Gerry Harvey is blaming poor results on the consumers

The outspoken Australian retail king-pin “Gerry Harvey” is blaming poor performance on declining  consumer sentiment , created by media.

Australians should be "as happy as pigs in shit" with low unemployment and a resources boom, but instead they're scared to spend money, he says in an interview with AAP yesterday.
"You've got too many things out there affecting the minds of humans and it's just an avalanche of media activity and government activity that's making people unhappy and not wanting to spend their money."

After posting a nine percent increase in profit last year (nett profit after tax $252.26 million) one may wonder the background behind such negative statement.

Let’s look at the facts:

-       Harvey Norman are currently experiencing more than a 5% drop in sales since the start of this year, urging a cautious outlook due to global volatility, increased utility costs, possible increase in unemployment numbers, dampened housing markets and weak equity markets.

-       The positive result last year was not created by themselves, but simply by the strong Australian dollar reducing the cost on imported goods.

-       Whilst they continued having visitation to their stores, customers bought less from them resulting in a lower value per transaction

Maybe it is time to start pointing the finger at himself rather than external factors, such as media, overseas on-line retailers and politicians, for Harvey Normans negative development.

Harvey Norman stocks generic branded consumer goods, also available at other retailers, their service is scattered amongst a very broad network of franchisees. Their unique selling proposition is their property portfolio which is very strong spread across Australia and close to the market.

In an environment where, number of stores and store locations are playing a declining role, in particular for home electronics, what is the future for Harvey Norman? The fact that visitation has kept up, with a decrease in transaction value, may suggest that consumers make their product selection in their stores but make the final purchase on-line. After all, you get a better service on-line and a better price, than in their stores.

After several attempts by Gerry Harvey to block on-line retailers in Australia, he has finally conceded and will launch his own e-commerce site in early October this year. This will again have a fall-on effect on his existing franchisee network, who today set their own pricing. In order to remain competitive on-line, Harvey Norman will need to price the goods lower than in their own franchisee network likely to lead to internal competition resulting in a lower margin. Which leads to the questions -what additional value do they bring with their property portfolio?

To add fuel to the fire, Masters, a joint venture between Australian Woolworths and American Lowe’s, are opening their doors this week with an aggressive roll out plan across the continent. Masters will go head to head with Harvey Norman for white goods selling the same brands.

Is there a future for Harvey Norman at all? Gerry Harvey is cautious with his own outlook, but is he looking at the wrong enemy when blaming the consumers, media, politicians, basically all but himsef?

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The one percenters

There are several stories about brands starting out as an idea in social media, they achieve a fan base, start a business and some of the fan base start advocating the brand through their network. One such example is "bacon salt".

What began as a tribe quickly multiplied into 37,000 fans on Facebook and MySpace. Over time the buzz moved across to newspaper articles, TV interviews and PR. Their success began with a small group of self-identified fans of a category.

There are millions of members in various social networks, and a fan base can be created in thousands around more or less any idea or venture, however, they will never translate into millions of buzz-spreaders.

What we have learnt from past experiences is that it’s generally a small percentage of the community within the network who spread the word — about about 1 percent... often described as the "one percenters".

These "one percenters" are the roots to much buzz and PR around a product and there has been a lot of research in how to identify and charecterise the "one percenters". Finding the formula for this would be the holy grail for most marketeers.  What we have learnt however is that they are not the usual suspects of early adopters or blogger advocates. They are hidden across all demographics, networks and on-line behaviours.

The reason for them to act as ambassadors appear to be unique from case to case and individual to individual, the challenge is to identfiy what makes them act and how to attract them.

The "one percenters" is a term created by Jackie Huba and Ben McConnell in the book Citizen Marketers

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Customer centric change management

The current trading climate is often viewed with pessimism and doom, however, managed the right way, there are huge opportunities to build market share and benefit of the economic downturn.

To prosper in uncertain times, it is crucial not to take unnecessary risks, but to focus on your current customers. The most obvious recipe to survive and benefit from the volatile market is to deliver the solutions and experiences your current customers want – today.

Over the past months I have met several retailers who relate the most critical consequence of the economic climate to financing and capital management. The majority of them have failed to analyse and realize the impact to their customer base. The changing economic environment may have made old customer knowledge irrelevant as segments of the market have turned more conservative, whilst other segments have remained unchanged. The process of making a buying decision may have changed and there may have developed new target markets for existing products.

It is imperative to understand your customers, what they need and how they want it and serve it to them today.

