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Building Brands The Omnichannel Way: Sweets Anyone?

From pop-ups to exclusive web content, there are a number of tools available to brands that create compelling ways to engage consumers.  A number of these examples are on display during this Holiday season.

With a slight obsession with chocolates and sweets, here are some unusual ways that some brands are going to market, often bypassing traditional distribution methods:

  • Cailler, Nestle’s super premium brand of Swiss chocolate, has been previously unobtainable in the U.S.  The brand has chosen to create exposure to this upscale offering in a few different ways. There is an on-line Holiday store front on Amazon.com as well as two pop-up locations that really help bring the magic (and exclusivity) of the brand to life. The locations are designed as retail holiday pop-up shops in New York’s Meatpacking District (November 19th-26th) and San Francisco’s Union Square (at 117 Post Street through December 21st). These locations were designed to create brand buzz and drive traffic to the Amazon.com site.
  • Oreo has created an on-line holiday site that delivers White Fudge Oreos in a festive holiday tin. One of the more unique features is that a customer only has to input the email address or mobile phone number of the recipient, who is then notified of the gift. Shipping is also free. https://gifts.oreo.com/oreo.html?siteid=34#/catalog

  • Magnum is a longer standing example of using pop-up to build their brand and has been moving around its Make Your Own Magnum in key global cities around the world like London, Sydney, Singapore and New York. Customers can customize and co-create their own decadent Magnum bar.

 

Besides making you hungry, what’s the point of these efforts?  Brands can leverage new tools to launch a product, offer an exclusive product, allow customers to customize, give a gift and most importantly, build trial and awareness, all while by-passing more traditional retail distribution points.

While pop-up in retail has been around for some time, pop-up can also work on-line. The key will be to develop new forms of measurement that go beyond simple P&L’s. On-line offers easy ways to measure such engagement—traffic, conversion, etc. while retail offers trickier sets of measurements like halo effect that can track lift in a market or community.

Omni-channel brand building is still very much in its infancy but I expect to continue to see new creative uses of these forms of engagement that create excitement while building traffic and sales.

Neil Stern for Forbes

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Shop to Table

Non-food retailers set their sights on food & beverage concepts to reinvigorate large retail spaces, generate buzz, drive visits and target growth.

Retailers are Creating Moments for Customers to Shop & Savor

For some time now, retailers have been incorporating in-store restaurants, cafés and high-traffic concepts, such as salon services, to complement the shopping experience and encourage lingering.  Once considered primarily a vehicle to create staying power, food and beverage concepts now present retailers with an attractive growth opportunity of their own accord.

Last year marked the first time in U.S. history that consumers started spending more on dining out than they do on food inside the home, and non-food retailers are beginning to tap into foodservice to attract customers and leverage underutilized square footage for socializing, savoring, and elevating the in-store environment with culturally-relevant multi-sensory experiences.

Are Struggling Store Bases Adopting a Winning Recipe?

This month Barnes & Noble debuted its third prototype store offering a full-service restaurant and café aimed at delivering unexpected comforts in the customer journey as shoppers read, relax and browse. The store at the Palladio of Broadstone located in Folsom, California, features a 2,600-square foot space dubbed ‘The Kitchen’ that provides seating to accommodate 140 customers.

The Kitchen offers regional wines, local brews and a chef-driven, all-day menu of seasonal farm to table fare using locally sourced ingredients, adding a touch of cultural cache to upscale the retail offering. Inside the space, customers can purchase books, receive table service and lounge in the attractive setting, providing one more reason for shoppers to spend time at the bookstore retailer.

In November of last year, Urban Outfitters took matters a step further when the company inked an unusual deal to acquire a majority stake in the Philadelphia-based Vetri Family group of restaurants for approximately $20 million. Urban Outfitters had previously experimented in partnerships with high-profile chefs, including Marc Vetri, to operate food concepts in collaboration with the brand’s lifestyle concept stores, such as Space 24 Twenty in Austin, TX.  Now Urban Outfitters includes its namesake specialty apparel stores, Anthropologie, Free People, and The Vetri Family group of restaurants, known for its award-winning Pizzeria Vetri.

