Murale: Beauty for you

Amidst the burgeoning size and scope of the beauty industry, an opportunity exists to improve on the lack of personalized shopping experience. The highly fragmented industry characterized by thousands of different products has led to consumer confusion about product selection. Although magazines and blogs offer product recommendations, this advice is highly generalized, making it difficult for consumers to know what products really work without spending money.

Shoppers Drug Mart Corporation’s new beauty store business, Murale, attempts to address this gap. With its retail value proposition focused on selection and experience, I believe that it is well positioned to succeed in the marketplace. Let me explain why.

Compared to other beauty retailers, Murale excels in the experience dimension. While Sephora offers product recommendations, Murale leads the way as the first retailer to offer personalized consultation services via a trained skin care team. This novel experience appears to follow the latest trend towards customized beauty solutions offered by manufacturers (such as Procter and Gamble’s OlayForYou campaign), as companies attempt to simplify and influence the purchase process by helping consumers identify which products are best suited for their needs. Murale’s complimentary service is one that will surely be valued by consumers, who can now purchase with confidence that their money was spent on the right products.

Murale strives to differentiate its retail assortment by playing in niche segments (such as dermatology). Within specialty categories, it has debuted lines which have never been available in Canada, with some even being the first in North America. These retailer exclusive products force consumers to visit the store to make the purchase, thereby increasing traffic and expanding the average basket size. To further the success of its current product portfolio, I believe that Murale would benefit from the addition of a private label business. By introducing an affordable alternative, Murale will be able to improve its bottom line by capturing more price conscious consumers. As well, the presence of successful private labels (such as Sephora’s house brand) has proven to be invaluable in fostering store loyalty, as consumers know that the brand is only available at one retailer. Murale may also benefit from gaining a presence in the green and organic beauty products category, to address the growing emphasis on health conscious and environmentally friendly options. Any combination of these new business opportunities will help advance Murale’s position in the marketplace.

Recently, Shoppers has also focused on expanding the beauty sections in their existing drug stores. With Murale’s entry, Shoppers must identify methods to reduce cannibalization between the two businesses. Shoppers may be well served to scale back its focus on the high end beauty segment in the drug stores operating in the same regions as Murale.

As the industry grows more sophisticated, retailers must become more creative in their offerings. Murale is one example of how the beauty industry can keep evolving to provide its consumers with fresh and exciting products or services. Watch out Sephora – Murale is here to stay!

Links/References:

http://www.beautycare.com/newspro/archive/arc10-2000.html, Volume.com launches

http://www.canadianbusiness.com/markets/cnw/article.jsp?content=20081107_094502_4_cnw_cnw, Shoppers Drug Mart Corporation opens first Murale store in Ottawa

http://www.cnw.ca/en/releases/archive/September2008/02/c7606.html, Shoppers Drug Mart Corporation reveals details of a beauty masterpiece: Murale(TM)

http://www.murale.ca/brands.html, Murale website

Do luxury stores have a future?

As everyone has now realized, the recession has crippled even those with the deepest pockets. When people today talk about high-priced fashion, it is often accompanied by the notion that it has become unaffordable to general society. However, it is my belief that luxury still exists in this world but it now comes at a cheaper price.

At the insistence of my mother and sister, I found myself in many malls over the Christmas holidays. During these trips I went into stores such as Saks Fifth Avenue, Lacoste, and Hugo Boss. Walking in, I expected them to be empty. Everything I had been reading in the news led me to believe that people have less disposable income and less money to spend on these luxury items. However, I was could not have been more wrong. I realize that I went at high season but these stores were jam packed. After looking around more, I noticed that there were two types of shoppers there. There were the very rich people who have not felt the effects of the economic downturn as much as most and those that were searching for bargains. The latter group represents a serious threat to the RVP of these high end stores. All three of the above stores pride themselves on being high end. When I walked into these stores in the past, I found elite items at elite prices. This inevitably set a barrier to people who could not afford $20,000 purses. Even looking around these stores has been known to intimidate people since the whole ambiance is tailored to the extreme upper class.

