The Draw of Brick-and-Mortar in a Digitized Retail Landscape
Consumers might be purchasing more on mobile, but there’s still a place for in-store shopping, according to a new, global survey.
Long live brick-and-mortar. A study conducted by Mood Media confirms that in-store shopping continues to have a place in today’s retail market, though its role might be shifting. Consumers are increasingly visiting physical locations for instant gratification and entertainment, the study revealed.
The research aimed to understand why consumers choose brick-and-mortar over online. To gather the results, Mood Media polled 11,255 consumers over the age of 18 in nine countries, including the U.S., China, Australia, Germany, the Netherlands, Russia, Spain, the U.K. and France.
The main factor drawing shoppers to physical stores? Experiences. “Seventy-eight percent of consumers globally cited touching and trying items as a top reason for shopping in-store — 87 percent of Russian consumers strongly agreed. Seventy-two percent of Americans cited this as the main reason for visiting a brick-and-mortar.”
Consider the approach of men’s wear brand, Bonobos’ to keep inventory overhead low and bolster omnichannel shopping. When attending a store — or “Guideshop” locations as Bonobos coins them — shoppers are presented with new styles, discern their preferred fit, interact with a brand stylist and then have the selected purchase directly delivered.
While Bonobos sets to amplify omnichannel, it might be missing the mark of the second highest reason that shoppers keep it classic and shop brick-and-mortar: instant gratification. “In every country, instant gratification was the second most cited reason for shopping in-store versus online,” said the report. “Sixty-six percent of Americans say the convenience of getting [their purchase] instantly is a top reason for shopping in-store.”
This especially applies to Generation Z shoppers — quick deliveries and immediate purchases strike a chord with these speed-driven consumers. “Among Gen Zs, the majority still prefer visiting stores to make their purchases,” said Accenture’s “Gen Z and Millennials: Leaving Older Shoppers and Retailers in Digital Dust” report.
And though Generation Z and its older cohorts, Millennials, are shifting a chunk of their product perusal online, nearly half of those polled still refer to physical locations to discover a new product. “Forty-eight percent of consumers globally cite discovery as a top three driver [to brick-and-mortars],” said the report. Forty-eight percent of U.S. consumers prefer to mine new finds in-store.
China is the only outlier in this segment — 21 percent said discovery is a main factor in visiting a physical store. Instead, shoppers in the region name atmosphere and experience as a top three factor in deciding to shop in-store instead of online.
Even though much of the industry is turning toward automation for external and internal operations, consumers still value human interaction. “While the brick-and-mortar industry talks a lot about bringing more online technology into the off-line space, consumers point out that we can’t forget about the value of the store associates,” the report said. “Twenty-six percent of U.S. shoppers list being able to speak with a shop assistant as a top reason for choosing a store over online.”
Curating an atmosphere that’s inviting and entertaining will best keep shoppers once they’re in the door. “One in five consumers around the globe choose to shop in-store versus online for the enjoyable atmosphere,” said the report. This requires that the ambience is, well, enjoyable.
Start with playing music that resonates with the brand — but more importantly, the consumer. “Eighty-three percent of Americans — and 78 percent globally — say they like hearing music when shopping in-store,” the report said. “This figure rockets to 91 percent among those 18 to 24.” Not having music can cultivate an adverse reaction. The report noted that shoppers commonly feel disappointed, disengaged and unwelcome when in a silent store.
Maximizing on a shopper’s good mood can translate directly into revenue increases. The better the mood, the more likely one will impulse-buy, said the report. “Thirty-seven percent of U.S. consumers say that feeling in the right mood drives them to make impulse purchases,” said the report.
What’s even more impactful than a strong playlist? Discounts and promotions. “Fifty-four percent of U.S. consumer say that discounts and promotions drive them to make impulse purchases,” said the report. Spain was the region most influenced by special deals – 72 percent said that they were drawn by these initiatives.
It’s not all rosy, however. Long lines and items being out stock were the top frustrations across the board. Mood’s survey found that globally the top frustrations were waiting in line (60 percent), an item or size being out of stock (47 percent), too busy or hectic atmosphere (43 percent), staff unable to assist (33 percent) and store hours being inconvenient (22 percent).
