468 Retail and Channel Management Blog

Sunday, February 28, 2016

Fossil: Thoughtful Marketing

When you walk through a mall, what is the first thing you see that draws you into a store? For me, it’s the exterior layout of the individual stores. A store’s transition zone establishes a change and makes it obvious that the space will provide a different experience. How the company designs this space has an effect on customers walking by as it may be their first impression of the brand. Fossil, an American designer and manufacturer of accessories, has put time in effort in establishing a consistent theme, not only with the physical aspect of the stores, but also with their products and marketing materials.

Fossil was founded in 1984 by Tom Kartsotis and his brother Kosta. Most business established during the early ‘80s centered their brand based on their products, its features, and its benefits. Fossil, however, based their brand on their design. During the time, Tom and Kosta were hesitant on basing their brand off of design; however, the success Swatch made with creating affordable, design-driven products gave them hope. The company IPO’d in 1993 as Fossil focusing was on fashion watches with a retro look before introducing leather goods in 1990 under the Fossil brand and Relic line of watches.


With an average store size of 1250-1500 square feet, every square foot needs to be taken into consideration when trying to create a comfortable environment for customers to shop in.

The layout works well for all three types of shoppers. The variety of products shown in a small amount of space allows navigation, and also an easier way for the shoppers to browse which markets to the general plan and unplanned shopper. The products are also organized into their own sections so it also guides mission shoppers to where the product they may be looking for will be.

The displays of the products are also thoughtful; not only are the products in their individual sections within the store, the spacing of the products (specifically leather) between each other, encourage customers to remove the products from the shelves and try them on. There are shelves around the store allows there to be a display of the variety of products the company offers. Islands in the middle of the store are low so that customers can see the entire store without any shelves blocking their view. The lighting in the store would highlight the products and makes the environment feel warm, cozy, and comfortable. These different considerations contribute to the overall modern vintage aesthetic.

Smaller details

Diving into other promotional materials Fossil considered to facilitate their theme and brand is their packaging and other point of sale materials. Fossil establishes consistency that extends beyond the physical layout of the store and products that customers buy. You can take even more of the store back home through their packaging: the vintage tins.
There were countless times when I would walk by the store and become attracted to Fossil’s display of vintage tins; there were times when I wanted to buy a watch just to get the tin. Tim Hale, the creative director of Fossil since 1987, says "The identification of Fossil with the tins is almost on the same level as the identification of Coca-Cola with the hourglass bottle." The popularity of the tins have resulted in the decision of having dates and serial numbers assigned to them to foster an urge to collect more.

Overall, Fossil has spent a lot of time in fine tuning what their brand is through the variety of products they offer, the store décor, and promotional materials. It has taken years to build this brand and it will take continuous efforts to maintain this brand image to the public. 

Saturday, February 20, 2016

Costco's Big Box Style Cashes In

When I was younger, I used to love going with my parents when they went grocery shopping at Costco. From the numerous food samples, to the socks and underwear worn by seemingly everyone on the planet, there was always a motive for me to tag along. At the time there were only 2  locations in Edmonton, both of which were over 15 minutes from our house. This did not stop us however, from making Costco the primary grocery store we shopped at. Costco’s big box selling is becoming a highly desirable feature in Canada, and the resulting trade areas of their stores are massive. With only 3 current locations in the Edmonton region, located either in the outskirts of the city or within industrial sectors, it is evident that people are willing to drive past numerous other grocers to shop at Costco.

Although the location of the Edmonton stores are considered subprime, Costco has by far the highest percent same store sales growth in multiple quarters, closing its last quarter at 9% (Sturgeon, 2016). It’s closest competitor was Walmart at 4.3% (2016). This shows that Costco has managed to differentiate itself from other supermarket stores in a superior way. With 60% of Costco’s products being Supermarket-type merchandise, they have still found a way to get customers to drive past the local Safeway by their house and out to their stores instead.

