Jul. 31, 2017 "Rethink your strategies for mobile sales": Today I found this article by Harvey Schachter in the Globe and Mail. There is some psychology and technology in this article:
The mobile economy is with us, but companies are stumbling in figuring out how to be effective. Anindya Ghose, an Indian-born professor at New York University’s Stern School of Business, who has been tapped as one of the management thinkers most likely to shape the future by the Thinkers50 rankings, may have some answers.
He has been studying the mobile economy on several continents, researching the factors that can point to success. He places the mobile economy at 4 per cent of global GDP and expects it to rise significantly.
People spend about a quarter of their time with media on mobiles these days, but companies are spending only about 12 per cent of their ad dollars on that avenue, so growth is inevitable.
“For organizations, there is a massive opportunity for monetizing mobile that they can tap into,” Mr. Ghose says in an interview.
People spend about a quarter of their time with media on mobiles these days, but companies are spending only about 12 per cent of their ad dollars on that avenue, so growth is inevitable.
“For organizations, there is a massive opportunity for monetizing mobile that they can tap into,” Mr. Ghose says in an interview.
Hindering growth are four contradictions yet to be sorted out.
People seek spontaneity, but are predictable and value certainty in their shopping and favour stores they are familiar with.
People find advertising annoying, but they are missing out on great buys.
People want choice and freedom, but are easily overwhelmed.
People protect their privacy, but they increasingly use their personal data as currency.
People seek spontaneity, but are predictable and value certainty in their shopping and favour stores they are familiar with.
People find advertising annoying, but they are missing out on great buys.
People want choice and freedom, but are easily overwhelmed.
People protect their privacy, but they increasingly use their personal data as currency.
Right now, advertisers are overwhelming prospects with messages. And they often resort to subterfuge to gain personal data rather than addressing the issue openly and offering to trade information for rewards, such as discounts and better-targeted messages.
In one of Mr. Ghose’s studies, for a mall in China, shoppers were offered the chance to use the mall’s free WiFi as they entered, indicating where they would be shopping, in exchange for coupons and discounts. Even though they could use the WiFi without agreeing to share that data, 81 per cent did.
In one of Mr. Ghose’s studies, for a mall in China, shoppers were offered the chance to use the mall’s free WiFi as they entered, indicating where they would be shopping, in exchange for coupons and discounts. Even though they could use the WiFi without agreeing to share that data, 81 per cent did.
“I’m asking consumers to not hold back on data but share it. When consumers do that, however, companies must act responsibly,” Mr. Ghose says.
In his book Tap, he identifies nine forces that are affecting the mobile economy. Asked to pick the most pivotal, he names:
- Context: You need to understand the factors and circumstances that will determine the shopper’s decision-making. That’s not a new concept, but for mobile – when people tend to be in motion – it requires answering three questions.
- Why is the customer there?
- What does the customer want now?
- How is the customer feeling now?
- That allows you to extend the right offer at the right time with the right price.
- Crowdedness: It helps to know whether the consumer is alone or in a crowd. Interestingly, mobile devices are a form of escape in crowds, as we get lost in our screens; so his studies showed commuters on a crowded subway train are about twice as likely to respond to a mobile offer by making a purchase as people on non-crowded trains.
- And the more crowded the train, the greater the increase. “If you get a targeted message, you are more likely to pay attention,” he notes.
- Trajectory: It helps to know the path a consumer is taking so the marketer might predict (and shape) what is coming next. For example, in that study of a Chinese mall, if the person visited three high-end fashion stores in a row, a targeted offer from a similar retailer was highly effective.
- Social dynamics: We respond differently to cues when alone, with family, or with friends. One study found that children in their “tween” years begin to replace their family members’ opinions about purchases with friends’ thoughts.
- Another found people are likely to spend more money when shopping with friends than family.
- Weather: This can affect our moods and purchases in food, drink, fashion, travel and other areas. One study found that purchase likelihood increased 31 per cent in sunny weather and declined 9 per cent in wet weather.
- Time to purchase from receipt of a mobile ad is 42-per-cent faster in sunny weather. It might well be that variable pricing can help take advantage of these trends – higher prices for soft drinks in a vending machine on a hot day – or counter it, with discounts on wet days.
The other four forces are the location where the individual is, the time (duration of an offer, or point in the day when it is extended), the saliency of the message and the mix of technologies by which ads are sent. It’s a complicated area, but one that is important for marketers to understand.
https://www.theglobeandmail.com/report-on-business/careers/management/five-forces-to-consider-when-rethinking-your-strategies-for-mobile-sales/article35832389/
My opinion: I know the weather affects my behavior. If it's really cold, snowing, or raining outside, there is a low chance I'm going to go out unless it's for work.
Aug. 15, 2017 "Changing consumer habits, not Amazon are behind the retail slump": Today I found this article by Vitaly Katsenelson in the Globe and Mail:
My opinion: I know the weather affects my behavior. If it's really cold, snowing, or raining outside, there is a low chance I'm going to go out unless it's for work.
Aug. 15, 2017 "Changing consumer habits, not Amazon are behind the retail slump": Today I found this article by Vitaly Katsenelson in the Globe and Mail:
Retail stocks have been annihilated recently, despite the economy eking out growth. The fundamentals of the retail business look horrible: Sales are stagnating and profitability is getting worse with every passing quarter.
Jeff Bezos and Amazon get most of the credit, but this credit is misplaced. Today, online sales represent only 8.5 per cent of total retail sales. Amazon, at $80-billion (U.S.) in sales, accounts only for 1.5 per cent of total U.S. retail sales, which at the end of 2016 were around $5.5-trillion.