So what exactly is the RVP of these types of stores? I think it is fair to say that the main reason why people like to shop in these stores is the image that the high class brands portray. When I see someone wearing a Hugo Boss suit, for example, I automatically view that as relatively elite. The value of these stores also lies in its store presentation and its personable and well-dressed staff. It is my view that all of these factors while still important to some extent, have become a much smaller factor today. When I go to these retailers, I cannot believe how relatively inexpensive some of these items are. People can now purchase items for a fraction of their original price. Sale signs are found throughout stores and they truly don’t have the same feel as they did a couple of years ago. This is not currently a big issue because the elitist shoppers seem to be a thing of the past. Some people think that this kind of over-indulgence within fashion will never return. Should that be the case, then these stores will not have any issues going forward. However, when the inevitably prospers once again, will this have hampered the opinion of some people with respect to these high-end brands? I truly think it will have serious effects that will be hard to reverse. It will be interesting to see how companies re-build their image and their importance to their original customers in an industry that has seen its value decrease by over $10 billion in the past year. One thing is for certain in these times: “Saving is the new spending.”

Sources:
http://www.guardian.co.uk/business/2009/jan/31/retail-shopping-habits-credit-crunch
http://www.thestar.com/living/article/574815

Go Green!-Wal-Mart's green private label program

Ethical business has been a hot topic nowadays. Wal-Mart did not want to disappoint its consumers, so the retail giant initiated new marketing strategy-green strategy at the end of 2008 to meet the expectation of its stakeholders. In the mean time, the new strategy also differentiated Wal-Mart from other retail business in this competitive market. There are several advantages of initiating green strategy. First, green marketing strategy can maintain current consumer base. Second, sales volumes are triggered by attracting environmental friendly consumers. Third, green strategy can build a trust image in the community.

The green private label program strategy does not require customers to make a trade-off between affordability and sustainability. Customers even can pay less by purchasing green private label products in Wal-Mart store. The intention of this program has been very clear. Wal-Mart wants to encourage its consumers to buy environmental friendly products by providing lower price. In the mean time, by providing affordable green private label program, Wal-Mart is giving price sensitive consumers an opportunity to make a contribution to sustainable development. The majority of the consumers shopping in Wal-Mart are price sensitive people. Generally speaking, if green products are more expensive than regular products, price sensitive consumers will not choose to purchase green products due to their low disposable income. Consequently, they cannot enjoy the feeling of being a nice people among their social group. However, under the green private label program, price sensitive consumers can also enjoy being a nice people. As a result, Wal-Mart can maintain its current consumer base by providing green private label program to exceed their expectation.

The green private label program also drives profitability. When I was working as a customer representative in Sobeys, I discovered that Canadian consumers are sensitive to environmental issues. If green products are available in the store, consumers prefer purchasing environmental friendly products. Andrew Pelletier also mentioned that sales of greener good products performed very well in 2008. The sales of such products totaled around Canadian dollars $170 million, up 86% from the previous year. The promotion of green private label program attracts environmental sensitive consumers to shop in Wal-Mart, which will drive high sales volume. From cost perspective, Wal-Mart is currently encouraging suppliers to use smaller packages to introduce green products. The reduction of product packaging can reduce cost by 5% over the next five years, mentioned by Pelletier. Consequently, the cost reduction during manufacturing period will lead to low price, which will benefit end consumers.

The green private label program helps Wal-Mart win trust by rebuilding a new corporate image in the community. Wal-Mart has always been in trouble with its corporate image in its community. Stakeholders always critizes Wal-Mart for its mistreatment to its labors. Wal-Mart spent a certain amount of legal cost to handle those issues with the community. The green private label program can minimize the legal cost Wal-Mart will spend in order to resolve the conflicts with its relevant stakeholders. Further, the establishment of ethical business image can attract talents to work for Wal-Mart, which will benefit its long time development strategy.

Traditionally, Wal-Mart's RVP has been price and customer experience. The intiation of green private label program enhances customer experience by giving price sensitive consumers a feeling of being nice people. The new program also gives customers more product selections between green products and regular products. In addition, the new environmental friendly strategy can attract more consumers holding environmental concern. More and more talents will also be attracted to work for Wal-Mart. I believe that more and more retail business will initiate green retail marketing strategy after seeing the success story of Wal-Mart.

Relevant Readings

http://www.walmart.ca/wms/microsite/GreenerGood/en/overview.html

http://www.walmart.ca/wms/microsite/GreenerGood/en/media.html

http://www.cio.com/article/456625/Wal_Mart_s_Green_Strategy_Supply_Chain_Makeover_Targets_Chinese_Manufacturers

http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20090126/ACQDJON200901261447DOWJONESDJONLINE000508.htm&symbol=AAPL&symbol=IBM&symbol=SPY&symbol=WMT&selected=WMT&selecteddisplaysymbol=WMT&coname=Wal-Mart%20Stores,%20Inc.&logopath=&market=NYSE&pageName=Company%20News&mypage=companynews&title=Wal-Mart%20Cda%20To%20Launch%20Green%20Private%20Label%20Program

Prada on the Wal-Mart Frequenter? Noooooooo....

