Three visions of the future of retailing

Suning

What is the future of retailing? Different businesses have differing visions of how people will shop and buy in the future. Here are three visions among the many being planned and tested worldwide:

• Suning, a Chinese retailer, is testing unstaffed stores. (Photo above is from its news release.) The company calls this 'smart retailing' because of omnichannel choices and automation. Shoppers who have registered their Suning financial services account are identified via facial recognition and gain entry to the unstaffed stores. The idea is that some shoppers prefer to examine merchandise and buy in person, with tech assistance to speed transactions. 

  

  Start Today

• Twenty-year-old Japanese fashion e-commerce firm Start Today wants to help customers order clothing in the correct size. Shoppers dress in a Zozosuit and their measurements are captured electronically. Then shoppers can order clothing made to fit. 
• Retailers (both online and offline) are increasingly stocking a larger selection of preowned products (meaning gently-used merchandise). This is a trend in the upmarket wristwatch business, for example. It's also a trend in designer clothing and accessories. Not vintage, necessarily, but used items that originally were luxury priced.

Luxury brands move toward omnichannel marketing

Luxury brands were, in many cases, late in adopting ecommerce strategies because of concerns about top-notch customer service, price competition and other issues. Now leading luxe brands are moving into cross-platform marketing to accommodate changes in consumer behaviour and buying preferences.

Consider LVMH, the €37.6 billion French-based group marketing top-quality, upmarket brands like Louis Vuitton, Bulgari, Tag Heuer and more than 65 other brands (soon to include Christian Dior Couture).

LVMH had a previous ecommerce venture, eLuxury, but eight years ago, during the great recession, the company closed the retail function and transformed the site into a digital fashion magazine.

Now LVMH is launching a new ecommerce venture. This new business (both online and app version) is 24 Sèvres, named for the firm's Paris street address. The business will go live in mid-June.

'Increasingly consumers want pictures over words', says LVMH's chief digital officer, Ian Rogers, mentioning the rapid rise of Instagram and Snapchat. Therefore, he says, 'if you look at our site, we lean far further toward visually-led merchandising than the more editorial skew of our competitors'.

Instead of brand-specific sites and apps, this new online retail platform will feature multiple LVMH brands--and some non-LVMH brands as well, with a visually innovative customer experience. Rogers says: 'There is . . . currently a major focus on omnichannel and experience, and we are moving from a mass culture to a mass of niches'.

Western brands market on China's WeChat

WeChat QR code

China's wildly popular mobile text/messaging app WeChat serves more than 700 million users (the number will probably be even higher when you read this).

Users are so glued to the WeChat app that brands, naturally, want to be part of the experience. Here are just a few ways that Western brands are marketing via WeChat:

• Burberry announces new products and showcases classic styles, as well as using WeChat for customer service.
• L’Oréal Paris uses WeChat as part of its frequent-buyer rewards scheme.
• Procter & Gamble's beauty brands have advertised on WeChat to engage consumers and build buzz.
• Mulberry has used WeChat to target gift-givers on special occasions.

The marketing lesson: Brands have to be where their customers are, and adapt quickly to digital media or whatever new technology is on the ascendancy.

Marketing Starbucks in China

Continuing a look at global brands in China, this entry is about Starbucks, the US-based coffee shop company that has made lattes and espressos part of daily life all over the world.

Starbucks just opened a spacious flagship cafe in the new Shanghai Disney resort. This isn't the first Starbucks connected with a Disney resort, but it is the first of this ultra-modern design...with more than 100 employees to serve thousands of customers every day. The company says this will be the busiest Starbucks on the planet.

China is an attractive market for Starbucks because coffee consumption is still relatively low compared with consumption in other areas--which means a lot of growth potential as consumers adopt the 'coffee culture'. Starbucks already has 2000 cafes in China and plans to open 2500 new cafes over the course of 5 years.

To reinforce its brand image and provide an upmarket consumption and sampling experience, Starbucks plans a new Roastery and Reserve Tasting Room for Shanghai. Modeled on the tasting room near the company's headquarters in Seattle, this Shanghai location will demonstrate the roasting process and offer samples of various coffees and flavours.

Will consumers in China pay the luxury price for a luxury coffee often enough for Starbucks to profit handsomely from its investment? 

Competitive changes in the UK chocolate market

The UK market for chocolates is increasingly split between mass-market brands such as Cadbury Dairy Milk and upmarket brands such as Hotel Chocolat.

In fact, Hotel Chocolat's founder says: 'It's an emotionally charged food product that people are buying for the taste and the way it makes them feel'. With a decade of experience in marketing the emotional and taste benefits of luxury chocolates, Hotel Chocolat has established a distinctive brand image and built considerable brand equity.

