Content Matters

Are Showrooms the Future of Brick & Mortar Retail?

Barry Ritholtz had an interesting post this morning, posing the question of whether Best Buy had simply become Amazon's showroom. This is a topic I've discussed with a number of people in the past 6-12 months - what is the future of brick and mortar retailers in a world driven by ecommerce?

Already today there are a number of product segments where physical stores are irrelevant. Music is the obvious one. It's much easier to discover, explore and purchase music online than offline. And since the primary use of CDs now is to burn them to get music onto your iPhone or iPod, the physical media just becomes an unecessary step.

The same applies to books. A few years ago, I'd wander into a Borders (BORD) or Barnes & Noble (BKS) to flip through books, then once I'd decided which to buy, I'd typically order it from Amazon (AMZN), as the cost savings was typically 20-40%. Today, that browsing step is largely unneeded. The other day I wanted to pick up an introductory book on Python programming. After reading Amazon reviews, I narrowed it to three potential choices, downloaded the free first chapter of each onto my iPad, then bought the one I liked best.

As the Ritholtz post points out, the most effective and economical way to purchase electronics is to look at or listen to them at a Best Buy, then order them from Amazon. With free shipping (especially for Amazon Prime customers), aggressive prices and favorable return policies, there's little benefit to buying them at a physical store. The one possible exception today is big screen TVs where Best Buy (BBY) can provide value add through installation and setup.

The only barriers to this model that stores have today are either impulse purchases (you'll see the typical item on the checkout line has a huge markup - a USB hub that sells for $18 at Amazon was priced at $30 at Best Buy) or price ignorance. That $30 USB hub might have seemed attractive had I not been able to find the Amazon price using my iPhone. As more users have smartphones, it will be harder for retailers to count on ignorant consumers.

So, what will happen to the brick and mortar stores going forward? Some, of course, will simply vanish, following in the footsteps of Tower Records, Blockbuster and Borders. Others may develop more value-add services that help drive sales (tailoring for clothes, etc), while I think we may see a new "showroom" category emerge.

There are definitely products that you need to physically see before purchasing. Luggage is a good example. You can take three different 21" upright wheeled bags with the same approximate capacity and they will be arranged very differently. Ebags and its peers do a good job, but I think most people will want to see how their stuff will fit. The same applies to a lot of clothing. My wife walks through women's clothing stores touching all the materials before picking something out. I can order shirts or slacks online at Brooks Brothers but for many items, especially women's fashion, there is a need to touch the item first.

But you don't need to stock a complete inventory of every size for this. A showroom, where users could see and feel the items, could drive a lot of sales.  I wonder if the economics could work to enable mall showrooms which are really just "super affiliates" for Amazon. I don't think the standard Amazon affiliate commission would cover all the costs of an offline presence, but if there were a higher affiliate rate I don't see why it couldn't work for select items.

Another area where this could work would be eyeglasses. I find it obscene the markup that LensCrafters and other vision stores charge on a pair of glasses. More outrageous is the "with and without" insurance rates - where they offer special pricing but not with your insurance coverage. So, while my daughter's primary glasses come from Lens Crafters, she buys her spare pairs (camp, prescription sunglasses, etc) from Zenni Optical. Optically, the Zenni glasses are the equal of the mall store versions, but they're priced at $20-40 rather than $300-400. The frames vary in quality but are solid overall. But the problem is that it's really hard to choose a pair of eyeglasses without trying them on first. My daughter will try on 12-15 pair before selecting the ones she likes. So, it would make sense to open mall kiosks that act as Zenni affiliates. Try on all the frames, pick the pair you like, provide your prescription and have your glasses shipped to you in a week for about 10% of the cost you would have otherwise paid.

To be economically feasible, showrooms may have to be funded in part by manufacturers (as they are in the automotive industry). But, between manufacturer incentives and affiliate programs, there's certainly room for this new model.

What do you think?

 

 

What a Long, Strange Marketing Trip It’s Been

It’s no surprise that a key to innovation is rejecting conventional wisdom. And innovation thrives in many businesses, particularly those in the technology space. But whether in silicon valley or silicon alley, marketing is still largely done in the same way it has for decades. Companies hire PR firms who push out press releases, while marketers post product info to web sites and create factsheets for their sales staff.

Marketers may dabble with new approaches, sticking a toe into the social media space by creating a Facebook fan page or setting up an official Twitter account, but even then most apply old approaches to new platforms. Knowledge is shared through boring white papers which sit behind a registration wall while Twitter accounts push out links to bland press releases or staid marketing messages.

 When it comes to breaking the rules of marketing and rejecting conventional wisdom, David Meerman Scott (literally) has written the book. And now, he’s joined together with HubSpot CEO Brian Halligan to author a new book, Marketing Lessons from the Grateful Dead.

It’s not the first time that David has written about the Grateful Dead. Readers of his book World Wide Rave may recall a discussion framed by asking whether you wanted to be like Led Zeppelin, whose historic reunion show at the O2 arena was not made available in video format (and where YouTube was forced to remove clips posted by fans), or like the Grateful Dead who, long before the days of Facebook and social media, encouraged concert attendees to record their shows, even setting up special sections where they could plug in to the soundboard to get better quality recordings.

