Report from WRC--A Global Perspective on Global Innovation

We had the pleasure of attending the World Retail Congress in Berlin, which was held from September 25-28th of 2011. The World Retail Congress is a gathering of international retail executives. While there is a decidedly European feel to the conference (and attendees), North America and Asia was reasonably represented.
Ebeltoft’s (and our) official role at WRC was a coordinator and judge in this year’s Retail Innovation awards as the US member of Ebeltoft Group. This year, a record number of nominations were submitted and categories were split into two categories—business innovation (more about process) and format innovation (more about format).
The finalists provide a telling view on where Innovation is headed. In the format innovation category, they were:

• American Eagle –77 Kids. Their new concept store incorporates innovative digital in-store experiences with a dynamic in-store design
• Carrefour Planet. The most significant reinvention project in retailing. An attempt to reinvent the generalist hypermarket concept into a multi-specialist store
• Disney Store—New York. The largest Disney Store , representing their large scale reinvention, incorporating immersive interactive experiences
• Shoes of Prey—Australia. The only pure play on-line retailer, where customers can customize and design their own shoes, changing the color, toe, heel type, back etc.
• Eataly—New York. The fantastic New York outpost of the Italian food concept, blending together restaurant and food retail in a dynamic experience.
• The Craftsman Experience. Built as both a store and studio, this concept re-defines the relationship between a bricks and mortar store, the Internet and social media.

The winner in this category, Eataly, proves that retail excitement can still drive significant traffic to a brick and mortar store. Eataly reports first year revenue of an eye-popping $80 million.

Under business innovation, the range of submissions were vast, from weather forecasting tools to the latest take on loyalty marketing. The finalists were:
• Donna Ida—Denim Clinic. One-to one appointments to find the perfect pair of jeans.
• Karen Millen and Aurora Fashions—Deliver from 90 minutes. The world’s fastest fashion on-line delivery service
• Payvment—Facebook Storefront. The number one Facebook ecommerce payment platform for more than 800 million Facebook users.
• Titan Industries Goldplus—A soft benefits loyalty program for a jewelry chain in India, which rewards customers in the form of life experiences (a Cricket Match, trip to a Temple, etc
• Adidas—adiVERSE Virtual Footwear Wall. An in-store virtual footwear wall for Adidas utilizing state of the art Intel processors and touch screen technology.
• Tommy Hilfiger Europe—The Hilfiger Club +ID24. Interactive touch screens at POS to drive higher loyalty.

The winner here was Adidas, who also had their wall on display at the WRC. They plan on introducing this into a physical store environment within their London Flagship store.

What do these concepts have in common?:

• The seamless (or attempt to make seamless) integration of new technologies
• Blending together on-line and off-line experiences
• Creating more personalized and customer experiences, whether through the customization of products or the customization of experience.

In addition to the cases highlighted at WRC, Ebeltoft Group produces an independent project focusing on additional cases from around the world that showcases true global innovation. Contact me at nstern@mdretail.com to reserve a copy.

Loyal Until The First Screw-Up

Like many, we received an e-mail from Netflix CEO Reed Hastings this morning concerning the controversy surrounding their sudden price increase (upwards of 60% in many cases, including ours) a few months back. In addition to suddenly increasing prices, there seemed to be zero recognition of customer loyalty. When we cancelled the “by mail” portion of our subscription, the response was an automated statement requesting that the outstanding DVD’s be returned immediately or we would be charged the full price, etc… Nice knowing you, Netflix.
Apparently, we weren’t alone. The latest results from Netflix reveal a rash of subscriber cancellations, with subscriber base declining by nearly a million. This is even more startling because the company was on a significant growth trajectory prior to this move. The streaming side has also faced its own issues of late, losing its contract with Starz, a popular source of streaming content. The stock, predictably, has plummeted from its earlier dizzying highs. And yet, two months went by without a direct response to the million(!) customers who apparently were unhappy.
So what did Reed have to say to customers today? Along with a brief apology, a more detailed explanation of the “business” problem emerges. Internally at Netflix, streaming and by mail businesses need to be nurtured and grown separately. As a result, they are officially separating the two models, even renaming the original business to Quikster. Customers who subscribe to both will now get two invoices and visit two separate websites. But, the good news—no more price increases for the added inconvenience!
While Reed Hastings has been one of the more dynamic executives of the Internet age, we suspect that this second explanation isn’t going to play much better than the first. The consumer moved from a bundled (and intuitive) solution to a separated one. We would suspect that more customers will opt out of one (or both) services and that it will be much easier to view their offers independently against other options. Two months in and can’t saw we’re missing the by-mail service and the streaming option often disappoints with limited or dated content.
While the intent of aggressively positioning the business for a streaming future so his business doesn’t become the next AOL or Borders is an admirable one, the execution of this plan has consistently lacked thoughtfulness and most importantly, a focus on the customer that Netflix (or Quickster) is supposedly serving.
So, apology not accepted. And for businesses that pride themselves on delivering customer service, the caveat in the headline applies: customers are only loyal until you give them a reason not to be.