Coming in the future from Retail Leverage:

• Educational articles that provide you ideas to build retail strategies from.
• Case studies / examples of how other brands are succeeding in retail to provide inspiration for you.
• Tales from the front line of selling to retailers, providing unvarnished perspective from the brand’s side of the table.
• Guest posts from experts in special interest retail areas such as private label, licensing, direct response tv.
• Expansion of our LinkedIn network to provide valuable networking opportunities
• Retail rumors, speculation, an innuendo

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I need you to re-subscribe to “Retail Leverage” to keep on receiving our updates via email.  I’ve attached a link below that will allow you to re-subscribe by entering your desired email address, taking all of about 10 seconds.  So I feel a little like the end of the sunday service of my rural Western Kentucky Baptist Church I grew up attending, but “won’t you please come join us now?”  While not as moving, just know that when you take a few seconds to re-subscribe, it does mean a great deal to us.

Re-subscribe via eMail

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Thank you.

-Ben Smith

Co-Founder of Retail Leverage

ORIGINAL ARTICLE:

So the rumor is out there – Radio Shack could be on the market, and Best Buy’s name has been tossed out as a suitor – we wanted to share our perspective on what it could mean.  Best Buy and other retailers are known to be taking learnings from European Retail and applying them in the US.  Best Buy’s own acquisition of Carphone Warehouse in the UK in 2008 could serve as a model for a potential acquisition of Radio Shack.

If Best Buy buys Radio Shack, they could convert Radio Shack stores to “Best Buy Mobile”.  While there are approximately 61 Best Buy Mobile stand alone stores in the US today, there are over 6,000 Radio Shack locations when you combine company owned stores, franchies, and wireless kiosks.

Per TWICE 3/26/2010: RadioShack could be seen as an attractive asset thanks to aggressive cost-cutting measures by CEO Julian Day, solid cash flow, and its strong position in the growing wireless market. Its more than 4,000 small-format stores would also play into Best Buy’s mobile strategy of rolling out freestanding, mall-based wireless shops.

We live in a connected world, and Best Buy’s key differentiator is all of the value add they provide their customers – from educating them on new technology, providing advice on products, to being able to configure / install / fix the products they purchase.  While Walmart and Amazon can match or beat them on price, Best Buy can win on service.  Radio Shack locations can extend the reach in a more manageable, focused format.

Per Financial Times 3/26/2010: Best Buy said it was testing labour models and store design concepts aimed at demonstrating the “invisible” services in the centre of its stores, and that its first Best Buy stores in the UK, opening this Spring, would influence its remodelling efforts in the US … As part of the strategy, it is also continuing to roll out smaller Best Buy Mobile stores to malls and shopping plazas, and CPW’s Wireless World format, which sells computers alongside mobile phones.

RETAIL LEVERAGE TAKEAWAYS:

Frankly I’m just trying to wrap my head around this at the moment, and am sharing this as a service / food for thought for our readers.  At a high level, retail consolidation puts more power in the remaining players, and Best Buy goes from leading the mobile phone market to OWNING it.  With the kind of reach that thousands of additional locations provides, long long term you start to question the viability of stand alone brand cell phone stores (ie AT&T store).  However you look at it, Best Buy would get larger increasing their own leverage versus the competition, but also with their vendors.

It is hard to say what impact there would be beyond the mobile phone + accessories category, as well as the brands/categories that are in Radio Shack today.  The average Radio Shack store is 2,500 square feet, whereas the average Best Buy store is in the 40,000 square foot range.  I’m not sure about the size of the typical Best Buy mobile section inside their US stores, but it is pretty small.  The carphone warehouse stores they bought in the UK average 800 square feet.  Just as their is additional computer / technology related merchandise in Radio Shack’s today, I’d assume there will be more than just mobile phones + accessories in a Best Buy Mobile store.

I’ll keep my eye out for additional thought / speculation floating out there from people we trust on this potential retail shake-up, and I’ll share – primarily via our twitter feed @retailleverage , which I highly encourage you to follow!

UPDATE #1: Note – shortly after hitting submit on my article, Brian Barrett of Gizmodo wrote a great article that blows out lots of the topics I discuss below. Check it out.

