Business success depends upon Customer acquisitions
One of the common myths of ecommerce business is – You build a site on ecommerce platform, integrate with good UI/ UX and provide multiple payment options and load your entire assortment of merchandise..
Voila. You have a business at hand i.e. D2C business model.
There are multiple flaws associated with this thought and one of them is Customer Acquisition cost (CAC), 90% of the ecommerce sites that I have come across, their CAC is higher than their Gross Margins on the product which they sell on their site.
In commercial terms we call this as Burn rate & this is one of the prime reasons why ecommerce business is hard to breakeven.
CAC breakdown includes your advertising spends, your promotions spend, influencer marketing, CRM, backend support, conversions etc that is basically how much cost you spend to gain business from your customers.
Customer acquisition-Rent the Runway turns to Amazon fashion
The US D2C giant Rent the Runway has now partnered with Amazon Fashion to acquire new customers.
Rent the Runway which started as rental business has recently tweaked their business model i.e. to selling of secondhand garments and partnering with Amazon fashion (marketplace) can bring them instant recognition and sales from new set of customers.
Amazon customers can purchase items from Rent the Runway’s designer exclusives as well as secondhand garments retired from its rental service or may even subscribe to their rental services.
To learn more about Rent the Runway business, click here
The company has forged a number of partnerships with retailers and even a hotel chain to ease pick up and drop off of rented items and to fuel sales.
Rent the Runway has always remained agile with changing times and have adapted their business model couple of times as well.
Rental model to subscription model and now selling of secondhand garments.
Summary:
D2C business is highly competitive and any platform which masters the art of acquiring and retaining their customers will come out shinning as winner.
My book, “ How to be a shark salesman” contains actionable insights for professionals to excel in selling by adopting new technology or social selling approach in building & scaling businesses.
Toys R Us which shut down its last store in Jan2021 is now making a comeback as a shop-in-shop concept with retail giant Macy’s.
As Fox Business reports, the Toys “R” Us stores inside Macy’s range from between 1,000 square feet to 10,000 square feet in size, with larger flagship stores set to exist in Atlanta, Chicago, Honolulu, Houston, Los Angeles, Miami, New York, and San Francisco.
Last month, Glossier (a beauty etailer) announced its distribution partnership with Sephora. (read the article here)
Nordstrom recently teamed up with at-home fitness brand Tonal to put mini-storefronts into 40 of its stores in an effort to capitalize on the boom of interest in home fitness.
Walmart had earlier set up Disney SWAS stores as well.
What is SWAS model (shop within a shop) & why it is helping brand to reinvent their physical retail?
One of the most popular strategies right now is SWAS, also known as ‘store within a store’.
Store Within A Store, also known as SWAS, is an experiential retail strategy where retailers set aside floor space for partnering brands to set up shop.
This may be done as a permanent lease or as a temporary pop-up lease strategy to drive footfalls into the main departmental store or even malls.
Pop-up stores are very popular amongst luxury brands as well as they get an opportunity to showcase their new collection in a high upmarket commercial space without opening a permanent retail store.
SWAS concepts will often involve value-added offerings in addition to just selling products.
This includes tutorials/product demos, roundtable discussions, or product sampling campaigns that enhance the customer experience and drive a buzz around the brand and the host retailer.
Post-Pandemic, most retailers are trying to reinvent themselves and the SWAS model is an excellent strategy to expand & increase brand presence.
Benefits of SWAS model for the host retailer/ shop in shop benefits.
Adding newness into the store without adding burden on capex.
Partnering with known brands attracts new customers for the host retailer
Maximum utilization of the store space by adding complementing brands to the host retailer’s offerings.
Additional source of revenue generation for the host retailer.
Changes in consumers preferences driving growth of SWAS model
Today, consumers are just as likely to discover new products on social media as they are in-store.
Moreover, 81% of consumers say that they research a product online before purchasing it in any channel.
Why SWAS is a good model?
Having maxed out their online audience and facing increasing acquisition costs, many successful D2C brands have taken the plunge of bringing their products offline to participating retailers.
Product Visibility and product trials are the key to growth.
Retailers can provide unique value by offering experiences in-store that shoppers cannot get online.
Opportunity to touch & feel which is not applicable to the online shopping experience
To learn how a toy retailer could add million dollars to their profits, click here.
Physical stores are a crucial touchpoint – but not necessarily the point of purchase.
Today physical retailers are moving their mindset from Transactional relationships with their customers to “imparting experiences” to build brand loyalty.
Allowing customers to book an appointment via the website for a free makeover, lead the customer to experience not only the makeup brand but uplifts the probability of higher purchases in-store.
Focus of right merchandise mix.
SWAS model helps the brand to optimize their merchandise offering, instead of offering everything, it gives them an opportunity to curate the right product offering which is a more focused approach towards inventory planning.
If you have a young son or a daughter at your home who is fond of gaming whether it is Roblox or any other platforms, You will observe that they get involved and engaged in the gaming environment so much so that they start associating themselves with the characters of the game.