The biggest draw to a Costco store over a Safeway would be the price. This is what gets the customer into the store and shopping. The other major feature is the buy in bulk mentality that is slowly being adopted by Canadians. The sizes and quantities of Costco’s products take longer to go through at home, and this gives customers the convenience of having less frequented trips to and from the grocery store. These reduced trips appeal to the time-starved consumer segments, particularly families. Costco’s mandatory membership card may seem unreasonable, but I think it helps promote customer relationships and retention. It arguably increases the conversion rates in their stores as well. It would be challenging to spot many people entering a Costco store and leaving with nothing in their hands. The additional selection of electronics, clothes, furniture gives customers a one stop shop experience, and increases the likelihood of unplanned purchases by customers. The food sample stands and appliance demonstration not only increases the sales of the products, but increases customer engagement as well. For a big box store, customer service can be challenging, and this is a unique way that Costco has attempted to reach out to the customers.

Costco’s substantial growth in the supermarket industry is suggesting a transition of consumer preference towards price conscious bulk purchases. This is challenging for many existing companies such as Loblaws to adapt to, leaving Costco largely unchallenged in Canada, and allowing it to capitalize on this trend. With only 90 stores in Canada, It would not be surprising to see its market share grow even more in the next few years as more locations open up.


Friday, February 5, 2016

Etsy Gets Physical

Following suit of some of the biggest players in e-commerce such as Amazon, Rent the Runway, and Shoes.com; Etsy is getting physical. That is to say, the online retailer that provides a platform for the worldwide community of crafters to sell their handmade creations, has just opened their first physical shop. Etsy has partnered with Macy’s to open a store in their flagship Herald Square location in New York.  This is a part of their strategy to partner with major retailers to develop a greater reach for the site’s sellers. “For designers to showcase their products to a locally and globally diverse customer base in the exciting selling environment of Herald Square, is an incredible opportunity for both wholesalers and customers,” said Marc Mastronardi, executive vice president and general merchandise manager of Accessories/Center Core for Macy’s. This presents Etsy an opportunity to target different segments that Macy’s might already be bringing in. They may differ especially on psychographics, capturing those who do not typically shop online. There is also an element of horizontal differentiation as there are some Etsy products that have been specifically designed for Macy’s. Introducing handmade products may appeal to customers who value the craft over mass production. I believe Etsy will see good results from this development as the company has garnered a strong customer base in their 10 years of operation, and will likely grow that number by having physical store fronts for customers – new and old – to visit. 

While by nature, Etsy has a highly engaging retail value proposition by allowing anyone to become a vendor and facilitating customer engagement, they are now able to engage face-to-face. Although there is only one shop for now, Etsy could leverage face time to strengthen customer relationships and reinforce that sense of authenticity they so proudly value. I also think there is an opportunity here for the customers to actually meet the designers who made the products they are buying, creating an even stronger relationship than the anonymity of a typical retail experience. Not only this, but Etsy is already one step ahead as they have the advantage of being able to use the customer data from their online platform to analyze, and better serve their market in-store.

This is the first time since the launch of the website that Etsy has used omni-channels to physically present products to customers. The tangible element gives customers a “try before you buy” option, allowing them to evaluate the quality of the product for themselves. This way, they may use the shop as a showroom to acquaint themselves with each designer, and use the online channel to continue buying from them with confidence in what they will receive. Etsy will provide a virtual endless selection to consumers as well. Macy’s has a dedicated team of curators that select the products to be sold in-store by eight vendors, which will be updated every six to eight weeks, with a new theme each time. If I lived in New York, I know I’d be visiting with every update to experience the new themes they've come up with.




H&M and the Absence of Online Commerce in Canada

As a university student, I love H&M. Their budget-friendly trendy offerings keep me looking fly without emptying my wallet. They even offer designer collaborations as Bianca Barry notes in her recent post. But it puzzles me that the world’s second largest global clothing retailer does not have online shopping in over half of their markets, including Canada.
Typical H&M Storefront

Up until August 2013, fast-fashion retail giant Hennes & Mauritz, wasn’t even engaging in e-commerce in the United States. Yet a 2015 IBISWorld report revealed that the average annual online sales of men’s clothing grew by over 17% from 2010 to 2015, the fastest growing category even when looking towards the future. Canadian online clothing retailer Frank & Oak, for example, has seen tremendous success by focusing on the digital customer, while other competitors like Zara, Gap, and J. Crew offer Canadians an online shopping experience in addition to their brick and mortar stores.

