer is not necessarily focused on which item is better for them. 

Retailers and manufacturers need to focus on selling their value, not their price.  Often items are being engineered to hit a price point by cutting details, dumbing down the overall quality of the item. Focusing on the discount can potentially create a race to the bottom, one in which the entire chain will suffer.  Over time, this will drive retailers out of business, eventually raising the prices to the ultimate consumer.  A short term gain turns into a long term loss.  

LINK: RETAIL TOUCH POINTS - 52% OF RETAILERS USE MORE THAN 10 PRICING STRATEGIES

The Convergence of Retail and Mobile: The Creative Shortlist

Another interesting piece from Google.  Mobile experiences are changing the way people are shopping in store.  How many people do you see walking around looking at their phones (missing all of the stuff they were looking for by not looking up?)  They're busy scanning for deals instead of seeing the physical goods in front of them. 

Mobile retail experience has to be quick, inspiring, and offer instant gratification.  This is particularly useful for omnichannel retailers, able to lead the IN STORE user.  Even though sales associates are nearby, a shopper doesn't always want to ask them if a sofa comes in a different size or available in a different fabric.  Instead, they want the information easily accessible - click the item and see the options. 

While this article is specific to mobile retail and not in store, I believe the true winner will be one that incorporates these principles into the live shopping experience and offers the benefits of virtual inventory as well as the customer's ability to see the item in person.  This will in turn lead to lower prices and better experiences, since retailers will be able to show and offer more without having to stock the merchandise in the store, cutting down inventory, ultimately providing better pricing to the consumer.

LINK: THE CONVERGENCE OF RETAIL AND MOBILE: THE CREATIVE SHORTLIST

Pantone Color of the Year 2015 - Marsala?

Pantone_Introducing_Color_of_the_Year_Marsala_banner.jpg

Normally the Pantone color is a bit less offensive than this year's.  This just reminds me of the color of that lady's teeth at a party who has clearly had too much to drink and doesn't get the hint you want nothing to do with her.

Luckily, Fast Co Design has 20 better descriptions of this color done by people far more creative than I.

LINK: 20 Ways to Describe Pantone's Color of the Year - Marsala