Whether the games are PUBG, Fortnite, league of legends, or Minecraft, one thing is common with all these games is the level of addiction and engagement to succeed to the next level.
Why do gamers get hooked on games?
The author Nir Ayal in his book “Hooked” explains this phenomenon as 4 step process.
a trigger to begin using the product,
an action to satisfy the trigger,
a variable reward for the action,
some type of investment that, ultimately, makes the product more valuable to the user.
How could toy retailers use 3D print phenomenon to their advantage?
If you observe the consumer’s behavior while they are hooked on their game on their pads or gaming console, you will discover the underlying need that exists inside each one of them and that is the need “ To be the part of the game” i.e. superhero fans want to be “immortalized in plastic” by seeing themselves become action figures.
Frankly speaking, during my younger days, I was a big fan and collector of GI JOE figurines and toys.
With the advent of tech tools, the dream for millions of gaming fans is coming to life.
Wherein they can create their own figurine or get “immortalized in plastic.”
Gadgets like 3D printers and facial 3D scanners (which are now available as an app as well) bring the dream of creating your own 3D printed figurine into reality.
Hasbro, the world’s biggest toy manufacturer is spearheading this revolution into the world of Hyper Personalisation for their customers.
The Hasbro Selfie Series, which employs 3D printing to let consumers create a collector-grade six-inch action figure in their likeness for $60.
The team at Hasbro will initially launch with costume designs from G.I. Joe, Ghostbusters, Power Rangers, and Marvel, as well as designs inspired by Star Wars heroes.
To make a figure, fans download the Hasbro Pulse app, scan their face, customize the action figure and hairstyle, and send their mock-ups to 3D printers.
Join my FB group of Retail Evangelists, using this link, click here.
The 3D print advantages to retailers:
Hyper Personalisation will lead to creating brand loyalty which will result in sales.
Building a community of gaming enthusiasts and creating a virality of your campaign without spending on celebrity endorsements.
An unique gifting proposition to gift someone you love their personalized figurine in the costume of their favorite gaming environment.
Want to learn more about Hyper Personalisation, click here.
Check out the video
Summary:
Indeed a long road ahead for our middle eastern toy retailers to look beyond trading.
They need to create experiential gaming hubs using the Hyper Personalisation model similar to the Hasbro selfie series.
If you are a retailer and in need of bespoke strategies to grow & scale your business then feel free to reach out to me.
email me riteshmohan786@gmail.com
My book, ― “How to become a shark salesman”, provides tricks, concepts and hacks to grow your business by learning the Art of selling & become a ―Shark in selling.
Off lately, sustainability and eco-friendly products have become the buzzwords for every retailer.
Hence, Fashion retailers are introducing collections that are made from sustainable materials, and also shoemakers are now introducing products made from recycled plastic bottles.
Retail is seeing a plethora of brands coming up in the space of sustainability. I am talking about fashion and beauty brands.
The real question,
“Can a retailer adapt their product offerings to meet the expectations of the consumers who loves to care for their environment as well as love to buy products that are ecofriendly and sustainable?”
Sustainability should start with the core purpose of the business and brand.
My article answers this question and provides retailers few hacks and insights.
1. Sustainability approach : Change your instore lightings.
If you use power-consuming incandescent lamps, then it’s high time to switch to LED which consumes a fraction of the power and helps you drive your sustainability mission forward.
2. Switch to E- receipts: sustainability solution
You can capture the key customer’s data and use it for your data analytics. Moreover, also save on printing of paper invoices which in return would save trees and the environment.
A good starting point can be your shopping bag itself.
Areyou using plastic bags or re-usable & recycled paper bags?
Check out the innovative way to recycle the newspaper into a shopping bag.
recycled newspaper shopping bag
Packaging is likely to be a necessary expense for your business.
Sustainable shopping bags may even result in a cost reduction when compared to normal plastic bags.
Case study: Sustainability in luxury fragrances.
One of the most wasteful expenses in any perfume creation is its packaging.
The hard truth is that without the attractive outer box and attractive bottle, the customer does not get attracted to the scent.
Once the customer buys the fragrance, thereafter, its packaging material gets thrown in the dustbin.
Luxury brands spend 15-20% of the product cost on the packaging itself, which according to me is a wasteful expense and can be re-looked by perfume brand owners.
Having spent almost a decade in perfumery, one of the cases which blew me completely was the launch of CK one fragrance.
I had never imagined that a perfume bottle could even resemble a cough syrup bottle.
It was a disruption in the bottle packaging.
Case study:
Luxury niche perfumery house Jules & Vetiver found their brand on “sustainability” positioning.
One of the brand’s founding principles is “luxury without waste”.
It reflects in their packaging, as a result, they used the hand-stitched leather pouch as the outer packaging cover for their minimalistic stylist fragrance bottles.
Usage of recycled paper to create a multi purpose outer box.
Check out the brand’s video here:
Jules & vetiver perfumes
Conclusion:
The sustainability aspect should become the core of Retailer’s DNA.
Until then the words “sustainability , ecofriendly” would just remain a nice topic to be discussed in webinars, conferences.
