Tag Archives: Marketing

Digitization of Retail: It’s Coming Whether You’re Ready or Not

There are big changes coming to the retail world.  Indoor malls are struggling to survive.  Space that was once premium is becoming costly and of little benefit to the those that inhabit them.  The retail model for the future won’t be able to compete directly with online stores in price, so value added services and convenience will be the ultimate drivers for shoppers to buy in person at any brick and mortar retail outlet. Microsoft and Accenture have created a prototype for a Smart Fitting Room concept, while consulting industry leader McKinsey & Company have provide insight on how the smart store of the future can benefit retailers.

Fast Company’s online design section gave us a glimpse of Microsoft and Accenture’s connected fitting room.  The fitting room is connected to items in the store using RFID technology.

A photo of a smart fitting room (Photo Credit Fast Company http://g.fastcompany.net/multisite_files/fastcompany/inline/2014/06/3031689-inline-i-fitting-room-01.jpg)

When a shopper walks into a fitting room, a digital screen shows them the items that they have picked out and shows them the size options and makes suggestions of other things that shopper may like.  With the click of a button, a shopper can order a different size, color, or item to try on without having to leave the fitting room.  This convenience alone will  increase sales, but as well as provide excellent data to the  stores that employ these systems.

Using this new data, a store can more easily track inventory, have a feel for how many items a person typically tries on, and even how long someone typically takes to try on items in a visit to a dressing room.  Stores will be able to make decisions about how many dressing rooms are needed, how much space is needed for clothing hangers, and even how pegs for hangers are needed.  The RFID tags will allow stores to know what routes are the most common while looking for clothing to make sure that stores have the best layouts possible and can strategically organize items around the store based on this information.  In the future, these dressing rooms can be used as a substitute for the cash register.

Despite competing with Accenture, McKinsey & Company project retail the same way.  They provide information on their projections and give advice in their most recent Quarterly Insight in an article titled Digitizing the Consumer Decision Journey.  The piece is by three of McKinsey’s Principal consultants, Edwin van Bommel, David Edelman, and Kelly Ungerman.  They describe the rapid changes in technology in retail and how a cross channel experience can change the way shopping feels to a customer.  In the article, they describe a couple that has bought its first home that needs to buy a washer and dryer.  The couple decides to utilize the websites of several big box stores before going to one with a saved shopping list on one of the store’s website.  When they enter the store, the process of ordering the item is not only as simple as it would be if purchased online, but also provides the convenience of being able to see, touch, and measure the item.  

The couple can use Google Maps to navigate to the store.  Transmitters much like the RFID tags used in the system being developed by Accenture and Microsoft, are installed near the entrance to the store. These are set up to recognize the information for the couple and send them personalized offers as well as provide directions inside the store to locate the items they are interested in.  If the couple has particular history, it may provide additional offers related to previous purchases or even specifically target a sale.  Payment and scheduling delivery can all be done electronically without having to take out a wallet.  Notification for delivery can be set with in a thirty minute period so customers won’t be stuck waiting at home all day.  

Companies need to start thinking about how they can make their stores more efficient and the data of the store of the future provides bright possibilities.  Better knowledge of your customer base, whether you are selling organic vegetables, clothing, or electronics will help to cut down on excess inventory and help create greater margins for retailers.  To make this happen, investment in people with non-traditional backgrounds from the norm in retail will be critical.  Experts in data mining, statistics, and supply chain will be crucial to being effectively using newly gathered customer data.  The value added service of having the right items at the right time is the only thing that will keep retailers competitive against online retailers like Amazon.  Retailers have to re-invent their showrooms and understand that customers start shopping far before they open the door to the store.



Apple Was Right to Buy Beats

A few weeks ago, Apple announced their intent to purchase Beats, a company founded by two powerful men in the music industry.  Apple Inc, the company founded by Steve Jobs and Steve Wozniak is without either of its founders today at the helm for the first time since Steve Jobs returned to the company after Apple purchased Job’s company NeXT.  Wozniak or “Woz” as some call him left full-time employment at Apple in 1987, but is still considered an employee while Steve Jobs passed away in 2011 while on leave from Apple with pancreatic cancer.