UPDATE #2: Tom Ryan at Retailwire started a discussion on the topic of “Best Buy Reportedly Exploring RadioShack Merger.” They currently have 20 comments from various retail industry contributors.  One note – Retailwire contributors tend to come from the retailer perspective often.  We hope to add more brand marketer perspective to the conversation in the future.

UPDATE #3: An article in the Minneapolis St. Paul Business Journal highlighted a nugget from a Best Buy job posting – that they plan on opening 50 Best Buy Mobile stores this year – in enclosed shopping malls.  Obviously a great deal of Radio Shack stores are in shopping malls – buying Radio Shack would put this plan on steroids.

Additional Reading / Sources:

• Fort Worth Star Telegram article: RadioShack shares up on report of takeover or merger
• average Radio Shack store is 2,500 square feet
• average Best Buy store is in the 40,000 square foot range.
• average carphone warehouse is 800 square feet.

WATCH & LEARN – HOME DEPOT DECLARES BLACK FRIDAY IN APRIL:

The fight for Retail Leverage doesn’t end with brands duking it out in the aisles.   Retailers take it outside, fighting their own battles.  If you think unemployment, the real estate market, and tight credit has hurt sales for your brand, imagine how that rolls up to create a desperate environment for the retailer.  While the home improvement sector in retail is still fragmented, the two resounding leaders are Home Depot and Lowes.

Home Depot, in a bid for some Retail Leverage of its own, and in an effort to drive year over year sales growth, has declared “Black Friday Is Back”, creating their own retail big event.  Craig Menear, executive vice president of merchandising for Home Depot, was quoted in BusinessWeek saying that Home Depot will increase its marketing through newspaper circulars, online promotions and other advertising to draw consumers during its busiest season.

HOME DEPOT MANUFACTURES ITS OWN SUCCESS AND GAINS RETAIL LEVERAGE:

Home Depot is following the retail leverage playbook, creating their own “Can’t Ignore” / “Too Big To Ignore” event.  I love what Home Depot is doing, and it would still be a great idea even if it wasn’t during their peak season.  To start a fire you need oxygen and sometimes when everybody else is screaming “fire” it sucks all they oxygen out of the room.  What might get lost in November may have a better chance of standing out during other times of the year.  While timing isn’t the motivating factor, it does work out well if there is stronger seasonality at play, and that is definitely the case here.

HOW CAN YOU “DO IT YOURSELF?” (apologies for the Home Improvement channel puns)

Don’t get hung up on the fact that it was a retailer doing this, and not just a brand.  As I mentioned before, everybody looks for opportunities to gain leverage against their competition – retailers are the same.  And the same goes for scale –  it’s all relative to the pond you are swimming in, and there are levers that any brand marketer can pull to make your own “Too Big To Ignore” event.  I’ll provide a list of basic “tools” we recommend (I’m on a roll with the puns today)

List of Tools To Build Your Own “Too Big To Ignore” Event:

1. Promotion: it all starts with a strong promotion that will maximize participation among your retail partners (something they don’t want to be left out from)
2. Circular Ads: align circular ads across all your retailer partners for one week / period (again, they don’t want to be left out of this one)
3. FSI / gift guide: these dedicated pieces allow you to fully tell your story, and create a multiplier effect in conjunction with your circular presence.
4. Traditional Broadcast Media (tv/radio – if it makes sense given your $ scale)
5. Demo/sampling events (if it makes sense given your product)

The list is by no means exhaustive – depending on your capabilities and resources there are other arrows you can pull from your quiver.  Some brands have a strong social media presence & connection with their customers.  By all means – give your connections marching orders to visit participating retailers during your event.  If PR is a major component of your strategy, please do engage with those wizards who have mastered making something “look bigger than it really is”.  The net is – align as many resources as you can to amplify your message, create your own big bang and stand out from the crowd (wow 3 buzz phrases in a row).  If you succeed your only problem will be figuring out how you “Do It Yourself – Again!”