ABOUT THE AUTHOR
Ritesh Mohan is a passionate retail professional with over 23 years in the Retail sector, handling some of the biggest brands in the beauty, fashion, and fragrances retail & FMCG sector.
He has been instrumental in the growth of some of the regional brands as well in the Middle East region.
Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management.
He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
One of the sectors that saw huge spike in usage was undoubtedly ecommerce, logistics and fintech companies.
Buy now pay later is one such fintech solutions which is disrupting banking sector especially credit cards.
What is Buy Now Pay Later (BNPL)?
Buy Now Pay Later (BNPL), as the name suggests, is a micro-credit instrument.
It’s function is similar to credit card, that I allows consumer purchases just as a credit card.
BNPL users get to split their eligible online or offline purchases, i.e. purchases made with partnering merchants, into zero-to-low interest instalments or repay the total dues at a later date within the repayment cycle at no interest charges, according to the terms and conditions of the BNPL service provider.
For example, if you buy something in a store or online, you may be offered the buy now, pay later option at checkout.
If you get approved, you usually make a small down payment at the checkout.
You would then pay off the remaining balance in a series of interest-free instalments.
Why so much noise for “Buy Now Pay Later”?
Pandemic has changed the way we shop or our buying behaviour,
Convenience is the buzz word and if it comes with easy credit facility then it becomes a trend. (in urdu we say,sone pe suhaga, means cherry on top of the cake)
Global e-commerce transactions totalled $4.6 trillion last year, up 19 per cent from 2019, a report from Worldpay says.
BNPL accounted for 2.1 per cent or about $97 billion of that sum. (source: worldpay)
So, when you are talking about a trillion dollars sector, then it gets all the attention it needs in the marketplace.
There are a number of BNPL players vying for a share of the Middle East market, including Spotii, Postpay, Cashew, Tabby and Tamara. Australia’s Zip, a global BNPL platform, bought Spotii for $16.25 million in May this year.
Learn how to develop your Influencer Marketing Plan, Click here.
Why Millennials are in love with Buy Now Pay later (BNPL)?
Millennials hate conventional banking.
They are not interested in high interest rates on cards, and recurring fees.
Convenience of easy on-boarding. (Hassle free documentation of BNPL attracts them).
BNPL service providers often use new-age mechanisms to evaluate the creditworthiness of an applicant; thus, the customer onboarding process is usually fast and convenient with zero documentation requirements or joining charges.
The entire process is digitally enabled through internet-connected mobile devices or apps.
Upon approval, a BNPL service provider issues a line of credit based on its assessment of the user’s creditworthiness and income.
After signing up, users can visit a partnering merchant application, website or offline store (in some cases), add the desired items to the shopping cart, and select their BNPL provider’s payment option at ‘check out’ to buy the selected items in a secure one-tap manner.
Users can then convert their dues into zero-to-low interest EMIs, according to the terms and conditions of their BNPL service provider.
These BNPL companies are operating like mini banking institutions wherein they incentivize the purchase with cash backs, extended credit facility etc.
How does BNPL operate?
The main premise of Buy Now Pay later companies is “Consumerism is here to stay”
Ritesh Mohan
“Why wait for tomorrow when you can have your favorite gadget or dress today at equated monthly installments, which are interest free”
BNPL player’s services or model help countless customers, especially the ones who have just started working, to better manage their expenses by allowing them at least a few weeks to make the repayments.
BNPL services, thus, are rewarding spending tools for those who are yet to recover from the many financial shocks of the pandemic-induced lockdowns or are outside the credit card ecosystem.
Word of Caution- Buy now pay later
Customers must keep in mind that a BNPL facility is still a loan that needs to be repaid in full on time to avoid penalties and an adverse impact on their credit scores.
Since the sector is in its developing stage, following are some challenges.
Customer and Merchant acquisition
Getting both customers and merchants to come online with BNPL player is one such challenge, however BNPL players are identifying themselves as more of the omnichannel solution providers to the retailers in order to mitigate the risks involved.
Goods returns
Returns can be an issue, too.
If you return an item, it can take substantial time and effort to have the BNPL credit provider acknowledge the return.
You may still be obligated to pay your installments till the issue is resolved
How does the BNPL players make money?
At the outset, the financial looks similar to that of credit card company.
Net take rate represents the commission charged to merchants (Take rate) minus payment processing fees that the BNPL company pays.
Debt financing cost corresponds to the interest BNPL providers pay banks for liquidity (to provide loans to their customers). Debt management cost equals the credit check costs plus payment collection costs minus late fee payments collected from customers.
Provision for debt impairment is the weighted average percentage of loans that are not paid back (i.e., bad debt)
GMV refers to Gross Merchandising Value, the sum of all payments conducted on the BNPL platform.
Marketing and sales expenses are the expenses incurred as BNPL providers acquire and onboard both merchants and customers to their platform.
General and administrative expenses include team salaries, technology, and other infrastructure costs.
Let’s take an example: Suppose your net take rate is 5% (assuming merchants pay you 6% and you pay 1% in payment processing fees). If you pay 1% interest on your loan, and it costs you 1% to manage consumer loans, the percentage of your non-performing loans can’t exceed 3%; otherwise, you lose money.
