Nordstrom does it again...

Nordstrom is legendary for great service…. this is the retailer who will take back almost everything and standardized "the walk around" to hand off purchases at the cash wrap. It's no surprise then that Nordstrom's new website, launched last Saturday, is brimming with thoughtful details that put the customer first. Users can now search through products with ever more detailed screening options in every category. Following the mantra that "content is king" the site is building out a section rich with articles and video that feature archetypal customers and their favorite products.

What may be most important change on the site is one you can't see… the inventory policy. While it may sound boring, it's a minor revolution in the retail world that Nordstrom has been linking their stores' inventory with the website. Most web-storefronts treat inventory as wholly separate from stores… hence, a shortage on the website might lead a customer to shop a competitor even though the desired product is on the shelf at one of the stores. It's incredibly hard to implement, but by coordinating inventory between site and store, stores reduce overages, inventory holding costs and markdowns – all the while delighting customers.

As the New York Times reported this morning, the results for Nordstrom's bottom line have been powerful…. Inventory turns are at five-year highs and the company continues to deliver strong profits in a challenging retail environment.

Mary J. Teaches Marketers a Lesson

Back in May, I wrote about the lame launch of Hermès new fragrance, Voyages d'Hermès. Their abstract, expensive and artsy campaign for a difficult to understand product category did not yield much of an online audience. Getting customers excited about fragrance before product trial is really difficult. So how do you successfully launch a fragrance if web 2.0 marketing strategy aren't effective?

Last weekend, singer Mary J. Blige offered the beauty business a powerful marketing lesson… showing that a potent combination of celebrity, insomnia and a good story goes a long way. Blige launched her scent, "My Life," on the Home Shopping Network (HSN) at midnight on Saturday and proceeded to sell 72,000 bottles in 24 hours, a HSN record. At one point in the day, HSN's servers crashed due to sales volume. Blige's personal narrative of triumph through struggle struck a chord with home shoppers, who called in and shared their own stories before buying the fragrance. Strong narrative is a powerful tool often overlooked in launching new products.

The success of the launch seems to have caught everyone off guard – HSN, industry watchers and even Ms. Blige were overwhelmed by the response. My guess is you'll start seeing Coty running this playbook before the end of this year.

Rise of the Precision Consumer

Two weeks ago, American Express Publishing and marketing consultants at the Harrison Group released the 2010 Survey of Affluence and Wealth in America. The report details changes in the spending habits of wealthy consumers since the beginning of the Great Recession. This latest survey is an excellent indicator of long-term effects of the contraction, since consumers have emerged from their foxholes and are spending again.

One important trend documented is the emergence of wealthy "Precision Consumers." Whereas four-five years ago, these folks loosened their wallets in every category – from apparel to electronics to autos, spending liberally on everything. The Precision Consumer is still interested in luxury products but is better researched and more careful to purchase. They spend liberally in select categories where they feel luxury delivers value and fulfills explicit needs and wants.

This week, a MasterCard Advisors Spending Pulse report showed further evidence of the rise of the Precision Consumer. Spending in the electronics category is growing while apparel spending growth is stagnant. Of course, if you saw the lines outside of Apple stores last month, you didn't need to read a bunch of spending surveys to come to the same conclusion.

Are the Rich Like Us?

As retailers fight to get customers back into stores, prognosticators have hoped the high-end of the market would be the first resume spending. Even though luxury's core wealthy customers have not been as hard hit as aspirationals, there is more evidence that the return to old spending habits is a long way off. The highest end of the market continues to cut back spending in all categories. Maybe the rich really are like the rest of us.

Why is this? Well, wealth (like everything) is relative. Even though it's hard to muster sympathy, in high end real estate markets, the lower end is suffering. Foreclosures and short-sale blues are hitting these consumers just as in middle class markets – one in seven mortgages over $1 Million is seriously delinquent. Last week, the New York Times wrote about the spike in payment delinquencies and short-sales in Los Altos, CA, where the median home price is $1.5 million. Note to Los Altos: Palo Alto is snickering at you.

Luxury retailers are adapting to more careful customer behavior. More customers are making multiple visits to stores before deciding on a purchase. These consumers are not only planning purchases more prudently but waiting for possible discounts and prolonging the thrill of the purchase. Neiman Marcus is one retailer retraining associates to work with customers within the longer sales cycle.

I spoke with one customer who related her story of shopping at Ralph Lauren in Atlanta. She fell in love with an evening gown at the store, but wasn't ready to bite at the $6,000 price point. As soon as the dress was marked down to $2,000, the sales associate called her personally and she was ready to buy. Just like us? Relatively.

