Smarts ‘R Us

20 06 2010

Like a bouncing ball on a playground, Toys ‘R Us has had its ups and downs of late. Prior to the dotcom boom over a decade ago, it enjoyed dominance in the toy business, and expanded not just across the USA, but also across the world.

But the dotcom era brought with it the need to reconsider how sales are made, as well as how to compete in the shadow of emerging retail giants. The 21C has not been very kind to Toy ‘R Us, although they have managed to survive.

To their credit, they realized their own inadequacies in e-commerce. They strategically aligned with Amazon.com to run their online store…this following an embarrassing debacle in 2001 when it could not fulfill orders in time for Christmas. Then-tech savvy parents were left without gifts for their children. TRU was able to wiggle out of their Amazon agreement mid-decade once it had figured out how to go it alone.

All this time, TRU was facing intense competitive pressure from Walmart. They may have learned to stand on their own two feet online, but it was bricks-and-mortar that was killing them. Cheap imported toys became Walmart’s weapon of choice as they chose to assert dominance in yet another product category. And when WM takes you on, you had better brace yourself for a duel to the finish. And that’s usually your finish.

So what’s an old school retailer to do? Simple. Go old school.

And that is exactly what they have done with the recent announcement of their Christmas Savers Club. While it is admittedly pushing the envelope for Christmas retailing, it is a great defensive move for a company trying to stave off Walmart while simultaneously dealing with the lingering effects of a recession.

Basically, the Savers Club is just a clever way to package a gift card. But it also locks people in to future purchases, at the same time giving TRU an advance on its allowance. Heck, Christmas inventories have not even arrived yet, but TRU has some of the money to pay for it all. Genius, right?

TRU pays a 3% dividend on these savings, which is bold given the minute interest rates on savings accounts these days. They are so banking on these advance sales that they are willing to take a hit on the cash value.

It’s also a rather clever move to help avoid layaways. Financially challenged shoppers often put merchandise on layaway in the fall, and then do not return to pay for it until Christmas. This requires the retailer to store the goods in the back room, tying up valuable inventory space. But money does not take any space to keep.

The only problem I see is that the folks who stand to benefit the most from this program are probably the ones least able to take advantage of it. Between the recession and trying to take some semblance of a family vacation, who among us has the spare cash to float TRU a loan? But for those who do, the return is actually an annualized 6%…not bad at a time when the market is teetering and banks are only tossing a bone every now and then. And if the most economically challenged are not able to able to participate during the summer, they will be the ones this fall most likely to be attracted to WM’s aggressive discounting.

It is a bold move indeed for TRU to effectively become a retail bank. It’s just too bad my kids have moved on from most of the stuff TRU sells. Because I would be there tomorrow morning making my initial deposit.

Dr “Savings ‘R Me” Gerlich





From The Ashes

19 06 2010

When I first started teaching a course in E-Commerce way back before the turn of the century (sounds so long ago, doesn’t it?), internet start-ups were a dime a dozen. Everyone and their brother who could build a website was doing so, and trying to sell everything from wheel barrows to sofas. Folks were giddy at the prospects of being e-commerce pioneers, as if there were an entirely new nation to explore and endless veins of gold to mine.

That all came tumbling down about the time we flipped the “19” to “20.” Just because you can build an online store doesn’t mean that people will suddenly want to purchase their wheel barrows and sofas from you. Hundreds of firms came tumbling down, and wads of venture capital monies were flushed down the toilet. Today, only a handful of those early start-ups exist, household names like Amazon, eBay, Travelocity and Expedia. And Priceline.

While it is interesting to note that three of those survivors are in the travel business, it is Priceline’s story that is the most compelling, for they reinvented themselves amid the economic and travel crisis following 9/11. They are a Phoenix rising.

Priceline’s business model is vastly different from that employed by Expedia and Travelocity. The latter pair are basically online travel agents, while Priceline invites customers to name their own price. It’s a gambit that pays off nicely when Priceline is able to squeeze handsome concessions from airlines, hotels, rental car agencies, etc. Customers just have to be a little flexible in travel times, as well as willing to lock in to certain hotel chains and car rental firms. In the mean time, Priceline is scooping up unused capacity on the cheap and selling it to folks who bid on their willingness to go with the flow.