On the mass-market side, Cadbury Dairy Milk (owned by Mondelez) continues to top the list of leading UK chocolate brands, with year-over-year growth. Mars and Nestle both have chocolate-bar brands in the top 10--and private-brand chocolates are also among the top sellers.

However, the competitive situation is about to change. Thorntons has been struggling for some time, caught between the upmarket brands and the mass-market brands. Now Ferrero has acquired it, which may lead to a new marketing strategy, not to mention a new positioning for the products and the retail shops. This will cause all the aspirational brands to work harder to connect with customers and reinforce loyalty.

So the hypothethical marketing plan for Lost Legends Luxury Chocolatier (which is included in my Essential Guide to Marketing Planning textbook) must be updated to reflect these important market changes.

Burberry builds on core competence of digital marketing

Burberry (founded in 1856) is a 21st-century marketing star, not just because of its strong luxury brand heritage and fashion sense but because of its savvy development of digital marketing expertise as a core competence across the company.

Shopping in a flagship Burberry store is a multimedia experience, with screens, speakers, iPads, live streaming of fashion events and more. 'We wanted to totally merge the digital and the physical worlds', the creative director said when the redesigned store was opened in 2012. Rather than worry about showrooming, Burberry seems to be diving into multichannel marketing with the knowledge that customers are and must be in control of where and when they browse and buy.

Visitors to Burberry websites have many multimedia options--including participating by showing what your trench looks like on the company's Art of the Trench site. Want your own custom-designed Burberry trench? Since 2009, the company has invited you to design what you want online. The mobile site can stream fashion events and more so you can watch or buy from your smartphone or tablet. 

Burberry aims to have a digital presence wherever its brand fans are (or want to be). Just recently it opened a digital branch on China's Tmall shopping platform, owned by Alibaba. In short, Burberry's content engages customers and fashionistas on multiple platforms, including in-person, via mobile and online. Take a look at Burberry's integrated social media presence on YouTube, Twitter (3m followers), Pinterest (86k followers) and Facebook (17 million likes).

This is a brief update to the closing case in chapter 1 of Essential Guide to Marketing Planning.

Village England enters the middle as Mulberry moves upmarket

Just in time for London Fashion Week, an art gallery was transformed into a pop-up shop to showcase the new line of Village England leather handbags. Founded in 2012, Village England is establishing itself as a brand for women who favour classically stylish handbags in the affordable luxury price range.

Co-founders Julia Dobson and Eddie Knevett set out to design a leather handbag 'you can fall in love with but isn’t so precious that it can’t be thrown in the back of the car'. In other words, the product is fashionable yet functional, a handbag for walking downtown, taking the Tube or driving into the country.

The co-founders have a background in fashion marketing, and they see a promising opportunity in affordable luxury as Mulberry moves upmarket into premium luxury leather bags, priced as high as £2,500. Lately, Mulberry's upmarket momentum seems to be stalled, with the firm issuing profit warnings even as it eyes the buying power of Asian status-seekers who covet British luxe brands with tradition and cachet.

Mulberry's upmarket move leaves a gap in the market, which Village England aims to fill. Most of Village England's handbags are priced below £300, although some (like the Elsworth Black Tote featured in House of Fraser) carry price tags around £395.

Sociable from the start, Village England is building its brand in social media, especially important for building buzz after its pop-up shop shuts. Click to its Facebook page, Pinterest board or Twitter feed to see the brand's messages and its growth trajectory.

Marketing undies

Undies--yes, undies for women and for men--are the new fashion statement. Not just as gifts for St Valentine's Day, but for everyday luxury as well as for comfort.

Now Marks & Spencer, traditionally a favourite store for undie purchases, is feeling a lot of competitive pressure from lingerie fashion retailers like Victoria's Secret and Agent Provocateur.

Victoria's Secret, based in the US, has made a major marketing investment in London. The 36-year-old company recently opened a splashy flagship store on New Bond Street. Its branded lingerie is a perfect fit for Pinterest social media marketing. The brand also has more than 22 million Facebook likes (surprise, surprise), more than 2 million Twitter followers, 61 million YouTube views, and 1.7 million Instagram followers.

Meanwhile, Agent Provocateur recently opened a large flagship Mayfair, London store, adding to its 60+ boutique and department-store locations worldwide. The retail chain is less than 20 years old yet it already has developed a unique advertising look that adds to the brand cachet. Its chief executive is an experienced manufacturer and has found ways to cut costs and boost profit margins without eroding quality or image. Agent Provocateur has 209,000 Facebook likes, 19,000 Twitter followers, and nearly 6 million YouTube views.

