Word of the Day: Convenience

Tim Wu: “Convenience is the most underestimated and least understood force in the world today … In the developed nations of the 21st century, convenience — that is, more efficient and easier ways of doing personal tasks — has emerged as perhaps the most powerful force shaping our individual lives and our economies. This is particularly true in America, where, despite all the paeans to freedom and individuality, one sometimes wonders whether convenience is in fact the supreme value.”

“Convenience has the ability to make other options unthinkable. Once you have used a washing machine, laundering clothes by hand seems irrational, even if it might be cheaper. After you have experienced streaming television, waiting to see a show at a prescribed hour seems silly, even a little undignified. To resist convenience — not to own a cellphone, not to use Google — has come to require a special kind of dedication that is often taken for eccentricity, if not fanaticism.”

“For all its influence as a shaper of individual decisions, the greater power of convenience may arise from decisions made in aggregate, where it is doing so much to structure the modern economy. Particularly in tech-related industries, the battle for convenience is the battle for industry dominance … The easier it is to use Amazon, the more powerful Amazon becomes — and thus the easier it becomes to use Amazon. Convenience and monopoly seem to be natural bedfellows.”

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Is Gucci Today’s Most Innovative Brand?

From a Wall Street Journal interview with Imran Amed, founder of Business of Fashion: “Without a doubt, the single most innovative brand of the moment is Gucci … Gucci has completely overhauled their e-commerce strategy and changed the way they communicate about the brand. They’ve embraced new channels like Instagram but also done beautiful events and interesting advertising campaigns.”

“They’re not doing any discounting on their main runway collection … We’ve kind of trained the consumer to wait for things to go on sale. Gucci’s stopped that. Fifty percent of their customers are millennials. Millennials are the drivers of success for the fashion industry now. Without engaging them, you can’t really operate a successful business today. Gucci has found ways of engaging with that consumer.”

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Efficiency Is No Cure for Phony Baloney

The Wall Street Journal: “Over the past 2½ years, thousands of workers lost their jobs, and iconic Kraft buildings, including the original Oscar Mayer headquarters in Madison, Wis., have been shuttered and sold. The cost-cutting project is now wrapping up, giving Kraft Heinz Co. the highest operating profit margin among its peers in the U.S. food industry.”

Troy Shannan, Kraft Heinz’s head of North America supply chain, comments: “We look at pretty much any opportunity we have to drive efficiency. And we use the savings from those efficiencies to reinvest in our brands and our businesses and back into our supply chain.”

“Still, Kraft Heinz is grappling with a problem that can’t be solved by increasing efficiency: U.S. sales of cold cuts and other processed meats slipped to $21.3 billion last year, from $21.9 billion in 2015. Oscar Mayer’s market share dropped to 17.5% from 18% five years ago, according to Euromonitor. Natural and organic brands, as well as small labels buying from local farms, have nibbled away at sales. ‘Consumers are looking for something they think is handmade or looks handmade,’ said Chris Fuller, a consultant to meat processors.”

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Bad Apples Spoil Bean’s Return Policy

Business Wire: “It used to be that customers could bring back items bought at L.L. Bean’s stores and online any time they felt it didn’t live up to their expectations. The guarantee covered the item’s full lifetime. Now, the policy extends for one year only. After that, customers can only return an item if it proves defective. In another change to the policy, customers will also now need to provide a proof of purchase for a return or exchange.”

“L.L. Bean relayed the news to customers in the form of an emailed letter from Shawn O. Gorman, the company’s executive chairman and great-grandson of founder L.L. Bean. In the letter, Gorman wrote that it was people who took advantage of the generous return policy that forced the company’s hand.”

He wrote: “Increasingly, a small, but growing number of customers has been interpreting our guarantee well beyond its original intent. Some view it as a lifetime product replacement program, expecting refunds for heavily worn products used over many years. Others seek refunds for products that have been purchased through third parties, such as at yard sales. Based on these experiences, we have updated our policy.”

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Sportsneakers: Performance Shoes Trip Up

Quartz: “As sneakers have grown into the everyday footwear of choice—even in the office—for millions of Americans, performance shoes have been pushed aside by styles that co-opt their looks and comfort but shed their athletic intent … In 2017, sales of performance shoes dropped 10% to $7.4 billion, while sales of sport leisure sneakers grew 17%, reaching $9.6 billion.”

