5 Ways Best Buy Beats Amazon

The New York Times: “Best Buy’s rebound has been surprisingly durable. Revenue figures have beaten Wall Street’s expectations in six of the last seven quarters … How do they do it?” Highlights from a conversation with Best Buy CEO Hubert Joly: 1) Price. “Price-matching costs Best Buy real money, but it also gives customers a reason to stay in the store, and avoids handing business to competitors.” 2) Humanity. “The associates in our stores are much more engaged now, much more proficient,” Mr. Joly said.

3) Showcase & Ship. “Mr. Joly realized that with some minor changes, each of Best Buy’s 1,000-plus big-box stores could ship packages to customers, serving as a mini warehouse for its surrounding area … Best Buy also struck deals with large electronics companies like Samsung, Apple and Microsoft to feature their products in branded areas within the store. Now, rather than jamming these companies’ products next to one another on shelves, Best Buy allows them to set up their own dedicated kiosks … Even Amazon has set up kiosks in Best Buy stores to show off its voice-activated Alexa gadgets.”

4) Quiet Cuts. “Under Mr. Joly, Best Buy has used the scalpel as quietly as possible … he has never announced a huge, public round of layoffs, which can crater employee morale and create a sinking-ship vibe.” 5) Luck. “It’s lucky that the products it specializes in selling, like big-screen TVs and high-end audio equipment, are big-ticket items that many customers still feel uncomfortable buying sight unseen from a website. It’s lucky that several large competitors have gone out of business, shrinking its list of rivals. And it’s lucky that the vendors who make the products it sells, like Apple and Samsung, have kept churning out expensive blockbuster gadgets.”

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Houzz & Poshmark: Killing It Against Amazon

Axios: “How can you do something different from Amazon, like having professionally-generated content? Houzz is a perfect example, offering expert-curated products and help for people looking to remodel part of their home. Amazon just isn’t geared to build that sort of community. Or a company like Poshmark, where you have lots of users sharing and selling what’s in their closet. A lot of them have become influencers because other users like their style.”

“It’s what Pinterest should have done with commerce but didn’t. Amazon sells clothes, but it sells them like it sells a PC or a phone. Fashion is about having different parts that go well together, which means curation.” [Excerpts from an interview with Venture capitalist Hans Tung]

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Dollar Stores Offer More Than Just Bargains

The New York Times: “As dollar stores have proliferated across New York City, they have provided not only bargains for shoppers, but also jobs and livelihoods for a new generation of immigrants … These immigrants say the dollar stores are a step up from the restaurants and factories that have long sustained the city’s newcomers, but offered grueling schedules that left workers little time to spend with their families. Their dollar stores are often stocked with reminders of their own homelands as well as of their friends and neighbors, from guava juice and curry pastes to hot peppers and Goya canned beans.”

“But even as some dollar stores have found a niche in a diverse city, others are struggling as they increasingly compete for customers with other dollar stores — often steps apart on the same block — and face rising rents and operating costs. In recent years, they have also had to contend with national chain dollar stores, which once stayed away from the city but have now moved into many neighborhoods, as well as online retailers like Amazon.”

“Across New York, there were 1,247 variety and dollar stores in 2015, up from 1,002 stores in 2005, according to an analysis of census data by Queens College. Brooklyn had the most, 469 , followed by Queens, with 355, and the Bronx, with 224.”

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Public Hotel: Ian Shraeger’s Airbnb Killer?

The Wall Street Journal: “Stroll into Public, a full-service, 367-room hotel that opened this summer on Manhattan’s Lower East Side, and it quickly becomes apparent that certain features are nowhere to be found … Guests check in via a series of self-service tablets along a wall, where they can find their reservations, create their own room keys and proceed up an elevator to their rooms. If questions arise, they’re answered by a handful of roving, jack-of-all-trades staffers known as ‘Public advisors’.”

“These cost-cutting efficiencies are all part of an attempt by Ian Schrager, the veteran hotelier and night life impresario who owns Public, to fight back against Airbnb Inc. on behalf of the hotel industry, which he believes hasn’t properly assessed the challenge posed by the tech upstart … he aims to better compete with Airbnb on nightly rates and offer superior amenities such as bars and other places to socialize … Mr. Schrager’s new concept fuses a sprawling bar and restaurant operation onto the property, deriving revenue and profits from amenities that are meant to attract a much larger crowd than just the hotel’s guests.”

“Bjorn Hanson, a clinical professor at New York University’s hospitality program, said Mr. Schrager’s concept flips the traditional role of food and beverage in hotels. Rather than being a less-profitable service that a hotel must provide as an amenity to guests, Public’s food-and-beverage offerings are meant to be a centerpiece that can ultimately drive more room occupancy, he said … The hotel’s rates officially start at $150 and increase during high-demand times, such as fashion week. In early August, rates started at $250, with some last-minute online rates as low as $180—well below the rates of upscale, full-service Manhattan hotels, which typically range higher than $500.”

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Stores as Experiences: Back to the Future

The Atlantic: “The funny thing about stores-as-experiences is that, even as a notion that is shaping retail’s future, it also represents a return to its past.” Tracey Deutsch, a professor of history at the University of Minnesota, comments: “Apple might be interested to know that the first post-WWII malls often used similar rhetoric about public squares. Victor Gruen, who designed Southdale (the first indoor mall) and who really created the look for many of these shopping centers, saw himself as creating new public space.” Gruen based his vision on “the ancient Greek Agora.”

