Online operators….all that is glitter is not gold…

Anybody who thinks that putting their unwanted Christmas pressies online and making a fortune , need think again. Well not quite true ‘cos if they cost you nothing , you will make something. That’s if you sell them. You, then, have to think if you don’t want them, why would anyone else? Ten years ago it may have been different . You still wouldn’t have made a fortune, but you would have probably made something.

The pattern is similar for online retailers. Five years ago they would have made good, relatively, easy money. It is a very different story today. There are few bricks and mortar retailers, in any market that would not say when asked ….I am being affected by online traders…In the U.K. online accounts for nearly 19% of all retail expenditure (world’s highest percentage). This means that for every £100 that used to be spent in shops ,£20 is now spent online. What is more , now £11 out every £100 is spent via a mobile device.

Retail life is very different. Online retail is even more different. There are a number of major issues, now facing online operators, that have arisen within the last five ‘plus’ years.

Stand alone web sites that were successful in the early days are now struggling against much bigger competitors who have much deeper pockets. A reality that is little different for any retailer.

The costs to market have dramatically increased. To keep yourself in front of your consumer has become a very expensive exercise. Furthermore, it is constant. The investment for back office structures and technology is high and constant as the technology changes , virtually daily, and becomes increasingly costly.

The costs of service have risen dramatically as have the consumer expectation. Today, the consumer expects next day delivery, 24 hour customer service and more often than not free or very low delivery charges.

The World Wide Web is exactly that. Your online competitors maybe based in Bristol or Beijing.

And of course, the elephant in the room , Amazon (and to a lesser extent eBay ). Let’s not forget that the elephant has been an extraordinary enabler for many successful online businesses. Starting over twenty one years ago, growing exponentially year by year, but in reality not really coming onto the radar in a more general sense until ten to twelve years ago, Amazon has become a retailing ‘behemoth’. Through the next six/seven years they developed their market place putting the consumer, very much at the forefront of their focus. Amazon suddenly became a huge cash generating machine and big players ignored them at their peril. Now few can afford to ignore the beast. Quite literally, there are few parts of our everyday life that their tentacles do not reach.

Being a huge cash generator does not necessarily equate to profit. Far from it. As a legitimate operator it is extremely difficult to create a working margin, especially with low priced items. As many will tell you, if your product costs you ‘zilch’ you would be hard pressed to earn any money on any item retailing for £2-2.50 . After commission, VAT, postage and operating costs there is nothing left . Yet items still appear for less, which is why I used the word ‘legitimate’ traders.

Therein, lies a further obstacle..non legitimate traders. I would rather not use the term illegitimate, as many are on the ‘edges’. Much of what they do may not be strictly illegal but is highly questionable. Because of the ‘world widelyness ‘ of the web it makes it very easy for these traders to dip in and out of whatever market they like, virtually with impunity, with little chance of any authority having the resources or inclination to investigate.

Amazon, itself, whilst panned for paying minuscule amounts of tax, for many years made no profit at all, it was all ploughed back into the business. Closer to home, Ocado, the UK’s leading online grocery site, established over seventeen years, took over ten years before making an operating profit.

What to do? There is no doubt that online will continue to harvest an increasing share of the retail market. But what is also true is that within the next two-three years that market place will be very different to that of January 2018. The technology will continue to develop, logistical challenges will increase , the consumer perception and expectation will change, costs are likely to increase and margins will be squeezed further. The latter is quite simply the continuing cycle of any retail development.

I am not expecting bricks and mortar retailers to shed any tears. However, there are many who think that all online operators are ‘thieving gits!’ or as one customer very recently said in a rather more restrained manner ‘the authorities should stop Amazon and anyone who sells on them…as they are ruining everyone’s business ….’

I have no doubt that within ten years ‘traditional online retailers’ will be bemoaning the fact that their business is being desecrated by ‘dronetailers’ who are sending ordered product down to a device around your wrist(no it won’t be a watch because that will be imbedded into your other wrist) which will 3D print your order within ten minutes….and then replace it every 12 months with an updated version…or, maybe someone will get a building, fill it full of stuff and get people to come along and buy the stuff….don’t bet against, Amazon aren’t.

The problem with glitter is that most of it gets blown away or hoovered up….

Traditions….what are they? …and are they of any use?

Over the last 18 months many have expressed their dismay at the demise of many of the UK’s traditions. Apparently many of these have been lost to outside influences and there is a desire to reclaim them.

What exactly are these traditions? And more to the point why are they being missed ? It maybe a lazy technique but I feel the burning urge to list some of those that have gone..

  • Bear baiting
  • Cock fighting
  • Persecution of catholics
  • Persecution of Protestants
  • Colonialism
  • Serfdom
  • Slavery
  • Lousy pub food
  • In many cases, lousy beer, as well
  • Criminalisation of homosexuality
  • Bastards (in this case-illegitimate children)
  • Duelling
  • Child chimney sweeps
  • Unchecked child abuse
  • Kids working in coal mines
  • Corporal punishment within schools

I am in no position to judge what is good or bad, yet all of the above would have been active for extended periods of time during the last six centuries, some , obviously, would have been more recent than others. I am in no doubt that there would be some who wished a number of the items in the list were more prevalent today.

