Diferentiating your company with an "exclusive brand experience" has led to another kind of race to the bottom. More and more brands are trying to be the most "iconic", "relevant", "fresh", "sexy". The commoditization of these concepts is everywhere. They get so diluted and commericalized in the barely veiled desperation for relevancy that now I avoid such "experiences" whenever I realize I'm being "engaged with". I might buy your overpriced tshirt on its own merits, just don't try to tell me I'm changing the world by wearing it. Such a concept has a very precise, limited application that gets unsustainably depleted when used by a bunch of clothing companies. It's the marketing version of strip mining.
In my experience selling a consumer product, barely a month goes by without a new PR/marketing agency telling me we should “go for the green angle”. Few people seem to understand that, like you said, these common differentiators, in my case “green/natural”, have become extremely commoditized.
There is, despite what's been written here, no "breakdown" of the wholesale-retail model for revenue, except in the minds of lazy editors such as whoever edited this piece.
Brick and mortar sales exceed online sales by nine to one. Obviously the trend line is moving away from brick and mortar, and equally as obvious, at least in the commercial real estate industry, the US is way, way overbuilt with retail.
So closures will continue, and articles featuring the "apocalypse" premise will continue, and at the end of ten years, brick and mortar...will exceed online by maybe 8 to 1.
That said, the article central premise is sound. Designed experiences in surviving retail space are going to get deeper and more numerous.
Your points seem mostly logically separate from those in the article. (You may have extrapolated too much from the title.)
The author is arguing that Nike and other high-profile brands will move to direct-to-consumer sales rather than using intermediate wholesalers. But he explicitly includes Nike-branded brick-and-mortar shops as an example of this shift. He's not arguing on brick-and-mortar vs. online.
More then that, there is an inversion: The experiential retailers are actually media channels and gets compensated with promoting the brand. That is, Nike shifts from being a vendor of the retailer to a client of the experiential retailer.
That neatly addresses the growing practice where a brand consumer goes into a physical location and then purchases from online.
In other words, the inversion makes the brick and mortar vs retailer dichotomy meaningless in terms of sales.
It's kinda like what Tesla has already been doing.
What is not said in the article: the role of Amazon in squeezing traditional retailers from the othet side; the continued erosion of broadcast advertising.
Post 2008, every city I've lived in or have visited you see gutted strip malls everywhere. Areas that were awash in stores during the last decade of economic boom are now ghost towns or worse since a lot of them were built up to support all the new housing developments. It's a double hit when these developments go bust and then the surrounding retailers go under with them.
Two years ago I was pondering opening up a skatepark and I couldn't believe how much commercial real estate was available. The owners were desperate to get a client into their buildings, it was unreal.
This is just an intermediate step in the inevitable shift to direct to consumer sales. Between Walmart, Amazon, dying retail and malls and globalization which killed control of product distribution worldwide, this is the only conclusion.
Brands will want to engage with customers directly and cut Bezos and co. out.
Honestly as a consumer "Engaging with brands" is somewhere just below getting a root-canal on my list of non-favourite things. Really I don't want to "engage" with anything I just want to give you some money in exchange for your stuff - why don't they get this?
That is probably true, although I do buy good suits - but even so has your wife ever "engaged with a brand" or does she think of it as "purchased a gorgeous looking $CLOTHING_ITEM"?
When they’re talking about “engaging the brand” they’re talking about people who enjoy shopping. They’re not just going to the store to buy a replacement bird feeder. They’re going out to the shops to enjoy being in a nice space, be treated courteously, and look for products to buy that will make them feel good. Consumers like that are less and less interested in digging through a thousand brands at a department store and are getting more from a more personal boutique experience where they can get more consistent service and products.
People in the marketing business would say when someone attends a Foo Fighters concert, or buys a Foo Fighters tee, or posts about them on social media, that they are "engaging with the Foo Fighters brand"
They imagine the same thing could be achieved by brands selling computer chips, tampons, washing machines, cars, and so on.
Personally, I doubt the words "brand engagement" have ever passed Dave Grohl's lips - but I can kinda understand where they're coming from.
Seems to me like it's the brand, because she'll find something similar on Amazon then talk herself into going to the brand's store for various reasons instead of buying the basically identical knock off.
My favorite reason is "I think the brand name holds up better," ... for the 5 times you'll wear it? But it makes her feel like we're doing well in the rat race, so works for me.
That works for an established brand of Nike, Procter & Gamble and Coca Cola variety, but creates quite a barrier for a new brand. Retailer’s value proposition, in a nutshell, is lower customer acquisition cost. Some brands need it, some don’t.
"New competitive pressure force established brands to come up with new ways to trick people into paying 200 dollars for things that cost 10 dollars to make."
HN readers are not the typical consumer. I guess the majority here will buy after making a comparative table and a Phyton/Go/node script to scrap prices from the web. :)
OTOH the typical consumer wants to "feel good" and part of a "special club" when buying, they want "an experience". That's what Nike sells along with the shoe, and that amounts to 80% of the price. /half-joking
HN users are just as vulnerable to branding as anything else; it's just different values. Linux in particular is a massive triumph of branding; it's success is based much more on the intangible benefits of open source and that particular "lifestyle" than utility compared to its competitors. Not a few products position to this crowd, namely the various phones for privacy geeks as one example.