Retailers inspire customers to spend more and return less

Summer is in high gear and innovative retailers are exploring ways to make customers feel better about spending, maintain loyalty to their brands and reduce merchandise returns. Here's a rundown of some newer initiatives…

• Several retailers are experimenting with stricter return policies. J Crew's summer sale is now the "Final Sale"… all sales are final. Prior to the recession, upscale retailers almost always accepted exchanges and returns – even on clearance merchandise. However, as inventories are more closely monitored by Wall Street, the final sale is becoming a more common move.
• Store loyalty programs are offering more attractive benefits to bring in new customers. Just as Back to School is rolling out, Target is offering Redcard holders a 5% discount on everyday purchases – this is on top of the 10% one-day signup discount. Expect to see several more store charge cards offer similar programs during Holiday.
  
• Sam's Club, Walmart's warehouse store for small business, is running a novel experiment to stimulate spending. The store is offering club members affordable loans in conjunction with the Small Business Association to stimulate enterprise growth. While the company will be lucky to break even on the loans themselves, it is betting that when club members' businesses grow, so will Sam's Club.

Luxury Marketing 101

For a luxury brand to develop its customer base, it must build awareness.  But sometimes, high consumer awareness undermines goals - a brand can upset or drive away core or likely customers. 

I find this 2X2 helpful for understanding why a brand appeals to certain consumers, which is a good place to start devising marketing and partnership strategy.  I divided awareness on two axes: the vertical axis represents mass-consumer awareness and the horizontal is awareness among likely and current luxury customers. 

In the upper right-hand quadrant, you’ll find brands that are instantly recognizable.  These brands make big statements.  It’s no wonder that the brands playing in this space appeal especially to consumers who are be a wee-bit ostentatious...  They like driving a Mercedes that everyone knows is luxury. 

Quadrant 2 contains luxury brands for whom mass awareness is unappealing – but its still very important that luxury consumers understand and identify the brand.  Bottega Veneta derives much of its brand strength by creating the perception of discreteness.  A signature weave, never a logo, makes a subtle but clear statement to peers.

Some brands thrive in relative obscurity... lower left-hand quadrant contains brands that are regional or for luxury connoisseurs.  These customers derive a great deal of satisfaction from being in on a brand-secret and might be upset if it becomes too well-known… even by peers.  John Lobb would have a hard time making customers covet $4,000 shoes without this sort of proposition.

Why would a luxury brand ever want to have low awareness by likely customers and high awareness among a mass audience?  Even if it did make sense, I’m not sure it’s possible.

Luxury Brand Marketing Strategy

For a luxury brand to develop its customer base, it must build awareness.  But sometimes, high consumer awareness undermines goals - a brand can upset or drive away core or likely customers. 

I find this 2X2 helpful for understanding why a brand appeals to certain consumers.  It’s a good place to start devising marketing and partnership strategy.  I divided awareness on two axes: the vertical axis represents mass-consumer awareness and the horizontal is awareness among likely luxury customers. 

In the upper right-hand quadrant, you’ll find brands that are instantly recognizable.  These brands make big statements.  It’s no wonder that the brands playing in this space appeal especially to consumers who are be a wee-bit ostentatious...  They like driving a Mercedes that everyone knows is luxury. 

Quadrant 2 contains luxury brands for whom mass awareness is unappealing – but its still very important that luxury consumers understand and identify the brand.  Bottega Veneta derives much of its brand strength by creating the perception of discreteness.  A signature weave, never a logo, makes a subtle but clear statement to peers.

The third and lower left-hand quadrant contains brands that are regional or for luxury connoisseurs.  These customers derive a great deal of satisfaction from being in on a brand-secret and might be upset if it becomes too well-known… even by peers.  John Lobb would have a hard time making customers covet $4,000 shoes without this sort of proposition.

Why would a luxury brand ever want to have low awareness by likely customers and high awareness among a mass audience?  Even if it did make sense, I’m not sure it’s even possible.

Burgers and Gays

France has long been a testing ground for mass marketers in the United States because of its more manageable size and due to its higher demographic diversity. This week, McDonald's launched a television spot targeting the large segment of LGBT consumers. What is now known as "The McDonald's Gay Ad" is a trial balloon to see if a similar campaign in the U.S. is possible.



The commercial is a little depressing. There are no burgers or shakes to be seen, the music is weepy, and the whole thing conjures up a very uncomfortable association for LGBT people – the time immediately before we come out to our parents. For many LGBT people, this is the most painful time in life. Why would McDonalds choose to highlight this period to build rapport with a new segment?

Bill O'Reilly weighed in with his two cents in his predictable bombastic fashion. In the same breath he compared gay people to Al Qaeda he predicted, "I guarantee you that will not run here." Bigotry aside, a boycott is not something McDonald's hopes to inspire with their ads. There must have been countless marketing execs involved in creating the spot: weighing in, poring over brand message and images and ultimately watering down the ad's impact.  The company took obvious pains to only imply homosexuality – the young man at the center of the ad is on the phone with his sweetie and the raciest thing he says is "I miss you too." Pretty tame stuff.

