Friday, June 16, 2017

Amazon shops at, no, FOR Whole Foods!

Amazon has taken control of Whole Foods, a publicly traded company. Amazon's offering a 27% premium on shares -- $42 per share, for a total of nearly $14B -- making this a big deal in both senses of the word. In fact, the biggest deal in recent memory, in the grocery business.

Whole Foods has struggled for years with its "Whole Paycheck" reputation, and in almost any discussion of what Whole Foods could or should do to revitalize itself post-Recession-of-'08, Trader Joe's has been the elephant in the room.

Basically, every one of those conversations revolved around, "What can Whole Foods do to be more like Trader Joe's?" Whole Foods sharpened pricing on their in-house branded products, and experimented with some smaller stores.

But now, the question is, what can Amazon do that Whole Foods couldn't have done on their own?

Analysts are saying that the Amazon deal will enable Whole Foods to lower prices, but so far I've read no explanation of how that will happen. It's easy to imagine Amazon pushing the whole grocery business into the online realm. So far, U.S. consumers have been slow to shop for groceries online. I haven't been tracking reported online sales, but a quick check suggests that a large majority of food purchases are still made in person, and carried home by the shopper.

This is one online market in which the U.S. lags. I've seen statistics that claim nearly half of U.K. grocery shoppers have at least experimented with online purchasers, and that over 10% of U.K. grocery shoppers buy all of their groceries online. I believe that; my sister lives in London, and does virtually all her grocery shopping online.

If I had to guess, I think Amazon feels it can achieve that kind of market penetration here too.

About 15 years ago, Jeff Bezos said,
I don't know about you, but most of my exchanges with cashiers are not that meaningful... "Have a nice day"... "You're welcome"... "No, we don't take credit cards." I mean, I love browsing around independent bookstores. But even there, the store doesn't instantly customise itself to suit your interests the way ours does and no one can tell you what other people who buy the books you're buying also bought. And you can't read your neighbours' reviews the way we allow you to. Those kind of community features can only be done online. And you can't have universal selection in a store, however big it is.'

Trader Joe's has built its brand on the strength of millions of direct, personal encounters between its famously cheerful and helpful staff and its zealous customers -- many of whom do feel that those interactions are meaningful. That's almost directly opposed to the appeals of online shopping. But crowded stores and famously congested parking lots are also part of the TJ's brand.

So it remains to be seen how much Trader Joe's business would suffer if Amazon made shopping online for Whole Foods groceries a real 'thing'. And, of course, this begs the question of whether the usually-slow-to-try-out-new-technology executives at TJ's will try to build an online shopping forum of their own.

Wednesday, April 12, 2017

If you're in advertising, United's fiasco should make you want to slit your wrists

Unless you've been hiding out in Tora Bora for the last few days, you know all about United Airline's PR fiasco. Last Sunday, an overbooked flight between Chicago and Louisville led to the "reallocation" (United CEO Munoz's choice of words) seen around the world.

But here's the thing: After that PR disaster -- hell, United basically detonated an atom bomb under its brand -- the company's stock dropped sixteen cents. Considering that the starting price was over $70, the effect of all that incomparably negative publicity was impossible to spot in amongst the normal daily standard deviation in UAL shares.

"Brand value? We don't need no stinkin' brand value!" says the market, as UAL's price rebounds to within a day's standard deviation of where it was before Chicago cops showed airline passengers they've forgotten nothing since '68.


If you're in advertising, you've spent your working life arguing that your clients' brands are among their most valuable assets. And you've almost certainly positioned yourself as a skilled steward of those brands. But would you dare suggest that any ad campaign could counter United's fiasco? Would you dare suggest that anything -- ANYTHING -- you'd ever do could help United or any other client, as much as that fiasco hurt them?

Of course you wouldn't. There are limits, even to the hubris of ad guys.

And yet at the end of the day, the markets have decided that blowing up United's brand was trivial.