Delivering a differentiated and customer relevant offer is a common element of high performing businesses, it is not a matter of squeezing costs nor lowering prices. Past recessions have shown that cutting costs and prices indiscriminately have been bad and fatal for businesses. These steps have generally gone hand in hand with reduced service which in turn have lead to diminished brand value, making customers inclined to defect and harder to win back.

This is the right time to be customer focused

A time for opportunity as well as risk.

Tactical issues to address

1.         Strategic Cost Management, eliminate non-customer beneficial costs and cost optimasation.

All costs balanced against customer impact

Don’t cut costs at the detriment for the customers

All cost reduction programs should start by segmenting and analyzing your customer base.

Profitability, Loyalty and acceptance of self service.

It is generally a better formula to allow customers to service themselves than to simply cut staff on the front line or replace qualified staff with cheaper unqualified staff.

It is possible to reduce costs whilst improving the customer experience

You need to understand why and when customers need service in the first place, then eliminating these reasons by addressing product design, communication, store signage, planograms, packaging etc

  

2.         Customer retention, secure your customer by understanding the change they are going through and offer updated and tailored products and services

Customers are changing buying behaviour

For instance customers may be more inclined to ask for layby, retailers need to prepare for this change and increase the capacity for layby and implement tools and systems for customers to maintain their layby with minimal cost per interaction for the retailer. Maybe a self service kiosk can be installed where customers can deposit payments towards a product. At the same time the cost saving can be re-invested into marketing the easy layby service for new target customers.

At times when the customers are more likely to defect it is more important than ever to deliver a flawless customer service.

  

3.         Growth through customer acquisition, win customers from competitors slow and unwilling to adapt, and tailored products and services for new and emerging target groups in the market place.

Whilst household expenditure tend to be negatively impacted during recessions, it is important for retailers to compensate the downfall with new customer acquisitions.

All too often marketers are too focused on quantity of new customers rather than quality. It is important to be strategic in customer acquisition to avoid churn. Attracting the wrong customers may lead to a higher cost in attracting than they will deliver in profit before they defect. Retailers must look at the dual goals of attraction and retention hand in hand. Ensure the cost of serving new customers are in-line with your current and future business operations.

  

4.         As credit begins to flow again, there will be increased activity in mergers and acquisitions. Be prepared and make a stand, be open for opportunities.

Industry consolidation can be of benefit for companies as long as there is a meaningful relationship between two companies and not merely a re-branding exercise. Customer base, brand values and operational structure needs to have a clear opportunity for optimization to be a merger of value.

Consider the customer through out all phases from planning to post merger integration.

Speed and integration is critical to success but companies must balance speed with planning and assessment of customer impact. Consider appointing a cross functional team from both parties to assess and ensure the customer relevancy in the integration process. This will both aid successful planning and communication. Having the ability to foresee customer issues will support the acquirer to retain customers

5.         Expand the operating model to new markets with minimized additional overheads.

Irregardless of the global economy, globalization will continue and you need to consider its impact wether you are a multinational or national retailer.

This is a good time to re-evaluate the geographic relevancy behind servicing your customers. Multinational retailers may have to opportunity to merge service functions across several geographical markets to cease cost efficiencies.

Local retailers may have an opportunity to expand to other geographic markets with a small increase in overheads.

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To facebook or not to facebook

In marketing as in life, it is all about timing. The question was whether retailers and brands should be concerned that they are moving to Facebook at a time when large numbers of teenagers are abandoning it.

I believe it's horses for courses. Marketers of teen brands should definitely be concerned about teens exiting or reducing their usage of Facebook, as they have done with other social platforms in the past. However, there are plenty of others for whom the Facebook audience is apparently becoming more relevant than ever. Facebook reports 400+ million users as of February. According to them, 50 percent of active users log in on any given day. That's impressive stickiness.

Having said that, I'd like also to take a different look at those stats. Demographics and physically addressable market aside, the question is what proportion of your potential customers are receptive to the brand in that environment.

At the moment, Facebook is not a medium amenable to classic interruption marketing. (Although it may become that in the future, just like YouTube, with Google ads popping up across the bottom of the video.)

Neither is the Facebook user's primary purpose brand loyalty or looking at marketing messages. The average Facebook user has enough to keep him/her busy or distracted, without getting on to a brand's page. That video of a mother with laughing quadruplets is far more likely to get viewed and shared than any of your marketing messages.

If your brand isn't interesting, engaging, and open, you can't have the conversations that a platform like Facebook facilitates. If there's no ongoing conversation, your chief Facebook officer is wasting the company's time, money and internet bandwidth. Logout. Now.

Devangshu Dutta is CEO of Third Eyesight, a specialist consulting firm focused on India's consumer-products and retail sector, and managing partner of PVC Partners, a venture accelerator focused on early-stage businesses in India.