For Urban, the deal represents an effort to drive traffic to its core store business and to target growth by expanding into the casual dining sector.  According to a recent interview with Marc Vetri, Urban Outfitters is currently considering opening restaurant locations near traditional Urban Outfitters stores as well as opening pizzerias within certain stores.

Retailers Strive for Relevance to Today’s Digitally-Savvy, Experience-Wired Consumers

This evolving trend of looking to foodservice to reinvigorate non-food retail stores is underpinned by the rapid growth of ecommerce, giving way to a discerning omnichannel shopper who needs a compelling reason to visit the physical store.

And above and beyond enticing customers to visit stores, retailers are urgently looking to incorporate concepts that serve customers in culturally relevant ways that target growth and align with a longstanding shift toward an economy where consumers are seeking out experiences rather than just products.  Foodservice is just one area retailers are exploring to deliver a unique shopping experience to experience-driven consumers.

Retailers are exploring additional avenues, such as strategic partnerships that bring in new customers, provide new experiences and generate credibility for the brand. A successful example can be
seen in Nordstrom’s 2015 Vancouver flagship store, which includes Canada’s first-ever Drybar blow out bar, a high-end bistro overlooking Robson Square, and a rotating pop-up space that features exclusive products and experiences that keep customers coming back.

 

We commend retailers for their efforts to continuously evolve formats, products, and services to better reflect consumer appetites in today’s increasingly digital and experience-focused retail landscape.

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Eataly’s Secret Formula: Founder Oscar Farinetti Will Tell You It’s a Peach

We recently had the pleasure of hearing Eataly founder Oscar Farinetti share the secrets of the development of Eataly at the Latam Retail Congress held in Sao Paulo, Brazil.  It was one of the more inspiring retail stories we’ve heard in some time, and it perfectly exemplifies the passion for food and life that is evident in their stores.

It also comes on the heels of the opening of their 32nd store around the world, in the Westfield World Trade Center in New York. Additional US locations are scheduled for Boston later this year and Los Angeles in 2017. Farinetti resists calling Eataly a chain, with each individual store reflecting the character of the country and neighborhood. While the original New York Flatiron store features nearly a 50/50 mix of market and foodservice, the World Trade Center location will likely lean more heavily on foodservice, reflecting the clientele of the area.

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Oscar Farinetti Speaking About Eataly

Oscar Farinetti Speaking About Eataly

Farinetti’s passion is evident when he speaks of the origins and aspirations of Eataly. As the headline discloses, his strategy can be condensed down to the image of a peach. At the core, is what he refers to as his “poetic target”. We would call it a mission statement. Farinetti’s aspirations were far greater than building a successful retail store. He wanted to provide employment for the country, celebrate Italy’s diversity and stem the decline of the country by focusing on the incredibly abundant assets around food and wine.  The core of all this, however, was about people and using Eataly to promote and celebrate people.

He then speaks to the many promises that Eataly wanted to deliver. As he describes each, the vision of what Eataly is about truly comes to life.  It’s about creating a wow, teaching customers and celebrating the beauty of the food. By tying product to the producer, it makes the experience more special.

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Eataly's Sixteen Promises

Eataly’s Sixteen Promises

The final product of Eataly is then very easy to imagine. Creating a unique fusion of market place, restaurant and education, seamlessly blended together.

By the way, Farinetti encourages copying just as he encourages taking photos of his presentation. Copying is a form of learning and form of flattery. What can’t be copied, however, is Farinetti’s passion. His zest for life, for reinvention, for celebration must be experienced. And it won’t be easily replicated. And this vibrancy resonates in the Eataly stores, from New York to Chicago to Sau Paulo to Milan and beyond.

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Eataly Milano

Eataly Milano

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Disruptions in food retail: What’s next?

I had the privilege recently of speaking at Western Michigan University’s Food Marketing Conference. It was the 51st such event, which is remarkable in itself.

My topic was “Disruptions in Food Retail.” It was inspired by Supermarket News’ recent “Disruptors” issue, which featured 25 people who were doing precisely that in the food world. One of them, the CEO of Fetch Rewards, is just 22 years old, a reminder that some of the students in the Western Michigan audience could soon be disruptors themselves.

