Apple’s Insanely Great Idea? Stores.

Scott Galloway: “Apple made this crazy irrational decision 20 years ago to forward integrate into the medium that was supposedly going away. Stores. And they have somewhere between five and six billion dollars in store leases now on their balance sheet and have reallocated capital out of traditional broadcast media, which is declining every day in effectiveness, into the store where people still make physical contact if you will. They still consummate the relationship with the brand at the point of purchase.”

“So you have this temple to the brand which is this unbelievable experience called an Apple Store, and then you have this very mediocre experience called an AT&T or Verizon connect your phone experience for Samsung and the other Android players. The biggest value-creating decision in the history of modern decision: Apple’s crazy decision to forward integrate into stores.”

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Amazon: A Bad ‘Hood For Luxury Brands?

The Wall Street Journal: “Amazon is courting companies across the retail spectrum, but one sector is still mostly holding out: the world’s club of luxury brands. Swatch and others in the luxury industry say Amazon’s online marketplace undermines the strict control they say is key to maintaining a sense of exclusivity—and keeping prices high. While some makers of luxury products have decided to join Amazon, many of the industry’s biggest players—including Swatch, Gucci owner Kering, luxury-watch maker Cie. Financière Richemont SA and LVMH Moët Hennessy Louis Vuitton SE —are staying away for now.”

“The absence of high-end products has hampered Amazon’s push to be a force in the fashion industry, despite years of working to expand the merchandise it sells officially though its website. Adding luxury goods would help Amazon boost margins and build loyalty among customers of Amazon Prime, its premium service favored by higher-income shoppers that offers faster delivery and other perks, according to former executives familiar with the company’s shopper base.”

“One of the biggest worries for these luxury companies: The difficulty of segregating their product listings from the rest of the goods sold through the site. That means a $5,000 suit from luxury Italian menswear company Brioni, a subsidiary of Kering, can appear next to a $200 suit from Kenneth Cole.” Jean Cailliau, executive adviser at Paris-based investment bank Bryan, Garnier & Co., comments: “That contradicts the essence of luxury selling and shopping, where the product is the product also because of its environment.”

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Lidl Effect: So Far, Not Much

The Wall Street Journal: “Since opening its first U.S. store in June, Lidl, the German grocery giant, hasn’t exactly upset the American grocery cart … When Lidl’s first nine U.S. stores opened June 15 in Virginia and the Carolinas, they lured customers away from other grocers, according to an analysis by inMarket, a location-based data firm. But Lidl hasn’t been able to sustain that level of traffic, and grocers including Kroger Co. and Wal-Mart have recovered much of their lost market share, according to inMarket.”

“The timing of Lidl’s U.S. arrival wasn’t ideal. It opened its first stores the day before Amazon.com Inc. surprised the industry by announcing it would buy Whole Foods Market. Supermarkets responded, slashing prices to keep up with growing competition on many fronts while investing in online ordering and delivery. Lidl doesn’t currently have an online grocery-shopping operation in the U.S.”

“Missteps in store location and merchandise have hurt Lidl’s U.S. rollout, consumer analysts say … Other analysts said Lidl stores give prominent display to items that seem geared toward Europeans, whether it is $39.99 cycling shoes or $15.99 badminton sets. Some stores’ produce sections have run low on conventional items while stocking big organic offerings, and in some stores emphasis on wine hasn’t squared with local tastes focused on beer.”

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Walmart Shoppers & Drive-Thru Culture

The New York Times: “A personal shopper is something you might expect at Bergdorf Goodman or a boutique on Madison Avenue. Not at the Walmart on Route 42 in Turnersville, N.J. But that’s where you will find Joann Joseph and a team of Walmart workers each day, filling up shopping carts with boxes of Honeycomb cereal, Cheez-Its and salted peanuts. The customers select their groceries online, and then the shoppers pick the items off the store shelves and deliver them to people when they arrive in the parking lot. Customers never have to step inside the store.”

“Walmart, which is one of the largest food retailers in the United States, sees grocery pickup as a way to marry its e-commerce business with its gigantic network of stores — a goal that has eluded many other retailers. The company started ramping up the service two years ago, and it is now available in about 1,000 of Walmart’s 4,699 stores across the country … Walmart is betting big on the millions of Americans in suburban and rural areas who drive everywhere. The company is trying to make ordering groceries online and then picking them up in your car as seamless as a fast-food drive-through.”