Profitability for BNPL or for that matter with any tech firms is based on
Scalability – acquire more customers and merchants.
Incentivize the purchases especially up-selling using BNPL product.
Negotiate better terms with both Merchants and Banks (for debt financing cost).
Access more data on customer’s spending and build a separate data insight report for the merchants to buy and take benefit.
Buy now pay later – a boon for ecommerce sites.
Reduce cart abandonment rate.
This is the main challenge for any ecommerce site is to reduce the cart abandonment as over 40% traffic that comes on to the site, leaves the cart without click on the “Buy now” tab.
Improves the basket size by means of upselling. Hence your average transaction value increases along with the average transaction quantity.
Ecommerce retailer gets their full payment while their customer enjoys installment plans. This helps in customer retention and build trust.
Lower customer acquisition cost- Increase in sales for the same amount of efforts done in getting the online traffic through marketing efforts.
Attracts first time buyers with the installment option at the time of check-out.
Since the cost of earning new customers is up by over 50% in the last five years, keeping your current customers is more valuable every day.
Summary
Providing your customers with many payment options is essential to boost customer experience and it can help you convert more shoppers into paying (and loyal) customers.
Buy Now Pay Later option just does it.
It’s a win-win option for both fintech BNPL players, Banks, Merchants and consumers.
References: The Guardian.com, Observer’s Fintech , thefinancialexpress.com , worldplay.
About the Author
Ritesh Mohan is a passionate retail professional with over 22 years in the Retail sector, handling some of the biggest brands in the beauty, fashion, and fragrances retail & FMCG sector.
He has been instrumental in the growth of some of the regional brands as well in the Middle East region.
Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management.
He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
Recently, I completed a program on retail transformation from one of India’s Premier B-school (IIM-B), and during the course, we undertook several case studies like Threadless and big basket, Webvan, and stitch fix.
Stitch fix is one of my favorites as I relate myself to the fashion & beauty world.
I am writing this article to help my readers and retail fraternity members to take learnings from the real-life case of Stitch fix and learn as to how Katrina lake (founder of stitch fix) transformed her business model.
What is the stitch fix model?
The Basic idea with which stitch fix started was of providing a Personal styling fashion experience and provide customers a personalized fashion outfit, all at a subscription fee model.
Stitch fix selects and mails clothes, shoes, and accessories to its clients based on an extensive style survey (i.e. data).
The better the “stylist” selects the clothing, the more money Stitch Fix makes.
Basically, it is like Netflix of the fashion world.
(Similar to how Netflix suggests programs on your viewing behavior or patterns).
Since its business model is based on predicting the styling that will suit their customer’s preferences hence it became obsessed with Data analytics and understanding their customer’s fashion sense and preferences.
Challenge is “Getting the style and outfit right for the subscriber every time”.
Learn how Rent a Runway is on its way to becoming the Netflix of fashion, click here.
Data is oil – Stitch fix “tinder for clothing”
As part of their Style Shuffle—a “Swipe right” type of “Tinder for clothing”— Stitch fix has found a way to reach beyond the feedback they’d get from customers through buying alone.
By letting customers swipe through different styles in their entire collection, they amass tonnes of data that helps them better understand the customer, as well as age and demographic trends shaping the fashion industry.
More the customer spends time swiping the garments, is leaving a digital cookie which is then analyzed towards his or her liking for the fashion garment.
The model is very addictive as Tinder since you are shown garments that a professional stylist has shortlisted for you.
Data points on their customer’s preferences make stitch fix’s proposition more profitable.
Stitch Fix makes money on clothing sold more so than subscription fees.
The more clothing from one box that fits or flatters, the more profits they will make.
Why Stitch fix is successful?
Stitch fix changed the paradigm
Stitch fix is not fashion but a “tech company which deals in fashion”.
Instead of fighting head-on with physical fashion retailers and eCommerce companies, stitch fix has created a blue ocean strategy for them by finding their niche in data analytics.
They share the data points with the designers who in turn ensure that their garments are made in line with their customer’s preferences and likings.
“Feedback” is the main crux that stitch fix has provided to designers who never knew about their designs and creations sales movement.
Now with stitch fix, they feel engaged with the customers.
With enormous data points, Stitch Fix is able to see not just products people buy, but products they want to buy.
That’s why I give them the credit for changing the paradigm completely.
Whereas traditional fashion brands are either competing on prices or eCommerce companies on the fastest deliveries, Stitch fix has found their niche is providing personalized fashion experiences to their subscribers.
Their commitment towards their “why” (purpose) is so strong that the founders chose to start the company in the Silicon Valley (being a tech hub) rather than moving to New York City (fashion capital).
They had clarity on the core strengths of their business right from the start.
Learn 10 growth hacks for eCommerce business, click here.
Algorithms & Data analytics coupled with Human stylists – Recipe for success.
They aim to bring personal styling to the masses, using data and machine learning to deliver personalization at a mass scale.
Watch the video on why stitch fix clothes have better sizes and fits.
