Oh SoLoMo! Retail's Mighty Mashup

Social. Local. Mobile. Disruptions that retailers and brand marketers have had a heck of a hard time harnessing all at once, even as shoppers have enthusiastically embraced social media, geo-location, and mobility in crafting their shopping and sharing experiences. The term “SoLoMo,” is mash-up that addresses how shoppers are interacting with brands on all three levels simultaneously.

Recent developments promise to rescue the social, local, and mobile domains from their disjointed beginnings and evolve SoLoMo into an integrated consumer targeting trifecta for brand marketers.

Facebook’s release of “enhanced page post targeting” sounds benign, but the new set of features will offer unprecedented content targeting granularity to brand marketers, bringing them one step closer to turning social media into social sales. Before the update, posts could only be segmented by country and language. Now brands can target their posts to their fans and followers based on an expansive list of criteria, including relationship status, gender, workplace, and education. Marketers can drill down further by matching the frequency and timing of updates to user behaviors.

Twitter has just announced that it will allow advertisers to more easily target messages in the Twitterverse based on user interests. Twitter will zero in on those interests by drawing from various criteria, including users’ followers and what they tweet about. The move is significant, given that interests are emerging as the socially-derived stats to track for brands and retailers. Point-of-sale data may show what consumers have bought in the past, but as Venky Harinarayan, co-founder of Walmart-acquired social analytics company Kosmix has noted, current interests are a far better indicator of what consumers will buy in the future. Beyond that, Twitter’s users disproportionately access the service on geo-location-enabled mobile devices, building a powerful social, local, and mobile bridge for marketers’ content strategies.

Meanwhile, a torqued-up search engine called Polaris is the latest launch to come out of Walmart’s skunkworks offshoot, @walmartlabs. Polaris promises to rescue searches from literalism by leveraging capabilities like synonym mining to arrive at shopper intent. A search for “denim,” for example, would be sure to pull up a selection of jeans. Algorithms also factor in the number of “likes” a product has on Facebook, and soon, the number of pins it has on Pinterest and user ratings and reviews will be factored in as well. Polaris will power Walmart.com, along with the company’s mobile web and mobile apps, and the company claims that it has already seen a 10 to 15 percent post-Polaris increase in completed transactions.

Ongoing innovations on the SoLoMo scene present exciting opportunities for brand marketers, but also call for new strategies. Early in the game, the SoLoMo promise was to explode brand message deployment through new mediums. However, the latest developments demand an uncompromising commitment to both content quantity and quality. In order to take full advantage of the latest thin-sliced segmentation capabilities, brand marketers will have to create higher volumes of fresh content targeted to specific affinity groups. Successful marketers won’t simply buy ads on various platforms, but will be called to promote sharable brand stories that resonate across the SoLoMo spectrum.

Retail Wire picked up this article. Check out the discussion.

This article originally ran on the International Licensing Industry Merchandisers' Association (LIMA) website.

Wholesale-to-Retail Heading Hyper-local

In a recent blog article for the Licensing Industry Merchandisers' Association (LIMA), I introduced the concept of “proto-ships” – stores, such as Duane Reade’s recently-opened mega-store in Manhattan, that are one part prototype and one part flagship. I predicted that more retailers would begin to leverage retail locations as live labs, as well as increase the number of experiments that are being conducted in each location at any given time.

Own-It-All Retail

For a growing number of wholesalers, owned retail has become the ultimate learning lab, a chance to wrest control of distribution and display destinies away from retailers and gain insight that can be fed back into both the retail and wholesale side of the business. In a recent example, HMX Group, a New York-based apparel manufacturer led by lifestyle designer Joseph Abboud, has announced that it will debut a new retail concept, Streets, which will showcase all of its men’s brands in one location. HMX’s growing portfolio of brands includes Hickey Freeman, Hart Schaffner Marx, Coppley, and others, many of which will be included in Streets’ assortments. According to Abboud, ninety percent of each store’s merchandise will come from HMX’s brands, allowing the company to leverage its own factories and achieve 30-day turnarounds on key trends – a rate that puts them right up there with vertical fast fashion retailers like Zara and H&M, but with higher-quality, branded goods. The relatively staid menswear market hasn't traditionally relied on pulling trend triggers; Streets has the potential to speed up the long, slow cycle of male style and introduce a new generation of male shoppers to trend-right merchandise.

According to Women’s Wear Daily, HMX CEO Doug Williams has described the concept as “a retail laboratory that will allow us to bring everything under one roof…It will help us figure out what works and what doesn’t.” He gave a nod to HMX’s retail partners, stating that they do an amazing job of selecting among the brand group’s offerings, but noted that the company’s traditional wholesale model doesn’t give it the opportunity to “exploit some of the things we really believe in.”

Street Cred

The Streets model is exciting on a number of levels, as it foreshadows the evolution of the wholesale-to-retail model and represents the next turn of the screw in hyper-localization. Each of Streets’ locations carries its own place-branded moniker and the first two, Streets of Georgetown and Streets of Beverly Hills, are slated to open in September (the company is currently scouting sites in other urban U.S. markets, including New York, Boston, and Chicago). Williams said that the inspiration for Streets sprang from a desire to have stores that create “intimate relationships with the communities in which they reside.” By attaching its brand to well-known streets and neighborhoods, Streets is also leveraging a form of co-branding that doesn't involve royalties or permissions.