“Some brands have capitalized better than others. While Nike is by far still the king of the US sneaker market, Adidas has made significant gains in the US by delivering the fashionable, athletic-inspired shoes shoppers want. Nike has a deep roster of these styles, but its newer shoes, such as the Epic React Flyknit, still emphasize performance.”

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Purchase Brands vs. Usage Brands

Harvard Business Review: “Where traditional brands focus on positioning their brands in the minds of their customers, digital brands focus on positioning their brands in the lives of their customers. Furthermore, they engage customers more as users than as buyers, shifting their investments from pre-purchase promotion and sales to post-purchase renewal and advocacy.”

“Purchase brands focus on creating demand to buy the product, while usage brands focus on creating demand for the use of the product … Purchase brands emphasize promotion; usage brands emphasize advocacy … Purchase brands worry about what they say to customers; usage brands worry about what customers say to each other … Purchase brands try to shape what people think about the brand along the path to purchase; usage brands influence how people experience the brand at every touchpoint.”

“The simple view would be that traditional brands are purchase brands and digital brands are usage brands. But there are exceptions, including brands like Visa, FedEx, Lego, and Costco, which exhibit many of the characteristics of usage brands … They think of customers less as one-time buyers and more as users or members with an ongoing relationship … Purchase brands focus on the ‘moments of truth’ that happen before the transaction, such as researching, shopping, and buying the product. By contrast, usage brands focus on the moments of truth that happen after the transaction, whether in delivery, service, education, or sharing.”

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Profits Eat the App-etite for Delivery Services

The New Yorker: “In 2016, delivery transactions made up about seven per cent of total U.S. restaurant sales. In a research report published last June, analysts at Morgan Stanley predicted that that number could eventually reach forty per cent of all restaurant sales, and an even higher percentage in urban areas and among casual restaurants, where delivery is concentrated. Companies like GrubHub maintain that the revenue they bring restaurants is ‘incremental’—the cherry on top, so to speak, of whatever sales the place would have done on its own.”

“They also argue that delivery orders are a form of marketing, exposing potential new customers who might convert to lucrative in-restaurant patrons. The problem is that as consumers use services like Uber Eats and Seamless for a greater share of their meals, delivery orders are beginning to replace some restaurants’ core business instead of complementing it … And, as delivery orders replace profitable takeout or sit-down sales with less profitable ones—ostensibly giving restaurants business but effectively taking it away—the ‘incremental’ argument no longer holds.”

“DoorDash, an Uber Eats competitor, has started to experiment with leasing remote kitchen space to restaurants so that they can expand their delivery radii. If such practices catch on, it’s easy to imagine a segment of the restaurant economy that looks a lot like, well, Uber, with an army of individual restaurants designed to serve the needs of middle-man platforms but struggling to make a living themselves.”

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How IKEA changed the shopping experience

The Washington Post: IKEA, “which has 412 locations in more than 40 countries, has become an international empire. Its sprawling stores with their tortuously winding routes have continued to thrive in an era of hurried online shopping. Analysts say Ikea has been successful in not only getting shoppers to linger for hours, but also getting them to come back, over and over, whether for mattresses or meatballs.”

Warren Shoulberg, a consultant, comments: “Before Ikea came along, furniture shopping was a laborious task that a lot of people dreaded because they felt like they were making a decision they had to live with for 30 years. Then Ikea showed up and said, you can buy something and use it for a couple of years — or you can keep it longer — but this isn’t necessarily something you’re going to pass down to your kids or your grandkids. That was a remarkable transition.”

“The retailer has also been successful, he added, in creating a shopping destination. Traditional furniture stores may line up all of their sofas in one section and beds in another, but Ikea displays items by room, so shoppers can see how different pieces might look together … Its success has also given way to a cottage industry of businesses that specialize in assembling Ikea furniture. Ikea itself has gotten into the fray: In September, it purchased TaskRabbit, a start-up that providers contractors for odd jobs, to appeal to a generation of time-strapped consumers who want Ikea furniture without the hassle of assembling it.”

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