RETAIL LEVERAGE CONCEPT(S) COVERED:

• Have Something So Big “They” Can’t Ignore
• Retailers don’t care about your brand’s battles – they only care about their own

RELATED RESOURCES / ADDITIONAL READING:

• Retailwire discussion about FSI’s growing popularity (with comments from Retail Leverage on how you can leverage them)
• BusinessWeek article covering Home Depot’s “Black Friday Is Back” promotion, including executive quotes

WARNING: YOUR PRODUCT DEVELOPMENT PROCESS IS HARMFUL TO YOUR HEALTH

Your company/brand has spent many years attempting to honor a classic “product development” process. You have flowcharts in conference rooms and in PowerPoint decks that detail each of the steps (along with owners, stakeholders, approvers, etc). In many companies, that process has some variation of five steps or “stage gates” that the product marketing team tries to follow religiously:

5 Typical Product Development Stages / Gates:

1. Discovery/Scoping
2. Building the Business Case/Plan
3. Development
4. Testing & Validation
5. Product Launch

Each of these gates typically is completed when a series of deliverables, criteria, and outputs are defined by the collective meeting of the minds between Marketing and R&D.

THE TRAGIC FLAW:

This process has one major flaw if you are a brand whose business case is primarily built on accessing the consumer through the world of retail – the retailer is predisposed to prefer a private label solution to compete with your new product type or class.  In today’s product development process, the supplier brand diligently takes the retailer through all of the consumer insights upon which the new product is based, showcases the research & development capabilities of the company that make the new product possible, and shares the market research around all aspects of the new product ranging from the product name, packaging design and predictive demand models based on various price options and advertising/promotions investment levels.

Shortly after launch (assuming successful national brand sales), a funny thing happens – the retailer plans a private label derivative of your new product (without so much as a “thank you” for your efforts in hand-delivering them all of the upfront inputs that they need in order to launch a lower-cost version of your branded product). You didn’t account for such copy-cat behavior in Gate 2 (Building the Business Plan) of your product development process. So in the end, your branded unit sales, revenues, and gross margins are lower than anticipated and your advertising expense dollars are higher because you have to more aggressively compete against the very retail “partner” with whom you enthusiastically shared your new product marketing inputs in the first place.

Any Parallels To The Story of The Scorpion & The Frog?

In the story, a scorpion and a frog meet on the bank of a stream and the scorpion asks the frog to carry him across on its back. The frog asks, “How do I know you won’t sting me?” The scorpion says, “Because if I do, I will die too.” The frog is satisfied, and they set out, but in midstream, the scorpion stings the frog. The frog feels the onset of paralysis and starts to sink, knowing they both will drown, but has just enough time to gasp “Why?” Replies the scorpion: “Its my nature…”

How could this be the fault of your company’s product development process? Because if a retail reseller model is your primary path to market, then you have the wrong people in the room as you are managing through the product development process as a supplier brand and you have the wrong requirements to move a product from gate to gate.

YOU MUST OWN THE CAPABILITY:

Today’s stage gate process breaks down for many consumer brands at retail between Stages 2 (Building the Business Plan) and Stage 3 (Development). For brands at retail, it is no longer good enough to defend your offerings against private label through product differentiation alone – your company must also “Own the Capability” around making the product or supporting it in the market while also being different in terms of feature and/or performance.

Brands at Retail must seek to “own the capability” associated with their new products in one of three ways:

1. Patent the Product/Process – If your brand is planning to launch a new flavor, color, or functionality to your line-up and your company cannot patent these differentiators, then odds are that you will never generate the profits from the R&D investment that you are anticipating. Adjust your future profit expectations downward or STOP the product from moving through the stage gate process to launch. Add your legal department as a key input to the development process to assess the level of legally defensible/ownable aspects to your new product while in Gate 2.
2. Control Production Capacity – If, between Stages 2 and 3, your company concludes that it has the ability to own and/or manage most of the production capacity required to make a product with your new features on a global basis, then you can also expect minimum private label threats. If not, then expect a private label derivative within months and adjust your outlook accordingly.
3. Dispense the “Kill Pill” – Some business models prevent private label or knock-off brand alternatives by building products that simply won’t work unless branded products are purchased. For example, many desktop inkjet printer companies build printers that simply won’t fire unless original equipment manufacturer cartridges are loaded.