From filing a lengthy questionnaire when customers sign up – evaluating factors like lifestyle, body type, and most-wanted items ;
Stitch Fix’s ‘Style Shuffle’ feature on its app and website allows it to amass huge amounts of data.
Building robust communication channels with subscribers
On receiving the box containing five clothing and accessory items, the customer gets a sense of belongingness as they’ve provided their preferences and selected by the stylists, just for you.
Customers provide feedback after each shipment since they know that their feedback will help stitch fix deliver more garments that they want to buy and not what stitch fix wants to sell to them.
It’s two-way communication.
Want to learn the basics of category management in 5 mins, click here.
Combing the art of discovery and convenience
The fun of discovering the most sought-after garments, that are personalized and customized as per your body type/fit is beyond capturing in the form of words.
Getting your fashion quotient boosted through personal stylists gives a confidence-boosting to the subscribers which remain loyal to the brand since their self-esteem & social needs are getting fulfilled at the convenience of their homes.
In an interview, Katrina Lake, founder once said,
“Our business model is simple: We send you clothing and accessories we think you’ll like; you keep the items you want and send the others back.
We leverage data science to deliver personalization at scale, transcending traditional brick-and-mortar and e-commerce retail experiences.
Customers enjoy having an expert stylist do the shopping for them and appreciate the convenience and simplicity of the service”
I believe this statement from the founder summarizes the brand’s purpose.
References; HBR case study – case study reprint 2018 (IIM-B) , CMO network, Guy Raz book-how I built this.
About the author:
Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in the beauty, fashion, and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
Challenges being posed by OTT platforms on Movie theatres.
Being a movie lover, I have always been curious about the economics behind this wonderland of Cinema and its magic.
My curiosity was at its peak when I watched a new film starring Bollywood shahenshah Amitabh Bachan’s release on Amazon Prime “Gulabo sitabo” last month.
What is the meaning of OTT?
OTT means Over the top and media like Netflix, Amazon Prime, Zee5 are all part of OTT platforms.
Post watching the new release on OTT platform, the first question that came to my mind,
“How can a movie producer make money by releasing his asset on over-the-top (OTT) platform prior to its theatre release”?
As per the industry sources, more producers are now ready to follow the OTT route.
It’s also speculated that several films, including Akshay Kumar’s Laxmi Bomb and Karan Johar’s Gunjan Saxena – The Kargil Girl, are in advanced stages of digital deals.
This throws a few questions for brainstorming.
How Theatre owners can retrieve the value of their physical assets i.e. movie theatre?
What will be the future of people employed with exhibitors? And associated sectors like Malls etc wherein cinema halls are crowd pullers?
Can a virus (covid19) create havoc across the world’s economy including retail, tourism, aviation, entertainment sectors?
Questions are too many to answer but let’s understand the business of Movies and its future.
OTT vs Movie Theatre – The magic of Big screens
Theatres provide experiential experience to moviegoers.
Imagine a Bollywood Blockbuster movie like Bahubali, which swept the nation in viewership getting released on OTT platforms, would have killed the mega opus production values, CG works (animations), screenplay, etc.
The theatrical experience is irreplaceable.
The films that are planning to move to OTT were made for theatrical viewing. They cannot be watched on your phone to get the complete impact of sound effects, VFX, story, etc.
OTT vs Movie theatre – OTT provides a captive audience to small budget films
For small films with less saleable names, OTT guarantees a wider audience.
They can also save on print and advertising costs. Storytelling can come out much better in non-commercial films or experimental films.
OTT vs Movie Theatre- Covid19 grips cinema lovers
People across the world will still be cautious for the whole of 2020 and they will increasingly embrace digital entertainment modes.
Personally, I conducted a small poll on Linkedin.com and 70% of the respondents voted for their preference of watching a new release on their OTT platforms. Truly, covid19 has impacted the media consumption habits and preferences of the consumers.
Most of the big banner films have delayed their releases to the last quarter of the year 2020.
OTT vs Movie theatres: Content war
The theatrical-OTT rift is felt across the supply chain.
Film promotions have shrunk from lavish affairs to webinars and telephonic interviews.
Overall, film producers have to rethink their content;
“Is it meant for audiences that enjoy watching movies at the comfort of their homes or is it a suspense thriller with jaw-dropping effects”, then it is definitely meant for theatrical release.
“The content of the movie should dictate the medium of its release.”
Competition from OTT (over the Top) platforms is not new for theatres as they have seen worst times & challenges during VCRs, VCDs, DVDs & piracy days.
The truth is that we all enjoy going to the theatres which is something that will never change.
Irrespective of whichever medium is the winner, according to me, watching a film in a theatre is an ultimate experience and I don’t think people will ever stop doing that?
It is an experience; it is like a family outing for many of us.
Usually, a portion of theater ticket sales goes to theater owners, with the production house and distributor getting the remaining money.
The percentage of revenues an exhibitor (theatre owner) gets depends on the contract for each film. Many contracts are intended to help a theater hedge against films that flop at the box office.
That means the exhibitors cover their losses by gaining higher margins from the hit movies.
