Staples Second Quarter Profit Drops 16 Percent

Using Asymmetrical Merchandising Online and Offline

For years advertisers have been using pictures to create stories in the minds of customers. Through magazines, TV, online, and now mobile, products and services are placed in picturesque settings – igniting customers to imagine how the product or service can fulfill their desires and needs.

Social sites like Pinterest and Polyvore have expanded on this concept; where users pin or post pictures of products, services or things that interest them. The result is a curated grid of products. When products are presented with this type of strategy, shoppers have shown to buy more. According to Gartner research, 59% of consumers made a purchase after seeing a Pinterest pin board. Polyvore drives 20% of all social media merchandising online.

These results caught the eye of 2nd largest online retailer, Staples. Staples used Pinterest and Polyvore as part of the inspiration for redesigning its online and bricks-and-mortar stores. By using asymmetrical merchandising strategies and utilizing consumer insights from social, scientific and lab insight perspectives, Staples decided to simplify the selection of items on their web-site and in their stores.

Arun Arora, ‎SVP/GM Global e-commerce at Staples, told delegates at this year’s NRF Big Show about how they leveraged the idea of “curation,” to help shoppers overloaded with information make purchasing decisions quicker and simpler to make.

In the redesigned of Staples’ physical stores, Staples’ decided to scale back on the overwhelming assortment of products offerings. This has meant selecting the “top three products that have most relevance for the features and price-points that our customers look at,” said Arun. If shoppers wanted to then browse a wider selection, Staples’ installed a variety of digital kiosks that give access to the huge assortment of items sold on Staples.com.

More specifically, Staples’ employed the strategy of asymmetrical merchandising, showcasing products together that have no obvious connection. Similar to how advertisers use pictures to tell a story, Staples grouped together unrelated products on a display to tell a story about how that grouping of products can fulfill a shopper’s needs and goals. For example, Staples created break room and facilities room mock-ups that put products into a context that may spur additional, related purchases from office managers. The strategy improved on the traditional aisle with simplified, more compelling product placement

Since October 2013—the day the new site went live—the company has seen a 100% increase in conversion. Their in-store shops reduced their store footprint from 28K to 12K sq ft and kept of product selection. By using an asymmetrical approach, Staples has achieved their goals of increasing revenue while simplifying the website or stores, reducing the number of SKUs.

Rebecca Shirazi is the marketing manager at RBM Technologies. She is a frequent contributor to MerchandisingMatters.com, where she writes in the areas of marketing, merchandising and supply chain.

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IBM CEO Believes Big Data Will Change Retail

Speaking at the NRF conference in New York during Monday’s keynote session, IBM CEO Ginni Rometty noted that a new era of value is shifting in business, thanks to the explosion of data.

80% of the data produced has been created in the past two years. What’s more, researchers predict an 800% grow in data in the next 5 years. This means, in all industries, particularly retail, technology and data will have influence in unprecedented ways.

Here are 3 emerging technology trends will have impact in the retail world, according to Rometty:

Big Data
An obvious buzzword for the last couple of years, Rometty believes it’s actually under hyped and will become the world’s vast new natural resource. Where almost everyone will have access to some part of the 2.5 quintillion bytes of data that is generated each day. However, the value only goes to those who refine it. This translates in the world of retail where information will be the basis of competitive advantage. And stores will be the greater source of data to come.

Cloud
On average, a retail chain has over 450 specialized applications. These applications are usually not integrated or are unable to ingrate with other systems. By investing in cloud computing you are just not only investing in technology but you are investing in a new business model. A model where retailers will know the placement of data and knowing where it is and what it’s doing is critical. Ginni believes those who adopt the cloud will benefit from agility, speed, privacy and security.

Cognitive Computing
A new topic we do not hear much about in the retail industry is cognitive computing. Rometty believes this is the 3rd major era when it comes to computers. The first was an era where systems counted, in the second systems were programmable.

“This era is the cognitive era,” said Rometty, “We’re going to see services and systems that learn, you don’t program them. These systems are taught, learn by experience and interaction, and get smarter and better at time. It’s not a search engine, it will know the implication of a question and ask one back.”

A major theme at NRF’s Big Show this year was how retail will change in the next five years and retailers must be prepared to adapt to unforeseen shifts in the landscape. According to Rometty, cognitive computing might be a major player in interpreting the mound of data available to retailers and help them find new solutions to react to these changes.

The Mannequins of NRF 2014

While we have been spending most of our time covering various keynotes and breakout sessions, one thing we noticed at Retail’s Big Show this year is that many exhibitors have stepped up their mannequin game.

We have clocked countless miles wandering around the Expo Hall floors, snapping photos for our twitter feed, and we thought we would compile a few of them into a post here on Merchandising Matters for our readers who might not have been able to attend NRF this year.