RECAP:

If your brand depends on retail and your company cannot “own the capability” associated with making or supporting your new products based on one of these three methods, then DO NOT MOVE THE PRODUCT THROUGH THE STAGE GATE PROCESS. Your marketing insights, research and development, and marketing investments will only become inputs to a retailers’ new private label growth strategy.

WHY MINNEAPOLIS?

For Retail Leverage purposes, 3M doesn’t stand for the company that gave us post-it notes.  In this case, it stands for Mobile Marketing In Minneapolis – where you should look for leadership in this rapidly expanding consumer touchpoint.  Target and Best Buy are retail leaders in different aspects of mobile marketing, and their leadership will impact adoption throughout the rest of the retail.  This article provides an overview of their mobile marketing efforts.  If you deal with Target or Best Buy, your antennae should be tuned to how you can incorporate / leverage mobile marketing in your business with them.

TARGET LEVERAGING MOBILE COUPONS

One point of differentiation between Target and Walmart has been that Target embraces coupons.  So it is no surprise that Target will become the first retailer to accept mobile coupons at all of its stores. Target’s program requires consumers to opt-in to receive text messages to their mobile phone, with links to mobile web pages with barcoded offers they can use at checkout.

I don’t have the data to prove it, but I’m willing to bet that Target’s customers have a higher adoption rate in smart phone usage, as well of general text messaging usage than Walmart’s customers.

Promoting the usage of coupons also helps Target in its quest to overcome the perception that customers don’t save as much when they choose to shop at Target over Walmart.  On a related note, I wonder if the mobilization of coupons will cause Walmart to warm up to them?

BEST BUY LEVERAGING SALES LEADERSHIP IN SMART PHONES

Best Buy demonstrated their mobile marketing leadership early by enabling consumers with mobile phones to get product info sent via text message.  They plaster the 7 digit code & instructions throughout their circular ads and in-store POS and got valuable learning from consumers use of the technology.  However, the text messaging was just a piece of their evolving mobile marketing strategy.

Best Buy’s unique position as the leading retailer of smart phones (and mobile phones in general) positions them at the front lines of the rapid growth / evolution of uses for Smart phones, including mobile commerce.  In a recent article appearing at www.mobilemarketer.com, Tracy Benson, senior director of interactive marketing and emerging media at Best Buy, shared the trends Best Buy sees in mobile commerce, as well as provided a peek into their mobile commerce results.

6 trends in Mobile Commerce that Best Buy discussed:

1. Increased Smartphone Sales And Usage
2. Dramatic Increase In Mobile Web Usage
3. Mobile Commerce Adoption Grows
4. Mobile Search Becoming Essential
5. Multichannel Marketing Mix Expanding
6. Market Fragmentation Continuing

Visible Impact to Best Buy online traffic:

3% traffic coming from mobile (and increasing as a percentage of total)

Significant Impact to Best Buy’s Conversion rate:

25% higher on mobile platform than wired website (and increasing as compared to wired website)

Ways Consumers Are Using Best Buy’s Mobile Platform:

• 30% are using for research
• 18% are using to check inventory
• 28% are using to make a purchase
• (In store pickup heavily used)

Where Best Buy’s Mobile Platform Is Used:

• 60% are accessing from home via their mobile device
• 14% are accessing while in store

TAKEAWAYS:

You already knew retailer dot-coms were increasing in importance.  It’s not like that internet thing is going away – but I’m not sure if everyone sees the mobile marketing tsunami silently rolling across the ocean.  The smart phone arms race will accelerate the mobile applications available and consumers understanding of how much power they have in their hands.  If you’re visited Retail Leverage before, I’m sure you’ve picked up the theme that your retailer’s priorities should be your priorities also.  So add mobile marketing to your retailer checklist and bone up on the latest applications that consumers will use when making decisions in the aisle.  The good news is that retailers dot coms can be a great equalizer for challenger brands versus the big guys.

Finally, here are 3 things brands can do to improve their mobile marketing efforts:

1. Optimize your brands website for mobile.  The goal is to help consumers find info about your products from their mobile phone, without regard for where they actually purchase it.
2. Improve / increase your presence on your retailers website.  If you have a brand showcase on a retailers website, investigate its mobile appearance / functionality.
3. Optimize search on the retailers website.  Yes you have to pay for this.  Others are already doing it.  It is only going to increase in importance.