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Outright outlet success

Every now and then we get to hear about a new concept store. We hear about concept cars, concept songs, concept movies in short future belongs to concept.

A concept is an individualistic idea that characterizes your brand/outlet in a unique manner with a recall value for your prospective customers. Today's retail management is about concept development techniques that can help you brand your retail well with a recall value.

Successful Store Stories: A decade ago the concept or the theme branding was still evolving, consumer economies were embracing this idea to create a niche for themselves; stores like IKEA, Harrods, Walmart, JCPenny, Carrefour, McDonald's, KFC, Pizza Hut, Burger King, Gap, Starbucks, 7 Eleven, Toys r Us and Radioshack are all concept stores belonging various category. They emerged as concept stores initially but later propelled into chain and ultimately global franchises. They are the great success stories of stores marketed as concepts.

In the clutter of retail outlets everywhere from malls, streets, markets or online thematic stores like I-Tunes, Amazon and E-Bay; the fundamental idea behind is to present your retail outlet on outstanding parameters. Today retail outlets invest millions of dollars for the upkeep of their image and value marketing.

Following are some concept outlines for which agencies might charge you several thousand dollars we'll share few jests with you:

Image Definition:

Won't it be nice if customer will come running for your outlet- that's possible if only they have your brand image engraved in their minds. Look at Costa Coffee, Borders, Virgin, Radiocity and likes, don't you think all these products are easily available everywhere else, why do people get magnetized to them. The reason is their environment and psychological relevance for each of their categories. Therefore getting an image defined for your outlet is a great idea to begin with.

Niche Audit:

Auditing niche is easily for products, but as an outlet it is pretty tricky, because you must know what your specialty is. If you are food outlet-you must know your best selling recipe, if you are a drug store-you must know what type of drugs give you best profit and brings most sales, if you are in apparel- there must be a certain category of clothes that would sell most frequently; in simple words you can't sell all types of food and expect retention. KFC and Mc Donald's might have many commonly available fast food items but they are known for Fried Chicken and Burger respectively. If it's hard for you to figure out, conduct a customer feedback survey or bring an external professional advisor/consultant on board. He will help you think out of the box.

Demographic Scan:

Know your customer profile. The best way to do is conduct first hand research- get an external or temporary customer relation executive to help you out. If not, seek the help of professional firm to draft a customer survey form for you. After that compile the data, make sure to include mandatories such as indirect inquiry of income profile, size of the family, locality, education, ethnicity (quite important), profession etc. Some customers might not volunteer for such an activity- compensate them, they will become more than willing to do it; a gift hamper or a seasonal discount will go a long way for strong feedback, set up a desk with attractive facade, of course with a smiling CRO.

Corporate Experience:

Every outlet is a little bit exposed for familiar to seasonal promotional themes such as Christmas, Summer Holidays, Tourists campaigns, Valentine's Day, Mother's Day and Father's Day sort of occasion. Get your staff talking set up an appraisal program for the best idea, you may get pleasantly shocked by their loud thinking, if only you can get them talking. If you are not successful in getting their engines running, then the door of external help is always open for a consultant. Concluding it all, there is a lot more to it than just an essay, such as store assessment, trade show coaching, merchandising, buying strategy and retail marketing & growth strategy all these areas will plunge your outlet into surprising results.

It's always good to adapt fast with the changing trends and the demands of tomorrow, being pro-active can be really beneficial, for your business, customer and above all yourself. Invite, attract, gain attention, customer share mind is clearly reflected by the traffic generated at the outlets.

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Out of sight, out of mind

Many a times looking sharp is not enough. No matter how good an outlet may seemingly look but it’s the aesthetic use of functional aspects in commercial designs that can contribute in improving sales figures along with an exquisite customer experience. Therefore branding your retail outlet is not just improving its façade but it has a lot to do with the clever use of designs to create an impressive impact on customer’s mind.

Let’s just begin with a simple point, the design of an outlet no matter how brilliant, if it is not personable then it will only work as a showroom and not a retail sales outlet. There are numerous malls that are designed so ultra-exquisitely that customers perceive them as possibly overly-priced. Yes this is very important, on the contrary look at IKEA- the prices at the store are not less than any other major furniture franchise, but it’s the easy going walk-in atmosphere and the easy functional outlook of its furniture design that has made IKEA a household name. A name is considered pioneer and synonymous for DIY (Do It Yourself) designs, a design for which you don’t need a carpenter but just a little bit of logic and common sense.