Lots of marketing speak in there so my TLDR (with apologies to ‘sitelus): when people want to buy Nikes, they go to Nike.com, not drive to the nearest mall (except for grandpa buying nike’s for his grandson’s birthday, but there are fewer and fewer of them, and even then they might not have the model that grandpa wants, resulting in a potentially lost purchase).
Running a successful company is about managing focus and effort. In the light of the above, Nike has decided that dealing with mass retail is just not worth the effort+time investment anymore.
You still want to have a physical presence in the real world, but you want it to be iconical - people making a point to going to the Nike Store, etc (did Apple pioneer the modern version of that concept? I can’t think of product companies who did something like it before). So that’s what Nike is betting on.
It depends on where you stand geographically - in some places, there are retailers who are simply the go-to solution.
Now, anyone who knows some history of marketing, or who have been working on this for some time, knows that the sales channel helps with brand positioning - this is basic marketing.
If you have a luxury brand (yes, Apple is a luxury brand) you stand where luxury brands are - you even use media that luxury brands use for advertising.
Nike was about empowering people who liked sports - they were a mass market brand. That's where mass retail comes to play because they have distribution on the scale to the masses - the problem is that they squeeze margins. Mass retail REMOVES effort + time from the equation precisely.
Maybe Nike just wants to thicken their margins, since they are watching what's happening with SUPREME - a fashion brand where people make lines to buy t-shirts... if SUPREME cult can do it, with ridiculous margins... why can't they?
Nike has the brand cult, they have the product, now they just bump the prices and create the idea of exclusivity with a small supply - the illusion of scarcity.
I mean, they have a good example with basketball shoes in the USA.
Secondary market will love this.
Btw, Apple didn't pioneer the concept of the modern brand stores - they copied boutiques from luxury jewelry and watches brands.
Nike has been doing the "costumers standing in lines to buy their product" thing for longer than Supreme has existed. Their basketball shoe line has been massively cultish since at least Michael Jordan.
Go to a store that specializes in running shoes. The people tend to be fairly knowledgeable.
For example, I overpronate, have high arches, and 2EE feet.
Running shoes are like Cinderella's slippers. No one shoe is perfect for everyone. Nikes tend to be too thin for my feet, and it happens New Balance is one of the few brands that have 2EE running shoes.
m-commerce virtual shelving[0] allows mid-level e-commerce ventures to
(1) setup branded in-store experiences / show rooms
(2) align logistics supply lines (manufacturing, importing, warehousing, distribution suppliers) to move supplies closer to "pickup points"
(3) connect local partner "distribution points" and "pickup points" to also act as 1-hour delivery using Uber, PostMates, etc
Online retailers need to connect their own existing shopping experience with local shops using virtual shelves, think backlit movie posters outside a movie theater. This can come in the form of dedicated walls, laminated print book, a simple picture frame, etc in a friendly location and an option to either ship or local pickup. As long as the local shop is tied into their partners' back offices and they believe in the brand, they can represent it well and act well on their own behalf by splitting the sales generated at minimal cost of mostly a little unused closet space. This lessens the need for mega shops like Amazon and eBay, as well as for mega logistics providers like UPS and FedEx because there are many warehousing and cargo van subcontractors available.
For an example, I've seen yoga studios with small, unmanned in-store corner shops and similar in martial arts studios and small gyms. They
might have a small group of hand-picked supplies, whereas, in this model, a new company that for example has a brand new safety gear might search them out and see their gym members as a good target. Then by setting up what we might call a consignment deal today, they can have a delivery of supplies on the next run from their partner warehouse and the new rep can start printing out and framing their displays for immediate roll out.
This would have unlimited potential for those who want to setup the deals that connect e-commerce and retailers as well. That is also a branded experience, and wheels need greasing.
>For consumers, to whom shopping experiences matter as much, or more, than products, mass merchants are bringing nothing to the table.
I’m not sure if it’s just me not being a hyper brand-conscious teenager anymore or if I’m just out of touch, but out of this whole nauseating article, this statement was (to me) the most ridiculous. When I need or want a product, I don’t give two shits about the shopping experience other than did I find the product in a convenient manner and was it priced low enough for me to afford it.
I’m ignorant of the economics at work here. Is there really money to be gained by abandoning a strategy of lower prices but wide availability for one of more expensive and harder to access?
Those brands never had wide availability to start with, and are straddling the line between commodity and bespoke goods. Nike really is a mass maker of commodity shoes; they have a slightly better brand cachet, but the audience for sneakers is a lot more mainstream and wouldn't support that kind of positioning.
A similar example would be in MP3 players. Remember Neil Young's Pono?
I guess that’s what I was trying to get at. I understand how brands like Gucci get away with ludicrous pricing and positioning themselves as exclusive, but I have a harder time understanding why this is a good strategy for a company like Nike.
In many places we need to demolish retail and build housing. In CA there are perverse incentives (prop 13) that continue to drive retail construction over housing. Thanks Howard Jarvis.