Brands and retailers that frame mobile as a tool instead of a threat will benefit. The majority — 55 percent — of global consumers use their phone while shopping. “The Chinese are the heaviest users of mobile devices when shopping,” said the report. “Seventy-two percent of Spanish shoppers use their mobile device when shopping and 53 percent of all Americans say they use their phones when out shopping.”
U.S. consumers most frequently compare prices on their smartphone when shopping in-store — 83 cited this as a top reason for using their mobile while shopping. “Eighty percent use their mobile phones for product information. Seventy-eight percent use their mobile to search for store promotions,” said the report.
By tapping into shoppers’ emotions through a cultivated and comprehensive atmosphere that reduces commonly encountered friction points such as long lines or unhelpful store associates, consumers will be more inclined to purchase — and visit again.
Brussels in late effort to tighten rules limitng off-exchange trading
European Commission seeks to limit trading on dark pools by closing loophole
Brussels is making a late attempt to shut a loophole in new share trading rules that authorities fear could be used by some banks and proprietary traders to conduct more business away from public stock exchanges.
The European Commission published a proposal late on Tuesday to tighten its definition for investment firms that transact customers’ deals on their own account, fewer than 200 days before the rules are due to come into effect at the start of 2018.
Its late intervention to change the Mifid II markets legislation marks a renewed effort to prevent what regulators fear is a plan to circumvent new rules designed to bring most off-exchange share trading back on to stock markets.
Although the rules have been more than six years in the preparation, policymakers have in recent months become concerned some banks and high-frequency traders will take advantage of what Brussels on Tuesday described as “an ambiguity” in the wording of the new rules.
They have raised concerns some banks and high-frequency traders will create private electronic networks to trade shares. That would run counter to the spirit of Mifid II, which is designed to push most off-exchange business away from so-called dark pools and bank trading desks.
The arcane point has become a divisive one in the industry. Some banks and high-frequency traders have spent months and millions of pounds preparing new technology for the rules and described regulatory tinkering as trying to solve a “problem that doesn’t exist.”
Brussels said on Tuesday its late proposal was “in light of alleged nascent industry initiatives”. It wants to use a fast-track legislative process known as an delegated act to amend its definition of “systematic internaliser”(SI), the legal bracketing for these investment companies.
The status grants exemptions from rules on minimum quoting and trading increments — or tick sizes — that encompass exchanges. Standards on trade reporting are also eased. Many banks, proprietary high-frequency traders and electronic market makers are expected to convert their legal status to an SI.
The Commission’s proposed definition is seeking to ensure that designated companies do not conduct “riskless” business in which they immediately offload business that they take on to their accounts. An underlying principle of the status is the company’s investment capital is at risk.
But lawyers pointed out that the new proposals still lacked clarity, especially over the length of time in which it could be argued the investment firm’s capital was at risk. Privately, some high-frequency traders planning to convert to an SI said the new definition would not change their approach.
Brussels’ new proposals come less than three months since the European Securities and Markets Authority issued guidelines to the trading rules in an effort to fend off what it saw as “potential loopholes”. The short timeframe available meant Esma turned to resolving the issue by publishing a series of technical documents.
Market participants will have four weeks to respond to the commission’s proposals.
London property recovery helps Berkeley enjoy 53% jump in profits
High-end housebuilder Berkeley Group has defied a slowdown in its key London market to push up pre-tax profits by 53 per cent, beating expectations.
On Wednesday the FTSE 250 group reported profits before tax of £812.4m for the year to the end of April, saying “the housing market has stabilised in London and the southeast” since a knock resulting from the Brexit referendum.
However, it added that “we are facing a number of headwinds and a period of prolonged uncertainty” resulting from factors including Brexit, global instability and a tougher tax regime for buy-to-let landlords.
The group sold 3,905 homes during the year, up 3.4 per cent from a year earlier, and pushed up its average selling price by 31 per cent to £675,000. Forward sales at the year end were down 16 per cent from a year ago to £2.74bn.
Total dividend payouts were down 2.6 per cent to 185p as the group shifted its policy to devote some cash to share buybacks instead.
The group dropped out of the FTSE 100 index last year on shareholder fears about the London property market. Since then it has branched out into Birmingham and has now bought its first site there, where it will develop 400 homes.
It said earnings for the next year were set to be at least level with this year, and reiterated earnings guidance that it would bring in at least £3bn of pre-tax profit in the five years to April 2021.