Recalling the start of this past holiday season, I was relishing the prospect of being able to afford high-end fashion because there were countless rumours about crazy sales at luxury retailers such as Coach and Saks Fifth Avenue. Soon I realized that I was up for disappointment as I noticed, while strutting the fashion houses in Hong Kong, that discounts were not as substantial as I had expected. Geography may have contributed to my disappointment as China is still a developing region so sales are expected to stay stable. Nonetheless, a major reason is consumer confidence. In the video “What Stores Do Wrong” (http://feedroom.businessweek.com/?fr_story=dcc7c11e144bf1909b5238f6404144c584f7db90), Paco Underhill mentions that sales at craft fairs this past holiday season were highest of all consumer categories because consumers saw the value in buying something unique. The same logic applies to fashion boutiques; if Prada suddenly offers merchandise at 80% off, the sense of eliteness will be lost. The exclusive experience that comprises Prada’s retail value proposition will be destroyed, and this will impact brand image negatively.

Nevertheless, sales are useful in pulling customers into stores. Most consumers are somewhat price conscious so most would be drawn to stores holding sales. As long as there are customers, salespeople can flex their skills to sell products. Nonetheless, in order to keep brand image intact, luxury retailers should package their sales as special occasions such as Christmas sales and Valentine’s sales. They can even offer an exclusive sale to their top customers as a gratitude program. This demonstrates the retailer’s appreciation of its customers and boosts their sense of exclusivity because only the elite are invited.

Surviving the recession purely on sales is unsustainable. Thus, this is the time when fashion labels can capitalize on its creative talents. Fashion labels can offer more common styles that fit everyone. They can cut costs by using less expensive materials and instead, focus on playing with cutting and draping, which is more about labour. Labour is cheap compared to materials costs so margins are better sustained. According to “Fashion Designs Reflect Recession Worries” (http://www.post-gazette.com/pg/08039/855796-85.stm), designers are making more seasonless pieces and are using less costly fabrics and materials such as ruffles and beads in place of crystals and gemstones. Colour can also be a major attraction to consumers, especially women, because we are naturally drawn to bright colours.

Some emerging labels have undertaken alternate retail channels such as the internet. Though this is effective at reducing costs, it takes away from the enjoyment of shopping, especially for females. Women enjoying picking around and trying on clothes so pushing collections online prevents them from touching and feeling the products, which is a very important element in shopping. Also, shopping online is less popular because there is always a risk that something will not fit. Therefore, I suggest fashion labels stick to the store format unless they can devise efficient sales return procedures that costs little and that satisfies their female consumers. Being a female myself, I can say that the latter is difficult.

No Name, No Problem!
By: Leslie Chan

As bleak reports continue to emerge about the recession, Galen Weston, CEO of Loblaws, has brightened our day by offering us ‘no-nonsense ways to stretch [our] dollar’[i]. What he’s really doing is pushing his low priced ‘No Name’ private label and hoping to gain a larger share of our smaller wallets. Like Galen, most people would assume that consumption of national brands during a recession would decrease as people trade down to more affordable private label brands. Working on this assumption, Loblaws has recently launched a new marketing campaign focused on comparing the price difference between a cart full of their No Name private label products to a cart full of national brand products.[ii]

So how able is Loblaws to compete on price, now that Wal-Mart has entered the grocery market? Loblaws has a compelling retail value proposition for most things, except price. They’re convenient because they’re everywhere with more than 1,000 corporate and franchised stores from coast to coast.[iii] They have great selection of products and are among the best for carrying the majority of national brands. While Loblaws may not emphasize a tailored shopping experience, neither do its largest competitors (i.e. Metro & Wal-Mart). Even though Loblaws is winning on all these factors, it is failing to meet consumer expectations on price. How will Loblaws change consumer perceptions of price?

Enter bright yellow signs! In its original black-on-yellow packaging, the low priced No Name line is more prominently featured and hard to miss.