So here they are, the mannequins of NRF 2014.

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Life Is Good CEO on how Joy, Compassion, and Optimism help grow your Brand

Good retailers obsess over what their customers think and feel about. Core values begin to emerge as a result that humanize their brand, streamline their messaging, and grow their brand through community engagement and customer experience.

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This was the topic of Tuesday morning’s NRF Big Show 2014 keynote session featuring BJ Bueno, Founder of The Cult Branding Company and Bert Jacobs, Co-Founder and CEO of Life Is Good.

BJ took the stage to outline the three core values that every good brand should strive to embody. In doing so, retailers create a level of communication with their customers that goes beyond transactions and reinforces their emotional connection with the brand.

Those core value are:

  • Joy – Coca Cola launched a happiness campaign that allowed their brand advocates to experience the emotional power of the stories featured in their campaign. As a result, consumers continue to love a brand who is already powerful.
  • Compassion – Google has a program to help executives become more compassionate and have genuine empathy for their customers.
  • Optimism- The power of optimism can transcend the cynicism that comes with age. Bert Jacobs at Life Is Good realized this when the bottom feel out of a box of t-shirts he as carrying through the rain and landed in the mud.

It was then time for Bert himself to take the stage. Clad in a t-shirt and armed with frisbees, he addressed the crowd saying “you are not retailers, you are people, you are people that love to laugh and have fun.”

“You were not made for retail,” he continued, “retail was made for you.”

He talked to the issue of the cynicism and how it grows inside us as we get older. He believes “Life Is Good” as a slogan is about maintaining that openness of when we were kids. For large-scale retailers, this is achieved by finding causes that align with their brand’ score values and nurturing them through them. As he put it “takers eat well, givers sleep well,”

As brands think about how to best convey their core values and messaging Jacobs has one piece of advice; “keep brand ideals simple and people will get it in an instant.” Simplicity and authenticity help your message grow your audience base which, in turn, leads to increased sales and brand engagement.

We have entered a world where customers are the co authors of your brand. “If they see something that is not authentic they will tear your business down,” said Jacobs. “If they see something that is authentic they will build it up.”

He then hurled another frisbee into the crowd.

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The Proliferation of Technology is Expanding Omnichannel Further

Consumers do not walk into a store and say “I want a seamless omnichannel experience.” While they know that is what they want, they surely do not use the word “omnichannel” to describe it. Today’s consumers inherently know they want an experience across all different vehicles related to price, color, availability, and most importantly, the brand.

During day two of NRF’s Big Show, Bob Carpenter, President and CEO of GS1 US, started the breakout session he was moderating entitled Achieving Omnichannel Success with Standards-based Supply Chain Practices by stating that the single biggest capability retailers want to provide is a consistent view of the customer – sadly more than half cannot. Turning his attention to his panelists – Mike Molitar, SVP eCommerce at Kohl’s, Peter Longo, President, Macy’s Logistics and Standards, and Dan Smith, CIO, Hudson Bay Trading Company – they began to backtrack through the evolution of omnichannel in order to help define its future.

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Peter Longo spointed out that in the very beginning, retail existed primarily as a single channel – the brick and mortar store. Helped along by newspapers advertisements, the consumer had no other choice but to enter the retail store to see new collections and make their transactions. Along came the Internet and all of the sudden retailers were faced with a second major, yet separate, channel to market their products – multichannel.

According to Longo, “[retailers] developed a shadow or parallel organization within the enterprise that managed this new channel but it was not unified with the physical store.”

It was the consumer that forced the transition from a multichannel world to an omnichannel one. They began to reject these two separate disjointed retail experiences and demanded a consistent brand across all platforms. The advent of mobile was really the development that forced retailers’ hands as all of the sudden there were new forms of engagement they had to account for.

“We have to look at rethinking all of the parts to make them as alike as possible,” said Dan Smith. “They are not going to be happy if they are getting a bad experience in the store and a good one online.”

Successful retailers, according to Smith, are the ones that anticipate the consumer’s needs and react to them accurately. You need to think of the path to purchase system as one entire process that exists in-store, online, and mobile, but also the varying technologies such as point-of-sale that exist within them.

Coming more from a demand management perspective, Mike Molitar said it best: “I think about it more from a demand perspective and the term customer-centric retailing … the proliferation of devices makes it complicated.” According to Molitar, mobile devices are just the beginning, we now see wearables on the horizon and countless others to follow that we haven’t even thought of yet.

“Omnichannel is just the beginning,” said Molitar, “it might be device-specific elements that lead to the overall experience.”

Indeed it does appear that not only do retailers have to begin thinking across store, online, and mobile, but take into consideration the unique attributes of each device they are using the engage with your brand.

“There is a relentless focus on accuracy,” said Longo, “there is not a lot of room for error and loyalty can be cracked at any moment.”