We’ll discuss couple of handy tips that might raise your interest toward smart designing: Fascia: From communication and commercial design perspective- the fascia of an outlet speaks volumes about the customer profile. From the geometrical patterns to colours to the typeface, people can recognize and they love their favourite brands. Everyone remembers the Swoosh of Nike, Levis trademark, Mc Donald’s M, Colonel of KFC and fonts of IKEA. All these brands are the results of the extraordinary brilliance, penetrability and inspirational dimension of their commercial designers. Their outlet insignia also corresponds well (due to their recall/registration value) with their interior theme based on similar geometrical patterns and colours.

Window Display: The window display elements whether they are mannequins, food, furniture, computers, electronics, jewellery etc. play a major role in luring the customer in. That means at a watch outlet it shouldn’t have to be the most expensive Rolex on the display, because lot of people might scare away thinking everything else also belongs to the same price tag. Instead try use the most selling item, that’s right there is a world of uncontrollable factors in the environment that influence the perceptions and ultimately the buying behaviour of our customers, obviously no one can scan it all. We can’t track them completely as well, instead just find the best selling item and gauge the response.

Merchandise Display: Once the customer is in, the in-design of your store theme starts working. Now the best selling items shouldn’t be stalked together, or else nothing else will sell. The interior merchandising theme should remarkably be different from the display or window. A good idea that works all over the world is to arrange merchandise in from of categories. Let’s just say in case of watch outlet- Sports watches together, strap watches together, ladies watches together, designer watches together, kids watches together. Similarly for apparel, they should be arranged in ladies, gentlemen and kids (which you must have obviously seen everywhere). Sometimes when we are working hard to push our retail set-up we often overlook these obvious basics. Similarly in a pastry shop dry cakes together, frozen cakes and pastries together, éclair and donuts together. You must have witnessed it at 2nd Cup, Subway or Dunkin Donuts sandwiches are kept away from sweet items and likewise soups are away from tea and coffee although all are served as breakfast but they are set differently or distantly because they are targeting, catering and satisfying different customers with different mindsets visiting your outlet for the same purpose. In a shoe outlet, sports must be kept together in respective ladies, gentlemen and kids sections. Office shoes must be aligned together, while you must have noticed slippers together and leather sandals stacked next to them. These are all techniques of keeping customer’s mindset away from confusions of choice and as a result walking over without a purchase.

Colours: When we talk of colours we include in it light direction as well as shadows, highlights, brightness and contrasts too blended with the colour scheme. Light is nothing but accentuation of colours of the merchandise and the interior. And remember it is not particularly necessary to keep the outlet well lit. A candle light dinner restaurant never looks like a fast food restaurant. Similarly Nike or any other sports accessories outlets are well lit in white light and they don’t have gloomy yellow light atmospheres like that of CK, Gucci, Versace or Armani’s formal designer outlets. Shadows, highlights, brightness and contrasts next on the list are also vital to create definition and visual value with recognisability/registration of your items in customer’s eyes and visual reference memory. Ever seen Levi customers recognizing their favourite cuts from distance? That’s a million dollar commercial design wonder, developed and conceptualized over decades.

Music: The music being played in your outlet can suggest your customers many things subconsciously. Jazz music will suit well to candle light or dress code restaurants decreasing the cardiac tempo instigating repetitive order for drinks etc. While pop, hip hop and R&B will cater most to fast food outlets instigating fast action and thus a high turnover. A bar on contrary will play rock music that gives a trip to beer drinkers and other liquor lovers-offering only hard drinks against hard rock. Music hits these rockers hard and they stay there till morning (in countries such as Thailand) another exceptional example to read and bias consumer behavior. Karaoke music attracts parties and casual occasional get togethers which are easy to get along and inducing hefty collective group billing.

Smell: Smell of your interior, merchandise and that of your staff also dictate a lot in your sales progress. Like music this aesthetic element also goes un-noticed and sub conscious but has dramatic effects. Infact this one works a lot better, because our brains are highly receptive to pleasant scents and may force us to give favourable response as an impact of these good odours. Ever noticed smell of bakery items on airports and malls, but you can’t seem to find them right around you, if you keep walking few steps you’ll find one a bakery soon, displaying just what you though these items would be. They diffuse such smells on purpose at distance and then preparing your mind for these items; in other words creating guaranteed sales. Summing it up, the artistic application of commercial design theories goes a long way when they are functionally entwined with your retail outlet theme. It seems like very obvious that high investments can garner good sales response, where as it is quiet the opposite according to recent research and studies. It is the smart execution in accordance with your customer’s mindset and the way he relates to your product that creates the ultimate magic.

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