You can’t go into a Loblaws store, website or read a flyer without seeing the yellow No Name logo. Because of this aggressive placement of the No Name brand, and more prominently placed No Name products on store shelves, Loblaws has begun to change consumer price perceptions. The No Name private label allows Loblaws the opportunity to provide competitive prices while still generating high margins given that they eliminate a layer of suppliers from the value chain. Let’s be real, Loblaws knows it can’t beat Wal-Mart on national brand pricing, but by pushing consumers towards their high-margin, low-price No Name label, Loblaws is attempting to retain their more price conscious clientele.

Another advantage for Loblaws is its convenient locations in almost all prime locations across the country. Making the No Name label readily available will help its private label market share as retail concentration is a good predictor of private label success. For these reasons, Loblaws has created a strong price proposition not only offering a lower price but doing so with a wide distribution network through its large number of stores.

To further its new price orientation, Loblaws has strengthened their new price proposition by complimenting its low price private label strategy with price freezes on some of its national brand products. The retailer has lowered and locked prices on certain everyday consumer purchases to enhance its image as a price competitive retailer. By bringing in traffic with No Name prices, Loblaws is also exposing consumers to the lowered prices on specific national brand products. This will start to change consumers’ price perception of Loblaws as a whole.
What I think will really influence and change consumers’ behaviour is Loblaws’ guarantee. Loblaws eliminates any hesitation in switching by saying, if you’re not satisfied with the No Name version, Loblaws will give you your money back.

Now, there’s a real value proposition if I’ve ever seen one! What do you have to lose to try No Name? I know Galen’s quest for my dollar has been successful.

[i] http://www.loblawgreatfood.ca/noname.aspx, Loblaw’s No Name Commercial
[ii] http://www.thestar.com/Business/article/571945, ‘Retailers fight slump by pushing generics’
[iii] http://www.msnbc.msn.com/id/28755095/ ‘CPRS Toronto: PR Community Recognizes Galen G. Weston’

Loblaw is playing the No Name game, will you?

Jan 16, 2009, The Toronto Star
Article Author: DANA FLAVELLE

http://www.thestar.com/article/571945

Blog Post: Courtney Hanmer

The formation of this blog came from a recent conversation with my mother. She called me to ask “What in the world is Loblaw doing spreading that yellow No Name brand everywhere? I thought they were using Galen Weston’s haircut as the newest company fad?” I laughed because that dreadful haircut did get national attention.

Since then, I've noticed that I'm being bombarded with Loblaw advertisements for their No Name product line in various media like newspapers, radio, and television. However, the visual design of this advertising campaign has lead me to question what consumer insights are driving the new brand direction, because clearly the yellow and black retro product focused ads aren’t encouraging any behaviours from me - other than to change the channel.

Upon investigating the strategy behind the changes it is clear that the goal of the campaign is to show how far you can stretch your dollar, especially in tough times like these. As quoted by John Quelch, a Harvard professor, the article of focus describes the main consumer insight driving the change “private label consumption goes up during every recession as people trade down from national brands”. I think it is clear recent changes to the company’s retail value proposition have shifted the focus back to their private label brands. Interestingly, Loblaw is putting their money on the No Name brand rather than the traditionally favoured premium positioned President’s Choice line. The reason – Loblaw is hoping that consumers’ desire for the lowest priced goods will bring them onboard with the No Name game too.

Personally, I think that the print advertisement that show a basket full of No Name products is priced equivalently to a half full basket National brand highlights achieves the goal of highlighting the value of No Name products. Another TV commercial shows that a basket full of the top 26 selling No Name products costs $73.91, while the basket of 26 comparable national brands comes in at $100.38. Clearly, Loblaw is betting that promoting the price saving is critical in this new age of grocery shopping, where consumers are forced to save pennies on even the most basic of shopping trips.

The response from representatives of national brands is nothing less than expected. They are fighting back by highlighting their own RVPs, which place weight on experience and selection over low prices. Nancy Marcus of Kruger Products highlights the No Name ad “reinforces the view that No Name is a value brand that competes only on price.” They reinforce that there will always be people that will remain national brand loyal even during a recession because these people make sacrifices in other parts of their lives in order to have that specific type of Cashmere toilet paper.

However, after successfully seeing past the neon yellow advertisements, I have decided that I am definitely willing to play the No Name game. After all, as a consumer I see few perceivable differences in basic commodities like flour, butter, and salt.

Other interesting links:

http://www.canadianbusiness.com/markets/cnw/article.jsp?content=20090107_132503_3_cnw_cnw

http://stockgroup.financialpost.com/sn_newsreleases.asp?symbol=T.L&newsid=12185948&apFlag

http://supermarketnews.com/news/loblaw_retro_0116/

You too can buy designer...