Stores alone were never held to this type of rigor. The tech-savvy consumer expects to be able to purchase a product wherever and whenever they want it and the have an expectation that it will be available. Not only is availability a make or break factor, but speed will soon be as well. It might be that in the very near future next day delivery is too slow.

Retailers that take the time to listen to their customers and understand their needs will be well-positioned to create a consistent brand experience for them across every channel. Technology is forcing an evolution in the way retailers foster the brand experience leaving very little room for error in the process.

A look at SAP and Motorola Solutions at NRF 2014

There are a record number of exhibitors and attendees at the 103rd annual Big show by NRF. Two companies front and center at this year’s show are SAP and Motorola Solutions. We thought we would put together a quick post to show off both, and if you saw the lines outside each booth you would appreciate he lengths we had to go to to get these.

In the interest of transparency, we will admit that Merchandising Matters operates under RBM Technologies, a company represented at both booths.

Want to learn more? Stop by booth 1501 (Motorola Solutions) and 3205 (SAP) and see for yourself. They are both very active on social media and you can follow them at @MotoRetail and @SAP_Retail

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President George W. Bush gives NRF Big Show 2014 Keynote Address

A crowd of over 5,000 packed into the Javits Center’s North Hall to hear President George W. Bush give the keynote address at the 103rd annual Big Show. Topics ranged from his initial reactions following September 11th and how that event shaped the type of President he would become, the first time he ever met Vladimir Putin’s “piercing blue eyes,” his decision to create TARP in light of the housing bubble, and how great it felt to be back on Air Force One as he joined President Obama on a trip to South Africa to attend Nelson Mandela’s funeral.

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Touching occasionally on the world of retail, touting his memoirs in the process (available on Amazon), the former President did have a great overarching message that reinforces what we have been hearing of far at NRF 2014 – executives need to be leading their organizations into the future.

President Bush reinforced this concept when he talked about his first few months in office. He realized that it would be to his benefit, and the benefit of the country, if he got the smartest and most experienced people to surround himself with to help shape how he was going to lead.

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“When you are the leader of the country, or a leader of a company, you have to have a strategy and vision,” he said. “By reaching out I learned that you can learn a lot by listening to someone else. It mattered when it came time to find common ground.”

The insight gained from those he chose to surround himself with allowed him to make more informed and confident decisions during his presidency. What’s more, he realized you do not have to sell your soul in order to achieve this.

In our coverage of Foot Locker CEO Ken Hicks’ keynote session we noted that retail is going to change more in the next five years than it has in the past 50. CEOs are going to be critical in leading retail companies through this change, testing new solutions, finding new ways to create a positive consumer experience, and most importantly, not rely on what worked in the past to help shape the future.

Just as President Bush is enjoying creating the next chapter in his life post-presidency – a period which his wife Laura playfully refers to as the “after life” – retail CEOs need to look to new ways of conducting business to remain viable in the changing retail landscape.

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Foot Locker CEO: “The Customer Has Become More Demanding”

The second keynote session during day one of NRF’s Big Show here in New York City kept the drumbeat going for what was the day’s hot topic: change is coming to retailers and the customer is at the center. Those retailers that are willing to take chances and implement real change from the executive level down to store managers are poised to reap the benefits.

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The afternoon keynote session, entitled Navigating Retail’s Relentless Reality: What CEOs Are Doing to Thrive in a Consumer-Driven World, began with JDA Software CEO Hamish Brewer recapping results of a recent global CEO survey focused on where the top global retailers are putting their focus towards in the coming year.

The session really took off when Brewer was joined by Foot Locker CEO Ken Hicks and Forbes Magazine Chief Insights Officer Bruce Rogers to expound on many of the points Brewer spoke to – central to all was the fact that the consumer has become more demanding.

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According to Brewer, the retail landscape is going to change more in the next five years than it has in the past 50. This means the role of the CEO is more important than ever as they will be crucial in navigating through the next few years and ensure the successful execution of both in-store and omnichannel strategies. “Retailers need to bridge the gap between risk and strategy to combat them,” he said. He went on to issue a note of caution for retailers saying they should not revert back to processes that have worked in the past as they cannot account for the changes that are coming.

It was Ken Hicks who said outright that the consumer has become more demanding. He added that competition is everywhere and not just the store down the street. With the proliferation of online and multichannel retailing, the competition might be halfway around the world, completely online, or worse, the customer themselves. Armed with the right mix of solutions and strategies, retailers can create unique experience for consumers that they cannot find anywhere else.

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“The customer may enter the store knowing more about the product than the sales associate,” said Hicks, “You have to be flexible and you have to be aware of what is going on.”

Speaking of his own company, Hicks said they are willing to try anything if it is going to help create a better consumer experience. He made a point to say that the trick is not investing all of your time in one solution, but to test out as many solutions as possible and at many different levels within your organization to see what works. Effective in-store experiences are the result of well-informed and developed practices.

