Augmented Reality Does Not Bite

If you are going to take a break from digital “bliss” by putting your phone down, take the time to read this Harvard Business Review primer on augmented reality. “Augmented” is not the same as the “virtual” reality which your children love and of which you make fun.  Augmented reality bridges physical reality with the data that all of the machines around us are generating utilizing a screen attached to our face (aka glasses).  Think of a heads up display on a fighter jet.

So you can be on a plant floor, retail store, trading floor, or hospital and see the reality in front of you merged with the data that can assist you in making better and faster decisions. It’s well worth the read and sitting with your team to think through the implications for your business. One way we hope to use this technology is with our mechanical team so they can access repair manuals in front of the machine instead of going back to a terminal. Download the app before reading the article and it will literally jump out at you from your phone. This reality does not bite!

Amazon, Alexa, and The Black Plague of Retail

One of my good friends, Kevin Coupe of Morning Newsbeat, scored one of the best interviews of the new year. In his conversation with Tom Furphy, a former Amazon executive, he drills deep into Amazon’s secret sauce as well as its implications for the rest of us who are living through the “black plague in retail”. From overall retail to the impact of Alexa, it’s a great conversation, or as Kevin would say, “An Eye Opener” and you won’t find it in the Wall Street Journal or the NY Times. You can listen to the interview here: The Innovation Conversation

 

Big Brands Fight Small Batch in 2018

If you can’t beat them join them (or buy them) is the mantra of the largest consumer product companies for the upcoming year. With minimal entry costs due to the low costs of digital media, combined with easy to find quality contract manufacturing, little brands have spent the past few years getting big fast and causing real pain to the largest companies. With consumers in the mood to spend up for (perceived) quality, it’s easier than ever to get consumer trial for a new brand because price is not the driving consumer focus.

The Wall Street Journal started 2018 with a great piece on Unilever and how they’ve adjusted their global branding to meet the challenges of these fast paced “ankle biters”. As someone who was once called an ankle biter by a dear wall street friend (oxymoron), I can think of no better compliment or sign that larger companies never see the train in the tunnel until it’s too late.

We who disrupt are not ankle biters. We are going right for the jugular of their business models, but it takes time for those companies to feel the cut until it’s too late. Read the WSJ piece here: Outfoxed by Small – Batch Upstarts, Unilever Decides to Imitate Them, as a great primer on one of the key battles that will be fought in 2018.

Logos, Emojis and Shakespeare Meet Great Design

It’s Waterloo time for brands as the sea of private label obsessed retailers low ball their way across the globe leveraging technology and new distribution channels to blitzkrieg around the branded “Maginot Lines”.

Design is where brands can beat private label whose masters and commanders are less obsessed with design than with margins. So it was with pleasure that I heard Michael Bierut one of the best designers of our age is coming out with a new book titled Now You See It and Other Essays on Design. It’s a series of essays which can lead you to some of his other works which will inspire you to design higher.

In a hundred years there will not be a single private label brand displayed in the Museum of Modern Art. But hopefully one of yours (or our) brands will be featured. Read this terrific and witty interview about Bierut and I promise you’ll feel the potential for design. How can you not enjoy a writer who says, “My favorite cartoon character is Wile E. Coyote. He had this endless faith and brand loyalty and never thought to try the competition even though Acme products failed him time and time again.”

Free to download Bierut-designed emoji

Emoji by Michael Bierut

Innovation and Amazon? Size, As Well as Pizza, Matters!

To understand Amazon‘s success, I need to digress a bit. A few years ago I visited a leading mid-western department store retailer on a regular basis overseeing their work with a brand they licensed from me and my partner. At the first few meetings in 2008 there were 5 people in the room (three from the retailer) as we meandered through a “new” corporate headquarters filled with empty chairs and easy parking.

Within two years the meetings were with a team of over 25 people (we were still 2 people) and my partner was introducing members of the retailer’s team to each other after fighting to find a big enough and unused conference room, never mind finding a parking place. Other than killing our brand along with many others they licensed during that period, the handwriting of bad management was literally around the overcrowded table around which no one could move forward.

With that story in mind, one of the better “digestif” pieces about Amazon/Whole Foods is in Harvard Business Review. The analysis focuses on investment in R&D and its clear where this story will end. But there is a chart buried in the story that is amazing. It lists, by year, the new initiatives taken by Amazon and whether it was successful or not. Red means bad and blue means success. Blue outnumbers red, but not by as much as you’d think. What is “Blue and Red”, is how innovative Amazon is relative to all others. We all knew this, but the chart captures the epic pace of innovation.

As I said in an earlier post, this is the Waterloo moment for the grocery industry and all of supporting brands because of the private label angle. Scott Galloway of L2 has a chart that illustrates private label penetration at Whole Foods vs Amazon Fresh. Brands must innovate and fast.

So what is the HBR secret innovation sauce analysis? “Amazon CEO Jeff Bezos famously believes that if you can’t feed the team with two pizzas, it is too large”.  Thank God my competitors don’t even think of pizzas! There is clearly much more to innovation, but as they say, size matters.

Amazon Whole!

Its Game of Thrones time with the unfolding battle between Amazon, Aldi, Wal-Mart and the growing food oriented Dollar Stores. Kroger melting down and Amazon buying Whole Foods are just the tip of the coming “winter” in grocery retail. As if there were not enough potential for retailer margin impact, the stealth European giant Aldi is firmly committed to a private label only strategy which puts more pressure on brands.  If you thought food and household products were in a deflationary spiral, this slug fest at the bottom says it’s a long-term 3-5 year battle.

