Disruption

in retail

TEN GLOBAL TRENDS AND TWENTY-ONE CASE STUDIES

FROM AROUND THE WORLD

D isruptors

are winners

in retail

D

isr

up

tio

n

is

ab

ou

t c

ha

lle

ng

ing

r

ule

s

3 4Introduction

Here at TBWA, we don’t all claim to be retail experts. Indeed, the study you ’re about to read was conducted partly to get smart in this sector. That’s not to say it wasn’t ambitious.

Drawing on our international network, we looked for retail trends and disruptions in 32 markets worldwide. We studied not only food retailing, but more than 15 different categories, including bank­ing and telecoms. Importantly, we did not cover just our own clients – in fact, most of the com­panies featured in this book are not TBWA clients.

We received suggestions for more than 150 ongoing disruptions, as well as 400 historical ones. The material weighed in at about 3,500 pages. Over a considerable period of time, we whittled this down to our 55 favourite case studies. And then we chose 21 to present to you in this book.

Now it is complete, we hope the study will spark a dialogue between TBWA, the retail sector and all those who are interested in this fascinating business.

One field we can claim to be experts in is Disruption. After all, we invented it.

To be more accurate, the ‘father’ of the theory is TBWA Chairman Jean­Marie Dru, who wrote his first book on the subject – simply called ‘Disruption’ – in 1996. Two more volumes have followed. But the seeds of Disruption go back to the 1980s, when Jean­Marie Dru co­founded the French agency BDDP. The agency specialized in helping ‘problem’ brands. It did so by seeking solutions that were drastic and intrusive, provoking a ‘rupture’ with the past. This evolved into Disruption: a controlled but dramatic change. It soon became apparent that successful brands could benefit from Disruption, too. Even the most solid brand needs to constantly criticize and push itself if it is to thrive.

Introduction

When BDDP merged with TBWA (and subsequently joined forces with swashbuckling Los Angeles agency Chiat/Day), Disruption slowly seeped into the culture of the organization. John Hunt, of TBWA’s South African office, began staging Disruption Days for clients. News of the success and popularity of these brainstorming sessions spread around the agency. Finally, Disruption became the backbone of TBWA’s approach, worldwide.

Disruption is about challenging rules. It ’s about identifying the self ­ imposed restrictions that stifle brands, companies and individuals from true creativity. We call these restrictions ‘conventions’. The ‘disruptive idea’ is one that overturns these conventions and allows a company to adopt a unique standpoint. The summary that outlines this new positioning is known as ‘the vision’.

Over the years we’ve worked with many visionary clients. If Apple is perceived as a brand that makes tools for creative minds – as opposed to a computer company – it’s partly due to the disruptive approach that we’ve supported. Disruption is all about ‘thinking different’.

Disrupt ivecompaniesare originalthinkers

D

isr

up

tor

s

ar

e w

inn

er

s

5 6Introduction

For Adidas, we helped refine the notion that sport is about finding your limits – and overcoming them. With training, determination and the right equipment, something that at first seemed impossible becomes achievable. ‘Impossible’ is not a fact: it’s a phase. The vision that sprang out of this is summed up by the words ‘Impossible is nothing’.

One of our favourite disruptions involved Pedigree. The dog food company was finding it difficult to stand out amid an array of conventional advertising. TBWA came to the conclusion that dog food ads failed to capture the close relationship people had with their pets. People love their pets so much that dogs are often featured in family photographs. So Pedigree adopted an ambitious stance: “Everything Pedigree does is done for the

love of dogs.” That changed not only the brand’s positioning, but also its behaviour. Pedigree employ­ees were now invited to bring their pets to work. Salespeople could visit their clients with their dogs. The company became dog crazy.

By now you get the point: disruptive companies are original thinkers. Their disruptive tendencies allow them to take a leadership position and distance themselves from their competitors. Disruptors are winners.

Introduction

All our retail cases prove this point. Many of them feature companies that were solid but unremarkable performers before they decided to take a disruptive approach. Thailand’s Krung Thai bank transformed itself from a stuffy bureaucratic organization into a youth brand. And environmentally neutral Marks & Spencer became one of the UK’s most admired ‘green’ companies within a year.

One of the most successful retailers in the world, the UK’s Tesco, has achieved enduring success because it has shattered a convention: you can’t have low prices and high quality. An unflinching commitment to both has allowed Tesco to sell more and grow bigger. Now, its sheer scale allows it to buy produce for less, thus keeping prices down and quality high. We could write an entire book about Tesco, so we have not included it among our top case studies. But we’d be happy to share our Tesco findings with you – as well as all the other case studies that didn’t make it into the book. Just get in touch!

As we said at the beginning, the aim of this project was not to reposition ourselves as retail experts. Our skill lies in creating disruptions and applying them using the tools we call Media Arts. But we are also keen observers of marketing and communication practices. This book, then, is a series of observations. And, we strongly hope, inspirations.

