BRANDOOGLE

Category: How Marketplaces Work

  • For some Retailers, Black Friday should be renamed Brown Friday

    When I was in elementary school I had to do a project on my family’s history. I asked my father if any of our ancestors had been war heroes.  He went on to tell the following story:

    In the 1700’s a great grandfather many generations back had been an Admiral in the Royal Navy.  One day a sailor called down from the crow’s nest to report that a Spanish warship had been spotted on the horizon.  The Admiral turned to his first mate and told him to get the Admiral his red shirt. “That way” he explained, “if I am wounded in battle, the sailors won’t be alarmed”.

    A moment or two later, the sailor in crow’s nest frantically called down that it was not just a single Spanish warship, but the entire Spanish armada. The Admiral calmly turned to his first mate and instructed him “Go get my brown pants”.

    I was recently reminded of this story as the first reports started coming in about the weak Black Friday retail store traffic. Shortly after the initial retail reports started coming in, the internet sales volumes were reported, and at surprisingly robust levels.  So the pundits were half right. Sales volumes in total were up, but heavily lopsided towards on-line sellers*.

    How, with all the resources and big data at their disposal, and months of planning did so many experts and retailers get it so wrong?

    How? Because 83% of the sales on Amazon were to third party sellers (as reported by therobinreport.com), and most large retailers don’t participate in Marketplaces. The reason most of large retailers don’t participate in Marketplaces, is the same reason that many consumers are drawn there to shop:

    PRICE

    When online sellers choose to participate in a marketplace (Amazon, Jet, Rakuten, etc.) they commoditize products, and compete almost exclusively on price. Retailers have a much different, and generally higher, cost structure than their online counterparts, and therefore cannot compete solely on price. It then follows that major retailers cannot compete on marketplaces. Unfortunately, it looks like that’s where the shoppers were.

    So despite the huge advancements, and investments, in OMNI Channel infrastructure, technology, customer experience initiatives and web design by most large retailers, shoppers chose to spend their money where they could get the best deal. Interestingly, what the large retailers did not invest in was technology and service providers to help ensure pricing integrity across their assortment. By monitoring which brands were chronically discounted online, they could have steered their assortment into brands that have demonstrated an ability to maintain pricing consistency across channels. In that environment, consumers would have expected to pay the same in store as online. Not coincidently, retailers could have leveraged their customer experience assets to win the sale. Price would no longer have been a part of the equation.

    Regardless of what the reason is, shoppers appear to place a lot more weight on price and 2 day delivery, than the black Friday retail consumer experience.

    A few years ago, the fear was that shoppers would visit retail and buy online (showrooming). This year proved that fear to be misguided. Now retailers are struggling just to get the shoppers in the store. The truth is that the retail landscape is forever evolving. In years past, the major retailers shrugged off the risk of a single product, single brand or single website posed to their business. To continue the metaphor, a single warship. They are now seeing much of their assortment available at much lower prices from an entire armada of online sellers. If retailers choose not to invest in the pricing management solutions in the coming year, then they should probably reach for their brown pants.

     

    *Most of the major retailers have yet to report if e-comm sales, and margins, made up for some, or all, the shortfall in store traffic. Not all retailers break out there numbers by e-comm versus traditional store sales.

     

    David Coleman is the CEO and Founder of Brandoogle (brandoogle.com) and can be reached via e-mail at dcoleman@brandoogle.com. Brandoogle is a supply chain research organization that specializes in the identification, investigation, and remediation of pricing irregularities on the internet. Brandoogle works with both Retailers and Brands to improve margins using a proprietary suite of software and services.

     

  • The Great Showrooming Showdown

    That right. It’s coming. Showrooming is no longer just a minor business nuisance, it’s becoming a life altering change in the lives of traditional brick and mortar retailers. And they’re not taking this change sitting down. They’re coming out swinging. Brands that are involved in Showrooming will be shown the door by their top retail accounts.
    Are you prepared for the showdown?
    We’re all aware of the relatively recent change in pricing transparency that the internet has brought to the lives of consumers. They can now go into retail stores, evaluate products, and from the leisure and comfort of their own home (or mobile phone) purchase the desired product for 40% off what they would have paid at retail, on-line. Great for consumers, bad for retailers and brands.
    Retailers, by and large, have had some difficulty understanding the role that they play in the consumer buying experience since the advent of the internet. Many thought originally that it was just a novelty, and were slow to develop, and dedicate resources to managing this channel. Things have changed. Traditional Brick and mortar retailers now have a much better understanding of the web, and the opportunities and challenges it presents.
    Showrooming is perhaps the single greatest threat most retailers have experienced in a generation. Not since the advent of the Yellow Pages “Let your fingers do the walking” tag line that encouraged consumers to call stores for the best pricing, have retailer seen such a dramatic change in consumer buying patterns. Fingers are still doing the walking, but that’s about the only thing that has remained the same.
    Retailers know that the key to their survival in this new age, is to understand the impact “Showrooming” is having on their business, and then taking actions to address it. In the not so distant future, retailers will determine which brands, and products, they are being showroomed on, and those brands will no longer be welcome in the store’s assortment.
    If you are a brand or a retailer that doesn’t fully understand the extent of showrooming within your business, finding a trusted partner to help you measure this problem is the first step in addressing the problem.
    The Great Showrooming Showdown is coming. Are you prepared?

    Brandoogle is a Showrooming Solutions Company. We help brands and retailers understand, measure and manage their showrooming risk exposure. Software, Services, Solutions…We’re here to help.