Overseas rights
Overseas rights, off late, has become the major source of revenue for the production houses as well as exhibitors.
Bollywood movie, Dangal did more business in China than in India. (In India too, it was a blockbuster though).
Merchandising Dollars
It all started with Star Wars. Since the George Lucas sci-fi saga began back in 1977, the franchise has made billions in revenue from toys alone, not to mention licensing income from other third-party companies. In 2015, “Star Wars: The Force Awakens” brought in $700 million in retail sales.
Satellite & Music rights
Movie recovers its costs even prior to its release (at least for the production houses), through the selling of satellite and music rights.
And now, we have rights for OTT platforms to add to these revenue streams.
Not to forget, the inflight cinema entertainment rights are another channel that is now gaining popularity.
(Hoping aviation industry recovers post covid19 sooner).
The brands enjoy additional visibility to influence the viewer’s preferences and behaviors.
Conclusions:
Magic of movies and big screens shall always remain and will leave its lasting impression on the generations to come.
Time shall only decide which medium shall emerge a winner i.e. OTT platforms or theatrical experience.
Being a movie lover, this article is my attempt to demystify the business of movies and gain new insights into the world of commercial movies.
Hope you will find it useful and entertaining.
Watch the interview of the filmmaker SS Rajamouli (Director of the movie, Bahubali) wonderfully summarizing the current debate of OTT vs Theatre.
About the author:
Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion, and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
Today brands and retailers are using travel retail for building their brands by targeting a much-focused audience.
Travel retail or duty-free retailing or airport retail are the terminologies used by modern retailers for this emerging business channel.
My article narrates some of my experiences acquired by spearheading travel retail operations and sharing some trends which I foresee emerging in 2020.
Travel retail will become the way customers shop in the future. One of the reasons is that it’s tax-free.
A number of airport retailers are increasingly looking into customer experience surveys to get a better understanding of travelers’ spending habits.
Travel retail – A modern face of retail – My perspectives.
I got exposed to travel retail in 2017 when I was assigned the responsibility for initiating and launching a new business channel for brands handled by me as a retail practitioner.
As I got involved in business expansion pitching to various duty frees category managers and leasing spaces at prominent airports, I found that this business has the potential to overshadow the existing malls or traditional retail.
What is fueling growth to travel retail business?
During my recent holidays in India, I was amazed to see the booming travel retail operations not only in metro airports (New Delhi or Mumbai) but also in tier 2 cities airports (Bhopal, Goa, Dehradun, Surat)
The quality of airport infrastructure has drastically improved.
The quality of retail offerings and brands, cafes, lounge facilities, brands (fashion and accessories), book stores (WHSmith is the category leader in this segment) or even travel accessories shops have improved and they offer high-quality products.
Airports offer a great variety of food options (food lounges, food halls, etc).
Millennials today prefer to learn from travel experiences, gathering memories is more important than saving money. They believe in the quote “Travel is the great teacher”.
Change in traveler’s behavior, today they see traveling as a leisure activity and prefer to spend more time at the airports which offer great experiential retail.
It makes more sense to check-in early at the airports and experiences its retail galore.
Today, airports (I can say from Indian & the Middle Eastern aviation scenario) are busier than most of the prominent malls in the country.
The picture shows an activation by MyFM in Ahmedabad thanking their listeners for making the FM station number one. The passengers received a hamper gift pack for them at the Ahmedabad airport’s arrival terminal.
Emerging Trend is toward luxury items in travel retail.
The reason is that passenger buying behavior has changed dramatically. Passengers research, check availability and compare prices online – and then purchase the products at the airport.
There is the emergence of electronic shops at airports selling the latest i-phones, Macbooks, Samsung notes, etc which were not common in the past.
The big game-changer has been the surge of mainland Chinese travelers.
Their appetite to learn about and visit the world and their willingness to shop when they travel have provided the industry with a fantastic opportunity.
Interesting Statistics- Travel Retail
Travel Retail channels now encompass Airports, Airlines, Cruise Lines, Ferries, Border Stores, and Diplomatic stores
Airports have heavily increased their retail spaces and turned into shopping malls with multi-brand stores and stand-alone boutiques.
Travel Retail offers a shop window and communication platform with the highest frequency of customers in your matching target group.
A huge increase in potential customers due to consistent growth rates of international travelers. More than 1 Billion tourists crossing international borders globally.
Category domination: (global travel retail sales in 2018)
US$ 5.7 billion Watches, Jewellery, and Fine Writing
Fashion & Accessories contributed US$ 9.6 billion
US$ 25.6 billion Fragrances & Cosmetics
Confectionery & Fine Food pitched in with US$ 5.0 billion
US$ 11.4 billion Wine & Spirits
The winner is Fragrances & cosmetics category globally followed by wine & spirits.
Learn as to why entrepreneurs need to say NO to stay focussed, read here.
Building the Travel retail ecosystem – the role played by data analytics.
Airports provide the physical space and infrastructure; brands and retailers the retail environment and airlines provide the necessary customer data to communicate with and sell to passengers in a targeted manner.