I'd ask, "What does the stock market know that we don't know?" but at the end of the day, I suspect the market's placing about the right value (cost) on this worst-corporate-PR-of-the-year moment.

The truth is airlines' customers have, by and large, adopted one of two operating modes (or, they're combining those two.) Some are pure price shoppers, and they'll buy the cheapest ticket they can find on any given day subject to their personal willingness to endure things like multiple or long layovers; others are points-gatherers who have picked an airline and are sticking with it.

Millions of people have posted, "I'll never fly on United again!" on Facebook. If you're one of them, the market's called bullshit on your threat. If you're in advertising, the market's blithe evaluation of the impact of that event on United's brand, or -- take your pick -- the fact that the market basically doesn't value brands nearly as much as you do, you pretty much have to slit your wrists right now.

While I have to believe that there are still a bunch of companies that thrive because of great customer service, there are clearly plenty that don't.

Friday, February 17, 2017

What Donald Trump’s campaign (might have) learned from Trader Joe’s

When I wrote ‘Build a Brand Like Trader Joe’s’ back in 2012, I could not have imagined Donald Trump as the President of the United States.

Since Trader Joe’s customers skew liberal, I will probably not make any new fans by pointing out that one of the secrets of Trump’s success could have been pulled straight from my book. Donald Trump has certainly internalized one of the secrets to Trader Joe’s success—and it’s one that, while obvious, is not followed by many other politicians, or brands.

So what is this thing, that Donald Trump and Trader Joe’s have in common?

It’s simply this: Neither Donald Trump nor Trader Joe’s care how many people don’t like them, as long as enough people do like them.

Both Clinton and Trump were historically disliked. The difference: Some people really liked Trump.
True story: If you Google the phrase “What I love about Trader Joe’s”, you’ll see all the same things you see if you Google “What I hate about Trader Joe’s”.

Those famously chatty cashiers? Some people love ’em and others hate ’em. You know the way TJ’s arbitrarily drops one item and replaces it with something completely different without notice? That drives some people crazy, but for everyone who hates it, there’s someone else who thinks that the unpredictable product mix makes every trip to TJ’s a little adventure.

That willingness to piss off a potential customer is incredibly rare. Most companies will do almost anything to avoid conflict. In the decades I spent in the ad business, I had clients who spent hundreds of thousands of dollars producing TV ads. We launched ad campaigns and clients often saw an immediate uptick in sales and profits—but only a handful of viewer complaints were all that were needed to kill a costly campaign.

The problem with that cautious approach is, if you’re preoccupied with making sure that no one hates you, you’ll almost certainly also ensure that no one loves you, either.

Almost every brand would do better to focus on making some people love them. But Trader Joe’s is one of the only businesses I’ve ever studied or worked with that really takes that truth to heart.

Donald Trump’s the only Presidential candidate who I’ve ever seen who almost went out of his way to antagonize voters who he knew would never vote for him anyway. I’m fairly certain he has not read my book (or anyone else’s, really.) But he instinctively knew that by winding up liberals, he could made right-wing voters love him.

You know that I’m right about this: The things that liberals hate about Donald Trump are the very same things that his supporters love about him.

By contrast, Hillary Clinton’s campaign tried desperately to appeal to old-school Republican voters who were put off by Trump’s persona.

Basically Clinton’s strategy came down to a battle of negative ‘net-favorables’. “Lots of people hate Donald Trump. If I can be the sensible candidate that fewer people hate, I should win this thing hands down.”

Fewer people did hate her, but not enough people loved her.

As the election came down to the final days, I watched Trump with a mixture of horror and fascination. I realized that he was simply never going to pivot to the center—in defiance of accepted wisdom amongst GOP strategists. In the end, his approach worked just well enough to win the Electoral College vote.

Now, of course, it really doesn’t matter that many people find shopping at Trader Joe’s to be infuriating; they can shop at many other grocery stores. Trump… that’s a different story. If you find him infuriating, he’s still your President.