RELATED READING / RESOURCES:

• Related Retail Leverage Article: “Buying BIllboards In Bentonville”
• Ad Age article (subscribers only) An App for That, Too: How Mobile Is Changing Shopping
• Mobile Marketing Watch article about the killer barcode scanning app from ScanLife – it’s being preloaded on millions of handsets sold by Sprint and others. Note – it can even read basic UPC’s on every product.
• Mobile Marketing Watch coverage on Target mobile coupon announcement
• Mobile Marketer article that shares Best Buy’s insight on mobile marketing

Growth makes the world go round.  The market demands it, the CEO and CFO expect it, and the managers chase it.  To provide retail perspective on the old quote  - “if you aren’t growing, you’re dying” – we do believe you are growing in a less desirable sense – that is growing more reliant on your existing customers.

Being realistic, unless you are a start-up or regional player, your brands products are probably already in the expected channels for your category(s).  Of course you could and should be trying to grow in your existing channels – but you’re probably in trench warfare now, fighting over the same turf as your key competitors, not to mention your partner retailer’s private label products.

I don’t know if I’m suggesting something as radical as the authors of the book “Blue Ocean Strategy” would suggest – I’m merely advocating you change the channel by looking beyond your existing business.  That being said, pursuing new channels does have some similarities to the core philosophies shared in “Blue Ocean Strategy”.  Think about your existing retail channels in context of the Red Ocean Strategy below, and then look at the Blue Ocean Strategy.  It makes a Blue Ocean Strategy in retail seem worth a shot.

WHAT ARE ALTERNATIVE CHANNELS:

So a “Blue Ocean Strategy” in retail is what we are affectionately calling here “Alternative Channels”.  What exactly are “Alternative Channels?  I don’t mean alternative channels in the 1990′s or satellite radio sense.  The simplest definition I can offer is that “Alternative Channels” are means of distribution outside of those you’d traditionally expect for a given product / service to reach customers.  This means they probably require modifying how you go to market.  This impacts everything from the margins and programs you offer, to how you reach customers and present yourself at the point of purchase.

Agencies and vendors take note – pursuing sales via alternative channels often creates new growth opportunities for you too. Additional marketing budgets for somebody’s special initiative.  Targeted messaging.  Custom displays.  Special packaging.  New types of promotions.

RECENT EXAMPLES OF ALTERNATIVE CHANNEL PLAYS TO GET YOUR IMAGINATION GOING:

P&G expansion at BabiesRUS

During 2009, P&G moved from Pampers & Dreft at Babies R US to a broader assortment of consumables.  Given that Babies R US tends to be a destination for parents on a mission for diapers or formula, they are providing convenience that perhaps reduces a separate trip to pick up these other essentials.

Nintendo Wii at Sports Authority

Nintendo’s Wii Fit has shown up in other places such as Babies R US, but the biggest example is their showcase in Sports Authority stores.  They have the opportunity to solution sell the wide range of fitness accessories that can go hand in hand with Wii Fit sales.

Dell’s Kiosks at over 140 Malls (RIP 2008)

Note – Dell’s mall kiosks served as a transitional tool for the direct marketer to dip its toes in the retail waters.  In 2008 Dell shuttered its mall kiosks and opened up retail distribution in leading computer retailers such as Best Buy, Walmart and Staples.

Taking OfficeMax Branded Products Outside Their Own Stores

Officemax has been selling branded products at Safeway since 1998 and announced recently they were expanding to Food Lion, as well as other unnamed mass and grocery retailers.

Ultimately, the purpose of growing outside of your existing book of business is to drive growth for your business.  You gain leverage with your existing customers, even if they don’t know it / acknowledge it, by having alternatives.

Key Benefits To Pursuing An “Alternative Channel” Strategy:

1. If you successfully develop new customers, you lessen your dependance on existing customers
2. Experience serves as a “Learning Lab” where you can test new ideas & apply learnings in your existing channels
3. Opportunity to create new demand for your product by positioning it for specific applications / uses
4. Growing sales in new channels may help lessen impact of seasonality in your existing channels
5. Buyers / merchants tend to stay within the retail industry – your new friends may pop up in your existing channels down the road.

