Project Pinnacle: Caddy Tests Virtual ‘Test Drive’

Wall Street Journal: “Buyers walking into a Cadillac dealer in the near future could find an interesting thing on the car lot: nothing … Cadillac President Johan de Nysschen will this month begin looking for commitments from some store owners willing to set up showrooms where buyers can get a car serviced or learn about products via virtual reality headsets without getting behind the wheel. Driving off immediately with a new vehicle will be impossible because these stores won’t have inventory.”

“Virtual stores are a part of ‘Project Pinnacle,’ an extensive retail-strategy overhaul by Mr. de Nysschen,” who “is revamping the way the company compensates its dealers by rewarding them less on the basis of vehicles sold … and more on the way those dealers mimic better performing luxury brands with perks such as free roadside assistance. Those who do adopt the virtual model will have tester cars on site, which can be loaned to people getting their car serviced or used in test drives.”

“Auto makers have long flooded dealer lots for two reasons: car companies book revenue on production volumes, not retail sales. An overabundance of output can boost revenue, and the problem can be taken care of later via discounts or production cuts. Car buyers are also used to having ample selection to choose from. Mr. De Nysschen says this isn’t the case with luxury car buyers. He said: ‘I don’t think Hermès or Rolex are famous because they have a sale every month. They have brand cachet’.”

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Loyalty Cards Pivot: From Discounts to ‘Experience’

The New York Times: “Research … shows that while people say discounts are important, they also ‘overwhelmingly say they want special treatment and offers not available to others in a loyalty program’, says Emily Collins of Forrester Research. ‘They come for the perks, but they stay for the experience’ … Sephora’s rewards program offers free samples and tutorials to loyal customers. It has three tiers, and the top spenders are invited to free closed-door events like Beauty Before Brunch, where they receive makeup lessons, discounts and a goody bag.”

“The samples don’t cost much, but are of great value to customers who want the newest makeup and hair products … and store loyalists often share these discoveries on social media, which draws in more customers. And that’s a crucial part of the equation: making sure customers aren’t just loyal, but also loud. Brands rely on them to spread the word far and wide about great loyalty programs.”

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Birchbox Unboxes An In-Box Experience

Bloomberg Business: “Birchbox is famous for cutesy cardboard boxes filled with delicate tissue paper and diminutive samples, the stars of countless unboxing videos on YouTube. But that may not be enough anymore … As it seeks a bigger slice of America’s $16 billion prestige beauty industry, Birchbox is struggling to become a full-spectrum retailer rather than just a precious peddler of monthly subscription boxes … The company is looking for an identity somewhere between the online box business and the retail store, a hybrid that can do battle with traditional beauty retailers and the horde of rival beauty boxes.”

Birchbox’s “New York store is a two-story smorgasbord of beauty products … The goods here are organized by type, not brand, unlike traditional cosmetics areas in department stores and even pharmacy chains. The format encourages shoppers to discover new labels, just as the sample boxes are meant to do. Down the light wooden stairs sits the men’s grooming section, a segment Birchbox added four years ago and a testament to its willingness to seek out new customers and one day become a multibillion-dollar brand.”

“Birchbox is still fighting to be profitable, and it hasn’t received new outside funding since a $60 million round in 2014 … Meanwhile, the move to stores has raised doubts among industry observers about the company’s devotion to the sample box. The very existence of Birchbox’s stores goes against its original pitch as the first beauty seller to do online right.” Co-founder Katia Beauchamp comments: “We really want to change the potential customer for the beauty industry. We want to change her relationship with beauty. She doesn’t have to have this boring, errand, I-have-to-do-this experience.”

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Walmart Moves Upscale To Set Itself Apart

USA Today: “Depending on which Walmart store you choose nowadays, you might do a double take. In a growing number of stores, there’s an entire wall dedicated to organic produce, fresh sushi and a selection of about 50 gourmet cheeses … Forget just having a cold case of packaged deli meats — now there’s a charcuterie section … Roma tomatoes tumble down angled displays that make it easier to see what’s available and honeycrisp apples beckon from farmers market-style crates.”

“These Walmarts are the leading edge of what could become a grocery revolution at the giant retailer … Walmart’s produce and bakery sections are being upgraded to make them more attractive and easy to navigate … Further into the store, the bakery department now has chalkboard-style signs, lower tables that better showcase cakes and cookies, and bread baskets that invoke the charm of a local market … Walmart put department managers back in grocery after having removed many of them to improve efficiency … At the same time, Walmart is ramping up its online grocery service with store pick-up … The service doesn’t require customers to leave their car — a store employee brings out pre-bagged orders”.

“Walmart spokesman John Forrest Ales says many pick-up customers then stay and shop some more … The higher-end feel of its food offering may also attract higher-earning customers who could help increase sales in other areas too … Walmart can no longer rely on its bread and butter — low prices — to set itself apart.”

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Target Store Tests ‘Connected Living Experience’

Engadget: “Last year Target unveiled its Internet of Things ‘Open House’ experiment in San Francisco. The goal was to create a shopping experience that would help customers figure out how connected devices work with each other … Now it’s moving past the testing phase and opening a ‘connected living experience’ in a suburban Minneapolis store … The Minneapolis setup won’t be as elaborate as Open House in San Francisco with its touchscreen tables. Instead it will have large displays above the products that explain how a gadget interacts with other devices. Target will also make sure the staff is up to speed.”