Following 9/11, though, US travel suffered a big hit. Expedia and Travelocity barely eked out their existence. But for Priceline, there were few bargains for them to scoop, and to likewise pass on to customers. Instead of going the way of garden.com, pets.com, and furniture.com, though, they looked elsewhere for market opportunity. And they found plenty of opportunity…first in Europe, and then around the globe.

Priceline was savvy to realize that, at the time, Europe lagged US usage of online travel agencies. Furthermore, there is far less corporate concentration of hotels in Europe, thereby giving Priceline much better negotiating abilities for low prices.

And from they took wings, grabbing market share just as Europe was embracing e-commerce, and then later by purchasing regional online travel agencies around the world.

Through it all they have retained William Shatner as spokesman in all of their advertising. At a time when other dotcoms were going goofy (anyone remember Pets.com’s sock puppet?), even Shatner’s spots were stretching it a bit. But the veteran Trekkie has helped launch the Priceline enterprise to the next generation of e-commerce players.

It’s a model worthy of our envy. The dust bin of e-commerce history is filled with hundreds of mistakes, missteps, fumbles and foibles. But Priceline found its wings and has flown to a lofty orbit.

Sure beats trying to figure out how to ship a wheel barrow.

Dr “Live Long and Prosper” Gerlich





Friend Request

18 06 2010

Way back in 1983, a relatively unknown Michael W. Smith released his first studio album. And on it was a little gem titled Friends. It probably was not intended to be the break-out hit that it became, but it simply resonated. It became an anthem not just of an entire generation, but for many people since. Graduations…summer camps…you name it, this song has been played more times than the copyright police could ever begin to count.

But today we find, even in the USA, that people don’t have as many friends as they might like. Or in the right places. Or at the right times. This perplexing situation has spawned a number of “rental friend” websites (such as RentaFriend.com) for the express purpose of helping people keep from being alone. Lonely. Stranger in a strange town.

At first blush, this just seems utterly pathetic. How in the world, in this era of Facebook and social connectivity, could anyone possibly be without friends. How could someone be more than a call, text or mouse click away from reconnecting?

But maybe the very existence of these sites underscores a deeper problem in 21C society…that, in spite of Facebook, we often feel like we are plying the sea of postmodernity alone. Maybe these sites are not for pervs and sex addicts, but really for the folks who are silently screaming their lungs out. All they want is a little humanity to grace their presence. Just someone with whom they can hang out.

And you know what? I think it’s not just the customers who are lonely. I have a hunch that the “sellers” that RentaFriend tries to pair with customers are equally lonely, and not just opportunists. Sure, an enterprising person could make $20-30 an hour going to dinner with a stranger, showing them around town, even playing cards. But the folks who would do that are probably the same ones who sell their plasma just to make ends meet.

RentaFriend is adamant about its site not being a call girl service, and they promise to drop any seller or buyer if propositions are made. But who’s to say that such things don’t happen? And who’s to say that some legitimate friendships might not be kindled because of an outing? So maybe what we really have here is the platonic equivalent of Match.com, eHarmony, et al. A meat market for dinner buddies. Blind dating for the risk averse. An occupied seat next to you at the movie.

Because friends are supposed to be friends forever. But in this hyper-connected world in which we live, we may not actually be as close to those we love as we might like. It just seems that way.

Dr “A Lifetime’s Not Too Long” Gerlich





Splice

17 06 2010

Amid all the hype and hoopla surrounding the announcement and release of iPhone 4, Google has been quietly adding to its portfolio of products. In many regards, Google is a lot like global warming. You hear about it happening, but it’s difficult to see the encroachment on a day-to-day basis.

Like yesterday when they announced new video editing tools on their YouTube site.

“And just how, Dr Gerlich, are we to get excited about this?”