Amazon Launching Try Before You Buy Service
Prime Wardrobe will ship style to shoppers’ homes for free and add in a discount for buying at least three pieces.
Amazon’s moved the e-commerce fashion fight from the doorstep to in front of the bedroom mirror, launching a beta test for Prime Wardrobe.
With the new service, which was revealed today but has not yet launched, Amazon’s millions of Prime members can order fashions to try on at home, keeping only what they want. The service offers over a million items across women’s, men’s and kids and gives shoppers seven days to try them on at home. Returns can be left at the front door, where the box will be picked up.
Prime Wardrobe will include styles from Calvin Klein, Levi’s, Adidas, Timex, Theory, Hugo Boss, Lacoste, J Brand, Milly, Parker and more.
There is no minimum or fee beyond Prime membership and shipping is free both ways — making good use of the logistical might Amazon’s been spending heavily to build. Shoppers get a 10 percent discount for keeping three or four items and a 20 percent discount off five or more pieces.
The web giant described it as, “The fitting room that fits into your life.”
Amazon’s taking a page from players such as Stitch Fix, which has been gaining steam and grew revenues to $730 million last year by letting users try on looks at home. While Stitch Fix uses a combination of artificial intelligence and full-time stylists to recommend looks tailored for each user, Amazon brings to the table its massive scale, logistics expertise, aggressive stance and nearly endless supply of funds. Amazon has also been working on ways to recommend looks to shoppers.
Since the dawn of e-commerce, shoppers and retail experts have said stores have one big advantage — the product in real life to touch and feel and try on. If Prime Wardrobe takes off, that advantage would lessen, leaving retailers scrambling all the more. Already, stores of all stripes are struggling mightily to figure out the right combination of online and store to serve the needs of shoppers.
Amazon is not afraid to experiment and has been working hard to find the right fit in fashion. Last year, it launched an livestreaming shopping show akin to HSN or QVC, but shut down the effort this spring.
It is also getting directly into retail now, with a $13.7 billion deal to buy Whole Foods.
Louis Vuitton Gets Block Against Amazon Sellers in Knock-off Case
The luxury fashion house won the first round in a new fight against counterfeiters worth more than $60 million.
Louis Vuitton won the first round in a new multimillion-dollar fight with more than two-dozen alleged sellers of counterfeit product operating through Amazon.
A Florida federal judge granted a demand for preliminary injunction by the storied luxury fashion house, which will prevent about 30 Amazon store operators from continuing to do business while trademark infringement litigation winds its way to resolution. The case against the sellers is likely worth in excess of $60 million.
Louis Vuitton has approximately 15 separate trademarks covering its popular monogram design, its checkered damier design and various styles of the brand’s initials and name, all of which it claims are being used, in one form or another, on various counterfeit items being sold on Amazon, including leather goods and cell phone cases.
When Louis Vuitton in late May filed suit against the sellers, it sought the injunction in order to stop them from not only selling purportedly counterfeit merchandise, but to stop the defendants from simply quitting one Amazon store and registering another selling the same goods.
The house also said in its complaint that the accused sellers are mostly based outside the U.S., but they’ve provided false or “misleading” information to the online marketplace in order to remain anonymous “for the sole purpose of engaging in illegal counterfeiting activities” which targeted the U.S. market.
“Defendants’ Internet-based businesses amount to nothing more than illegal operations established and operated in order to infringe the intellectual property rights of Louis Vuitton and others,” the brand said in its complaint.
Louis Vuitton went on to note that the symbols used on the alleged knock-offs are “exact copies” of its trademarks and said they’re being used “with the knowledge and intent that such goods will be mistaken for the genuine high quality goods offered for sale by Louis Vuitton.”
Moreover, the sellers are engaging in online marketing and search engine optimization strategies for their fake Louis Vuitton goods, the brand said.
“Defendants are causing concurrent and indivisible harm to Louis Vuitton and the consuming public by depriving Louis Vuitton and other third parties of their right to fairly compete for space within search engine results and reducing the visibility of Louis Vuitton’s genuine goods on the World Wide Web, causing an overall degradation of the value of the goodwill associated with the Louis Vuitton Marks, and increasing Louis Vuitton’s overall cost to market its goods and educate consumers about its brand via the Internet,” the company added.