So why might H&M in Canada be lagging with their e-commerce adoption?

Let’s first examine their history. H&M began in Sweden in 1947 with the business concept of “Fashion and quality at the best price”. Their first store outside of Sweden opened in Norway in 1960, spread across Europe in the 1980s and 1990s, came to the US in 2000, and finally set up shop in Canada in 2004. Today H&M has more than 3,900 stores in 61 markets, 78 of which are in Canada. Of those 61 countries, only 23 are offered online shopping. The first non-Nordic country to have online sales was The Netherlands in 2006, resulting in demand which exceeded expectations.
Online Shopping on H&M's US website

In their Full Year Reports, H&M cites long-term investments in IT costs for online shopping as a main component for increased costs. Additionally, the low population density and large land area of Canada could make logistics appear daunting. There have been strides made in recent years, however, with 10 markets gaining online shopping capabilities in 2015, and another nine planned for 2016. If H&M continues at this pace, then we should likely be able to see online shopping in Canada within the next five years at most.
H&M Canada Website. Notice the note indicating online shopping is not available.

Additionally, we have learned that only 58% of respondents to a Retail Systems Research (RSR) study engaged in e-commerce as of September 2015. But RSR also revealed in 2014 that multi-channel retail customers were 54% more profitable than single-channel customers. But while H&M’s sales after expanding online in the US increased to 13,675 million SEK in 2013 from 12,550 million SEK in 2012, this could have also been induced by the opening of 44 additional American stores. Canada on the other hand had decreased sales from 3,125 million SEK to 3,024 million SEK during the same period and an additional five new stores. Therefore, it is possible that H&M feared that the losses of implementing the online system would loom larger than the gains, a risk which may be unattractive when facing decreasing profit. In 2015, however, Canadian sales increased 26% in SEK. If this upward trend continues, could we Canadians see online shopping in 2016? Holding a huge market share already, adopting consumer trends by investing in e-commerce in all their markets may help H&M move towards the goal of overtaking Zara’s parent company Inditex for the spot of number one global clothing retailer.


Second Cup, Second Choice

Second Cup is often the second choice when trying to decide where to go for a coffee date or a mid afternoon pick me up. With so many other competitors in the market - namely Starbucks, McDonalds, and Tim Hortons, their brand is stagnant, stuck between the convenience of Tim Hortons and the luxury of Starbucks, and facing a challenge in offering something new to coffee lovers.

In an effort to combat this, they introduced a brand overhaul towards the end of 2014, replacing their old logo and signage with something much more minimalist - simple white text on a black background. Along with this, the storefront of each of their locations, based on their boldly named “Innovative Café of the Future” in Toronto have been designed to “complement the culture of the neighbourhood” (Second Cup Press Room, 2015) and appeal to a younger, more fashionable consumer with features such as a Slow Bar, wireless charging pads, and an increased focus on high quality coffee.

Second Cup's "Innovative Café of the Future"

The problems that they have encountered with attempting to update their brand image stem from the inconsistent feel in their stores, and potentially a move to become “cooler” much too late after Starbucks carved out its reputation in consumer’s minds. I personally love the design and updates to the packaging, including the Artist Series cups that feature commissioned artwork, as well as the styling of the Innovative Cafe. At this point, Second Cup doesn’t lack a beautiful image, they lack follow through. This brand redesign was a hope for a turnaround, and meant to represent the “premium brand experience” offered by Second Cup. However, with the rollout of the new store design intended to take place throughout 2015, many of the stores now have mismatched decor that creates a cluttered and uncomfortable effect.

More problematic than the lack of consistency in the interior is how this improvement has not been carried over into the rest of the Second Cup experience, which is an area their competitors are particularly strong in. While Starbucks provides personalization and familiarity to their customers across their locations, Second Cup does not create the same sense of a “home away from home”.

My neighbourhood Second Cup, which I frequent more out of convenience rather than preference, is a first hand example of the inconsistent feel between replacing the signage and packaging in the store, but nothing else.

For Second Cup, in order to compete with the major players in the coffee shop world, something more radical will have to be done than a sleeker logo.