Easy. Like Al Gore’s inconvenient truths, Google is slowly engulfing and devouring the web. With the video editing tools, Google has sucker-punched Apple (iMovie) and Microsoft (Windows Live Movie Maker). No, Google’s tool won’t replace these stalwarts, but it will keep many users from ever opening up one. After all, who among us is posting polished Spielberg-quality videos to YouTube anyway? Heck, if we could add a couple of simple voiceovers and some titling, we would be making enormous improvements to our raw footage.

And that, my friend, is the Google model. When they bought Writely a few years ago and turned it into Google Docs, there never was any intent to replace Microsoft Office. But they have sure kept me from using it on more than one occasion. I love the simplicity of Google Docs, the ability to quickly and easily share with collaborators, the real-time editing done by multiple users. No, it’s not desktop publishing, but it gets the job done.

Which is another way of saying that Google recognizes and understands how people really use their computers and software. Most of us need only basic functionality anyway, and when it can be offered via cloud computing for no cost, it’s easy to see why the flies would flock to the honey.

And true to Google form, all of this will be advertising-supported. Anyone who thinks that Google is just a search engine company is sadly mistaken. They are the web’s premier advertising agency (followed closely now by Facebook). Being bombarded by ads is the price we pay for using the breadth and width of the Google portfolio.

It’s a price I am willing to pay. Because I am no Spielberg. And learning Someone Else’s Software takes time, something of which I am in dire shortage. Now go ahead and edit that.

Dr “Cut!” Gerlich





Phone Home

16 06 2010

And on the 15th day of the month, Steve Jobs said to his minions, “OK everybody…time to drink more Kool-Aid.”

So they proceeded to pour and gulp, until the website crashed and the Kool-Aid ran out. Everyone else will have to wait until they can find more powder.

The iPhone4 is now a certified bestseller. And sold out. Although its slated release date is 24 June, the Apple website is taking pre-orders for 02 July shipments. I suppose this means they are working double shifts over in Shenzhen.

Of course, the irony in all of this is that the iPhone is all about mobility and web access, yet their system crashed on this all-important day. Sure, there’s also the embedded commentary that, once again, Steve has caused millions to swoon all at the same time. All the Palms, Blackberrys, Droids and Motorolas put together can only produce one big yawn. Cell phones are just another thing we carry around with us.

Unless your happens to be a lifestyle statement. With over 51 million sold in the last three years, Apple knows that it’s time for many folks to start replacing their older models. In fact, anything older than a 3GS won’t be able to fully utilize all of the OS4 features, like multitasking. And as I have found when I upgraded to OS3 on my 1st-gen phone, there was major suckage of operating efficiencies. If I have an email alert trying to load, it pretty much puts everything else on hold. Like even trying to type a text. Can you say keyboard freeze?

My readers probably think that I am a major Apple stockholder, because it seems like I am singing their praises every week or so. Truth be known, I hold zero shares of Apple stock. But I have guzzled a few gallons of their Kool-Aid, and in a variety of flavors: iPhone, iPad, iPod, iMacs, MacBook Pros. I have a literal shrine to Steve among my possessions, but it’s my Apple-stock-owning friends who are reaping the real benefit (it’s hovering around $260 a share these days, thank you very much).

But shame on Apple for not being ready for its own party. Yeah, I know it’s a lovely situation when demand temporarily outstrips supply, but when websites crash, it just sends the wrong message. That’s akin to the locks malfunctioning on the morning of Black Friday.

In the mean time, I guess I am just going to have to wait a little longer before I upgrade my phone. I’ll still be loyal to Steve. I promise to buy the most expensive model. And I’ll probably wind up buying the nuevo-priced 3GS models (only $99) for my kids. But until then, just don’t try to send me an email while I’m texting. I may be able to walk and talk, but too much activity causes my old engine to sputter.

Dr “N. V. Us” Gerlich





Draw

15 06 2010

Hands down, one of the funniest movies ever made is Monty Python’s The Holy Grail. There are scores of websites with clips, memorable quotes, and pics. At just about any party involving beer, you are apt to find folks who, after consuming sufficient quantities, launch into their own recitations of entire scenes.

