All I want for Christmas is a virtual twin

Is anyone happy to predict what might be coming in 2017?  I suspect not. 2016 was full of unexpected surprises and is best epitomized by the new Toblerone, it still has peaks, but the gaps between them are bigger and more divisive, just like our politicians.

The nation is split over which retailer has made the best Christmas TV spot, M&S or Aldi, but it has not stopped shoppers from shopping. John Lewis might not have made the best TV ad for the festive season, but it did have the biggest ever week in its trading history this Black Friday. And the only prediction I can safely make for 2017 is that the retail event will be back next year. Black Friday has usurped the traditional ‘must have toys’ list and is fast becoming the official start of the festive shopping season spree. Next year we will see greater competition for shoppers and greater focus on their three budgets; time, money and frustration.

For the first time this year I received digital calendar invites for Black Friday events. Intrusive yes, but an indication of how far retailers will go to cut through the promotional clutter to get time with the WIGIG conscious shopper.

This Black Friday also saw a 12% rise in online spending according to retail analysts IMRG. Shoppers will always want value, but that is no longer simply price x quality. They want simplicity and convenience and at the moment that is being delivered (literally) by going online.

Of course, there are many retailers who still understand the vital role of physical stores as environments where shoppers can touch, feel and experience their product assortment and many more that will complain that their stores have simply become showrooms. But the online world is changing, today all the talk might be of the ‘internet of things’ but it is rapidly becoming about experience. The Internet of Experience.

VR and AR are two technologies that people are predicting will transform the shopping experience and we have seen many retailers experiment with solutions in 2016. John Lewis is bringing its Christmas TV story to life in store right now with VR, whilst DS Automobiles showcased a solution at the 2016 Geneva Auto Show which could have a more everyday application in the car buying process. I have no doubt that this will continue to evolve and the virtual showroom will become a permanent fixture both online and in-store for many retailers.

img_0057But perhaps the most interesting application of VR for retailers is not in enriching customer experience, but in helping them in their internal process. There are more and more retailers and brand owners that have VR cave solutions to help packaging design and merchandising programs to deliver the perfect shelf and perfect shop. The next generation of technology will mean this no longer has to be a linear process based on an idealised store layout, instead key stakeholders will be able to come together and collaborate around a virtual twin of an actual store and do that in real time by connecting it to digital shelf labels in a physical store, as is possible with the 3DEXPERIENCE Twin. I’m not going to make any predictions for 2017, but if I was a retailer, a virtual twin would be at the top of my list for Father Christmas.

I’m not going to make any predictions for 2017, but if I was a retailer, a virtual twin would be at the top of my list for Father Christmas.

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Sainsbury’s results may sound disappointing but the brand is doing all the right things

First published in Marketing on 11th November 2015

These are obviously testing times for the supermarket sector. Sainsbury’s has just announced a fall in both profits, by 17.9%, and like-for-like sales, down by 1.6 per cent, for the six months to 26 September.

Mike Coupe, the Sainsbury’s chief executive, said that “the grocery retail marketplace remains challenging” and cited investment in food price reductions and broader structural issues, such as food deflation, for the decline.

Analysts were expecting the falls to be steeper and my initial reaction is that I’m actually pleasantly surprised at the results. Yes, profits are down but if you look at things closely Sainsbury’s has made a £150 million in price and still delivered a 6 per cent increase in total income. It indicated that its prices “remain as competitive as ever” and claimed that price satisfaction scores have increased this year.

The problem for Sainsbury’s is that it is facing similar challenges to its rivals. Dave Lewis, the chief executive of Tesco, said in his recent CBI Conference speech that his sector faces three big challenges: the growth of digital, the growth in the number of retailers in the grocery sector and in convenience shopping, and structural costs increasing at a time of low profitability. As a result of these challenges, profit margins in the sector have shrunk from 5 per cent to 2 per cent in just five years.

Significantly, Sainsbury’s is facing the prospect of digital transformation. A challenge facing almost every business of scale anywhere in the world, it has to look at how new technologies can remove cost from its operations and how digital will enable it to connect better with their customers, who’s shopping habits are changing. It’s actually doing a pretty decent job on this and its online sales are up slightly.

And like many other big names it is in danger of being “caught in the middle”, it lost out years ago on price to Asda and Tesco, but maintained its brand values and is still a great place to shop. But shoppers are chasing value (price x quality) and are trading up, to Waitrose, and down, to Aldi and Lidl. Sainsbury’s risks being bounced out and that’s why the investment in price, making fresh produce more affordable for its customers, is significant and something I applaud.