In a world where designer gowns, trendy jeans and chic and expensive clothing fight for advertising space in our newspapers and magazines, the fashion industry has become an important form of expression for both men and women worldwide. The term fashion can be associated with both positive and negative connotations, representing beauty and goodness, but also trends and materialism. Fashion has become a status symbol, expressing one’s personality, level of wealth or cultural and religious beliefs. Global fashion hubs include, Paris, Milan, New York and London, where the most upscale designers go to display their new designs with pricey runway shows, and highly paid models and celebrities spend thousands of dollars on the newest and hottest designs. With three main categories of fashion design, Haute Couture, Ready-to-Wear, and Mass Market; entrepreneurs worldwide quickly knock off haute couture designs to the mass market retail customer in order to widen access to the high fashion designs and trends.

Today, in challenging economic times, people of all financial backgrounds are reducing their spending on frivolous items. Credit is tight, as people focus on securing the important necessities. In order for high end fashion designers to stay afloat, there has been an increasing trend for designers to produce lower-end, affordable mass market designs for North American retails chains such as Target, Wal-Mart and H&M, to name a few. Well respected fashion designers like Isaac Mizrahi, Liz Lange and Karl Lagerfeld were amongst the first to embrace this trend, starting in 2002. Marshal Cohen, author of “Why Customers Do What They Do,” stated that “fashion has a new venue,” as a way to confirm why these high-end designers continue to mass market themselves. Consumers and fashion-know-it-alls were shocked in 2008, when exclusive and edgy designer Comme Des Garcons decided to create a line for H&M Tokyo, with price tags under $100, following the success of Roberto Cavalli’s line for H&M. More recently high-end handbag designer Anya Hindmarch, and celebrity favourite shoe designer Sigerson Morrison have new product lines at Target for under $50.[1]

Even shoppers with larger budgets are eager to see what their favourite high end designers have created for the mass market stores.[2] Although the retail value proposition for Karl Lagerfeld at H&M is similar to Karl Lagerfeld on Fifth Avenue in New York City, consumers can guarantee a wide selection and great shopping experience, but with a very different and much reduced price tag. Today’s “recessionista’s” flock towards these mass market stores as soon as new designer merchandise is scheduled to hit the shelves, and it is no coincidence that Target and H&M sell out of their designer items within days of its arrival. Mass market stores place their new high fashion designer products directly at the front of the store to ensure that even consumers who are unaware of the new shipment will be forced to browse the clothing racks. This is not accidental, as the prices are quite a bit higher than the store’s own private label brand.

I personally think that the fashion industry has evolved into this new wave of fashion selling and merchandising. There are less people who are willing or able to spend upwards of thousands of dollars on haute couture, and I think that it is wonderful that these talented designers are sharing their masterpieces and fashion flare with the general public, the exposure is great for the designer as well as the retailer.

H&M has stated that this is just the beginning, they are hoping to acquire other big names in fashion, including “Tom Ford, Marc Jacobs…” and other high end designers that are globally recognized.[3] With the state of economy and retail in particular, this is good business thinking.


[1] http://www.thestyleinsider.com/king5/2008/10/three-new-designer-lines-hit-target
[2] http://www.cnn.com/2006/US/10/18/bin.budget.designers/index.html
[3] http://www.businessweek.com/magazine/content/05_22/b3935090_mz054.htm

The Death of Luxury Brands? A Reponse To Channel's 200 Job Cuts

Luxury brands have been considered immune to recessionary effects; however, Chanel’s surprising announcement of 200 job cuts in Paris this year suggests otherwise. In addition to downsizing, Chanel has chosen to cut back on certain events that have been the cornerstones of their past marketing campaigns. Since its inception, Chanel has been unanimous with luxury, known for its retail value proposition of providing its customers with the ultimate shopping experience. But, what will happen to Channel’s stable RVP in light of the recession? Will it be forced to alter its focus on experience in to specialize in price or selection?

In my opinion, Channel must alter its focus to thrive through these though economic times; however, slashing its prices could be a risky decision as focusing on another other area of the RVP will downgrade Channel’s luxurious credibility. Furthermore, choosing more than one area of the RVP to specialize in can confuse the customer’s perceptions of the company, especially for luxury brand retailers. Department stores have struggled with the concept of a one stop shop as it is extremely difficult to manage so many decisions simultaneously. Low priced retailers have struggled to find the ideal price point in a marketplace driven by competitive margin slashing. What makes this recession unique and different from those of the past is that today, no retailer is left unscathed.