Commercial property in California for whatever reason is also covered by Prop 13, so the property tax increases are limited. A large retailer of Costco or Walmart variety is able to move the needle as far as the underlying property valuation, which is why they typically assure a tax break before they even consider development. If the commercial property is owned by a REIT, and the retailer carries a long-term lease, the REIT as the landlord is covered by Prop 13 as far as potential valuation volatility goes.
There's a cut of the sales tax revenue that municipality gets, but commercial projects like shopping plazas also require significant municipal spending as far as the roads, street lights, infrastructure hookups, etc.
I live in Southern California which has a sprinkle of small towns packed into a limited space, with a new town forming through annexation every few years or so. Some towns are very commerce-friendly, some are very unfriendly. You'd assume that towns with a large retail presence are swimming in cash, while those that are mainly residential have a Prop 13-caused budget crisis any time they need to replace a light bulb in a street light, but it's not the case.
There are some very rich (as far as cash flow statements and balance sheets) towns that are purely residential and there are very poor towns with significant shopping and industrial presence, as well as the opposites of those two.
In Europe there is suitsupply. They have a very different approach to in store experience even though they started as online only store. They greet you with their first name, ask some personal questions (not creepy though), and try to find out what you really need. I always feel quite welcomed there.
I don't know whether I am in a majority or a minority. But I hate it when I go to a shop, am walking around and just browsing, and random store employees come to me for a chat, ask me questions etc.
I don't want to be approached and forced to have a conversation until I decide I want to proceed and buy something or try something on. Just let me browse without bugging me. I am more likely to find something I like and give you money that way.
I can totally understand that, I often feel the same way. I think it makes a huge difference how and when you are approached. That’s when a real good salesperson will show their skill.
Plus they have a true omnichannel experience: things you buy online can be returned via shop and the other way around. You can have your measurements taken in shop and then buy online. Or do alterations offline after ordering online.
There's something missing in this, I think, which is exactly what about the experience makes in-person retail work. Compare buying a book at a bookstore to buying it on Amazon or bn.com. Still, 20 years later, it's only good online if you know more or less what you want. Yes, you can buy a bestseller, yes, you can look at recommendations. But you can't walk into amazon.com and find something you didn't even know you wanted like you can in a local bookshop, a branch library, or a giant B&N. There is still a lot of room for growth and building a nike-branded area inside some big retailer is not the half of it.
This isn't a new era of retail. The article mentions that instead of widespread availability, retailers will sell direct to customer and only in a few stores. However, we have had this already with multiple brands; Bose is probably the primary example of this trend. And Bose is successfully challenged by Beats, who does normal retailing with many retailers.
Nike can try doing this, but they might find they've ceded a lot of ground to a rival brand who is willing to be visible and widespread.
They simply want to boost conversion of their product, which likely sells less as a shelf item with hefty stocking fees for a commodity experience. For wealthier shoppers (the target market of these brands) shopping is entertainment - something you do when bored. If the product can’t differentiate itself on a shelf, doing the brand maneuver justifies the high prices a lot better.
Wow. Reading this, having spent some years doing retail tech, I feel that Nike’s shift in strategy is as game changing for retail as $10K bitcoins will be seen for the finance world.
Can you please expand how it's a seismic change? Also Bitcoin is a bad comparison as we havent seen that through to its conclusion. If you wanted to say something was seismic, iPhone would be a better comparison as there is clear indicators of how it changed the landscape.
TLDR; Brands like Nike don't want to partner with 1000s of outlets that they typically did. Instead they will only work with 10s of partners who are willing to invest in creating brand specific unique experiences.
I am not sure if this is right approach. I think the whole era of "brand ambassador", "store experience" etc has ended. Previously brands carried promise of quality and uniqueness however these days this promise has been transferred to store itself that distributes those brands. Now these distributors are able to get similar quality from relatively unknown brands and sell at higher margin. This likely because most brands have centralized their manufacturing to places like China and there is usually same manufacturer there which produces same goods, one with brand label and other without. So as brands have outsourced their manufacturing, they have also outsourced their expertise.
You can see it as depressing that companies did this to themselves over, say, the previous 30 years. But they did it to cut costs and if the consequences of that action are only biting now, then maybe it was the correct decision. It probably kept the shareholders happy.
If you take a long view of 100 years, its hard to see whether shareholders would be better served by companies optimizing themselves for longevity or by a changing population of companies planning for an initial 10 years of growth, followed by 30 years of cost cutting, followed by gradual decline.
I'm sure I'm not the first to have had this thought. Does Economics teach a standard line on this?
That just means branding will become even more important to differentiate you from your competitors. It's not like this is new; grocery goods have been functionally the same among categories for decades now. You can buy unknown brands at the dollar store for less money. But then it's only the strong brands that will rise above the sea of Chinajunk to be more than that.
Is there a github/wikidata list of global manufacturers and the branded goods made by each factory? In theory, that would enable supply chain transparency, e.g. Amazon plugin for online shopping or mobile app for offline shopping. Note that the same factory can make goods to different quality specifications, depending on brand requirements.