In brand terms, Sainsbury’s is doing all the right things. The problems for the grocery retailer are not ones created by their brand positioning or advertising. Sainsbury’s is doing some innovative things with its marketing, the latest being its Halloween campaign, complete with the “Spooky Speaker” voice changing app, which provided some neat digital ideas.

There’s nothing wrong with the Sainsbury’s brand, it has a good heritage and as it prepares to launch its Christmas campaign and readies itself for a busy seasonal period, I’d say that Sainsbury’s is going about things the right way and its investment in price will pay dividends.

Has H&M lost control of its fashion collaborations?

This article was first published by Marketing on 6th November 2015

I’m a big fan of H&M’s collaborations with the famous designers of the world, writes Simon Hathaway, global chief retail officer at Cheil.

They are collaborations that result in one-off clothing ranges each year that bring high fashion to the high street.H&M’s initiative is a brilliant example of what I term “The Power of X, because collaboration between brands, or between retailers and brands, on new product lines has become one of the most powerful ideas today in retail.

The high street retailer was one of the first in fashion to understand the power of collaboration, its designer partnerships dating back to 2004 (when Karl Lagerfeld created his limited edition range for H&M).

But the scenes of chaos that met the launch of the Balmain x H&M limited edition range yesterday threaten to undermine much of its good work.

H&M hit trouble after the doors of its Regent Street store opened.

The police were called following reports of scuffles between people desperate to get their hands on some affordable Balmain gear. H&M was forced to close the store while its website also crashed due to high demand for the new range.

Enthusiasm and an element of chaos is not unusual at these H&M launches but this time around the situation seemed more extreme.

There’s no doubt that Balmain x H&M is a strong brand collaboration that drives value for H&M and also for French fashion label Balmain.

It’s a relatively small but desirable fashion house when compared to the Versaces of this world, getting a presence on the high street and free advertising in return for its designs.

As expected with this type of launch, where PR and generating word of mouth is an important factor, there’s an element of deliberate scarcity at play from H&M here, heavily advertising and publicising the product range then under-stocking it to create a buzz.

But I’d say the scenes outside H&M tip over from cleverly engineered scarcity into not understanding the amount of stock required to fulfil even basic levels of initial demand.

There’s a fine line between success and failure in these things: it’s great PR when people are camping outside the store the night before, but I’d argue your stock control is out of kilter when you’re forced to close the store with unhappy shoppers outside.

I wonder on this occasion if H&M totally understood the demand for the products.

It’s not as if the clues weren’t there. Balmain designer Olivier Rousteing has 1.6m Instagram followers and his friendship with the Kardashians and Kendall Jenner (pictured above), who have modelled his clothes, has made the Balmain brand highly desirable among high street fashionistas.

There is another significant concern for me in the way the stock management has been handled.

I’d suggest that a range like this fails to benefit retailer, brand and shoppers when it begins to look like a profiteering opportunity for the kings and queens of eBay rather than providing a genuinely exciting product experience for the dedicated followers of fashion.

When a H&M item is going for £650 on eBay within hours you have to start questioning who is really profiting here.

The situation is not irredeemable for H&M. If this happens consistently, though, then people will lose interest.

But it’s now all about resetting things for the next promotion. To focus on better planning, stock availability and making sure the web servers are up to the task. That way H&M will make money and boost its brand rather than provoking anger on the streets.

How many retailers will it take to change a lightbulb?

This article was was first published in Marketing Magazine on 11th June 2015 

“To beacon or not to beacon?” is a question on the lips of many retailers and brand owners.

Talk of how beacons, small Bluetooth-enabled transmitters in stores, will revolutionise proximity-based targeting of promotions has been in the air for at least two years now.

We’ve even seen some action. Tesco began a beacon trial in April 2014 at its Chelmsford store, integrating the trial with its MyStore app. A month later, Waitrose started a similar test at its concept store in Swindon. When Asda and John Lewis launched tentative trials towards the end of 2014, it seemed we were on the cusp of something big. Unless, of course, as was the case with QR and Foursquare, technology superseded instore beacons before they hit critical mass.

Now that just might be happening. In France, supermarket giant Carrefour has invested in an alternative approach. While beacons use Bluetooth LE (low energy) to determine the distance of a shopper (but not their precise location), Philips has developed an LED lighting system that transmits promotional codes to smartphones via light waves.