Does this mean the death of luxury retailers is inevitable in light of the current economic situation? “Karl Lagerfeld, the designer for Chanel, said in an interview… ‘Bling is over. Red carpety covered with rhinestones is out. I call it ‘the new modesty.’ ” This could present a promising opportunity for luxury brands to reposition themselves in the marketplace while allowing citizens all over the world to re-evaluate their core values, and possibly shift back towards a more primitive way of life, where material items are second-rate to family, or happiness.

According to a Luxury Goods Study conducted by Bain last semester, luxury retailers have been able to thrive, despite the general economic downturn. But how have some brands been able to flourish while others have drowned? I believe it is all a matter of retail strategy. In 2008, Bain reported that although the local consumption within mature markets is slowing, consumption of jewelry and shoes has continued to drive growth. It appears that there may be an ulterior method for luxury good retailers to survive by altering their strategies rather than their price points. New opportunities may come from changing values and consumption habits, which may motivate the consumer to select wardrobe staples such as belts and beauty products and disregard trendy, overpriced apparel. Luxury brands have the potential to bypass a negative fate by focusing on their retail assortment as opposed to their value propositions. Right now more than ever it is all a matter of truly understanding the customer and being able to adapt the retail assortment and product offering accordingly. The variety, breadth and depth of the retail assortment should be based on the customers wants, not simply statistics or historical data.

So which retail categories have mastered this craft? Makeup retailing giants, such as Sephora.[1] Sephora, although its products are often associated with luxury has been reporting steady profits despite the market conditions. Beauty products continue to be purchased while sales of other luxury items are dwindling because makeup is forever, eternally on a woman’s shopping list. Cosmetics can conceal the damages of lack of sleep, or an unhelathy diet but most importantly the stress caused by the current recession. So how can retailers capitalize on a negative situation? Rather than drastically slashing margins, luxury retailers can survive by centering on consumer’s insecurities and core values. Luxury retailers have the ability to use their brand to their advantage. They are able to differentiate themselves from competitors as well as avoid the “low price shopping” so readily done with manufactured brands. Brands draw consumers into stores but gaining a concrete grasp on the consumers’ mindset will allow luxury retailers to adapt their retail assortment to cater to what their customer wants right now. Retailers should narrow their focus; broaden their offering of durables and timeless pieces while decreasing their offering of trendy apparel items. The wave of materialism is over; make room for the “new modesty.”
SOURCES:

“Ominous Cutbacks at Chanel”
http://www.nytimes.com/2009/01/01/fashion/01ROW.html?ref=fashion
“In the Lap of Luxury, Paris Squirms” Top of Form
http://www.nytimes.com/2009/01/15/fashion/15paris.html?pagewanted=2&ref=fashion
“All’s Fair in Beauty and War”
http://www.nytimes.com/2009/01/15/fashion/15CRITIC.html?ref=fashion
Bain & Company Luxury Goods Worldwide Market Study: Key Findings
7th Edition, October 27, 2008
[1] http://www.nytimes.com/2009/01/15/fashion/15CRITIC.html?ref=fashion

Whole-istic Strategy

Response to the SmartMoney Magazine article “Whole Foods: Too Pricey to Thrive in a Recession”
Author: Janet Paskin
Issue Date: January 16, 2009