The next frontier is men's fashion underwear, exemplified by David Beckham's recent ad campaign for H&M.

Posh men's undies are being marketed by all the top retailers, including Selfridges and Harvey Nichols and House of Fraser, not to mention Mr Porter (Net-a-Porter's menswear site).

And the underwear marketing wars have only just begun.

Price promotions for luxury brands?

A ShopperCentric study, reported in Talking Retail and MarketingWeek, says luxury brands should consider discounting and distribution through discount intermediaries because of the 'democratisation of premium' trend. One quote:

Great (and proven) quality appears to lie at the heart of an unequivocal premium brand definition – but there is clearly also a role for expressing this, through price, packaging, image or even channel and in-store theatre. Care and attention on shelf also mark out a premium brand for many and poor housekeeping, or sloppy merchandising, can go a long way towards undermining a premium brand’s cachet.

Although ShopperCentric uses this as an argument for broadening distribution and offering occasional price promotions, it runs counter to the strategy that has supported many premium brands year after year. IMHO, price promotions and discount retailing are more likely to undermine a status brand. Making the luxe brand more affordable and more available would probably detract from rather than enhance its desirability.

I think the chief executive of Montblanc, a well-known upmarket brand, would also argue against discounting. In a recent interview, he said his 'high-end products are targeting a smaller group of customers and we are able to reach out to them in our own boutiques and through special interest magazines and digital media'. In other words, proper targeting is essential.

He also said: 'Quality, sustainable value and timeless elegance have their price'. His  target market appreciates the value of a Montblanc product and is willing to pay for it. Why discount? What marketing objective would that serve?

And remember, luxury brands have so far been largely (but not completely) recession-proof. The chief executive of PPR, which owns Gucci and other luxury brands, says his brands 'are a shield against price pressure and a weapon in which to enter new countries'. So the strong upmarket brand needn't discount because it delivers value to those who understand the quality and status of the offering.

With so many status-conscious consumers demanding brand-name goods in developing nations, turnover is generally strong, especially for products that are unique or produced in limited quantities. Here, discounting might damage the image of exclusivity and the perceived status because making the product affordable makes it more ordinary and less of a status symbol.

Mulberry: Watch this brand grow!

Maybe the world economy is still struggling, but not Mulberry, the UK brand best known for its luxury Alexa and Bayswater handbags. Mulberry is growing and highly profitable, with a lucrative presence in the Chinese market and planned expansion to Europe and South Korea.

Above, as mentioned on the brand's blog, today Mulberry's flagship stores in New York City and London are giving away small treats (fashionably presented) to promote their featured items for holiday buyers. Twitter is part of Mulberry's social media outreach, as well. Watch this brand grow!

Luxury thrives in a parallel marketing universe

Earlier this month, I blogged about how UK bargain hunters are buying, buying, buying at 99p Stores, contributing to the retailer's sharply higher turnover and profits.

At the same time, luxury products are thriving in what may be a parallel marketing universe. Burberry has rebounded, Mulberry's profits are higher (see its collection above), Prada is still popular and LVMH continues to do well. In this universe, segmentation by brand loyalty and brand aspiration is just as important as segmentation by household income.

Much of the upmarket activity is taking place in Asia, where appetite for top brands has always been strong. China's millionaires aren't only buying luxe products; they're also seeking upmarket travel experiences (while remaining loyal to well-known brands such as Shangri-La hotels). As CNN International recently reported, 'kaching, kaching, kaching'! And there's no end in sight as Asia's economies move ahead.

Upmarket vs Mass Market

How can upmarket brands such as Louis Vuitton and Tiffany maintain their exclusivity while marketing to a much wider target market? This is a major challenge for all kinds of luxury brands, as discussed in a recent Marketing Week story.

Global recession conditions have slowed sales for many and, in an effort to broaden their targeting, some brands are casting a wider net. Yet making the brand more accessible also opens it to a change in perception--risking the loss of exclusivity that gave the brand its cachet in the first place.

Vuitton is now on Facebook (where more than 2 million people "like" it) and posts videos of its fashion shows online. "Liking" a brand isn't the same as buying it, of course, but it does establish a connection, possibly an aspiration.

Finding the right retail space for an upmarket brand can be a problem. Luxury malls appeal to the target market but purely upmarket brands may have to share space with premium brands to attract sufficient footfalls. Premium brands may like to be associated with the top brands, but will consumers change their perceptions of the most luxurious brands in such situations?

Gucci and others are testing China's appetite for luxury with retail openings and social media marketing. Gucci's worldwide director of marketing says: “50 percent of Chinese consumers like to share images and information on luxury brands.” Will that interest translate into profitable sales and support the upmarket image of these luxe brands?