The Carrefour trial in a Lille store uses this Philips system and functions in a similar way to GPS-based maps. Each LED transmits a distinct location code, which can be picked up by a shopper with a compatible app using their smartphone camera. From this, special offers and location data are sent to the shopper, enabling them to search and locate their preferred promotions or discover promotions and products around them.

It’s a technology that Cheil Worldwide has experience of using, building a similar LED system to support emart’s Sales Navigation work in Korea. The goal was to provide promotions and product location detail direct to smart phones and the technology enabled precision delivery of this promise.

app01

The advantages, however, are offset by the relative high cost of the LED approach. The Carrefour/Philips approach involves replacing a store’s entire lighting system with the LED alternative. Beacons are relatively low cost and, therefore, could provide a good option for trial for smaller stores or those just testing the water.

Nonetheless, the LED systems offer a viable alternative because they provide a one-off, long-term solution. Even should the current iteration of proximity-based targeting fail to take-off, at least stores that have fitted the LEDs will be left with an entirely serviceable lighting system rather than a bunch of obsolete beacons attached to shelving.

However, don’t get blinded by the sake of technology for technology’s sake. The big questions brands should be asking don’t revolve around whether “to beacon or not to beacon”. Or even “to beacon or to LED”. What’s essential is to consider what you are doing with new technologies to solve customer problems and to enrich their overall experience.

When deciding on whether to invest in new ways of delivering in-store promotions, I’ve learnt that it’s important for retailers and brands to ask whether this activity will enrich the shopper experience, deliver convenience and value.

Don’t forget that people are on a mission when they shop. The best marketers understand that mindset, alongside the retail context, and so remove barriers to purchase. Most retail environments are already jam-packed with price messaging, discounts, and promotion. The last thing that shoppers want is more clutter, they demand clarity and simplicity.

This technology has the ability to deliver all of that and more. The opportunity to deliver personalized experience and dynamic value is there and with that shoppers will adopt this new technology because it will be contextually integrated into their buying habits enriching their retail experience, delivering convenience and value.

To make that happen I find myself asking a new question… how many retailers does it take to change a light bulb?

Forget Charlotte Street and look to the High Street – What politics can learn from retail

First published in Brand Republic on May 6th 2015

As we pull into the last few days of the 2015 General Election, I’m reminded of the main political parties’ lack of finesse when it comes to campaign communications. They only get to flex their marketing muscles every five years, so it’s not an area of expertise and their reflex action is to reach for a big blunt message and hammer it home repeatedly in traditional channels.

This time the approach is further exposed by voter cynicism and the rise of social media. So rather than looking to Charlotte Street for inspiration, maybe politicians should focus on the techniques of the High Street. It’s not as far fetched as you might think. There are plenty of similarities where retail techniques have worked in politics.

Politics is all about connecting emotionally with voters, which is something that the two main parties have failed singularly to do as their mid-30 per cent poll ratings show. The same has happened in retail where immovable monoliths like Tesco and Sainsbury have been outflanked by new consumer champions like Aldi and Lidl, who adopted a distinct tone of voice that spoke directly to the concerns of people.

Just as consumers have responded to this approach, so Nigel Farage and Boris Johnson have used humour and ‘telling it like it is’ to refresh the parts that other politicians can’t reach. Nobody is saying that you can laugh your way to electoral success, but a joshing aside disarms and opens doors to help your poke your real message through.

An area where retail really can teach politicians a thing or two is its attitude to ‘new’. It’s the most powerful word in marketing and supermarkets and brands apply it liberally. Yet in political marketing, the emphasis can be on defending the core vote, so ‘new’ is sparingly used. It’s worth remembering that one of the most potent political forces of the past two decades was ‘New’ Labour, which won three majorities before its sheen started to come off.

Reacting in real time is another area that retailers have taken up as their own. Aldi’s reactive adverts that poked fun at Morrison’s and Sainsbury’s were two great examples of how swift action can leave competitors leaden footed. In some ways political operators are starting to notice this too. Look at the Tories attack ads with Ed Miliband as a puppet controlled by Nicola Sturgeon.

In a tight election with little room for elaborate promises, making the most of the smallest differences is a strength. With price wars entrenched, stores thank shoppers on their till receipts reminding them how much they’ve saved by shopping with them. Could politicians do something similar to show how their policies would make a difference?