By: Julie Terry

The article referenced above talks to Whole Foods’ ability to survive in the recession, and the strategies they have undertaken prior to and since the recent economical crisis. Rather than comment on the obvious, the correlation between Whole Foods prices and cuts in consumers’ discretionary spending in these uncertain times, I would like to comment on Whole Foods’ prior strategic decisions.
Every other sentence in the article highlights Whole Foods’ RVP. Whole Foods offers an experience and a wide selection of grocery products. One would be hard pressed to argue against this, but Mackey goes so far to say their prices are competitive, forcing me to question their RVP. It seems as though he is defending the shocking bills customers run up at his store, as opposed to what distinguishes Whole Foods from its competitors. When it comes down to it, Whole Foods brings luxury and quality to a grocery store. In my opinion, experience is number one in their RVP because as Mackey puts it, “Food is this incredible, sensual, pleasurable thing, and our idea is to create stores that enhance that experience.” It’s pretty obvious that selection is the other, and not price. Mackey contradicts himself in this one article by saying, ““Our mission isn’t to sell the cheapest food, it’s to sell the highest quality food”—that’s what sets Whole Foods apart”, and then soon after, “And at Whole Foods, if you shop with a list and look for the least expensive items, your bill will be reasonable too. The problem is, while you were shopping, you didn’t buy all the least expensive stuff. You gave in to temptation.” Right here is where I saw the difference – Mackey isn’t trying to change Whole Foods RVP, he’s enforcing their original RVP. It is theoretically possible for customers to leave with a reasonable bill, but because the experience and selection is so great, they do not.
The latter quote illustrates more of Whole Foods’ strategy. Similarly to the Home Depot case that looked at a store layout decision for placement of their EcoOption products, Whole Foods made an explicit decision on their store layout. Mackey gives it away when he refers to customers’ inability to restrain themselves from the multitude of ‘tempting’ options that Whole Foods offers. It’s obvious here, that Whole Foods chose to place all items of the same product category in one area. I was not surprised by this decision, as any grocery shopper can see that all stores place cereals beside each other and all types of peanut butter in one section of one isle. However, the trick up Whole Foods’ sleeve is that they offer few inexpensive options, and multiple organic, nut-free, kosher, preservative-free (or however else they can increase the price) options. Now, can you really blame a Whole Foods customer for the bills they end up with? Mackey is putting people who think food is ‘sensual’ and ‘pleasurable’ in a world where senses are heightened and one’s shopping experience is filled with pleasure. Essentially, he’s offering candy to kids.
It seems like I have put a lot of blame on Mackey. However, as the CEO and founder I reserve all responsibility for him, and so does Paskin, “When the CEO is also the company’s founder, “he’s not going be the guy who says, ‘let’s take a breather,’”.” Paskin is blaming Mackey for the over-ambitious growth he pursued early in Whole Foods’ career. However, I disagree with the negative tone taken here. I think Mackey’s ambition is what upheld and drove the growth of Whole Foods, and is exactly what the store needs to survive. In the Sunripe case, we discussed the possibility of succession if the owner were to fall ill. I see a similar situation with Whole Foods, as he founded, and retains control and management of the store. Aside from the obvious difference in size and scale of Whole Foods compared to Sunripe, I think there is one other difference that sets them apart. Mackey made smart a smart decision of selling a 17% stake of the company to Leonard Green Partners 1. That is not significant control, but if Mackey were to fall ill, the connections Leonard Green maintains and corporate idols they have worked with would be useful in determining a successor.
Overall, Whole Foods may be threatened by the fall in consumers’ wealth, but they are prepared to confront this obstacle head on. They have made tactical decisions that, although arguably bold and abrasive, have dug them a niche in a highly competitive, normally low-margin, industry.

1 A Private Equity firm with a successful history of acquisitions

Source: http://www.smartmoney.com/investing/stocks/is-whole-foods-too-pricey-to-thrive-in-a-recession/

Wal-Mart's New RVP: The Shopping Experience?

By: Lainey Shrom

Wal-Mart, which has been known as a leader in price and selection, is trying to build up the experience component of its RVP. These efforts have been marked by store layout renovations to 75 stores in 2008. Wal-Mart is making an attempt to integrate “experience” into its value proposition to customers, while still aggressively focusing on low prices and product selection. Conventional wisdom states that it is nearly impossible to excel in more than 1-2 dimensions, but Wal-Mart is once again, trying to launch itself into uncharted retail territory.

Given that Wal-Mart is the #1 retailer in the world, it is forced into a defensive position in the marketplace and must be constantly changing as other retailers are vying for pieces of its market share. Management is eager to capitalize on consumer trends for more personalized shopping experiences. With the intense competition for customer loyalty, Wal-Mart, like other retailers, is finding a way to satisfy customer demands for both low prices and a high-end shopping experience.

The store format redesign has been done to improve customer traffic and create more open space to enhance the customer experience. Insights into the customer shopping behaviour have lead to changing the location of the pharmacy to the front of the stores. I believe that the movement of the pharmacy is due to studies related to the “Lazy Consumer Effect”. I feel that other major adjustments have been a result of an assessment of the categories within Wal-Mart’s portfolio. Management has reduced the depth of products carried in certain categories (Eg. Arts and Crafts) and has increased the breadth within growing categories, such as electronics. As well, categories that had previously been in separate parts of the store are now grouped together as a cohesive unit (Eg. Bedding, Housewares and Furniture) to better reflect the way consumers shop and make decisions.