One melancholy ad does not a test make – especially for the world's largest burger shack. Hopefully, McDonald's will try out several different versions before deciding on a go or no-go to the U.S. My advice?  Next time, try something a little more peppy.

Grocery Shopping in Paris

I had grand plans for food shopping during my time in France. The romance was irresistible: I love the idea of walking down the street with my canvas tote and loading it with farm-fresh vegetables, meats and cheeses al fresco. The reality is that I'm not that guy… I cook for one, my cooking centers more on efficiency than pleasure and my kitchen is better suited to an RV than an apartment. Thus, I've explored the frozen food aisles of grocery stores more than street markets.

All of the grocery stores in Paris are compact, but usually offer a terrific variety of frozen foods, cheese, wine and cured meats. You won't find a broad selection of American brands in any of these stores. Even though the Institut Louis Pasteur is just across the river, France doesn't look kindly on Pasteurization or over processed foods of any kind.

Here's my rundown of the French grocery chains:

Franprix:
The convenience factor plays heavily into my shopping here – there's a store right across the street from my apartment. The selection in all categories is limited, however the prices are usually quite good, especially for meats. They have a decent selection of frozen foods although the fresh produce looks a little tired. With the good prices comes a big tradeoff: inferior quality. Regularly, I see less than fresh chicken for sale. 

Monoprix: This is France's answer to Target. On the ground floor you'll find house wares, apparel, electronics, stationery and sporting goods. Upstairs (or down in some locations) you'll find the grocery section. Prices are decidedly higher than at Franprix, but so is variety and quality. Monoprix's selection of fresh seafood is lame, but their prepared foods (salads & sandwiches) are the best of the bunch.

Carrefour City: I was super-interested to shop Carrefour, because it has been competing so aggressively against Wal-Mart in the Asian market. Carrefour was – hands down – the best place to shop in Bangkok. In Paris, too Carrefour City is my favorite of the stores – they have great selection, high quality fresh foods and a well-priced private label. What I noticed most was that the look of the store was so put-together, the lighting is soft and the walls are painted a dark grey which combine to highlight the product.

Leader Price: This is the bottom of the barrel in terms of price. Much like Aldi, this is a limited assortment grocer that sells only their store brand. This can be an excellent store for budget shoppers and folks looking for packaged goods. It is a lousy place for fresh food of any kind: meats, cheese & produce.

Wal-Mart's Fashion Sense

The only time I can recall buying clothes at Wal-Mart was when I was driving my grandparents' car to Palo Alto from their home in Las Vegas. St. Frances of the Highway, the patron saint affixed to the sun visor, did not protect that 1984 Mercury Topaz from suffering a blowout midway between Barstow and Baker. My sister and I were stranded for hours in the middle of the Mojave Desert with only the clothes on our backs. Once we got ourselves towed to Barstow, we pulled into the parking lot of a Wal-Mart Super Center, where the tires were changed (all four) and my sister and I picked up the things we needed to spend another night. In addition to toiletries, I purchased socks, underwear and a clean t-shirt and thanked the heavens for Wal-Mart.

It seems I'm not alone in avoiding Wal-Mart for clothes. WWD published an interesting article yesterday on the many strategies the company has attempted to kick start their apparel business.

"Even as the world's largest retailer powered through the Great Recession while its competitors stumbled, apparel lagged while food and areas such as consumer electronics soared. And the problem has only become more intense now that the economy has begun to recover and Wal-Mart's competitors are closing the gap.

Wal-Mart is well aware of the weakness. Vice chairman Eduardo Castro-Wright last month said the retailer's apparel business was "below expectations and continues to be a work in progress" as the company reported a 10 percent increase in profits to $3.32 billion in the first quarter ended April 30 on a 5.9 percent rise in sales to $99.85 billion, although same-store sales in the U.S. dropped 1.5 percent.

Contrast Target Corp.'s first-quarter results, which reflected a 2.8 percent jump in same-store sales. Target reported a 29 percent increase in first-quarter net income, driven by higher sales of more profitable categories such as clothing."

One reason apparel customers may stay away is the perceived compromise a customer makes when shopping for clothes at Wal-Mart. In order to get the great price, they have to accept tier-two brands and a lower level of fashion. This might be a perfectly fine trade-off in categories where outward appearance and social acceptance play less heavily (grocery, electronics, housewares.) But for clothes – brands and trend matter deeply. In contrast, Target doesn't ask customers to compromise… customers can find top brands, on-trend private labels and brand extensions of top designers.

How do you think Wal-Mart can turnaround their apparel business?