CAVEAT:

You always have to be aware of the potential impact to your existing business.  It is much easier to find alternative channel success stories than it is to find people willing to tell you how they got their hands slapped by existing customers, or even worse, lost business as a result.  While your management probably won’t accept a printed copy of this article as a get out of jail free card, you are welcome to try.Take heart though – as the retail market has consolidated, ironically we believe there is less threat to pursuing sales via alternative channels than ever before.  In the past retailers used to obsess that someone else was getting a better deal than they were.  If you were living on the edge, every Sunday you held your breath knowing your buyer was ready to play a game of gotcha / you’re busted with the circulars as evidence.

Perhaps the abundance of price comparison websites/services means that nobody is really going to be able to offer a significantly better deal, so that threat has passed.  Perhaps retailers feel guilty about increasing competing against the brands they built their businesses on with their own private label goods.  The net is we believe the coast is clear as long as you are fair in your offerings.  If there isn’t anything you’d be ashamed of your existing customers to see, no worries.

ADDITIONAL RESOURCES / RELATED READING:

Note –  resources on alternative channels are few and far between.

• Amazon.com book page for “Blue Ocean Strategy”
• Blue Ocean Strategy community at 12Manage.com
• 2005 Article in DSN Retailing Today “Alternative channels gateway to better sales”
• 2003 article about alternate channel sales for furniture

LOSE YOUR “DELUSIONS OF BRANDEUR” WHEN DEALING WITH RETAILERS (credit quote to Carol Spieckerman):

We get so wrapped up in the day-to-day business that is marketing and selling our wares to large, demanding, “the customer is always right” retailers, that we sometimes lose sight of some basic human nature principles which we could actually harness to gain some leverage in our negotiations with them.  Many marketers of even the large, well known brand names backed with multi-billion dollars of total corporate revenue and $100+ million dollar ad budgets, feel like the David in the David v. Goliath relationship when it comes to negotiating with one of these big national retailers.  This is because no matter what our brand scores may read from the market research studies or what our loyalty rates are, at the end of the day, the end consumer is not walking into our corporate offices to buy their syrup, computers or baby strollers, but rather into a retail outlet to spend their hard earned money.  Your consumer is ultimately the retailer’s consumer.  And every time they walk into our “partner’s” (and I lose that term loosely) well-lit, freshly painted, freshly mopped stores, they can choose to follow their brand loyalty OR they can easily get swayed to the competition OR opt to skip the purchase altogether.

READY, FIRE, AIM:

Put simply, what the end consumers see is simply the final decision of what that particular merchant decided to put out on that shelf, or on that endcap or in those checkout-lanes in that particular moment of time.  Sometimes that merchant is a newly appointed college graduate given a lot of responsibility and other times the day-to-day decision maker might be a seasoned buyer of 20+ years.  No matter who is choosing the placement, one thing is for sure.  Once those decisions are made and retailers move into execution mode of supply chain and store operations, gone are the powerpoint charts and the negotiating tables, hello POS!  Either your POS or someone else’s that is.   And once there is POS, future decisions to expand, contract or maintain will be the most powerful data a retailer will use to drive future decisions.

So the road to proving ourselves with POS actually starts in the meeting rooms trying to convince merchants that our product is indeed the best choice for that shelf, or that endcap or in those checkout lanes.  Most of our past 30+articles we have written and posted on here have focused on strategies and methods to increase your likelihood for expansion into big box retail.  This article is no different, but may be a little more controversial.  Some may consider this tactic….well….cheating.

BUYERS ARE PEOPLE TOO, GOSH DARN IT:

One of the most basic human nature principles is that there is absolutely no substitute for one’s personal experience.  Obviously, having lived through or being exposed to some event, condition or stimuli gives one a stronger conviction in their opinion on a particular matter vs. not getting exposed to that experience.  We tend to piece together many of our conclusions and opinions by piecing together tidbits of evidence that we have experienced or been exposed to in the marketplace….such as a marketing vehicle!