In my presentation, I essentially broke disruption into four buckets:

  • The consumer, with profound changes in societal composition driving the need and desire to change how they shop and how brands and retailers serve them.
  • Technology, which becomes an enabler to help make such changes happen. Technology disruption ranges from all of the modes of shopping (from e-commerce to digital tools) as well as the way we will gather and process information.
  • Competition from new directions, which includes new foodservice concepts to e-commerce disruptors to foreign entrants into the market.
  • Formats, where retailers are creating new ways to serve different shopping missions.

Not coincidentally, the remainder of the speakers and sessions at the conference dove deeper into many of these areas. There were breakout sessions on Millennials, Boomers, e-commerce, private brands, digital strategies and innovations in foodservice. All of these provided examples on both the disruptions themselves and what retailers and brands need to be doing to respond.

My closing slide spoke to culture and the need for companies to evolve and change as these trends change. It is relatively easy to spot a trend and certainly conferences like this help crystallize what those disruptions are likely to be. It is infinitely harder to respond and bring an organization along to react.

How is your company responding to disruption?

Neil Stern for Supermarket News

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Millennials are Just Like You and Me, Only Younger…

Much has already been written about the Millennial generation. And for good reason. Spanning the ages between about 21 and 39, they represent a powerful constituency of U.S. consumers, with about 22% of the total population and $1.7 trillion in spending power. And, they will only become more important in the future as their buying power increases. It is critical that they are understood and marketed to for any company that wants to be relevant now, and into the future.

But, very importantly, they are not aliens who have dropped in from another planet.  They are a consumer group like any other, which means they are diverse, complex and resistant to any stereotypes we throw on them. Let’s consider some of the similarities and differences of this group of consumers:

There are significant differences between a 21-year-old Millennial and one who is in her mid-30s with children.

  • They span a broad age range. The difference between a 21-year-old Millennial just graduating college versus a Millennial in her mid-30s with children is significant and profound. We prefer to think of life-stages being the critical differentiator rather than just age. Yes, they are deferring some of these key life stage decisions (getting married, having children, etc.) to later in life but they still pass through the same life stages as every other consumer group.
  • They are ethnically diverse. 42% are from ethnic populations (Black, Asian or Hispanic) and fully 38% are bilingual. Clearly, this creates the need to be communicated to in different ways and will also profoundly shape their tastes and preferences. They are truly diverse.
  • They are digital natives. They have grown up with technology and are far more likely to adopt new behaviors faster than older consumer groups. This includes using social media and peer reviews to form opinions, shop online or shop from a mobile device and incorporate new digital tools (price comparisons, sourcing recipes, digital ads, etc.) into their shopping routines. Nearly 70% of Millennials won’t make a major decision without running it by their network first, and prefer brands with a well-developed social and mobile media presence.
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  • They are drivers of the shared economy. They have different motivations than older groups and are less driven by ownership. Access is key to them. Hence, the meteoric growth of an Uber (who needs a car?), AirBnB, Netflix, Spotify or Instacart. “25 years from now, car sharing will be the norm, and car ownership an anomaly.” — Jeremy Rifkin, Author and Economist
  • They founded crowdfunding. Their enthusiasm for technology has transformed the traditional marketplace. The world’s largest crowdfunding platform, Kickstarter, has facilitated more than $2 billion in project pledges since 2009. Today’s entrepreneurs and activists are raising capital and awareness by leveraging social networks rather than relying on traditional sources.
  • They spend more on food away from home. They are more likely to eat out than eat at home (43% of every dollar that Millennials spend on food is spent outside the home — MarketWatch). And when they eat out, they are driving the growth of fast casual restaurants and more diverse cuisines.
  • They care about provenance, authenticity, sustainability and local. They want more transparency from those with whom they do business. This is driving the meteoric rise of “craft” and “artisanal” products that stress ingredient purity, uniqueness and a message. Beer, chocolate, coffee, teas, etc., are now being elevated to new levels with a focus on the story behind the products. Millennials are also dedicated to wellness, devoting time and money to exercising and eating right. Their active lifestyle influences trends in everything from food & drink to fashion.
  • They crave variety and adventuresome foods. Perhaps driven by their ethnic diversity or more likely, their instant access to information, diversity in tastes and cuisines are culinary drivers.