With that, Louis Vuitton asked the court to permanently bar the sellers from counterfeit activities and to order Amazon and any other applicable marketplace web site to permanently take down any listings of counterfeit Louis Vuitton merchandise and stop fulfilling any orders for those goods.
Louis Vuitton is also seeking $2 million for each counterfeit product sold and asked that any payment services, including Amazon Payments Inc. and PayPal Inc., be ordered to restrain any funds linked to the accused sellers for the payment of any judgement.
U.K.'s Aviva Selling About GBP1B of Tobacco Co. Assets: Reuters
Aviva selling ~GBP1b of bonds and shares it holds in tobacco companies, Reuters reports.
- Aviva decided to sell holdings in Nov., has been divesting since, though not selling tobacco investments made on behalf of third-party clients
- Review began in early 2016
- “We have decided to stop investing in the tobacco sector and will divest over time,” an Aviva spokeswoman told Reuters. “We consider tobacco as ‘harmful when used as intended’, and have been reviewing our investment position for some time now.”
- Other insurers who have pledged to divest tobacco assets include AXA, SCOR, Covea, Achmea, Reuters says
Amazon goes back to the future of groceries
Supermarkets’ strengths are becoming weaknesses as technology changes retailing
Just when we thought we understood Amazon, it surprises us. We are used to observing an online retailer that cuts prices relentlessly to undermine brick and mortar stores. It has now decided to buy Whole Foods Market, a premium chain for Americans who can afford fancy cheese and fish.
If it wanted to turn physical, the Amazon of our imagination might have followed Aldi, the private German retailer, by investing $5bn to expand its US discount stores, or have directly taken on Walmart’s 3,500 grocery and hardware Supercentres. Jeff Bezos, Amazon’s founder, is instead entering the top end of the grocery market by offering $13.7bn for Whole Foods.
This suggests either that Mr Bezos has lost his bearings or that many people think about Amazon in the wrong way. In fact, it is not so much an online discounter as a vast convenience store. Making things easier, either by cutting prices or by delivering goods simply, is his master plan.
The Whole Foods deal brings to mind not Walmart, Aldi, or Kroger, the largest traditional US supermarket, but a company that predated them: the Great Atlantic and Pacific Tea Company. A & P was a precursor of US supermarkets and the way that it combined efficient technology with high street grocery outlets provides clues to Mr Bezos’s thinking.
Before A & P, Americans shopped at small-town stores that were “often run in a haphazard manner” and purchased their supplies from “a byzantine collection of jobbers and middle men that was rife with corruption”, accordingto Paul Ellickson, an economics professor at Rochester university.
Like an early 20th-century Amazon, A & P cut through all of that. In 1913, it opened “economy stores” on high streets, supplying them through its own network of warehouses and delivery trucks. It offered its own private label brands, which were fresher and less likely to be out of stock. A & P expanded to 16,000 stores in 1930 as economies of scale allowed it to undercut independents.
It eventually became a victim of its own success. Smaller operators lobbied for it to be curtailed and price discrimination was banned by the 1936 Robinson-Patman Act to stamp out discounting. It went into decline, replaced by large supermarkets built by Kroger and Safeway in warehouse districts and away from high streets.
But the combination of Amazon and Whole Foods suggests that history is starting to repeat itself. The supermarket itself has reached an apotheosis in huge suburban stores run by Walmart, as well as Carrefour and Tesco in Europe, and many shoppers are looking for alternatives. Amazon’s Whole Foods deal is an experiment rather than the solution, but it is intriguing.
The supermarket’s strength is becoming its vulnerability in an age when technology is changing the rules of retailing. It reduces costs and prices by grouping together many kinds of goods in one place, from tins of beans to fresh fish and meat, and persuading shoppers to bear the cost of final delivery. They drive to stores to load their trolleys and purchase everything at once.
Technology now offers a way to unbundle the traditional supermarket — to sell different things in different ways. Instead of having to shop for bulk household items, dried pasta and rice, and fresh fish all at once, the shopper’s leisure time can be allocated more enjoyably and effectively. Routine goods can be ordered online and delivered directly, leaving time to pick the choicest produce in person.
It is more complex than that, of course. For one thing, people’s shopping habits and sense of convenience vary according to where they live. Online grocery providers such as Ocado in the UK and FreshDirect in the US do best in cities, where people want to avoid traffic jams on the way to the supermarket. In the suburbs, it is often easier to drive to a Walmart or Kroger store.