“The store will be the first in what could be a major change to how the retail chain sells electronics … the company has found that its shoppers are confused not only about how these devices work together, but where they’re actually kept in the store. Would a smart thermostat be in the electronics or home section? Putting all the devices together in one spot and creating scenarios that emphasize how a smart light and a connected garage work together not only highlights what’s possible, it helps sell stuff.”

“Target plans on bringing its connected experience to other stores to see how shoppers react. Cupertino, California, and Tribeca in New York City are the next two locations.”

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Big Beer: Off With Their Heads!

Bob Pease, writing in The New York Times: “Today there are more breweries in this country than at any time in history — some 4,300, with scores coming online every year … But state laws usually don’t allow brewers to sell their products themselves; instead they have to use distributors, which hold enormous sway over which beers end up at which bars, restaurants and stores.”

“The problem is that, along with being the world’s largest brewer, Anheuser-Busch InBev is also the biggest beer distributor in the United States. And in several states, the law allows the company to distribute its own beer — and most markets have only one or two distributors. The company has also recently increased its control over the beer-distribution industry by purchasing five independent distributors.”

“Since its merger with SABMiller was announced, the company has bought several well-regarded craft brewers around the country … The enlarged Anheuser-Busch InBev … will have even more power to strong-arm independent distributors not to carry rival brands and exert pressure on retailers to cut back on, or even refuse to carry, competitive brands. And it will have more resources to buy up smaller breweries as they start to feel squeezed out of the marketplace.”

“Recent reports say that antitrust authorities are likely to approve the deal by the end of the month. If they do so without adequate protections, the merger could stifle consumer choice and choke off America’s beer renaissance.”

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Organic Coup: The Costco of Chicken Sandwiches

Business Insider: “The Organic Coup, which is the first USDA-certified organic fast-food chain in the US, just raised $7 million in an initial round of financing led by Costco founder and former CEO Jim Sinegal … The chain, which specializes in fried-chicken sandwiches and chocolate-drizzled caramel popcorn, has two restaurants — one in San Francisco and another in Pleasanton, California.”

One of the restaurant’s co-founders is Erica Welton, a “food buyer for Costco for 14 years before leaving to launch Organic Coup with Dennis Hoover, a 33-year Costco veteran … Welton and Hoover don’t have any prior restaurant experience” but “are modeling the new chain off of Costco in many ways.”

“Organic Coup is paying starting wages of $16 an hour in San Francisco and $14 an hour in Pleasanton. Fast-food workers in the US make $7.98 an hour on average, according to PayScale. The restaurant’s specialty is its spicy fried chicken made from organic, air-chilled chicken breasts fried in coconut oil … The menu is pretty simple. Customers can get the fried chicken with a range of sauces on a bun, in a multigrain wrap, or in a bowl with shredded vegetables … The chain will be adding tator tots to the menu as well.”

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Consignment Retail: What’s Old Is New Again

The New York Times: “Clothing resellers like Material Wrld, Crossroads and thredUP propose to make ‘refreshing’ your wardrobe more joyful, with their own trade-in kits and cash incentives to shop their wares to keep the cycle going. Ethical elimination is a theme (a corollary to ethical consumption). The manifesto of Crossroads, a favorite of college students who worry that their Urban Outfitter discards may end up in a landfill, is that ‘fashion shouldn’t come at a cost.’ Material Wrld aims to alleviate ‘fashion guilt’ with its own promise: ‘We’ll handle yesterday’s fashion so you can focus on tomorrow’.”

“Tradesy is like a dating site for your old clothes: You can post a photo, tell its story and the site will price your garment (a button invites online shoppers to ‘love’ your listings). Move Loot will do the same for your furniture; if a piece sells, the company will handle the exchange and arrange for pickup. So will Lofty, Chairish and Viyet, which sell high-end furniture, decorative items and artwork; curators from Lofty and Viyet will vet your items in your home. The luxury site the RealReal, a favorite of fashion-conscious New Yorkers, trades in artwork, designer clothing and jewelry.”

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Are You Smart Enough for Warby Parker?

The New York Times: “As an aesthetic, antifashion as fashion is annoying and alienating, as many people who are over 40, not particularly slender or less prestigiously schooled can attest when visiting a Warby Parker outlet. There is democracy in a relatively low price, but a sense of exclusion is woven into the gestalt.”

“Are you really smart enough to be shopping at Warby Parker? Have you read even a fraction of the books displayed? It’s dispiriting in a way to see old-fashioned chain stores feel as if they must contort themselves to stay vital in what is becoming an ever more polarized retail culture. A store like Cohen’s never makes you feel like a loser. Maybe it should post that outside of every branch, and declare a social victory.”

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Manhattan Saddlery: The Past as the Future

The New York Times: “When horseback riding was the dominant mode of transportation, equestrian shops were as common as fresh-pressed juice bars are today. East 24th Street was so populated with places to outfit and care for horses that it came to be known as Old Stable Row. Times have changed. And for the city equestrian, a rare breed in itself, the only remaining shop of its kind on Old Stable Row is Manhattan Saddlery.”

“The smell of leather permeates the sprawling two-story shop, greeting customers who arrive looking for saddles, bridles, halters, crops, stirrups and riding pants … Charlotte Kullen was shopping on a recent Saturday, as she does about once a week. At the shop she finds a receptive audience for her latest stories about Asantro, her horse. ‘It was his birthday yesterday,’ she said, displaying photos on her phone of the Dutch Warmblood, an athletic breed often used in competitions.”

Another shopper, Alex Roy, comments: “It’s funny, like any brick-and-mortar shop, if you think about it, you can buy anything they carry online … But you come here to talk to the people and to see the place.”

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