If you find yourself nodding along to many of these trends, you will also recognize that many, if not all, of their behaviors are also being adopted by other generational groups as well. And yes, Millennials are also subject to the same concerns of every other generation: They must raise families, get by on limited budgets and struggle to find jobs, balance in their lives, etc.  It should be no surprise that Millennials count Walmart and Target among their favorite brands along with perhaps more predictable ones like Apple and Nike.

The biggest difference I see, and the biggest threat, is that, unlike in previous generations, having their above needs met at a supermarket is not a given. A diverse range of formats have emerged that are also trying to cater to this consumer and they can also freely choose among digital and brick and mortar alternatives.  They will shop a diverse variety of stores or websites to meet their needs. Supermarkets can’t assume that their patronage is a given as they move into family formation age. And, in the same token, they also represent the next generation of employees who identify strongly with the values of a company as much as what they’re getting paid.

Millennials are just like you and me, only younger. They are smart, savvy consumers who aren’t afraid to let their wallets speak.

Neil Stern for Supermarket News

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The Fresh Market Acquired By Apollo Global Management: The Right Move With The Right Company

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The Fresh Market, photo by Neil Stern

The Fresh Market (TFM) announced that it would be acquired today by Apollo Global Management for $1.36 billion, or $28.50/share. This represents nearly a 50% premium from Thursday’s close, where speculation on an eventual acquirer began to ramp up. It also puts to an end several months of speculation on the company’s future after a strategic review of alternatives commenced. During this time, there had been rumors of prior family ownership retaking control of the company as well as Kroger, which has been on an acquisition spree of its own, taking a look.

Apollo is an excellent acquirer in this situation, having had terrific success in their two most recent investments in the space, Sprouts Farmers Market and Smart & Final. Sprouts, in particular, should offer a number of clues on how to re-position Fresh Market, who has 176 stores throughout the country but has seen its recent sales and new store opening growth stall of late. New leadership at Fresh Market has identified several major initiatives, including redefining the value equation, improving margin and re-defining how they differentiate themselves in the market. While these are undoubtedly the right areas to be focused on, large scale chain of this nature is often much better suited under private ownership, where month to month results aren’t under as much scrutiny.

While Fresh Market has had an extraordinary run of success, positioning the company for the next decade while facing increased competition will be a great challenge.

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As Uber Eats Rolls Out, What Impact Will It Have On The Food Industry?

UberEats

The Uber app displays Uber’s new food delivery service, UberEats.

Last week, Uber announced the roll-out of a new UberEats service in 10 cities, ranging from Washington D.C., Denver, Seattle, Atlanta, Houston and Dallas to some of the larger cities like New York, San Francisco and Chicago, where they’ve been testing a version of the service for some time.

With over a million registered drivers, the question has always been, “What else can they deliver while the fleet is not being optimized?”. The company has experimented with parcel pick-up and other services but food seems to have the most potential, albeit with a yet to be proven business model and a hyper-competitive market.

The mechanics of the new Uber program will be similar to other competitive services in the market like PostMates and GrubHub. Customers can place orders among dozens of restaurants and have Uber deliver them within about 30 minutes or so for a charge of $5. This is a new model for Uber, tested in Toronto, now ready for roll-out in select cities and requires a separate Uber app. Uber has also been utilizing another service in select cities that offers a limited selection of pre-chosen items that are delivered in less than 10 minutes with no added delivery charge. This service will continue as well. I have used the instant version of UberEats and it is highly addictive, with food delivered within minutes, generally at price points less than what I would pay had I ordered directly from the restaurant. Additionally, Uber has offered some playful extras to keep the service interesting, from a $5 bargain priced pizza to a free Sprinkles cupcake or Jones Soda with every order. They have even tried some unique promotions for $10 like Halloween costumes and Ugly Sweaters for the holidays.