“In the 19th century, the creators of early department stores, too, were attuned to the experiences of shoppers, particularly the middle- and upper-class women they catered to. Deutsch notes that these stores had cafes and tea rooms in which customers could rest, along with plenty of attendants to help carry any purchases.”

“The journalist and historian Marc Levinson offered another historical precedent for experiential retail … the Great American Tea Company, which set up a coffee-roasting plant in Manhattan’s Greenwich Village in 1865, aimed to dazzle people walking by with its sights and smells. (Levinson says the idea was inspired by the spectacle of P.T. Barnum’s nearby American Museum, which displayed live animals and freak shows.) Levinson comments: “A few years later, the company … played up its supposed connection with Chinese tea growers by painting its stores in vermillion and gold leaf, adding Chinese wall hangings and oriental lanterns, and turning the cashier’s station into a pagoda. Customers were meant to experience a bit of China as they bought their tea.”

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Simply Goodwill: Like It Used To Be

Forbes: “Goodwill Industries of the Valleys is testing a new type of store format, called Simply Goodwill, in Roanoke, Virginia, where the idea originated … Simply Goodwill is more like ‘what a Goodwill store once was,’ says Kelly Sandridge, vice president, marketing and public relations, Goodwill Industries of the Valleys in Virginia.”

“Shoppers have to hunt more for items in their size on racks of like items. Standard prices are listed for categories of items, rather than affixing individual price tags to everything, and 100% of the merchandise is donated – no new goods are brought in … Prices at traditional Goodwill stores have children’s clothing starting at $1.99, adult clothing starting at $3.79 and other wares – such as kitchen and office appliances, glassware, and toys, priced independently. At Simply Goodwill, children’s clothing starts at $1.00, adult clothing starts at $2.75, and other wares have standard price points on many items.”

Says Sandridge: “Simply Goodwill is currently a concept store that our Goodwill is testing.If it continues to be well-received, we will look to potentially replicate it in other areas of our territory.”

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LaCroix: The Essence of Effervescence

The Wall Street Journal: “The makers of LaCroix sparkling water go to great lengths to explain what isn’t used to create the beverage’s 20 flavors. There are no calories, no sugars, no artificial ingredients, no castoreum, no genetically modified organisms and no added phosphoric acid, according to the company. LaCroix nutritional labels contain only zeros. LaCroix is less forthcoming about what is actually inside its ubiquitous neon cans. The company says the flavors, such as peach-pear and pomme bayá, are derived from ‘natural essence oils’.”

“Essence is, essentially, the mystery behind a billion-dollar brand. As cases of LaCroix pile up to the ceiling of grocery stores across the U.S., die-hard fans admit they don’t have a clue what’s inside—and don’t care, either … Ask LaCroix executives for a definition of essence and you may receive something short of a clear response. ‘Essence is our picture word,’ LaCroix spokesman Rod Liddle said in a written response to questions.” He added: “Essence is—FEELINGS and Sensory Effects!”

“Essence isn’t defined in U.S. Food and Drug Administration regulations, an FDA spokeswoman said … Essence is created by heating at high temperatures the skin, rinds or broken down remnants of fruits or vegetables. Alcohol is sometimes added to the mixture. The vapors that rise off the stew are captured, condensed and eventually sold by the 55-gallon barrel … The LaCroix spokesman didn’t pour cold water on that interpretation, but wouldn’t provide cut-and-dried details of its manufacturing process.”

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Truth to Power: Tesla Flips The Switch

Quartz: “In 2016, Tesla sold two different versions of their Model S and X electric cars. One version had a 60 kilowatt per hour battery, and another a 75. The 75-kilowatt version cost $9,000 more. Prior to Irma’s landfall, Tesla announced that it would flip the proverbial switch, and allow the 60-kilowatt cars to become 75-kilowatt cars. This enabled the 60-kilowatt vehicles to go 230 miles per charge, rather than 200 … Tesla was able to upgrade the kilowattage in the cheaper version of the car because both models actually have the same 75-kilowatt battery. The company just chooses to limit the capacity in some cars so they can have two different price points.”

“The response to Tesla’s decision has been mixed. While some observers congratulated the company for proactively reacting to the impending storm, others were disturbed by the revelation that the company could so easily increase the capacity on their cars. If the battery could be more powerful without any extra cost to Tesla, ask critics, why deny this capability to certain drivers?”

“The answer: Limiting battery capacity actually makes Teslas more affordable. The extra $9,000 that Tesla gets from its less price-sensitive customers is what allows it to charge a lower price for the lesser version of the car, the one that more cost-conscious consumers might purchase (though of course anyone purchasing a $60,000 Tesla is not poor). Perverse as it may seem, having a version of the car that gets less mileage actually makes it more accessible.”

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Quote of the Day: Paul Misener

“At Amazon, we have a lot of experience with failure. We have failed many times — some very public, colossal ones, some private. But we are failing and we will continue to fail. Many times we will fail going forward, I’m confident of that.” ~ Paul Misener, vice president for global innovation policy and communications, Amazon.

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