Here is something we often forget.  The buyer is human.  That’s right, no matter how old, how experienced or inexperienced, they have emotion and form opinions much like any other.  If he or she owns a particular product, they form an opinion about that product.  If he or she sees a TV commercial or a radio ad, he or she forms various opinions on those commercials (especially when it involves a product that they have some expertise in).  An opinion can be as positive as “Wow that was creative/funny/informative!” or could be negative in some way.  However, and perhaps more importantly than like vs. dislike of a particular marketing message, the buyer might simply takeaway the opinion that “Wow, that company is really out there marketing that product (i.e. creating consumer pull)”  Most merchants, even the inexperienced ones, know enough that even if a product or marketing campaign is not directed at their demographic in particular, marketing campaigns that are raising awareness and creating consumer pull from any demographic is, in general, a good thing for the retailer.

I would argue that some merchants even go so far as using exposure or lack of exposure to a particular marketing campaign to help them to justify a decision they made in the past.  When the buyer gets exposed to the marketing vehicles regularly in their personal life, this makes them feel that that they might be missing out on if they chose to not assort or promote that particular product.  “Am I missing out on an opportunity here?”  Or better yet, “is all this marketing going to drive customers to my competitor down the street that is listing that product?” (conversely if they see marketing and earlier chose to promote the product, this probably helps justify their decision)

WHY YOU SHOULD BUY BILLBOARDS IN BENTONVILLE (or the alliterative cousin, Mobile Marketing In Minneapolis):

If you have a marketing communications budget that is sizeable (i.e. over $100M), you probably don’t need to worry about this issue too much (since you most likely already have retailer support and plenty of coverage).  However, if you don’t have a lot to spend and you need retailer support, you may want to think about dialing up marketing activity in the headquarter city of the retailer you are trying to penetrate.  This may not help you in the short term if you are not on the shelves at all but could help you penetrate that retailer in the future.  So buy a billboard or two in Bentonville, try local radio in Minneapolis, beef up your TV media schedule in Chicago.  Ask your agency to come back with 10 cost-effective ways to blast a particular zip code to see what they come back with.  (By the way, even though you may feel vindictive, you may want to avoid tagging the targeted retailer’s competition in this “blast”.  Although one could argue sometimes dialing up the heat can get results!)

Dialing up your marketing efforts in retailer headquarter cities can be a relatively small investment to help bolster future success with that retailer and give you more chances to succeed in future discussions.  Imagine going back into “Round 2” discussions with a particular retailer, after having some POS success elsewhere AND having the buyer say “yeah I’ve seen your ads all the time! I had no idea you were going to do so much!”  Now that’s gaining some retail leverage!

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!

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

Last week we asked “How Can Retail Leverage Help Garmin?” We didn’t pretend to have the answer, but we did share lots of background on their current situation.  We asked our readers to share any ideas/thoughts they had regarding Garmin’s dilemma and we were ecstatic with the response.  Combine that with some “new” news from Garmin in the last couple of weeks, and it begs an update.

READER FEEDBACK:

1) @retailxpert, our favorite “Retail Expert”, aptly handled on twitter ,had this suggestion regarding Garmin’s nuvifones:

“Garmin should license out core technology & pursue licensees to expand their line-up.”  She also noted that they are probably already doing this.

2) @susanschaffer A marketing consultant with 15+ years of experience in the digital camera industry, @slschaeffer , sees parallels to Garmin’s PND’s and mobile phones to another industry near and dear to our hearts:

“Reminiscent of what camera companies are going through re. mobile phones!”

3) @drtvguru, the founder & CEO of a DRTV agency, and is an expert on innovative uses of DRTV to build brand and drive sales, sees a positioning opportunity for the entire brand/portfolio, but with words of caution:

You can see his full comments on the original post, but I’m summarizing here: Embrace the single purpose nature, with an “anti-tech” positioning.  Garmin has already carved out very nice target markets, in part due to their single purpose nature (outdoor, fitness, marine, aviation) embrace the single purpose.  Caution – tech press tends to crucify anti-tech because they’re not “sexy” enough.  It would require a very clear understanding of what the target consumer needs and how to find those people. And, it probably requires a very aggressive campaign to get the tech press to grudgingly accept that anti-tech provides important solutions to human problems.

4) @rdsolimeno, the President of a consulting firm, says that “Open Innovation” could be the answer.