And without doubt the funniest scene is in the woods when Arthur meets the Black Knight. A duel ensues, with Arthur having to fend off an overly boastful and confident foe. Unfortunately for the Black Knight, Arthur is his match. One by one, Arthur slices off the knight’s limbs (with great amounts of fake blood spewing like a fountain). The Black Knight is unfazed, however, and while his bloody stump of a body teeters on the forest floor, he looks up with undeterred bravado and offers an olive branch.

“All right, we’ll call it a draw.”

In many regards, this drama is being played out before our very eyes, with Netflix playing Arthur, and Blockbuster’s CEO Jim Keyes playing the Black Knight. Knocked senseless by competition and a changing product market, Keyes is still adamant that he can lead his company out of the woods.

In case you haven’t noticed, the leaves are falling in Blockbuster’s forest faster than the day of a killing frost. They’re closing hundreds…yea, nearly a thousand…stores. Going down to the corner movie rental joint is so 1980s anyway. It seems like everyone has a queue at Netflix, and so the movies come in the mail in their predictable fashion. Or, better yet, you simply stream them. Who needs tangible movies when you have broadband?

And now Keyes is talking of developing a Hulu-like station to stream content. Well, nice idea…but Hulu has already done it. And the rest of his business is littering the forest floor much like the Black Knight’s limbs. When oh when will Blockbuster awaken to the reality that the fight is over? That we do not need them anymore? That their relevance has come and gone?

And so it is with a fake British accent that I respond to the cocksure, invincible Keyes: “You’re a loony!

Dr “What is the air-speed velocity of an unladen swallow?” Gerlich





Let The Games Begin

14 06 2010

Earlier this year I pontificated about the need for someone to create the ultimate online gaming experience. This game would be social in nature involving people either in the same room or oceans apart. And it would all tie into the social media grid.

It now looks like we are making progress in this direction with the announcement this weekend of Microsoft’s Kinect Adventures (on Xbox) and Rock Band 3. Both of these products will include integration with Facebook and Twitter for uploading pics, video and results.

With these new products comes the opportunity to reach millions of serious players, all with established (and posted) demographic information. Marketers are no doubt salivating in the board rooms of these companies, because they know the gravy train is arriving. I hear the train a comin’. It’s just around the bend.

And if you think your FB page is already littered with Other People’s Animals and mob warfare, think again. It has only just begun.

The Marketer in me is giddy at the prospects of integrating gaming and social networks, but the FB/Twitter addict in me wonders if I will ever be able to find a regular status update again. It gets a little cluttered at times.

Sure, Farmville, Bejeweled and Mafia Wars have done well on FB, and do indeed leverage the social aspect of gaming. I see the impassioned pleas for help milking the cows and bringing in the crops. But all of these games are limited to just the computing experience.

The new games require an external platform, yet it’s all tethered to the web and the social graph. This opens many more possibilities via a plethora of existing and forthcoming games that keep people beholden to the format more than just one particular app.

Is this a perfect solution? Nope. Because the ultimate online gaming experience will combine everything: computers, separate gaming hardware/software, AND mobile devices. Now that will be the killer gaming app. Play from home. Work. School. Car.

Now if Facebook could just offer a way for me to hide all this game chatter. Because in spite of all the Marketing opportunity, I really just want to know what’s on your mind.

Dr “…And Not In Your Barn” Gerlich





The New Free Rider Problem

13 06 2010

Evidence of the importance of social media marketing continues to pour in. As I have said numerous times of late, it is no longer about the company website. Yeah, you have to have one, but it is a fading star. People just aren’t going to websites like they used to do.

And we know where they are instead. Facebook. Twitter. YouTube.

So if you want to be heard, you need to shout in the right direction. As the World Cup unfolds, corporate use of social media is reaching new heights. And with it also comes a new version of the free rider problem: Companies using social media and creating the impression they are actually sponsoring the tourney.

In fact, Nike has done such a good job at crafting a pseudo-relationship with soccer that it is currently leading all official sponsors in terms of online buzz.