Starbucks’ attempt at neighborhood-branded retail quietly came to a close when it shuttered its 15th Avenue Coffee & Tea location in Seattle early this year, stating that no additional “learning environment” cafes have been planned. I was closely watching the concept since it seemed to promise many of the breakthroughs that Streets will now likely bring to fruition. Unlike HMX, Starbucks’ core model is retail. However, like HMX, Starbucks crossed over into complementary models (wholesale and licensing), making its products available in wide retail distribution. Had Starbucks stayed with the idea, it would have been able to leverage the resulting hyper-localized insights, not only in its own stores, but also with retail partners.

Will other wholesalers follow in HMX’s uber-local, owned retail footsteps and if so, will they share what they learn with their retail partners?

Want to explore how to leverage these and other retail dynamics in your direct-to-retail positioning? Contact me directly at carol@newmarketbuilders.com

Retail Wire's BrainTrust Query: The Squeeze on Dollar Stores

Retail Wire published the following excerpt of our article, Retailers' Inflation Improvisation Part I: Perilous Parity, on July 12, 2011.  The article generated a terrific discussion among Retail Wire’s BrainTrust panelists and we’ve included those comments at the end of this post.

Both Walmart and Dollar General have recently made it clear that high-low price shenanigans are off the table and that building trust through price consistency is their highest value. In a presentation at last month's William Blair Growth Conference, Rick Dreiling, Dollar General's CEO, claimed that "price integrity is building loyalty" with its customers and that those customers "truly trust" the retailer's everyday low price positioning.

But dollar stores are facing new competition from big-boxers -- from Best Buy to J.C. Penney, Staples, Target and Walmart -- who are determined to downsize their way in by shoving small formats into previously unexplored urban and rural markets, many of which are already populated with the original small format specialists. At the same time, rising fuel and raw material prices are pressuring margins. Combining the inflationary dynamics with the encroachment by the big boxes, and dollar stores' inherently narrow wiggle-room on both price and physical space, dollar stores' sovereign reign over some urban and rural fiefdoms may be at risk. Yet they aren't betraying much vulnerability.

Dollar General's Mr. Dreiling, for instance, recently spoke of the company's "radical shift" to "proudly" selling national brands alongside private brands. However, the more Dollar General focuses on procuring the same national brands that Walmart and others carry, the more they will have to obsess over comparative value, especially since local price adjustments are standard operating procedure for both Target and Walmart.

Family Dollar's CEO, Howard Levine, noted in the company's Q3 2011 earnings call that "so far, our market and price checks are confirming that our competitiveness remains strong" and went on to say that Family Dollar is looking at the competitiveness of various markets and taking advantage of "higher pricing opportunities" in those that aren't as competitive. He added that Family Dollar is continuing "to learn more about these opportunities, particularly as we open up more and more stores in urban markets where that's a lever that we can pull to help the margin." In other words, Family Dollar is banking on localized pricing winning the day, even as others who have arguably had more practice at it head their way.

Dollar stores have a very defensible position as they are thousands of stores ahead of the interlopers, but the nagging exceptions (markets that the big boxers have taken a shine to) have the potential to upset their apple carts as everyone attempts to adjust pricing to increasingly complex local market dynamics. Throw in Walmart's Site-to-Store and Pick Up Today services, which have the potential to transform every Walmart Express location into an endless aisle delivery mechanism (the brands and products in the store may eventually represent only a fraction of the actual item transactions that occur in the store), and you have a multi-layered, localized moving target. So how will dollar stores be able to carry out a balancing act and live up to price consistency claims as others encroach and as the continuous upward crawl of commodity prices adds even more complexity to the picture?

BrainTrust Panel Comments

Three quick observations.

1.  The only big box that can mount a credible threat to dollar stores with small formats is Walmart. The other retailers mentioned might do OK with small formats, but it won't be Dollar General's sales they will be taking, it will be other local merchants.

2.  Dollar General is doing precisely the right thing by bringing in national brands that Walmart will be offering. They can't afford to let Walmart have the additional advantage of being the only low-price, local store that is offering "the good stuff."

3.  In general, dollar store format operating costs remain below those of big box retailers. And the purchasing power of 8,000 stores is leverageable no matter how small those stores are. Even Walmart will have to go a long way to beat the typical dollar store net cost structure.

Small format Walmarts are indeed a threat to dollar stores in general and to lesser chains and independents in particular. DG and FD can stand up to the challenge -- but not without taking some hits along the way.

Ben Ball, Senior Vice President, Dechert-Hampe

Every retailer is always subjected to being vulnerable when some new, changing or more powerful force enters their environment. In the case of today's dollar stores, their vulnerability lies in big box stores with reliable supply chains and strong balance sheets duplicating the dollar stores format in urban and rural areas.

Gene Hoffman, President/CEO, Corporate Strategies International

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