As the book pointed out:

If you want to remain relevant in an always-on, fan-centric, YouTube world, you need to embrace—not restrict—your most important supporters. You need to believe in the power of a World Wide Rave to sell your products and services.

In this new book, David and Brian take a look back at how the Dead worked to develop and nurture an active community of fans, then show how to apply many of those same techniques to today’s marketing platforms. For example:

Rethink traditional industry assumptions – Rather than focus on record albums as a primary revenue source (with touring to support album sales), the Dead created a business model focused on touring.

 (blogger note: if you’ve read what Fred Wilson and others have written suggesting media companies look to monetize the audience, not the content, this is a great example)

Bypass accepted channels and go direct – The Grateful Dead created a mailing list in the early 1970s where they announced tours to fans first. Later,they established their own ticketing office, providing the most loyal fans with the best seats in the house.

The foreword to the book is written by one of the biggest (literally and figuratively) Deadheads, former UCLA and NBA great Bill Walton. As he so eloquently describes it:

Their passion, creative spirit, imaginative soul, and industrious commitment to promote truth, fairness, justice, and the Grateful Dead way led them through the evolutionary transition where they went from playing for silver to playing for life. This book tells you how to make that transition for your own career.

David Scott’s books are always practical, insightful and a fun read. Fans of his prior books won’t be disappointed here. Marketing Lessons from the Grateful Dead may be his finest book to-date.

 

Well Wishes raises $25k for Charity:Water via social media

Last December, I posted about microdonations and the project that Laura Fitton (@pistachio) had kicked off with a goal of raising $25k for Charity:Water by her birthday.
Well, her birthday was yesterday, and while it took a few minutes past midnight, Laura's extended social network helped her achieve the goal.

The bulk of the funds (more than $15k) were raised and contributed on Twitter via Tipjoy. Tipjoy and its founders contributed a matching $5k, while another $5k or so was raised directly on the Charity:Water site. That will be enough to provide fresh water to five villages, saving countless lives.

Laura did an amazing job, tapping into her network and the extended network of retweeters to get the needed contributions. While some contributions were as little as $0.25, others were much more substantial. I have to recognize @linlee888 who pledged $1 per follower, then blew that away with a $1,300 donation.

Laura put an amazing effort into this, topping it off with a one-hour live broadcast via UStream TV last night starting at 11pm. Putting yourself on a webcast with accompanying live chat is a pretty brave thing to do (and believe me, there are some weirdos chatting out there) but it all helped her achieve her Christmas wish.

The full details will be posted shortly to the Pistachio site. In the meantime, please join me in congratulating Laura and her network.

Interpreting the Black Friday Results

Barry Ritholtz points out the hype and spin in the media coverage of Black Friday. Journalism 101 instructs writers to understand your sources and what their motivation may be. But the media often don't seem to let that get in the way of a good story.

Much of the reporting of Black Friday focused on the data provided by the NRF - the National Retail Federation. Yes, the trade association representing retailers. As Ritholtz points out, the New York Times article suggests that NRF data tallied up sales from Thursday, Friday and Saturday and found shoppers spending, on average, 7% more than last year. But, the data were not from sales results.  The NRF data were based upon self-reported spending results from a survey of 3,370 shoppers. Hardly scientific.

As Barry suggests, and as I referenced in my earlier Cyber Monday blog post, a better source to monitor might be ComScore. The ComScore numbers are based on actual eCommerce sales; on Friday, they tallied up $534 million in online non-travel sales, up 1% from the same day last year. The results for the first 28 days of November remained 4% down from a year ago. Those numbers seem a bit more realistic to me, based upon anecdotal discussions I've had with friends, colleagues and a retail analyst I know.

It will be interesting to see where the Cyber Monday numbers come in. I'd guess they will be down a bit from last year. My guess is that as more and more consumers get broadband access in their home, the need to wait until "Cyber Monday" to access fast Internet from work is diminishing.

Fingers Crossed for Cyber Monday $AMZN

ComScore has reported that Black Friday online sales were up 1% over last year, though November eCommerce figures remain down 4% for the first 28 days of November.

Of course, for eCommerce companies, so-called Cyber Monday has become the big day; that's when shoppers go back to work and seem to spend their day comparison shopping online, taking advantage of high-speed connections.  Amazon (NASD:AMZN), Buy.com, Walmart and others will be posting online specials throughout the day on Monday. Most of the etailers reported strong traffic on Friday, though, and with increasing availability of broadband, it will be interesting to see whether Cyber Monday still has the same impact it has in recent years.

Offline shopping was stronger than expected on Black Friday, with ShopperTrak reporting a 3% increase in sales over the same day last year. While mall traffic slowed Saturday and Sunday, retailers clearly were relieved at the sales levels from the weekend. Retailers have been heavily discounting, both online and off, so bottom line numbers are still likely to disappoint.

ComScore had previously projected online sales for 2008 to be flat to the $29.2 billion posted a year ago.

My guess is that people went out in search of bargains this weekend for the gifts they have to buy, but that they'll cut back on their overall spending between now and Christmas.