‘Amazon Charts’ Re-Define ‘Best Seller’

The New York Times: Amazon now tracks “not only the top-selling digital and print books on Amazon, but the ones that customers spend the most time reading … With its lists, Amazon aims to redefine the notion of a best seller, expanding it to include books that are ‘borrowed’ from its e-book subscription service, and ones that are streamed on Audible. As a result, the lists give increased visibility to books that might not typically appear on other best-seller lists.”

“All of Amazon’s acquisitions and new features are having a cumulative effect, allowing the company to draw on its vast customer base and troves of data to discover what is popular, and return that information to customers, creating a lucrative feedback loop … Crowdsourcing and data mining are also driving the company’s approach to its bookstores, which act as showcases for books popular with customers on the site. While the stores have traditional categories, like fiction, nonfiction and travel, the most eye-catching shelves feature categories culled from Amazon’s customer data.”

“The first thing customers see when they walk into the store is a large display table, labeled Highly Rated, which includes books with an average rating of 4.8 stars or higher on a scale of 5 … Another display case, labeled Page-Turners, features books that people finish reading on their Kindle in fewer than three days … Another section features the most ‘wished for’ books from Amazon’s website … The books are all displayed face out. Under each book is a card with the average customer rating, the number of reviews and a featured review from an Amazon reader. Displaying the full cover of each book mimics the visual look of Amazon’s website, and might lure customers to unfamiliar titles.”

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Algorithmic Retail: Beyond Dynamic Pricing

The Wall Street Journal: “Advances in A.I. are allowing retail and wholesale firms to move beyond ‘dynamic pricing’ software, which has for years helped set prices for fast-moving goods, like airline tickets or flat-screen televisions. Older pricing software often used simple rules, such as always keeping prices lower than a competitor.”

“These new systems crunch mountains of historical and real-time data to predict how customers and competitors will react to any price change under different scenarios, giving them an almost superhuman insight into market dynamics. Programmed to meet a certain goal—such as boosting sales—the algorithms constantly update tactics after learning from experience … The software learns when raising prices drives away customers and when it doesn’t, leading to lower prices at times when price-sensitive customers are likely.”

“Algorithms can also figure out what products are usually purchased together, allowing them to optimize the price of a whole shopping cart. If customers tend to be sensitive to milk prices, but less so to cereal prices, the software might beat a competitor’s price on milk, and make up margin on cereal.”

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Two Buck Chuck: What Makes it So Cheap?

Business Insider: “Trader Joe’s wine is remarkably cheap. A bottle of the grocery store’s most popular wine brand, Charles Shaw (aka Two Buck Chuck, made by Bronco Wine) sells for less than $3.” What makes it so inexpensive? #1: “Most of the company’s vineyards are located in California’s San Joaquin Valley, where the cost of land is much cheaper than the more prestigious Sonoma or Napa Valley … Higher average temperatures in San Joaquin Valley can over-ripen grapes, which is a main contributor to the price difference between the regions.”

#2: “The company ferments wine with oak chips, which are cheaper than barrels.” #3: “The company uses … a mold of cork pieces glued together with a ‘real cork veneer at the bottom’.” #4: “Making wine in huge quantities keeps production costs low … The company uses machines to harvest the grapes, which helps keep labor costs low, but also increases the chances that bad grapes end up in the wine … Critics argue that mass production is also how animal matter can end up in your wine glass. But to be fair, there’s a chance of that happening with most agricultural products.”

#5: “Bronco cuts shipping costs by using lightweight bottles and cheap cartons … The lighter glass reduces the weight of a case of wine by several pounds, meaning Bronco can ship more wine at a time. Bronco also lowered the cost of its shipping cartons by a few pennies by replacing the white paper it was using with a light brown paper.”