There is an ongoing trend in the retail sector of decentralising powers to local stores. You need only look at local supermarket stores on Facebook, or the fact that GAME hands over all Twitter power to their store managers. Local engagement gets people’s attention because it shows you understand what matters to them. This is the complete opposite to how political parties work where the powerful central hand makes local communications weak.

If humble retailers teaching our political masters a few lessons seems a bit far-fetched, it is worth remembering that one of our most successful Prime Ministers was a grocer’s daughter. Retail is detail which means leaving no stone unturned in the search for advantage. That’s something that Mrs T understood instinctively.

To beacon or not to beacon?

It’s now a year since Apple announced it would be rolling out iBeacon technology across all its US stores. Since then there has been a plethora of retail destinations, retailers and brands following suit.

Regent Street, one of the most famous shopping destinations in the world and home to an Apple flagship store, is using beacons and an app to deliver offers to its tenants. Tesco began a trial in April at its Chelmsford store, integrating it with its MyStore app, and in May, Waitrose started a Beacon test at its concept store in Swindon. More recently UK publisher IPC Media has partnered with Tesco-owned One Stop, installing beacons in 740 convenience stores to drive magazine sales.

2014 has been the year of the beacon, a disruptive technology that seems destined to transform how we communicate in-store. Certainly, many see beacons as providing brands with the opportunity to direct more offers to shoppers in store, which will drive more sales. Right?

Well not necessarily. According to a 2014 survey of UK smartphone owners by eDigitalResearch, only 33% of consumers stated that personalised, direct messages sent to their smartphone would influence purchase decisions. So that means the majority, 67% of consumers, would be unmoved.

In a marketing landscape used to mass-market communication, where spends are still dictated by reaching the majority, the minority that would respond to ibeacons fade into relative insignificance.

Yet the marketing community is transfixed by digital technology – and most recently with ibeacons – even if it appears incapable of doing anything beyond simply digitising the traditional. TV spots are now viral films for the ‘YouTube generation’, old school promotion happens on facebook, instagram or twitter instead of in-store and beacons mean we can say goodbye to cardboard and paper to deliver a virtual coupon when consumers are within proximity.

There’s no question that this digital obsession is right, and for all the reasons we already know: people no longer follow a linear path to purchase, we expect our shopping experience to be everywhere, instant and personal. It’s just that to properly lever the connection between behaviour and technology, we need deeper, sustained insights into how the two play off each other.

Cheil is working on a number of beacon innovation projects for clients, and to truly understand this new technology it has built a solution that has turned our office into a living lab. When our London team of 200 people moved to a single location in Bankside we created an app called Cheil Break. It uses beacons to help people interact with the space and drive loyalty to the in-house café, Cash-only Tony.

CheilBreak1

In doing this we’ve learnt there are in fact three questions to ask when it comes to beacons:

  1. Are you enriching the experience?
  2. Are you delivering convenience?
  3. Do you have an opportunity to offer dynamic value?

People are on a mission when they shop and the best shopper-marketers understand that mindset, and the retail context, and so remove barriers to purchase. Most retail environments are already jam-packed with price messaging, discounts and promotion. The shopper does not want more clutter, they want clarity and simplicity. Yes they want offers, but they need to be relevant and most of all they need help in making the decision that is right for them. To achieve this, technology needs to enrich their retail experience, making it easier, more personal and more convenient.

Studying beacon location gives us much greater insight into context and enables us to target experience that is relevant. The loyal shopper may not want to know that there is a 2 for 1 on brand X in aisle 5, but, as she passes a beacon in aisle 15, she may be delighted to hear that they are opening a new check-out just for her.

Contextual integration

The Cheil Break app is activated by a beacon as employees walk through the front door so there is no need to open it or check-in. It is connected to searchable Pinterest profiles for our people so that we can use the app to search for specific experience or just locate people who are not at their desks. By encouraging and allowing more interaction between our people, the hope is that it will help them become even more creative for our clients.

It all starts in our café where we’ve replaced the traditional coffee shop loyalty card with a digital stamp in the café section of the app. Starbucks in South Korea, and Harris+Hoole in the UK, both do this well and have contextually integrated technology to make buying coffee more convenient and personal. They reward customers who sign-in to this service with recognition in-store, and allow pre-ordering and payment to circumvent the need to queue.

While Starbucks and Harris+Hoole achieve this with a sophisticated and expensive EPOS system, Cheil’s simply uses two beacons. The first activates the loyalty section of the app when a customer approaches and the second is tapped to deliver the digital stamp. In doing so, we made a breakthrough in understanding how to use proximity settings to enable a beacon behaviour not unlike RFiD/NFC, but which is recognisable by both iOS and Android.