Tim Cook was pushed into the lime-light following Job’s death.  Tim Cook, who became CEO when Jobs stepped down  earlier in the year, had previous served as the companies COO.  In his new role he was was expected to be not only Chief Executive Officer, but also Chief Showman like his predecessor.  Jobs had led the company through a massive resurgence following some difficult years.  He’d repositioned the company from mostly selling to computers, to one that also excelled with selling portable devices.

“An iPod, a phone, and an Internet communicator. An iPod, a phone…are you getting it? These are not three separate devices, this is one device, and we are calling it iPhone. Today, Apple is going to reinvent the phone, and here it is. ” -Steve Jobs at the MacWorld Conference in 2007 introducing the first iPhone.

Steve Jobs introducing the first iPhone in 2007

Fast-forward to today and we’ve had seven different generations of iPhones hit the market, the successful launch of the iPad, the iPad Air, as well as changes to the desktop PC, notebook computer, iPods, and AppleTV lines.  These lines are relatively mature with various adjustments as new technology becomes available. Can’t miss features like Siri, a fingerprint scanner, and a completely re-tooled mobile OS with the upgrade to iOS7 have left shareholders and the public wondering where the innovation is for this tech giant.  Have they lost it without their fearless leader?

Enter Beats, the company founded by Dr. Dre, a rapper and music producer and Jimmy Iovine, the former recorder producer and founder and CEO of Interscope Geffen A&M record label.  Both come with a great deal of credibility in their backgrounds.

Iovine in the studio with John Lennon in 1974 (credit NY Times Bob Gruen)

As detailed in a Newsweek profile of Iovine, the son of a longshoreman started out in the record industry as a janitor.  Before long, he was working as a recording engineer up to where he is now.  The profile goes on to describe his vision for success.  Iovine recognized that rap could be commercially successful before other labels had.  And it isn’t just this, Iovine is relentless in his pursuit.  Not only that, but he’s been a partner with Apple since the beginning of iTunes according to an article in the New York Times about the acquisition.

“Jimmy was one of the first people we showed iTunes to,” said Eddy Cue, Apple’s content chief.

The Wall Street Journal revealed the Dr. Dre played a similarly powerful role at Beats as Mr. Iovine.  Dre’s obsession with making sure their signature product, Beats by Dre have the best sound possible was only one part of his role at the company.  The man whose real name is Andre Young served as a sort of eye for the company on culture despite being forty-nine years old.

According to his biography in Rolling Stone, Dre grew up in South Central Los Angeles.  He was one of the pioneers of gangster rap, working with Iovine and groups including NWA.  Dre later moved into producing music and partnered with Iovine to start Beats.

As part of the deal, Iovine leaves his long time position at Interscope, but takes on a Senior role at Apple along with Dr. Dre.  So what does Apple get beyond the talent of these two music industry titans?  This will be the first time in its history that Apple has purchased another brand not to just swallow it up.  There is a great deal of equity in the Beats brand.

In terms of hardware, it comes with the signatures headphone line, Beats by Dre.  Apple has stuck to ear-buds since it launched its first iPods in 2001.  While they are sleek and small, their are serious limitations based on their size for us in new apps.  Having an existing popular headphone brand to build off of for application for apps is a game changer, especially with recently announced changes include in iOS8 like the Health app.

The brand also comes with a subscription music service.  The popularity of the music service Pandora led Apple to launch iTunes Radio.  Unfortunately, there has been virtually no talk about Apple’s service while Spotify has gobbled up market share.  Consumers have begun to care less about actually owning music and more about having access to it (something I’d like to explore further down the road).  Recognizing changing consumer taste for the current standing music ownership model, Apple knew it had to jump in head-first to compete with Spotify, but didn’t want to re-invent the wheel.  This purchase positions them well in music business while not abandoning the current successes of iTunes.

At $3 billion, it seems that Apple bought more than tangible assets.  Apple will almost certainly have to recognize goodwill on their books for this purchase, but in return will quiet down investors after years of hoarding cash and breathe new life into the company.   Human capitol and product additions from this acquisition make me confident in Apple’s future.