“I see the challenge before Garmin and their nuviphone line and think there is opportunity in giving end users more choice than iPhone or blackberry.  There is both risk and reward available for those companies willing to dip their toes into “open innovation.” By opening part of the product architecture up to innovators around the world with challenges to develop both ideas for new features and to develop them – goes in a direction that neither Apple nor RIM dare to go. They key word is “daring.” The innovation comes from the market itself.”

RETAIL LEVERAGE WEIGHS IN: With the luxury of seeing these great ideas roll in from our community, @retailleverage has the benefit and privilege of building on the ideas that were shared.

Licensing: the genie isn’t going back in the bottle regarding smart phones and GPS, so licensing is a way to exploit it.  I agree with @retailxpert that they are probably already doing it.  It could be an advantage for a vendor, multiple vendors, or mobile network(s) that their GPS is powered by Garmin.  On a related front, I have heard lots about Tom Tom’s app for the iPhone, but haven’t heard a peep about Garmin doing this.  I think they should have their own GPS app for smart phones, without worrying about the impact of their yet to gain traction nuvifone line.

What you can learn from mobile phones integrating cameras: yet another genie that got out of the bottle, yet the digital camera market has still sold approx. 70 million units in the last 2 years.  The camera functionality in phones is one of convenience, and IS becoming increasingly useful, when paired with a smart phone where the photos can easily be shared.  Camera phones are taking an increasingly larger share of casual snapshots.  In turn, the digital camera market is moving towards specialization and advanced features.  Camera phones will not replace DSLR’s, but the picture is blurring when it comes to point and shoots.  The manufacturers that win in point & shoot will have to offer convenience and specialized functionality that smart phones will not be able to provide.

Embrace single purpose positioning: What a great segue from the previous parallel with digital cameras/mobile phones.  For their traditional PND business to remain viable, they should look to their outdoor/fitness, marine and aviation businesses.  These are highly profitable, dominant in their categories that have succeeded with a relentless focus on the end user’s need.  I don’t think (or hope) that there are pilots or boaters out there navigating their vessels with an i-phone.  If so, get me a life-preserver.  I also believe that their mainstream success was driven by PND’s as an alternative to the more expensive in-dash screen in autos.  There has to be a combination of consumer cost/benefit and learning curve to where in-dash screens in autos are standard in every car.  Garmin has the technology to license to ensure that it can power a majority of these manufacturers vehicles.

Open Innovation: News flash – location-based services are going to be huge  Garmin has the technology and a trusted name that could provide the tools/kits to application developers to build countless valuable apps to leverage location data.  There could be multiple viable iPhone applications based on Garmin technology & know-how, but Garmin would have to be willing to let this occur while they are growing their own smart phone lines.  Whether on their own, or in the hands of others, Garmin could be the company that puts the “mobile” into smart phones.

KEY TAKEAWAYS: Just as we had the opportunity to listen to the ideas our readers shared, Garmin has the luxury and opportunity to listen to its customers.  Millions of people count on Garmin products every day, and with the exception of Michael Scott in the office, rarely are they pointed in the wrong direction.  I believe Garmin can find its own right direction by listening to its customers.  I’m sure they are already doing it at a consumer engagement level via social media.  Whether those ideas have an impact in the board room or lab is anybody’s guess.  With that in mind, I’m going to send a link to our articles to @jakesjournal , the most visible member of Garmin’s corporate blog team, to share what our community has to say and hopefully we’ll help in a meaningful, non-billable way.

As for our own businesses, this experiment has only reinforced the importance of listening to consumers.  Reviews, social media, surveys, focus groups – the challenge is finding ways to harness the power of the information you gather, or that is shared freely for you to take or leave.

UPDATED NEWS/RESOURCES ON GARMIN / PND MARKET:

• Garmin 2009 Q4 & Full Year Earnings Release (PND down big, outdoor/fitness growing, 1st gen nuvifones disappointed, but 2 new ones launching this year, aviation & marine down but margins still strong).
• This review by cnet gives hope that one of the new nuvifone models can succeed.
• From the CE Outlook blog, Tom Tom admitting that industry-wide U.S.  sales could start to decline by mid-2011.
• Nokia’s Free GPS Is Already Shaking Up PND Market
• See for yourself about Nokia’s Free Forever GPS for their customers