Although it is human nature to look for the simplest explanation, in truth, the confluence of a half-dozen unrelated developments is responsible for weak retail sales.
Although it is human nature to look for the simplest explanation, in truth, the confluence of a half-dozen unrelated developments is responsible for weak retail sales.
Consumption needs and preferences have changed significantly. Ten years ago, people spent a pittance on cellphones. Today, Apple sells about $100-billion worth of i-goods in the United States, and about two-thirds of those sales are iPhones. Apple's U.S. market share is about 44 per cent, thus the total market for smart mobile phones in the United States is $150-billion a year. Add spending on smartphone accessories (cases, cables, glass protectors, etc.) and we are probably looking at $200-billion total spending a year on smartphones and accessories.
Ten years ago (before the introduction of the iPhone), smartphone sales were close to zero. Nokia was the king of dumb phones, with U.S. sales of $4-billion in 2006. The total dumb-cellphone-handset market in the United States in 2006 was probably closer to $10-billion.
Consumer income has not changed much since 2006, thus over the past 10 years, $190-billion in consumer spending was diverted toward mobile phones.
It gets more interesting. In 2006, a cellphone was a luxury only affordable by adults, but today 7-year-olds have iPhones. Phone bills per household more than doubled over the past decade. Not to bore you with too many data points, but Verizon Wireless' revenue in 2006 was $38-billion. Fast-forward 10 years and it is $89-billion – a $51-billion increase. Verizon's market share is about 30 per cent, thus the total spending increase on wireless services is close to $150-billion.
Between phones and their services, this is $340-billion that will not be spent on T-shirts and shoes.
But we are not done. In the United States, the combination of health-care inflation in the mid-single digits and the proliferation of high-deductible plans has increased consumers' direct health-care costs and further chipped away at discretionary dollars. U.S. health-care spending is $3.3-trillion, and just 3 per cent of that figure is almost $100-billion.
Then there are soft, hard-to-quantify factors. Millennials and millennial-want-to-be generations (speaking for myself here) do not really care about clothes as much as people may have 10 years ago.
After all, high-tech billionaires wear hoodies and flip-flops to work. Lack of fashion sense did not hinder their success, so why should the rest of us care about the dress code?
After all, high-tech billionaires wear hoodies and flip-flops to work. Lack of fashion sense did not hinder their success, so why should the rest of us care about the dress code?
In the 1990s, casual Fridays were a big deal – yippee, we could wear jeans to work! Fast-forward 20 years, and every day is casual. Suits? They are worn to job interviews or to impress old-fashioned clients.
Consumer habits have slowly changed, and we now put less value on clothes (and thus spend less money on them) and more value on having the latest iThing.
Consumer habits have slowly changed, and we now put less value on clothes (and thus spend less money on them) and more value on having the latest iThing.
All this brings us to a hard and sad reality: The United States is over-retailed. It simply has too many stores.
Americans have four or five times more square footage per capita than other developed countries. This bloated square footage was created for a different consumer, the one who, in the 1990s and 2000s, was borrowing money against the house and spending it at the local shopping mall.
Americans have four or five times more square footage per capita than other developed countries. This bloated square footage was created for a different consumer, the one who, in the 1990s and 2000s, was borrowing money against the house and spending it at the local shopping mall.
Today's post-Great Recession consumer is deleveraging, paying off debt, spending money on new necessities such as mobile phones and paying more for the old ones such as health care.
Yes, Amazon and online sales do matter. Ten years ago, only 2.5 per cent of retail sales took place online, and today that number is 8.5 per cent – about a $300-billion change.
Some of these were captured by bricks-and-mortar online sales, some by e-commerce giants like Amazon and some by brands selling directly to consumers.
Some of these were captured by bricks-and-mortar online sales, some by e-commerce giants like Amazon and some by brands selling directly to consumers.
But as you can see, online sales are just one piece of a very complex retail puzzle. All the aforementioned factors combined explain why, when gasoline prices declined by almost 50 per cent (gifting consumers with hundreds of dollars of discretionary spending a month), retailers' profitability and consumer spending did not flinch – those savings were more than absorbed by other expenses.
Understanding that online sales (when we say this we really mean Amazon) are not the only culprit responsible for horrible retail numbers is crucial in the analysis of retail stocks. If you are only looking at "who can fight back the best against Amazon?" you are solving only one variable in a multivariable problem:
Consumers' habits have changed; the United States is over-retailed; and consumer spending is being diverted to different parts of the economy.
Consumers' habits have changed; the United States is over-retailed; and consumer spending is being diverted to different parts of the economy.
As value investors, we are naturally attracted to hated sectors. However, we demand a much greater margin of safety from retail stocks, because estimating their future cash flows (and thus fair value) is becoming increasingly difficult.
Warren Buffett has said that you want to own a business that can be run by an idiot, because one day it will be.
A successful retail business in today's world cannot be run by by an idiot.
It requires Bezos-like qualities: being totally consumer-focused, taking risks, thinking long term.
Warren Buffett has said that you want to own a business that can be run by an idiot, because one day it will be.
A successful retail business in today's world cannot be run by by an idiot.
It requires Bezos-like qualities: being totally consumer-focused, taking risks, thinking long term.
Vitaliy Katsenelson, CFA, is chief investment officer at Investment Management Associates in Denver, Colo. He is the author of Active Value Investing and The Little Book of Sideways Markets. His strategy for investing in an overvalued stock market is spelled out in this article.
The author does not own or hold short positions in Amazon. His firm owns a position in Apple.
My opinion: I have to agree with the US (and Canada) being over- retailed. There are a lot of choices and it's there to be competitive for the consumers.
No comments:
Post a Comment