Convenience trumps privacy

We’ve also found that people are prepared to trade some personal data for improved relevance and convenience. As a regular traveller I am looking forward to seeing how British Airways will broaden its use of beacons to enrich my experience of T5. With all the data it has on me through its Executive Club and the app I use to check-in and collect my boarding card the opportunities are almost endless. BA has started on the journey by using this new technology to ease an existing customer grumble and sending the wi-fi password to those with the BA app as they pass the beacon on the way into the lounge. It is a good use of beacon technology that is contextually integrated and will enhance my experience. In fact I probably will not even notice, because it is almost invisible.

The best technology is invisible technology

The concept of dynamic pricing is not new to retail. On-line specialists have become masters of this invisible technology to drive sales and beacon driven data may enable this in more traditional retail environments. There is also a broader opportunity to look at value and we are exploring how to use loyalty functionality in our own app to bring dynamic value to our staff. We’ve handed over this functionality over to the ‘Appreciation Society’ which runs our agency events and creates partnerships with local businesses that become Friends of Cheil. Our ambition is that we will learn more about the behavioural impact driven by dynamic pricing, but more importantly we will find new insight into ‘price plus’ that will be of real value for retail.

So, to beacon or not to beacon is not the question brands and retailers should be asking themselves. The real question is what are they doing with new technologies to solve their customers’ problems and enrich their overall experience?

Can Amazon deliver emotion for Christmas with its first bricks and mortar store?

First published by the Drum on 15th October 2014

The news that Amazon is set to go physical this Christmas with the first bricks and mortar store in its 20-year history should be anything but a surprise. The category-leading retailer seems to have no fear when it comes to exploring the retail space, whether that’s by drone, digital or delivery van. Why not a physical store?

This year has seen a flurry of exciting innovations from the Seattle giant. In February, an update to its app called Flow introduced image recognition so products could be photographed and added to your shopping cart.

Then came Amazon dash in April, a Wi-Fi device combining voice recognition and barcode scanner to instantly add items to your Amazon Fresh shopping list. The retailer then added social to its own list of options with the buy button, social shopping cart link on Twitter.

Amazon continues to sell more products in more ways. It is the ultimate Everywhere, Instant and Personal retailer.

The Amazon store, in Downtown New York, is not primarily about sales. It’s a canny way of avoiding the logistical problem of ‘we called, you were out’ that can bedevil Christmas. This ‘conversion gap’ can also put consumers off at Christmas when it’s all about no fail shopping. It’s one reason why physical retail is still the largest element at Christmas. Who wouldn’t want a piece of that action?

The stores – and they will be multiple if New York is a success – are likely to be functional and more Argos than Apple as some commentators have suggested.

But is this anything more than a holiday gimmick? Seasonal stores have become a feature of a retail market in recent years, with no shortage of empty space and plenty of landlords willing to be flexible on short-term lets. Look at the boom in pop-ups in recent years. Is Amazon simply taking advantage of this to help it over a logistical hump?

The good news for customers is that the stores look likely to be putting customer service to the fore. This could be an interesting longer-term strategy for Amazon, which puts great store in its service offering. If returning goods to Amazon becomes as easy as doing so to M&S, that’s a great piece of service design.

This isn’t the first time Amazon has looked to get physical. It already has secure collection lockers in cities to make pick up easier. It has also used pop-ups to sell product and has sold Kindles through store groups Target and Walmart. It even looked to open stores in Seattle two years ago before going cold on the idea.

With the store development it will need to ensure that its famed slick online service is replicated in-store. The prospect of joining a queue to pick up Amazon deliveries could be more Royal Mail sorting office than titan of ecommerce. Same day delivery in New York or click and pick sounds great, but the experience needs to be Amazon-like.

Arguably Amazon is the most convenient retailer in the world: it delivers a huge assortment at highly competitive prices in a way that is simple to shop, and the more we shop, the more personal the experience becomes. We like that, but we don’t love it like we love other retailers. That is because other retailers, especially those that deliver an omnichannel experience like John Lewis, build emotion into everything they do, especially at Christmas.

Amazon isn’t scared of breaking boundaries and taking shopping everywhere. Perhaps the bricks-and-mortar format is an opportunity for Amazon to stand for more than convenience and price, and start to establish an emotional bond with shoppers at that most emotional (not to mention key trading) time of the year – Christmas.