Wal-Mart has also created a designated area for its energy efficient technology. Though this is different to what Home Depot decided to do with its EcoOptions products, I feel that Wal-Mart will benefit from this strategy because customers will be able to find these products quickly (this enhances the shopping experience more than the ability to compare prices in the aisles).

The question that remains: How will customers respond to the store layout changes? From a strategic perspective, this appears to be a foolproof plan, but consumers are not necessarily receptive to change. Loyal Wal-Mart shoppers may be used to the old layout and become confused and frustrated with variations. This redesign must be accompanied with customer communications explaining the changes and how they will enhance the customer’s shopping experience.

What will Wal-Mart do next? Assuming this redesign is successful, management must determine the next big change for the company. My thoughts?
1) Continuing to building the grocery category to assert leadership position (It is currently the number one grocer in the US)
2) Investigating the possibility of mini-stores in urban areas to address consumer’s need for precision shopping (time-conscious consumers)


Sources

Wal-Mart Redesign Complete
http://www6.lexisnexis.com/publisher/EndUser?Action=UserDisplayFullDocument&orgId=2708&topicId=100019774&docId=l:841588382

Wal-Mart Updates its Look
http://retailnu.wordpress.com/2008/10/27/wal-mart-updates-its-look/

Wal-Mart Ushers in New Era in Store Design and Layout
http://findarticles.com/p/articles/mi_m3092/is_n20_v36/ai_19930066

The Wal-Mart Weekly: Supercentre Changes Happening in My Area
http://www.bloggingstocks.com/2007/10/12/the-wal-mart-weekly-supercenter-changes-happening-in-my-area/

Fresh Foods, Fresher Clothes

By: Rachel D'Silva

The word is out about Joe Fresh’s fashionable and affordable styles available at the closest Loblaws near you. Is this just another hopeless effort where Loblaws is trying to compete with Wal-Mart? Or is there an actual market who would purchase something for their feet alongside their meat?

When I first heard about Joe Fresh, I can honestly say that I didn’t think it would catch on. I thought it was another mistake of Loblaws similar to their efforts to provide “everyday low prices” to compete with Wal-Mart. However, this is not the case at all. Loblaws has managed to provide a unique retail value proposition: fashion, convenience and price.

This value proposition has enabled Loblaws’ new line of clothes, ‘Joe Fresh’, to become very popular. Loblaws has partnered with Joseph Mimran, a well known designer, known for his additions to Alfred Sung’s collection, Club Monaco and Caban.[1] Joseph Mimran has taken his ‘Joe Fresh’ designs to L’Oreal Fashion Week, where famous supermodel, Coco Rocha, strutted his collection down the catwalk.[2] Having a famous designer create the collection was a clever strategy that created a buzz around this new product offering making the ‘Joe Fresh’ brand on par with retail stores like H&M. Attaching a brand name to these fashions attracted fashion forward women making it less of a fashion faux pas to shop for clothes in a grocery store.

Loblaws has been successful at targeting a specific segment. The ‘Joe Fresh’ collection is primarily for mothers who want to continue to be fashionable but may not have the time for shopping sprees. Offering reasonably priced clothing in a supermarket is a perfect way to add convenience giving the ‘Joe Fresh’ collection a competitive edge. The sizes and prices are clearly displayed and very affordable making it very easy for those price sensitive customers to find and purchase an item. ‘Joe Fresh’ also offers a children’s collection, making Loblaws a one stop shop for everything a mother could need.

Lastly, the ‘Joe Fresh’ collection is strategically placed near the cashiers within the Loblaws supermarket. This enables the consumer to have a quick look before they head to cash. There is clear signage throughout the store advertising the ‘Joe Fresh’ collection enabling a consumer to easily sight the clothing. As well, the clothing section’s format provides a feeling of being in a store within another store. There are displays showing off the cute, fun fashions enticing the consumer to enter the clothing area. As well, they have even inserted fitting rooms providing the consumer with the same privacy they would get when shopping at the mall.

The Joe Fresh brand has been a successful venture for Loblaws. Fashionable attire coupled with low prices and convenience has made this brand a must have!

[1] http://www.joe.ca/Categories_en.aspx?catid=24&p=24
[2] http://www.ellecanada.com/Fashion/default/l-oreal-fashion-week-fall-2008-joe-fresh-photo-gallery-n256811p1.html