“Walmart is also showering grocery pickup customers with perks — Easter eggs hidden in grocery bags, a “beauty box” for moms at Mother’s Day, dog biscuits and discounts for recruiting new customers. It’s unclear how the company will be able maintain this kind of dedicated service if a store is inundated with pickup orders, which in many stores are free of charge and require an order of $30 or more. Walmart said it had hired thousands of workers to staff the new service across its many stores.”

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CVS & The Prescription Experience

Fast Company: “With the profusion of online pharmacies, CVS realized that to give people a reason to come in, it had to design a better service. A new pill bottle system is just one piece of a larger service-design challenge … hinged upon understanding the user end-to-end, rather than one transaction at a time.”

“CVS realized that one lever it had for creating more customer loyalty was the prescription itself—and how often those prescriptions go wrong. About a third of recurring prescriptions never get filled; of those that do, about one third are forgotten after the first couple refills. CVS’s bet is that a better service can improve those figures, and, in doing so, make patients not only more healthy but better customers as well.”

“The new prescription labels are just a start for a number of things CVS has on its roadmap, including ways to bundle together medications meant to be taken at the same time and an in-home delivery service. But perhaps their most user-friendly aspiration is to redesign the role of pharmacists. Today, they typically spend most of their time counting pills … CVS is working to have better service procedures, in which the pharmacists become a front-line in talking to patients—for example, by giving every patient taking five drugs or more an automatic consultation, which includes talking them through the new prescription schedule.”

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How Whole Foods Steals Walmart Shoppers

Business Insider: “When Amazon’s acquisition of Whole Foods formally went through in August, the e-commerce giant immediately made some changes — most notably, significant price cuts … The biggest source of foot traffic for Whole Foods were regular Walmart shoppers. People who visited Walmart at least twice a month accounted for 24% of new Whole Foods customers the week of the price cuts.”

“Across the board, the customers who defected to Whole Foods from grocery rivals were wealthier than the retailers’ average shopper … Walmart’s regular customers’ average income is $59,264, according to Thasos data; the average income of a regular Walmart customer that is defecting to Whole Foods, however, is $71,697 … While Walmart has aimed for more aspirational customers as Whole Foods cuts prices, Thasos data proves that both retailers are competing for the same shopper: the upper-middle class customer who is increasingly important as wages stagnate for much of the US.”

“All of this means that wealthier shoppers are increasingly influential, forcing bargain-centric retailers like Walmart to expand into more aspirational brands … Walmart is gearing up to cash in on wealthier customers, especially as it expands its e-commerce lines. Whole Foods winning over high-income customers could force Walmart on the offensive in this battle — one that both retailers are determined to win.”

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The Future of Plant-Based Protein

“Look at the dairy category: 14 percent of it now is plant-based, like soy or almong or rice milk. I believe the same could be true for meat. If we get to that meat [department] I believe there’s potential for at least 14 percent of this category to become plant-based.” – Seth Goldman, executive chairman, Beyond Meat, in brandchannel.

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Starbucks Shutters Digital Store

The New York Times: “As customers increasingly shift their retail shopping toward e-commerce, Starbucks is bucking the trend: It shuttered its online store … Maggie Jantzen, a company spokeswoman, said that the decision to shut down the online store was part of a push to ‘simplify’ Starbucks’ sales channels … The company’s chief executive, Kevin Johnson, spoke on Starbucks’ most recent earnings call about a ‘seismic shift’ in retailing. To survive, he said, merchants need to create unique and immersive in-store experiences.”

Starbucks chairman Howard Schultz told investors last April: “Every retailer that is going to win in this new environment must become an experiential destination. Your product and services, for the most part, cannot be available online and cannot be available on Amazon.”

“Starbucks said it would continue to sell branded products like coffee through grocery stores and some online sites managed by its sales partners. But it broke the hearts of some fans by ending retail sales of a cult-favorite product line: flavored syrups. The mixes used to concoct drinks like the Pumpkin Spice Latte are generally not for sale in the company’s stores, but Starbucks stocked them on its website … On eBay, a jug of Starbucks pumpkin spice syrup could be had on Sunday for $100.”

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