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Reimagining Main Street at NRF 2014 – The Panel

Earlier we covered Rick Caruso’s individual portion of the session Reimagining Main Street – How Brick and Mortar Retail will Thrive in the 21st Century during day one of NRF’s Big Show. In this post we take a deep dive into the major themes and trends discussed during the panel that followed.

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Moderated by CNBC Power Lunch Co-Anchor Sue Herera, the panel featured Rick Caruso, Founder and CEO of Caruso Affiliated, fashion designer Rebecca Minkoff, Sprinkles Cupcakes founder and pastry chef Candace Nelson, and Blake Nordstrom, President of Nordstrom, Inc.

The panel began by emphasizing the notion that brick and mortar retail needs to be as close as they can with the consumer and should always strive to be relevant. While it is harder to evolve in-store retail practices when compared to online, the onus is on them to remain in lock step with their customers.

Candace Nelson noted that she is always trying to find new ways to wow the customer and it was that drive that led to their new curbside delivery service. She mentioned busy moms who are running errands might not have time to make it into the physical store and that the new delivery service gave them away to deliver their product and still engage the consumer. According to Nelson, “we want the customer to feel pampered and cared for in that short transaction time.”

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Rick Caruso talked to this shift from getting the customer in and out of the store as fast as possible to one that invites them to stay as long as they want. The key is to give them reasons to come to the store even if there is nothing they want to buy. “If you do that, then that is where they will want to shop,” said Caruso. “It puts them in a happy spot and if they are happy then they are more likely to buy things.”

He mentioned that if a retailer is aimed specifically at women, they should incorporate elements of their store experience that engage the husband and kids as well. If the experience of shopping is more about a child wanting to go ride the train set that is in a store and not just a stop on a checklist of things to do, the transactions will follow suit.

Rebecca Minkoff described the ivory tower that designers used to be locked in, apart from their customers and fans. Through the advent of social media and more dynamic store designs, she is now able to interact with her customers in ways she never imagined. She spoke specifically about trunk shows she holds in various retail stores that allow her to share her products with her customers, but more importantly, create unique relationships with them.

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Looking to the future, Blake Nordstrom brought up the great point that creating unique stores that cultivate customer experiences are difficult to pull off and require hard work across a number of different areas. While many stores are serving as poster children, there are countless others that have yet to catch up. Fortunately the silver lining, according to Nordstrom, is that “the seeds are being planted today for retailers to be able to create this experience in five years.”

The main theme all four panelists agreed upon at the end of the session is that you have to make the shopping experience interesting and customized to the consumer. Do not get caught up in the quick transaction, if you create a space that they want to keep coming back to, the transactions will follow.

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NRF 2014 Kicks Off by Reimagining Main Street

Day 1 of NRF’s Big Show here in New York City kicked off in its usual fashion with an amazing session that set the tone for the next three days.

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Entitled Reimagining Main Street – How Brick and Mortar Retail will Thrive in the 21st Century, this session examined the trend of how retail is creating new “town centers” in a post-recession era. Retailers, now more than ever, are charged not with creating shopping centers but establishing vibrant gathering places that foster community and emphasize experience over transaction. The session had two parts, an introductory talk by Caruso Affiliated’s Founder and CEO Rick Caruso, and a panel moderated by CNBC’s Sue Herera (which we will cover in a separate post).

Caruso opened the session by outlining the key differences between in-store experiences and online, and why the former will never go away. “It’s the experience around [in-store] that leads to connection and community, all wrapped up in glamorous service,” he said. “While online is still a critical part of the retail ecosystem, people forego online shopping in favor of the atmosphere created by the brick and mortar store.”

For retailers to capitalize on this trend they need to be able to create an immersive experience, no matter the size of the store. Caruso cited Starbucks as a company that has maximized experience within small spaces. They have everything from the smell of the store to the sound of their machines calibrated to encourage people to sit in their stores for hours. The transaction is a side effect of inviting the consumer into your cave and sit by the fire. According to Caruso “you are not a retailer, you are a caretaker.”

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To that effect, he noted that one retailer went as far as to hire former Four Seasons executives to bring their knowledge and experience of hospitality to retail. According to Caruso, “if you are in the retail business, you are in the hospitality business.” A website cannot provide that level of hospitality and personalization. The store is the physical embodiment of who the brand is and every moment the consumer spends there informs their opinion and forges their relationship with them.

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Shopping serves a need for community, relaxation, and pleasure and is an important facet of our lives. Physical retail stores play a crucial role in supporting this notion. It goes far beyond things they can hold in their hand or hang in a closet. Retailers should embrace this advantage of being a disruptor to the online technologies that are meant to be disrupting them.