Fancy a Coffee … IKEA ?!

This is not another coffee rant. Actually it is not really about IKEA, well it sort of is , but not exclusively which will probably mean I may hang onto another reader .

It is more about retailers looking at ways of developing their business when they are in a saturated market. Which is where IKEA believes it is. They have , openly , stated that they do not see much growth in their stores situated in developed economies. 

So what is the coffee connection. Well, those of you who spend their Saturday nights partying down at their local IKEA store, will know they all have cafes . But what many will not know is they have opened a stand alone Cafe, called the ‘Dining Club’ in ‘hip’ Shoreditch in East London. This is mildly interesting but what is of particular relevance is that this cafe will host you a dinner party.

They will provide you with a chef who will then help you create a meal for all your friends (up to 20) within the shop. There will be IKEA’s kitchen products on display, but the only real snag is that it will be food prepared  ‘Swedish’ style. It is an experiment and is only being trialled in September, but  is  a good example of a retailer thinking ‘out of the box ‘in a manner that probably does not tread on the toes of many other retailer. Certainly not furniture retailers.

The coffee, the cooking ,  are specifics and have no particular relevance. How I see it as a business that by being creative has developed an idea that involves their customers, the local community and further down the line an additional stream of revenue. It is not just about just cutting prices. IKEA whilst offering very good value has never just been about prices. It has always been a retailer who offered original solutions to modern day living. What other reason would there be from an operation that gives names to  all their products, which are unpronounceable and immediately forgettable.

I am no apologist for IKEA, they have done the same damage to the furniture trade, as Tesco did to food shops, Card Factory to card shops and Poundland to loads of different types of retailers, but they all have one common feature. They all started , no matter how long ago, as a single independent outlet. A key difference is that IKEA  is creative. Not something the others are really known for. 

Creativity is not exclusive to the big boys. In many ways creativity is often hampered within big organisations. Decision making can be drawn out and cumbersome . There are new kids on the block , showing that creativity has a place and a future in retail. Tiger (a Danish company ), started  with one store in 1995 and now has over 550 world wide. What does it sell? Stuff you didn’t know you wanted, don’t need , but at a price that makes you think ….

“That looks different , I must have one …”

Evertyime you go in, there is different ‘don’t need or want stuff’ but it is presented in a way that says ‘buy me’. Well that appears to be the case, I have resisted but many don’t if you look at Tiger’s balance sheet and the queues at the tills.

No retailer has the right to exist, it has to earn that right and that undoubtedly has become more difficult in the last ten years. But there are success stories out there and there will be more. With the McDonald’s machine,commanding the burger fast foodmarket , you would think there were few burger restaurant opportunities left. Well, the biggest growth in fast food in the U.K., during  the last 5 years,has been ‘gourmet burger’ restaurants.

I don’t know much about the ‘act of being creative’, Julia will attest to that. But I can, sometimes, recognise the results. It applies to all types of retail , from the necessary to the unnecessary. With it won’t guarantee success but will help enormously on the way, without it , the future will be an even greater struggle.

Spoilt for choice….or are we?

There is rarely a day that passes without some part of the media bellowing on our how much choice we all have . If you go into a coffee shop and are faced with the bewildering list of possibilities that are available to imbibe in your daily dose of caffeine, you would be forgiven for believing it. The humble sandwich , needs a spread sheet to calculate your bread requirement  …

Hi Guys, would you like rye, granary, white, brown, seeded, gluten free, seedy white, seedy brown, roll, bread, panini , baguette, focaccia, wrap or flatbread ….

God forbid if you are having a coffee and sandwich for lunch. If you ain’t decided before you go in, you ain’t going to be popular with your fellow lunchers  standing behind you in the queue. When you have got the bread and coffee figured out , you’ve got the filling to choose.

just some more to choose from…

Having said all that, within the UK the coffee retail market, it  is dominated by two brands , Costa and Starbucks. It’s a bit like computers, there is a bucket load of different types but they way they operate is dominated by two brands Apple or Microsoft. Not much choice there, then.

Well that’s food  and drink . Travel is another area where the level of choice has developed exponentially. Oh and I have been told that there are a lot more varieties of drugs around today. However, on a more mundane back to everyday life, I suspect that our level of choice  is not as great as we think it is.

Today’s national High St chains , select,primarily, on maximum earnings per ‘sku ‘ ( stock keeping unit) . Which is what you would expect , as they are there to make money. But the reality is that this invariably means a reduction in choice. Quite simply major retailers will not stock items that don’t  earn their keep and that means if two ‘sku’s’ of the same product earns more than one of a much demanded product and one of a lesser demand, then the same products idea wins out every time. The other key component is that if a supplier has only one or two terrific items , it is very unlikely they will see the light of day, especially with multiples as they all have the very strange notion , created by accountants, that it is too costly to list a supplier for a small number of items. Show me the evidence that listing a supplier for one item, where in reality that one item could create high volumes and good margins, would not out way any notional increased cost , then I would give you historical evidence to the contrary.

Everyone will have favourite products that they struggle to buy. Julia and I like liquorice allsorts. For a couple of years we struggled to buy them. Fortunately , the truth has been uncovered and retailers have found a demand as they are to be found in every supermarket and most petrol station forecourts! Winners all round ! We are happy and the retailers are happy. However , that’s the good news. In the very same outlets , you will find  two, sometimes three metres or more of confectionary, where there will often be doubling , if not tripling of ‘sku’s’ of the same  products, restricting consumer choice. 

It could be said that online operators now offer that  greater choice. Many online businesses have been started on the model of offering items that are not easily found on the High St. And there you have one of the biggest ‘ ‘. But that isn’t all that it is cracked up to be as they have their own selection procedure. In my opinion , one of the criteria must be stuff you don’t need and probably didn’t think you needed until you saw it on their web site. 

More relevant is that a lot of the big online  players are adopting similar policies to that of High St retailers and that is selecting product only on the basis of volume and margin. The rational is very similar, the cost of adding product to the site is now very high. The big exception is, of course, Amazon, who tries to sell everything. Who is it that strikes fear and loathing into every retailer’s heart, why, of course, Amazon!

Now if I were to relate this to the Party market, it would not be difficult. Many of the online players are focusing on a limited number of high volume items , but with little margin. Many of the U.K bricks and mortar party retailers, much restricted by the lack of space, as they tend to be quite small in terms of square footage tend to repeat the pattern but for different reasons. They require high volume products, but many offer exactly the same product from the same suppliers as everyone else . Apart from lack of space , other rationale exist such as not knowing what is available and conservative (small ‘c’ I hasten to add) thinking.

The success of independent ‘niche’ retailers in other markets suggest that there are alternative ways. Take the confectionary chain Mr Simms Olde Sweet Shop. They started in 2004, with one shop, growing throughout the financial crisis, to where they are now  with one hundred.Principally, they offer choice, where choice has not always been made available. Very little of what they stock would have been considered high volume or even branded product.

The problem with choice is that there is a bit of a dichotomy . What the consumer would like to buy does not always match up with what the retailer wants to sell . Don’t be taken in by the major players continually bleating on about the ‘customer is king’ . That is a half truth. 

Ultimately, we, consumer or retailer, all have choices to make. It is just perhaps that choice is not always quite as great as it is cracked  up to be.