TEN

GLO

BAL

RETA

IL

AN

D C

ON

SUM

ER

TREN

DS

7 8Trends

Our study of the world’s most innovative retailers left us marvelling at the number and diversity of methods that are being used to seduce and serve today’s consum­ers. The examples in this publication are the crème de la crème: a handpicked selection of our favourite cases.

But first, in order to navigate the rapidly changing world of retail, we identified ten trends that are impacting consumers now. But beware: trends are tricky. The concept of disruption is all about overturning conventions. To emulate a trend is to create a conven­tion. This book should inspire you to set trends, not slavishly follow them.

Of course, you may be able to come up with a disruptive concept within one of these trends. If so, we applaud you. In the meantime, peruse this shopping list.

Trends

These days, when you book a hotel, what’s the first thing you do? If you’re anything like us, you check the guest reviews online. The hotel’s website showed you spacious rooms and an infinity pool – but it didn’t mention the construction site next door.

Consumers are better informed and more demanding than ever. Blogs, social networking, price comparison and travel sites allow them to uncover the truth about brands. And brands that fail to provide impeccable service will be exposed.

Some brands have bravely taken matters into their own hands. For instance, American Apparel customers can critique their purchases on the retailer’s site. Uncensored feedback strengthens the relationship with the consumer.

Technology has put the consumer in the driving seat. Self­check­outs and cashless payment (just swipe and go) are creating a swift and efficient shopping experience. There are even stores that turn window­shopping into a reality. Ralph Lauren has experimented with touch­screen window displays. Customers can touch the item they want and then pay for it by swiping their credit card through a wall­mounted reader. Or they can create a digital shopping cart and pay for the items online the next morning.

All of these developments will have a massive impact on store design and shopping habits.

ENABLEMENT THROUGH TECHNOLOGY1

SUPPORT THE T IME ­STARVED CONSUMER2

We know you’re in a hurry, so we’ll make this quick. Today, time is a luxury. According to Trend­watching.com, “half of US consumers now say that a lack of time is a bigger problem than a lack of money”. Even teenagers feel there are not enough hours in the day. New services and solutions are spring­ing up to help consumers grab back some time.

Concierge services are becoming familiar. Door­to­door luggage delivery services help time­starved travellers avoid lines at check­in. A site called City Servant in the UK offers a whole range of services, from supermarket shopping to dry cleaning. Just fill in the form online and at one click a concierge comes to your aid.

The existence of magazines like Organize in the US underlines consumers’ deep­seated desire to bring order to their busy lives. Brands that wade into the breach will win.

9 10Trends

NO MORE ONE S IZE F I TS AL L3

COST CONVERGENCE – OR THE RACE TO THE MIDDLE MARKET4

Today’s consumers defy easy categorization. Populations are becoming more cosmopolitan as borderlines blur and overseas living becomes more accessible. Age does not define attitude: the boomer generation refuses to grow old. “Can I borrow your PlayStation, grandpa?” Society is a kaleidoscope of social situations: singles, non­married couples, empty nesters, older singles. Retail concepts need to reflect this diversity.

The resurgence of items made “just for you” is part of this trend. Objects can be personalized or made to measure, from jeans to laptop computers.

Practically the only thing that unifies consumers is their expectance of high standards. Price is no longer a deciding factor. Today’s shopper demands value AND quality. “Hard discounters” are being forced to rethink because cheap and cheerful is not enough to retain customers. Fast fashion must offer cut­priced clothing AND cutting­edge designs.

Consumers refuse to be trapped in class categories. If they can’t afford a Louis Vuitton handbag or a Prada dress, they can rent one for the evening via an online service. Be whoever you want to be, as long as you’re unique.

Don’t mess with Mister In­between. Luxury brands introduced accessible items in order to boost their profits and satisfy shareholders. As a result, consumers developed a taste for luxury and began to won­der why cheap had to equal nasty. In order to please them, retailers like H&M, Zara, Target and Japan’s Uniqlo began trading up, improving the retail environment and adding catwalk zest to designs. H&M even brought in the firepower of designers like Karl Lagerfeld and Stella McCartney.

Other sectors have followed suit: McDonald’s is giving many of its restaurants a sleek makeover. Burger King has launched the world’s most expensive burger, made of Kobe beef. But with high­end mov­ing down and high street trading up, some brands may be left floundering in the middle. Accessible luxury and cheap chic are both on the money. Retailers selling so ­so goods at mid­market prices should start wor­rying, and this squeeze is likely to intensify within the context of the global credit crunch.

Trends

The giants will not be vanquished. Despite occasionally expressing concern about the growing reach of retail super brands, consumers continue to use them. That’s because the sheer scale and power of Wal­Mart, Carrefour, Royal Ahold, Metro Group, Tesco and their ilk allows them to constantly innovate. Super brands can cater to every whim of today’s super demanding consumers.

These brands exist in many sizes, from hypermarket to neighbourhood store – not to mention website with home delivery. They go far beyond food, to provide everything from CDs and books to furniture. They even offer travel agents and financial services. They have launched organic, fair trade and eco lines. And they cater to every taste and budget, from cut ­price to gourmet. In a time­starved world, they offer a one­stop shop.