Shopping habits also depend on income. Whole Foods and chains such as Trader Joe’s draw people who can afford fresh and organic produce and can pay higher prices. They are also likely to be busy professionals who might buy the same food online if they were offered freshness and variety.
The challenge for online grocers is that freshness and variety are hard to combine — if they sell one type of tomato, their stock will turn over fast and be very fresh. If they offer 20 types, the choice is wider but the tomatoes will sit in warehouses longer. The supply chain for groceries is trickier and costlier than for non-perishables.
Having experimented with Amazon Fresh, its online grocery service, in cities in the US and elsewhere, Amazon has clearly realised that it needs a physical network as well. It has to expand in order to attain what Chris Baker, a partner of the consultancy Oliver Wyman, calls “a virtuous cycle of volume, turnover and freshness”.
Beyond the Whole Foods acquisition lies a tantalising vision of the 21st-century A & P, an enormous, efficient retail enterprise that deliver a wide array of fresh, cheap groceries to a network of small and large outlets, as well as directly to homes. That would be the ultimate convenience store and I imagine that Mr Bezos knows it.
Saudi king replaces crown prince with favoured son
Economic reformer Mohammed bin Salman supplants security tsar Mohammed bin Nayef
Saudi Arabia’s King Salman has replaced Crown Prince Mohammed bin Nayef with his favoured son Mohammed bin Salman, overturning the established succession order to ease his son’s ultimate path to the throne.
The crown prince was stripped of his role as second in line to the throne and removed from his post as interior minister, where he oversaw domestic security and counter-terrorism policy.
The radical shift in royal succession, made by royal decrees issued on Wednesday, completes the elevation of Deputy Crown Prince Mohammed bin Salman, architect of the oil-rich kingdom’s ambitious economic reform plansand foreign policy.
Speculation has swirled that the elderly king would promote his 31-year-old son so that he could inherit the throne directly, rather than working under Mohammed bin Nayef.
Dow -0.29% S&P-0.67% Nasdaq -0.82% Russell -1.07%
US MArket Closed lower. WTI crude closed 2.1% lower at a price of $43.53 per barrel and weighted on the market. Energy Sector -1.3%. Cyclicals Struggle, Consumer dis. (-1.3%) & Industrials (-1.2%) closed at the bottom of leader board. top-weighted technology (-0.8%) and financials (-0.8%) sectors finished just a tick behind the broader market with just a handful of components managing to settle in the green. heavily-weighted health care sector (+0.3%) settled at the top of the day's leaderboard, thanks in large part to the outperformance of the biotechnology industry. lightly-weighted utilities group (+0.1%) also managed to settle in the green, but the remaining defensive-oriented sectors--consumer staples (-0.4%) and telecom services (-1.0%)--finished in the red. Fed Vice Chair Stanley Fischer (FOMC voter) and Boston Fed President Eric Rosengren (non-FOMC voter) both commented on the potential downside of keeping interest rates too low for too long. Mr. Fischer focused on the risks to the housing market while Mr. Rosengren discussed the effects on the overall financial system. USAfter Hours LZB +13%, RHT +10%, ADBE +4%, FDX +1% following earnings/guidance, CA +14% on potential M&A deal, GIGA +17% on earnings/strategic alternatives news... Argentina ADRs lower on MSCI news...UPS +1.2% on FDX numbers. Asian shares retreated and the yen strengthened as crude oil tumbled into a bear market on concern a global supply glut will persist. Shanghai equities were muted after MSCI Inc. added China’s domestic stocks to its emerging-markets index.
Nikkei -0.45% Hang Seng -0.45% CSI +0.38% Shanghai +0.02%
Eur$ 1.1130 CNH 6.8319 CNY 6.8320 JPY 111.25 GBP 1.2629 CHF 0.9748 WTI$ 43.56 -0.06%
S&P -0.13% EuroStoxx -0.31% Dax -0.31% FTSE -0.33% SMI -0.37%
Macro:
- MSCI to Include China A Shares in MSCI Emerging Markets Index
- Saudi King Names His Son as Heir to Throne in Palace Shakeup
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- WTI Crude Enters Bear Market, Falling 21% From February High
- New European Regulations Will Boost ETF Market, WisdomTree Says
- Uber Chief Travis Kalanick Resigns From Ride-Sharing Startup
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