And therein lies the problem. It is all too easy these days to talk the talk without paying the piper. Especially on Facebook, Twitter and YouTube. That there are over a dozen major sponsors all shelling out buckets of money for social media applications is proof positive that the medium has come of age.

To Nike’s credit, nowhere do they actually say they are a sponsor or associated with FIFA. They are just relying on the human tendency to make erroneous associations. And in this case, it’s a darn good error. For Nike.

It’s really no different from unauthorized t-shirt vendors hawking their wares across the street from Wrigley Field, or anyone else coattailing for that matter. Go where the crowds are and you have an automatic audience.

Neither the World Cup nor FIFA can do anything about the associations people create in their mind, paid or not. As long as Nike (or anyone else) doesn’t use protected language and/or imagery, the charade can continue. And all we can do is stand back and recognize that social media now more powerful than the once-vaunted website.

It’s hard to ignore 500 million Facebooklandians anyway.

Dr “G-o-o-o-a-a-a-a-l!” Gerlich





The Shopper’s Dilemma

12 06 2010

Fear and guilt are very powerful emotions, and marketers often rely on them to sell products. Bad breath, body odor and smelly feet are certainly unbecoming artifacts, and savvy marketers would do well to prey on our fears of committing a major social faux pas. And raising children is a role laden with myriad responsibilities, so it makes sense to scare the daylights out of people to get them ton buy the right tires for their car.

But what about when emotions are used to try to engineer shopping behavior at the macro level? Is it right to use fear and guilt to try to instill civic duty?

Back in 1979 the US auto industry was tanking (with the rest of the economy following suit). Imports were claiming an increasing share of US auto sales. To try to combat this trend, the United Auto Workers labor union stood behind the “Be American. Buy American” campaign. The message was simple. If you did not buy American-made cars (or anything else), you were being a rotten citizen.

I was driving a Japanese car at the time. I had just purchased it, a shiny new 1979 Toyota Corolla. To further complicate matters, I was off at school in Anderson IN, and lived in an apartment a couple of blocks from the UAW union hall. Anderson suffered from over 20% unemployment; its role as a General Motors town was in question, and thugs were going around at night bashing in the windows of “un-American” cars.

Yeah, I was pretty bent out of shape. I never could see the value in browbeating people into buying certain things. It’s one thing to scare me about bad breath, but it’s quite another to guilt me into buying something I do not want to own.

And never you once mind that, in my humble estimation, being patriotic means being free to choose. And letting you be free to do likewise.

So this spring when the Amarillo Chamber of Commerce and AGN Media launched the “Shop Smart. Shop Local” campaign, I was instantly put off. Once again, fear and guilt were the drivers used to guilt us into spending all of our money locally. Full-page ads in the newspaper preached how we would not even be able to fund our current police department if all Amarillo households exported even 1% of their spendable dollars. Fewer police, less safety. Easy conclusion, right?

The campaign also goes on to beg us all to not spend our dollars at out-of-town websites. And that’s when I lost it because…well, this is what I teach. With one stroke of the brush, all of e-commerce was whitewashed. Tainted. Condemned.

I wasn’t just bent out of shape. I was pissed. It goes against everything I learned in my economics undergrad major. It goes against everything I hold dear as a US citizen. It stands in stark opposition to everything I teach as a Marketing prof.

And that is firms should compete to provide the best value proposition to customers. Furthermore, this value need not necessarily come in the form of the lowest price, for value can also mean convenience, reliability, service, and more. Value is in the eye of the purse holder.

This does not mean that I am against all of our local businesses. Absolutely not! I spend the majority of my money locally, but not because I would feel guilty otherwise. No, it is because I apparently perceive some personal value in doing so. And when I find value elsewhere, then I shop elsewhere. Case closed.

Amarillo is a very special case anyway. While the mayor and everyone else would like to see our sales tax revenues increase, we must acknowledge that on a per household basis, Amarillo already spends more than the per household income.

How’s that again?

Simple. We are a destination shopping town, serving parts of 5 states and a total market area twice that of how many live in Randall and Potter Counties. Plus, we have many thousands of cars passing through I-40 as transient customers.