Uber is stepping into a highly competitive space with three significant advantages over their competition:

  • An enormous base of Uber drivers, who can be called upon to fill in gaps in their schedules to expand into other services. On demand anything seems a given with a large work force that can be continually leveraged.
  • In the same manner, Uber has a slick, easy to use application and an enormous base of mostly satisfied users. Their acquisition costs to expand into UberEats will be significantly lower than competitors because of their existing reach.
  • Finally, Uber has a seemingly unlimited amount of funds to invest into this (or any other) space. They can outspend their competition and also “out-lose” them while building their business. If the instant Uber delivery that I love seems too good to be true (or profitable), it probably is. Uber is investment spending to build a habit.

While this business model is unproven, it does have significant advantages over other on-demand models like Instacart that I have some significant doubts about. Foodservice, as opposed to grocery, has much higher margins to play with, which allows Uber to collect a fee from a restaurant that will still make a profit and collect a fee from customers for delivery. Consumers will spend more for foodservice and are less price sensitive, which explains, in part, the phenomenon of a customer coupon clipping at a supermarket and then spending $5 at a Starbucks at the other side of the checkout lane.

Uber has already proven its ability to disrupt one space. I think there is much more disruption to come in the future.

Neil Stern for Forbes

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The Magic Of Stew Leonard’s Dairy Comes To Long Island

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The new Stew Leonard’s Dairy in Farmingdale, New York, photo by Neil Stern

While much has changed in food retail since Stew Leonard’s Dairy first opened its doors in Norwalk, Connecticut in 1969, there are some things that hadn’t changed when they recently opened their doors to their fifth store in Farmingdale, New York on January 19th. When I caught up with Stew Leonard, Jr., the President and CEO of the family business, he was engaged in an active debate on where to place the 2 Rules three ton “rock” that is prominently featured at the front of every store. For anyone not familiar with Stew Leonard’s, the rock carries a very simple message stating the company’s policy:

  • Rule 1: The Customer is Always Right
  • Rule 2: If The Customer is Ever Wrong, Reread Rule 1

While the operating philosophy remains the same, I was also very curious about what will change as the new 60,000 square foot store opens, the first new store in eight years for the company. The three major changes can be summarized as follows:

  1. More Show and Tell. As Stew describes it, “we are trying to remove as many barriers as possible between the customer and the product”. This means details large and small, like moving the bagel oven to a position of prominence and eliminating much of the glass that used to separate prep areas in meat and seafood. The “tell” portion of the store is filled with great stories and displays about the products, the suppliers and their origins. Stew Leonard was “local” before it became a buzzword.
  2. Expanded Foodservice. “Customers are looking to spend less time in the kitchen and we’re filling that need through more pre-sliced, pre-prepped and prepared foods”, according to Stew Leonard, Jr.. The new store will feature a wok, a Mongolian BBQ and a pizza oven in addition to the huge range of hot foods tables that are typically found in a store. There is a kitchen doing complete prep work to ensure freshness of the product
  3. More Efficiencies. At 60,000 sq. ft. , the store is large by supermarket standards but considerably smaller than some of the earlier versions. Yet, it will have the same selling area with a reduction in backrooms. More efficiency and more focus on selling space versus production.
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Celebrating the opening of Stew Leonard’s Dairy in Farmingdale, New York, photo by Neil Stern

Still, the store will have the fun elements that customers have come to expect from Stew Leonard’s Dairy, from animatronic dancing farm animals to a new feature, a dancing “guacamole girl”. Stew Leonard’s Dairy has been a personal favorite store of mine for over 20 years since the first visit to Norwalk and later at newer stores in Danbury and Yonkers, NY. From the petting zoo outside the store to the cow that goes moo when you press the big red button, it has managed to be a delight for kids and a destination for parents without ever sacrificing quality. Remarkably, Stew Leonard’s carries just over 2,000 SKU’s, which means that it needs to be ruthless in product selection and making sacrifices about what it will and will not be. As Stew himself says, “Even I can’t do my full grocery shop here”. Despite the limited number of SKU’s, particularly on the dry grocery side, the store still manages to convey large assortments despite carrying only about 5% of the SKU’s of a similar sized grocery store.

There is a little bit of magic in every Stew Leonard’s, a combination of great products, great people and just a little bit of craziness. In an era when people are looking for ways to avoid the store altogether, Stew Leonard’s Dairy takes the opposite approach—a retail wonderland you can’t wait to shop!

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