For example- when you shop at any retail outlet at the airports, they scan your passport, hence your details other than your name, etc gets captured. Details like frequency of travel, destinations mostly traveled your shopping behavior, frequency of purchase, etc.
This data is shared amongst airlines, airport operators, travel retail operators and retail operators so that they can create experiential retail experiences in their concepts and services.
Challenges for 2020
High operating costs, emerging from built & run model or public-private equity models or even high bidding model.
Travel retail is a highly complex and concentrated business. TOP 10 Operators are generating 40% of global Travel Retail sales and keeping most airport concessions throughout the world
Brands are pushed to pay higher margins, resulting in low net operating margins.
Consumer’s perception that Duty-Free price advantage is less attractive.
External factors like travel caution advisories in cases of geopolitical issues, impact the entire travel retail sector.
Case study: How WHSmith pivoted its business model to the travel retail or duty-free retail model?
WHSmith, one of the oldest retail chains in the world.
You cannot miss WHSmith shop in case you are a frequent traveler as they are present at almost all the prominent airports, seaports in the world.
607 high street stores, as well as 149 airport units, 127 rail/metro units, 131 hospital units, and 286 travel units outside the UK. They employ over 13000 employees.
Amidst retail apocalypse, wherein most of the traditional retailers are going out of business, WHSmith is delivering consistent growth.
(Estimated growth for 2019 is around 11%).
The Key for WHSmith growth lies in understanding the travel sector and understanding consumer’s behavior.
WHSmith has mastered the art of studying its customer’s behavior.
At the airport, we are all a captive, trapped audience.
In such situations, people are driven by impulse purchases and immediate needs and are less price-sensitive and more focused on convenience.
WHSmith’s range of items – books, stationery, magazines, newspapers, entertainment products, and confectionery – cater perfectly to these kinds of impulse buys.
For example, imagine that You are at the airport waiting to board the aircraft. You decide you need something to keep you occupied for the journey.
You pop into WHSmith’s to buy the latest copy of your favorite business magazine and while you’re there you buy something to chew or some chocolates. Then you discover you’ve forgotten your charger.
Consolidating all the items, you have a decent amount of purchase in your invoice. And since you are in excitement for travel (either business or leisure) you don’t mind paying a little higher price for your purchases.
It is the emotion i.e. NEEDs overtaking the WANTs.
It happens with me quite often that I end up shopping for some small gifts or toys for my son or even chocolates while taking a return flight from my business travel.
Overcome online competition by completely ignoring it.
WHSmith, instead of competing with the likes of eBay’s or Amazon’s of the world, took a different approach.
They focused on securing more locations at airports, railway stations at every prominent travel hub.
Because, the answer to this strategic move is that in high street locations you would get lots of customers who would come and browse, but then they don’t buy, because, at that moment, they’re really just doing comparison shopping. But that doesn’t happen so much in a travel location.
The same rationale applies to moviegoers purchasing popcorn and a coke at inflated prices which are sometimes higher than the movie ticket prices.
In my next article, I shall share case studies from successful brand activations in travel retail.
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About the author:
Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. Ritesh specializes in Retail management, Product development, and Retail Operations, Sales Management and Franchising. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
“Sustainability” is becoming a business differentiator in the 21st century.
People, today are more aware of the environment and ecological conservations & the term “sustainability” is being heard quite often.
Let me give you an interesting statistics here; of the 7.5 billion virgin forests that once covered the Earth, nearly half have been cut down for human consumption, with devastating effects, such as global warming, and threatening indigenous people and native species.
In my previous article, I talked about sustainability in the fashion sector and now I would highlight a few sustainable brands in other sectors like furniture, farming sectors.
Sustainable fashion making commercial sense, read here
A brand must stand for some niche
The foremost requirement for a successful brand is their stand or promise which they make to their customers. Marketers call it “Positioning”… I call it Brand Promise, your Brand identity.
There are new brands that have positioned themselves towards sustainability ie by causing no harm to nature.
Brand: Greenington Fine Bamboo Furniture
Greenington uses Moso bamboo for their furniture. This is one of the fastest-growing plants and extremely sustainable furniture material.
Bamboo is 20% more sustainable and 100% harder than Red Oak. The natural beauty of Moso bamboo creates unique variations in all of their furniture.
Greenington also has a “no waste” mentality. They even use their bamboo sawdust to generate steam for press machines.
Myself, coming from India, we have seen the usage of Bamboo in furniture’s, let me tell you the advantages of bamboo as well.
Bamboo is actually a grass, and grows very quickly, 24 – 48 inches a day.
Bamboo shoots die and decay after 5 to 8 years but their roots will remain healthy and continue producing new shoots, even after the mature shoots have died or been used.
With its wide root system, bamboo crops prevent soil erosion and the plants contribute more oxygen and utilize more carbon dioxide than trees, which makes bamboo demand even more environmentally sound.
Brand: Ikea
The brand has taken sustainable initiatives and has started using sustainable wood materials like saw-dust to make pressed boards as well using Bamboo wood to produce DIY (do it yourself) furniture.