In other words, we have no problem taking shopping dollars away from other towns. But some folks have a problem if I buy something online or in Dallas. Go figure.

I want to see our economy thrive, but I want it thrive for all of the right reasons. If we provide the best value possible, we will thrive. Fear and guilt, though, are not the right reasons. Bad breath, body odor and smelly socks may be bad, but this campaign just plain stinks.

Dr “I’ll Make Up My Own Mind” Gerlich





Dining Alone

11 06 2010

Every once in a while I need to just get away by myself. Away from the office. Out of the house. It’s like doing a Delete All on my mental hard drive. “Are you sure you want to delete all 3987 items?”

You betcha.

It is during these rare instances that I can actually begin to think somewhat clearly. After all, my position is one of Deep Thinker (OK, I know I have many of you fooled…). That’s what I get paid to do. The “Ph” in PhD says Philosophy, so it probably behooves me to every once in a while philosophize. Have deep thoughts. Wax academic. Blah blah blah.

Like last night. I’ll let my Facebook transcript tell the story:

So I’m dining alone, and as is my custom, I brought a book in the restaurant for company. But instead of reading I find myself catching up on FB…something I do with increasing regularity these days vis-a-vis books. And you know what? I think it’s great. Because I am reading the story of my friends’ lives as the story is being written. No book can top that.

No, these were not the musings of someone after a few cold ones (for the record, I had one…count it…ONE bottle of Ebel’s Weiss from Two Brothers Brewery…ya gotta drink local, ya know). No sirree. I was quite cogent. But what ensued over my plate of eggplant lasagna was perhaps the most interesting of exchanges I have ever had on FB.

Instantly, some of my high school pals chimed in, followed by other friends. A couple of folks pondered whether we had become loners in the FB mobile era, which then led to considering whether we are actually voyeurs into other people’s lives. But I think we were being a little hard on ourselves. Here’s my take on it a few minutes later:

Truthfully I feel we are neither loaners nor voyeurs. FB is strictly volitional, and we post only that which we want others to know. If anything, I feel like I have several hundred people with me at all times. I can regulate the interaction by not posting, liking or commenting. And I can simply choose to not check in (fat chance!). The best part is when there are friends from very different parts of my life, all interacting. Like right now.

And it was at that instant we all realized the dynamic nature of the interactions going on. The old school linearity of our lives was blown sky high, because all of my (our) lives are being played out at once now. I am back in high school. No, wait. I’m with Betsy and Scott from the old church. And now I’m with Starr and Brent in the camping life group. Communicating with Stan about the Save Tex Randall campaign. On and on.

And I love it.

Where else but FB could you put people from so many seemingly unrelated paths all on the same story arc? And where else could you find the profound irony that the book I brought in with me is titled Story: Substance, Structure, Style, And The Principles of Screenwriting? Hell, rather than reading about story, we were all busy writing one. Together. One big happy.

By the time it all simmered down, there had been friends from 8 states and 8 very distinct layers of my life interacting.

And it is here that I think Facebook could really profit (Note to my readers; This is the all-important segue to Deep Business Thoughts, for which I am paid to produce). Yeah, they have done a great job of dynamically placing ads on our pages that closely match our interests and even the topics we post. But imagine a world in which FB is monitoring the conversations in real time. Imagine if they had picked up on the fact that three of my high school buddies were communicating with me at that very moment (minutes apart). And all of my other friends. Might FB be able to data mine just a little more and find ways to serve up even better matches? Like suggesting we start planning a 35th reunion? Or that some of my friends might find Stan’s Save Tex Randall campaign to be of interest? After all, we were all in the same thread together.

I know. Some of you may be thinking that more advertising is the ultimate buzz kill. But ads help pay the bills that allow FB to be free, which allows us to carry on the depth of conversation we had last night. And I would like to add that, even though I used plastic to pick up my tab, I think it was you, my friends, who treated me. If there were one big “Like” icon to click, I would do it.

Dr “Not Alone After All” Gerlich