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Redbro Chickens: Slow Growth, Better Taste

The New York Times: “Perdue Farms, one of the country’s largest chicken producers, has been raising what are known as slow-growth chickens side by side with the breeds that have made the company so successful. The new birds, a variety known as Redbro, take 25 percent longer, on average, to mature than their conventional cousins, and so are more expensive to raise.”

“Perdue is trying to find just the right slow-growth breed, and it has a strong incentive: A fast-growing cohort of companies that buy vast quantities of poultry, including Whole Foods Market and Panera Bread, are demanding meat from slow-growth chickens, contending that giving birds more time to grow before slaughter will give them a healthier, happier life — and produce better-tasting meat.”

“Consumers would … have to accept some trade-offs: While the new chickens have a fuller flavor, their meat tends to be distributed differently over the body, with more generous thighs and smaller breasts than the chicken most Americans are used to … In marketing slow-growth chickens, Perdue and others will have to make consumers understand why they are paying a higher price … the suggested retail price of a Sonoma Red (from Perdue’s Petaluma Poultry) that weighs four pounds is $16.”

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Whole Foods: Now Just Another Big Box?

The Wall Street Journal: “Whole Foods Market Inc. wants to cut prices without sacrificing the local products that define its healthy image … Some smaller suppliers and industry consultants say the shift to a more centralized distribution structure and other changes risk compromising Whole Foods’ ability to keep stocked with the latest foodie trends and hot local brands.”

“Many of the changes are being spearheaded by Don Clark, a former Target Corp. executive … The data analytics, centralized purchasing and strict shelf management he brought from Target could save money that Whole Foods can use to lower its relatively high prices … Whole Foods has long divided its 462 stores into 11 regions, each with distinct product offerings like local maple syrup and gourmet pickles. A quarter of Whole Foods shoppers that visited the chain in the past month did so for items they couldn’t find elsewhere, according to a survey by Kantar Retail.”

“Whole Foods co-founder and Chief Executive John Mackey said … his new strategy strikes a balance between the remaining autonomy of regional executives and an easier process for national brands to pitch their products just once at Whole Foods’ Austin, Texas, headquarters. That streamlining will lead to lower prices, he said … But smaller brands and people who work with them say they have less incentive to put up with a more impersonal Whole Foods … And some big brands say Whole Foods’ regionalized approach made it tough to negotiate a nationwide strategy for their brands.”

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Neiman Markups: Out of Fashion

The Wall Street Journal: “Once upon a time, all Neiman needed to do to lift profits was raise prices. That model has since fallen out of fashion … competition from startups like Farfetch.com and Matchesfashion.com are forcing more discounts. Over a recent 24 hours, Farfetch’s prices averaged 2% lower and Matchesfashion’s 15% lower than Neimanmarcus.com’s prices on 32 identical items, according to price-tracking firm Market Track LLC.”

“While brands still exert control, particularly over the newest and most popular items, it is harder for them to police prices that change rapidly across websites and fluctuate with shifting exchange rates, industry executives said … The explosion of discount chains, led by T.J. Maxx , that sell designer brands at cut-rate prices also made consumers rethink the need to pay full price. To compete, high-end department stores rushed in with their own off-price chains—Neiman’s Last Call, Saks Off 5th and Nordstrom Rack.”

“Neiman’s Chief Executive Karen Katz … championed a line of specialty stores called Cusp, which Neiman opened a decade ago, that feature lower-priced clothing and accessories. Neiman stores also have added relatively less expensive goods, such as $700 Prada handbags … Ms. Katz reduced snob appeal by allowing Neiman shoppers to use Visa and Mastercard … Neiman has invested heavily in e-commerce … Not all the moves have worked. After building six Cusp stores, Neiman closed two and stopped development of the chain in 2012.”

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Yes Plz: Locol Coffee Good & Cheap

The New York Times: “Is it possible for high-quality coffee to be inexpensive? At Locol, the self-described ‘revolutionary fast food’ chain opened last year by the chefs Roy Choi and Daniel Patterson, the answer is yes. Locol’s stated mission is to bring wholesome, affordable food to underserved neighborhoods … Obtained and roasted according to the same lofty standards found at … any of the small, innovative companies that have transformed the high end of the industry in the past decade, Locol’s coffee is clean and flavorful.”