The type of traditions that I prefer to reflect upon are

  • Bog snorkelling
  • Queuing
  • Humour
  • Tolerance
  • Cream teas
  • Believing a ‘cuppa’ is best first response to any problem(despite now being a nation of coffee drinkers)
  • Politeness
  • Innovation
  • Irony
  • Creativity
  • Honesty
  • Independent
  • Democracy
  • Supporting the underdog

Some of these maybe over egging the point , but many have a dewy eyed view that Britannia was one big pool of milk and honey , from which everyone drunk. It was never so, far from it.

“Whatever!” Referring to a more recent verbal tradition …”what has this to with the price of bread?”. A lot as it turns out.

Very recently, within our local shopping parade , a bakery has just closed . This Baker was part of a small chain that was first established about 65 years ago. For many years it was the ‘go to’ bakery and even made and supplied Winston Churchill’s 80th birthday cake (perhaps more to do with him being the local MP) . However, during the last ten to fifteen years it failed to adapt. It relied upon the wrong traditions (thinking customers wanted more of the same), failed to invest, innovate and create. The product was just not good enough, the staff were poorly paid and poorly trained . It allowed its customer base (it is the perfect customer base for high end, high margin artisan style baking) to go elsewhere.

On the flip side, Julia and I have just spent a weekend in 14 century house(hotel), where the owners have managed to develop a modern successful business, by combining over six centuries of tradition, with 21st century techniques, through investment, creativity and innovation.

All organisations, big or small gain, from looking at traditions, and learning from them . What traditions should be discarded and what traditions help shape and develop their future . The usefulness of a tradition can be defined as to whether its continuation, or reintroduction is to the future development of an organisation or that of society.

Know your customer!or lose them….?

Handing over my customary packet of biscuits (2 this time, nothing to do with Christmas, but will come back to that later) and the customer responded

Thanks, it surprises me that the majority of our suppliers don’t understand what they need to do to get an order ….

We, then, had a discussion about knowing your customer. I have to point out that this is the only customer to whom I give a packet of biscuits anytime let alone every time . Moreover, if I didn’t do it all it would not effect the level of business I get from this particular customer but the rationale underlines the need to knowing the customer. This knowledge is probably one of the most important part of any business , especially within retail and at every level of the chain.

For many years retailers have invested vast amounts trying to find out more about their customers. Whether it be via market research, focus groups , consumer panels, loyalty cards, and more recently ‘algorithms’. Yet, I believe they all have their failings . The first three, plus other similar techniques are flawed in many ways. They are an artificial construct. They are driven by the information the retailer asks for , and they work on relatively small samples. Admittedly ,these samples are then subjected to statistical analysis but as we all know with political polling this is a science that is not a particularly accurate one . Consumers or customers of any sort are prone to respond to questions and discussions in a very different way when not faced with real decisions.

Great example of market research being ignored

Market research indicated that consumers would never buy sony’s Walkman cassette player that didn’t have the capacity to record and users would be irritated by the use of earphones. The Walkman went on to sell 330 million units.

I strongly believe that algorithms plus massive data analytics, whilst being very powerful tools, have a degree of unreliability built in, because they rely on patterns . We, as humans, very often make decisions that are not the consequence of patterns or that pattern may not actually relate to the apparent purchaser. My Amazon order history is a case in point.

I would suggest that Amazon’s analytics would offer a number of potential profiles such as

  • Married with young family
  • Married with older children
  • Married with with grandchildren
  • Married with no children but has wider family
  • Married with no children but close friends with children
  • Any of the above with eclectic music and reading habits, plus outdoor recreational interests

The truth none of them are really comes close to an accurate customer profile relating to me or my purchasing preferences.

The point I am trying to make is that no matter who or what (organisations) you are aiming to trade with , you have to engage with them. Which is why many organisations are looking at the way they relate to the partners in their particular chain. I have always questioned the rational behind most multiple retailers policy on not letting the buying departments develop relationships with their supply chain. It says more about their inability to train and trust good professional buyers as opposed to a patronising, and insecure view that every buyer is going to be corrupted by the evil temptations laid before them by suppliers . As a consequence it leads to a lack of real product and market knowledge within certain product sectors . I believe that many of them are now paying the price.

Steve Jobs of Apple used to quote Henry Ford ….

If I had asked my customers what they wanted, they would have said ‘faster horses’

Apple use a technique called ‘ethnography ‘, which translates into watching how people react to product in their stores. Now there is very little actual selling activity within their stores. It seems to be more about interacting with the consumer and getting to know more about them.

With all this accrued data, they then create product that the consumer didn’t know they needed. That surely is really knowing your customer.

I go back to the 2 packets of biscuits . I bought 2, not because it is Christmas but because I like nuts. For the infrequent visit to our biscuit tin(actually sealed plastic container) I try to ensure there is a biscuit with nuts, despite our visiting daughter having a nut allergy , they are there for me. However, I know that the majority of the staff at this customer prefers chocolate. On proferring both packets on my arrival , the chocolate pack was politely whipped from my hand…

Thanks very much that one will do nicely , you can have the rest …

Not quite ethnographic, but I try to know my customer…