Bear it or Bring it?

Posted by Carol Spieckerman on April 16, 2012

In my last blog article for LIMA, I touched on the renewal that is going on throughout retail. In the short two weeks since, more retailers have announced significant technology upgrades, next-level transformations, or reinventions, including Penney’s headquarter staff reductions and Macy’s just-announced advances in shopper-friendly store technology. Across the pond, Tesco’s chief executive, Philip Clarke, is due to unveil his £1 billion plan for reversing the retailer’s fortunes and securing its future.

Clearly, retailers are stepping out in greater numbers as they realize that they can no longer dabble in digital or eke it out with legacy merchant models. “Evolve or die” has become a common theme with retailers and brands that are embarking on these changes. Fearing the retail reaper is a great motivator for change, but it’s the retailers that are meeting the same challenges and opportunities with a “bring it on” attitude that stand out.

Threat Leveled
The phenomenon called “showrooming” has been getting a lot of attention lately. Shoppers check out merchandise in stores, and then buy on rivals’ websites, often scanning barcodes to get a read on competitive prices. These days, the sight of a smartphone-wielding shopper is enough to make any retailer recoil, and many are portraying it as the latest grim reality of modern retail. In fact, showrooming has become the go-to explanation for Best Buy’s recent struggles, last week’s chief executive scandal notwithstanding.

It may operate in one of the most competitive multi-channel spaces in retail, but Sephora is unfazed by showrooming. In fact, it encourages the practice. According to Julie Bornstein, SVP of Sephora Direct, “The reality is that there’s not a lot of price differentiation in our world and most of our users are loyalty card holders, so showrooming doesn’t worry us.” Bornstein argues that smart phone shopping actually “makes the experience better.” Sephora offers its own app, which allows consumers to track the products they’ve purchased in the past, check reward point balances, and look up product ingredients. So far, the app has a staggering two million downloads, while according to the company, shopping at Sephora through mobile devices increased by 300 percent last year.

Rather than reacting to price transparency, showrooming, and a host of other new-world retail realities with shrugs of resignation or fear and trembling, Sephora is stepping away from groupthink and creatively meeting customers where they stand, arming them with the resources that they need to build stronger bonds.

Game On
Sales of consoles and physical video games are facing a major squeeze, as cheap-to-free social and online gaming options proliferate. In the UK, first-quarter physical game sales were down a whopping 30 percent year over year, accelerating the downward spiral of industry-leader Game Group, which filed for court protection in March and was rescued this month by investment firm OpCapita.

In the U.S., GameStop is being pressured by the same forces, and if that weren’t enough, its lifeblood, the used gaming business, could be crippled if Microsoft and Sony launch Xbox and PlayStation consoles that render game trading impossible, as is rumored.

While there aren’t any guarantees that the retailer will overcome the odds, it certainly isn’t taking things lying down. According to executive chairman of the board Dan DeMatteo, the company “saw this coming and prepared for it.”

A couple of years ago, it seemed as though Game Stop’s growth-through-store-count strategy would bring a Game Stop to every corner. CMO Mike Hogan saw the opportunity to direct resources into the creation of a powerful marketing platform that would go far beyond traditional retailer loyalty programs. GameStop’s PowerUp Rewards program has gone on to become the centerpiece of the retailer’s growth strategy. It’s making marketing efforts more productive, as it eschews mass advertising campaigns in favor of game release notifications targeted at interested customers, and it serves as a hub for GameStop’s legacy and emerging businesses, including mobile gaming and downloadable content. According to the company’s CEO, J. Paul Raines, GameStop will realize revenues of over $800 million in 2012 from businesses that did not even exist for GameStop two years ago.

In the company’s fourth quarter earnings call, Raines stated that the company’s “internal rate of change has been greater than the environment around us.” In the meantime, GameStop is maintaining close connections with over 17 million highly-profitable and engaged user/members.

Bottom line:

  • Who or what defines the difference between a threat and an opportunity for your company?
  • Are your business transformations self-directed or imposed?
  • How are you engaging with your retail partners as they transform their businesses?
  • Do you fear competitive comparisons or are you bold enough to enable them?
  • Is your internal rate of change greater than the environment around you?
Deluged with data, frenzied by new formats, pressured by price hikes … 2011 was a rollercoaster ride for retailers, yet those left standing are on the offensive and determined to evolve into multi-touch-point brand platforms. What are the implications for brand marketers as retailers become more than just distribution points?


Join us at Licensing International Expo for out third annual State of Retail Presentation and Store Safari. I’ll detail tools and tactics for brand marketers seeking to retool for new and evolving retail realities. I’ll also share newmarketbuilders’ transformational trajectories for 2012 and beyond, and break down what it all means to brand stakeholders pursuing direct-to-retail or traditional licensing opportunities.

Come for the presentation only or stay on for the retail safari where I’ll serve as a tour guide around a carefully selected group of major retailers that are defining the future of retail in multiple categories. Throughout the day, I’ll facilitate dialog and answer your retail and branding questions. This destination event is a great way for you and your retail-focused teams to kick off your Expo experience.

Date: Sunday, June 10, 2012
Time: 12:30pm – 5:30pm
Cost:
$80 – Non-LIMA Member
$75 – LIMA Member

Register Early! Space is Limited! Click here to register for Licensing Expo, and for the retail tour.

Want to continue the conversation? We welcome your comments!
For more retail insights, visit www.newmarketbuilders.com
Contact Carol directly at carol@newmarketbuilders.com or follow her on Twitter @retailxpert