Today Bamboo furniture category contributes 1% of Ikea’s global sales.
Ikea stands for doing things differently. Ikea team is now investigating paper furniture in their efforts towards using more sustainable materials.
Sustainability made its entry into the fashion
Bamboo is a highly sustainable plant and is becoming an increasingly popular alternative to cotton, not only because of its amazing properties which are kind to you but also it makes less dependence on cotton which is a highly water-consuming crop.
The fabric absorbs moisture away from your skin, keeping you drier & more comfortable.
Bamboo: The 21st century Steel.
Watching this video will explain the usage of sustainable materials in the construction sector as well.
Sustainability in farming
Imagine growing tomatoes in deserts… yes, it is possible using sustainable farming techniques. Watch the video below wherein they are growing tomatoes in the Australian desert using sea water.
Sundrop farms in Australia are innovative disruptors in this sector.
Since Sustainability is a vast topic to be covered in a short article hence my aim for writing this article was to make people aware of techniques that are being used and its commercial feasibilities making it a possible and a viable business proposition.
My readers can now reach me through my blog contact form, in case they need any clarifications.
Good News, you can now subscribe to the blog simply by entering your email address and get notified as soon as an article is published.
About the author:
Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region.
Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management.
He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
Rent the Runway wants to become Netflix of the fashion world.
My previous article highlighted as to how Instagram has given birth to new companies in the world of fashion. One such example is “Rent the Runway” company, which aims to become the next Netflix of the fashion world.
I shall summarize the business model of this company as a case study here.
Read my article on How Instagram is disrupting the fashion world, by clicking here.
Case study: Rent the Runway.
Insight for the business concept came from the fact that today Instagram is fueling the desires and aspirations to look good, fashionable amongst the millennials and in order to satisfy this urge, millennials have started misusing the return policy of most of the fashion brands.
Rent the runway adopts Netflix business model
It rents out designer clothes from some 500 different brands to subscribers who pay a monthly fee, allowing them to borrow a high-end wardrobe for much less than it would cost to actually buy.
The business model is based on a subscription model which Netflix has mastered.
Commercial result:
Company registered a sales of 100 million USD last year and showing a significant increase in its profitability.
Consumer’s insight:
Young women often faced the dilemma of buying expensive designer dresses which they would only wear once, especially after photos of them wearing these dresses were posted on social media. To resolve this dilemma, Hyman and Fleiss (founders of Rent the runway) decided to create a platform to make luxury brands accessible to everyone through rental.
What makes Rent the runway different from other fashion e-commerce companies?
In a recent interview, Jennifer Hyman (founder of Rent the runway) stated “We’re not in the fashion business. We’re in the fashion-technology-engineering-supply chain-operations-reverse logistics-dry cleaning-analytics business.”
This statement is so true that how technology has pivoted a simple fashion business model into tech-driven, analytical driven, reverse logistics operation model.
Pillars for success:
Partnership or collaborations with leading fashion houses and designers.
Take good care of the dresses to maximize their useful life and minimize inventory to drive sales.
Fittings: To help customers navigate the 65,000 items in its inventory and identify the best fit, they created “Our Runway”, a section on the website where customers can see how other customers, not models, look in a dress.
Logistics support in order fulfillment, the system tracks items coming in and out and prioritizes orders, taking into consideration the time required for dry cleaning and any repairs.
Reverse logistics if any altercations needed, dry cleaning, etc and bringing back the merchandise back in the warehouse. To optimize, Rent the runway has in-house laundry services as well. The dresses are steam pressed, re-inspected, bagged, and mailed to the next customer. 60% of dresses are back out of the door on the same day.
Lead generation:
Use of fashionistas and bloggers to drive the brand awareness of renting a designer dress. You get to subscribe 3-4 dresses a month. They have multiple subscription levels and depending on customer’s preference they can select the option.
Data analysis:
Rent the Runway analyzes an enormous amount of data on customer preferences, renting behaviors, and feedback to consistently improve its inventory selection and rental process.
They feed these data insights to brands and designers which helps them to come up with their new collections in next season. Its a win-win model for both the company and their fashion houses.
Will this model affect Fast fashion retailers like Forever 21, Zara, Uniqlo, etc?
Rent the runway has started their collaborations with upcoming fashion designers offering fast fashion trendy clothing on rentals.
They have introduced a low fee subscription model. Pay USD 80/- per month to get 4 fast fashion trendy dresses per month on rentals. The rental duration is approx. 4-7days.
Combined with accessories to glamorize the outfit.
Response towards fast fashion needs to be monitored. This trend would affect fast fashion retailers to adapt to newer buying cycle or patterns of the new customers.
Conclusion:
We all are living in an exciting era wherein no two days are the same in the field of business. Keeping yourself abreast of the latest developments has become a necessity. Thanks to the internet, it is disrupting all the sectors.
Watch out my next article as to why brands are shying away from social media. I shall publish mid-May month.
If any of my retail fraternity members need any help from my end to transform their retail vision into reality then feel free to write to me on riteshmohan@yahoo.com.
Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. Ritesh has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