“But unlike those shops, where a cup can cost $3 or more, Locol charges just $1 for a 12-ounce coffee, or $1.50 if you want milk and sugar. Rather than offer free condiments and pass on the cost to all customers, those who want milky, sweet coffee pay for their pleasures, while drinkers of black coffee get a break … Locol is rolling out a coffee brand called Yes Plz and plans to eventually open coffee windows and stand-alone shops in addition to supplying its three locations.”

Tony Konecny of Locol comments: “Coffee still thinks that mass appeal is a sign of selling out and inauthenticity, but everybody wears Levi’s. I think contemporary coffee has failed to find the consumers it should be finding.” He adds: “What we know about coffee sourcing, coffee roasting, coffee brewing, coffee service — there’s really no reason why you couldn’t make the coffee at every bodega taste good.”

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Tom Dixon, ‘Delaktig’ & The Future of Furniture

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The New York Times: With his design for an Ikea bed that is both durable and hackable, Tom Dixon is “trying to make a radical point: that Ikea, the Swedish furniture giant known for beds and dressers that are so inexpensive they are often perceived as being disposable, could manufacture a collection of affordable, heirloom-quality pieces to last a lifetime … Even more remarkable, the bed has built-in channels that allow it to be modified by users and customized with headboards, night stands and other non-Ikea add-ons”.

“Loosely inspired by D.I.Y. Ikea hacking sites and plug-and-play app culture, the transformable bed is part of a new Ikea concept called Delaktig, which will be unveiled at the Salone del Mobile design fair in Milan next week … Mr. Dixon also plans to make upscale components under his own brand, which may include marble side tables and headboards, Moroccan-style pillows, lamps and a kit for a curtained four-poster bed.” He comments: “The measure of success is if you manage to get a whole ecosystem around this platform. Then it takes on a life of its own.” Ikea aims to start selling Delaktig next February, and Mr. Dixon hopes it will have a starting price of about $400.”

“Despite its grand ambitions, when Delaktig is shown in Milan next week, it will be only one part of Mr. Dixon’s presentation … Mr. Dixon will offer film screenings, talks and a Johnnie Walker bar, and present his many creations in a series of shops, including a haberdashery with his first collection of pillows and throws, a chandelier store with his latest lighting collection, a perfumery of scented goods for the home and an antiques shop where his now classic designs will mix with other vintage goods.”

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JetBlue’s ‘Mint’ Does Not Cost One

The Wall Street Journal: “A lie-flat bed on a long flight used to be the ultimate perk, something fliers would pay up for. Now it’s a discount luxury.A new kind of business class has been pioneered by JetBlue’s Mint cabin on transcontinental routes … The affordable upgrade has been so popular, formerly all-coach JetBlue is now flying Mint seats from Boston and New York to the Caribbean as well as Los Angeles and San Francisco. It’s also announced expansion to San Diego, Seattle, Las Vegas and Fort Lauderdale.”

“This is not aviation’s version of a knockoff handbag. With Mint, the prices are lower but the recline remains fully flat, the pillows and duvets still soft. Service may lack some frills, but the airline still offers amenity kits with eyeshades and lemon towelettes … What’s most prized among savvy fliers are the Mint suites. On each side of the A321, JetBlue puts two seats in a row, then a row behind with just a single seat on each side. When seats fold down, the legs of the single passenger are tucked between the two passengers in front. The single passenger has a sliding door, creating an enclosed suite. The four suites cost the same as the 12 other business-class seats and usually get booked first.”

JetBlue EVP Marty St. George comments: “The biggest complaint is the single seat sells so fast.” Meanwhile, Mint’s success has forced other airlines to lower their business-class fares.

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