But retailers have also become skilled in striking partnerships with complementary brands: think of branches of Starbucks within Borders bookstores in the UK, or McDonald’s in Wal­Mart in the US. We’ll see more retail brands joining forces to launch “store within store” concepts.

SUPER BRANDS KEEP ROLL ING ONWARD5

The store may be the star, but the role of the web will continue to expand in the coming years. In the US, online’s share of retail sales is expected to reach 6.9 % in 2011 ( Jupiter Research). In

larger European markets it could hit 11 % (Forrester) and in China it is expected to sidle up to 3 %. As you can see from these figures, the web is not a threat to the traditional retail experience – but rather a comple­ment to the “bricks and mortar” setting.

According to WGSN, vast numbers of consumers – as many as 69 % – research product features online before buying. And 68 % compare prices so they know what they should be paying in stores. As for online purchases, books still lead the way (according to Nielsen), with clothing, accessories and shoes in second place. Videos, DVDs and games are third and airline tickets and reservations are fourth.

Even the most technophobe retailers – such as the luxury brands – have now grasped that an online shopping offer is an essential part of the marketing mix. But they should also be present on community sites such as eBay, Facebook and MySpace.

E ­COMMERCE KEEPS GROWING6

11 12Trends

RETAILERS BECOME BRAND MANAGERS7

WELL ­BEING, THE PLANET AND ME8

Ecological issues, ethical consumption and health consciousness have somehow become intertwined in an “aware citizen” retail trend that will only get bigger. As IPSOS put it: “Until recently the concept of ‘green’ or ‘being green’ was a fringe issue … Moving forward, being green will not only become main­stream, but will become the norm for most consumers.”

Retailers are still coming to terms with the pressure they face to “go green”. Many of them have only superficially addressed the issue, which leaves them open to charges of “greenwashing”. However, Marks & Spencer in the UK has publically promised to overhaul its business model, putting the environment at the heart of everything it does.

Meanwhile, concern about “fair trade” and the carbon footprint left by imported foodstuffs has driven an “ethical sourcing” trend. The provenance of food is clearly marked, allowing consumers to favour local producers – or those who are paid fairly for the crops they grow.

Finally, concerns about over­consumption, diet and obesity are driving a “health conscious” trend. Many food retailers now indicate the levels of fat, saturates, sugar and salt in foods. Advertising campaigns and in­store marketing are pushing healthy eating plans and prominently displaying fruit and vegetables. And fast food giants face even closer scrutiny.

Private labels are here to stay, and they ’re expected to make up 30 % of global food sales by 2020 (Admap). In Northern Europe, private labels account for some 40 % of sales, falling to 30 % in Southern Europe and 20 % in the Eastern countries. In the US, sales stand at 19 %. Interestingly, only 5 % of brand­addicted Asians prefer to buy products labelled by their retailer. Watch the emerging markets for this grow­ing trend.

The success of private labels is no doubt due to their flexibility. Retailers now have a range for everyone. Take Carrefour in France as one example. It has several different own brands, covering budget, organic, baby, mid­range, low calories, kids, gourmet, exotic and traditional. In the UK, Tesco customers know they can look to the higher­priced Tesco Finest range when they want a gourmet treat.

Trends

The mall is about to mutate. The shopping centre as we know it is a jumble of different universes, experiences and offers, crossing many price ranges and customer typologies. Over the next few years, new shopping centres will have coherent identities, targeting particular styles of shoppers. Tokyo’s Midtown complex, opened in 2007, set the scene: shopping, office, residential, hotel and leisure space, but all at a luxury level.

Says Trendwatching.com: “The shopping centre of the future will need a clear market position … the most promising position for malls will be value, entertainment, luxury or lifestyle driven.”

SHOPP ING CENTRES ARE SEGMENTING9

EXPERIENCE EXCELS10

Let’s face it: you ’re the customer who has everything. You ’ve shopped ‘til you’ve dropped; your home is bursting with stuff. What could possibly drive you into another store? Let’s see. Entertainment? As trend­tracking organization WGSN says: “The big trend is for more engaging store environments that encourage interaction and entertainment – e.g. the Apple Store.”

Providing an exciting in­store experience encourages customers to linger. And increased “dwell time” boosts sales and long­term loyalty. WGSN adds: “Never before has the ‘physical store’ mattered so much for making purchase decisions. Up to 75 % of all purchase decisions are made in­store – and not on the internet.”

Samsung has recognized this by opening an “Experience Store” in New York. The equipment is not for sale – it’s just there to play with. That way, customers can have all the fun and get someone else to do the heavy lifting, by completing their purchase online when they get back home.

To get your personal copy of the complete document – including 21 case studies – go to disruptioninretail.com and send an e­mail.

“Disruption in Retail” © 2008, TBWA Europe. All rights reserved. No part of the document may be reproduced or stored in any form or by any means – electronic, mechanical, photocopy, recording or otherwise – without the prior permission of TBWA Europe.

tbwa.com