The WSJ had a story called “Pressure on US Grocers Rises”. Pressure is not the word. Final nail in coffin is better. For 30 years the grocery industry has ceded market share to Wal-Mart which was barely in food when it started! Aldi, the European low cost “Ryan Airways” of grocery, is planning to open 900 new stores with 5 billion dollars in the US market. Lidl is also ramping up and if you have not visited one of these stores you must. And Amazon is now taking a leadership position by overlaying their consumer technology and warehouse expertise onto a premium and well located chain of stores.

Between Aldi at the bottom and Amazon/Wholefoods at the top, this is the coupe d‘grace for the Grocery retail sector which is the worst managed retail segment in American retailing. With a dead man’s focus on slotting fees and illegal charge-backs, the Grocery chains long ago forgot how to be merchants and innovators. Except for a select few like the innovator Wegman’s, there is little to miss after they ceded almost half of the entire food market to Wal-Mart during the past 30 years.

There is another serious deflationary piece on top of all this. Amazon recently signaled it’s entering the fight to take market share at the lower end of the demographic market. With Prime household penetration at 50%, the next segment for growth is the 50% of American households below the median household income line. Of course with the Whole Foods acquisition, they just bought 431 “fresh distribution/pickup centers” and with the highest demographic customers in the market. Hi end/low end…Amazon wants it all. But let’s focus on the larger end, the lower demographics.

Most commentators, such as the WSJ, think that Amazon is aiming at Wal-Mart. Clearly they are, but there are two looming competitors that are sharper and tougher for Wal-Mart to battle in the lower end market; the above mentioned giants of the value segment, Lidl and Aldi.

The WSJ has a great chart of food stamp customers which illustrates the relationship between Amazon, Aldi, Wal-Mart and the dollar stores. This story, which may be the most significant one in years, if you sell the mass market, shows how Amazon wants that market and is making some incredible changes around payment systems for the un-banked, delivery for security challenged areas, and lowering the cost of Prime membership. This is the first time that I’ve seen an Amazon strategy that is capable of hurting the dollar stores and Wal-Mart all in the context of the massive Aldi and Lidl launches.

Amazon may have cracked the digital divide and entered, what has been to date, that last retail corner immune to the digital wave. It’s still too early to call the winner(s), but the household products and food industry are in for some serious deflation/price pressure. Wholefoods, with Amazon at the helm, will morph from “Whole Paycheck” into “Half Paycheck”. Far from value but they can easily double the sales by cutting pricing and passing through their better back end management. Food, like war, is a logistics battle and nobody other than Wal-Mart can compete with Amazon.

So if you are a brand owner, ramp up the marketing. As the old Chinese proverb says, “The more you sweat in peacetime, the less you bleed during war.” The only defense against price deflation is a strong brand.

Just Another Brick in the Mall?

America has the highest per-capita amount of retail real estate of anywhere in the world. And with the digital world crashing the world of brick and mortar, a lot of “b” and “c” malls need major changes in their customer bases.

According to some analysts, over 400 of the country’s 1100 malls may close in the next few years. Fortunately, Adam Smith (with some help from Henry Ford), is quietly riding to the rescue. The WSJ had a story titled “The Mall of the Future Will Have No Stores” about the re-purposing of a Michigan mall into a combo traditional mall by re-configuring one of the major retail anchor spaces into significant engineering design center for Ford Motor Co. for almost 2,000 of employees. The key to all of the re-purposing around the country has been to add either office space or residential into the retail mix.

Nothing like a market evaporation to bring out the creativity. My bet is we are entering a new golden age of Malls and far from the headline of the “Mall of the Future Will Have No Stores”. Or as Henry Ford said, “Failure is simply the opportunity to begin again, this time more intelligently”.

Just Another Brick in the Wal…..

While Wal-Mart was busy getting hip buying Jet.com, Amazon was getting serious and just announced that it is offering air freight services to its sellers based in China. Think of this as the penultimate direct to consumer structure ever. Wal-Mart is still the king but this does not bode well.

The new battlefield is digital and like all battles it’s not the glorious stories on page one that mean victory. Similar to real wars, it’s superior logistics that win but to find this you have to dig into the WSJ story on page B4  with no photo announcing the new service.

This is a game changer for all who sell wholesale products. Imagine that today your factory in China now has a direct link to your customer’s home or business WITH EFFICIENT Amazon built end to end logistics. That’s a real “Jet”.

A Tort Shaken, Not Stirred Unless You Are a Semiotician!

Tito’s Homemade Vodka has stumbled into a fascinating piece of litigation around the meaning of the word “handmade” in what Walter Benjamin so aptly labeled our “age of mechanical reproduction.” I refer to one of the most important articles ever written about the value of art and any product in the modern age because he understood the implicit change in perceived value as a consumer product moves from the unique and handmade to the mass and repeated (of course ignore some of the 1936 dated Marxist allusions and delusions, but still an amazing and timeless piece of analysis).

Continue reading “A Tort Shaken, Not Stirred Unless You Are a Semiotician!”

“Soda Stream” for Home Makeup?

Coming soon to a home inkjet printer near you is the capacity to print your favorite makeup. Grace Choice, a Harvard Business School graduate who must have decided that investment banking for the overbanked was not for her, invented a system for “hacking” an inkjet printer to make your own custom color cosmetics. According to Bloomberg Business Week , the tool is aimed at 13-21 year olds who are already turning to the online world of makeup tips and ideas.

Continue reading ““Soda Stream” for Home Makeup?”