Retail, shopping & leisure

Beauty and the big beast

If mainstream companies like Amazon and Facebook are the “big beasts”, then niche companies like Moleskine notebooks and Ben & Jerry’s, are the beauties. At least that appears to be the thesis of James Harkin in Niche: Why the market no longer favours the mainstream. He claims niche companies are prospering while more established companies, like Woolworths, General Motors and Gap, are losing their way.

A niche product is one most people don’t want but is ideally suited for the people who do. So the website, Farmers Only, is well suited to farmers who are looking for friends or romantic relationships and Geek2Geek is especially for – well, geeks. But as John Kay of the FT remarks, it is easy to find a few cases that support the opposite argument. After all, neither Amazon, Google, Facebook, Apple nor Ikea appear to be struggling, and they are proudly mainstream and powerful. They didn’t start out that way: Facebook used to be a niche product for university students and Apple used to appeal to an arty minority.

Michael Porter of Harvard Business School put forward the niche argument 30 years go when he said businesses should avoid being “stuck in the middle”. Perhaps it makes more sense to say that companies can succeed with any market positioning, as long as they are well adapted to that positioning, just as surviving species adapt to their environment. It doesn’t mean niche companies replace mainstream ones, just as online banking, for example, hasn’t replaced bank branches. See Holding out a bank branch.

A nice niche

Here’s a niche brand that is doing well. Jack Wills describes itself as “university outfitters” and that’s its niche market. The look is preppy, surf-inspired, and expensive. Like many new brands, it avoids mainstream advertising, using social media and events instead. After all, that’s where the market is. Jack Wills employs 1,700 people, including a team that answers 90% of tweets with tweets and videos. It also hosts events, recently for 2,000 students in the French Alps, and sponsors university balls.

Jack Wills sends out 4 catalogues, called “handbooks” a year to generate buzz. Unwanted buzz, perhaps, came from complaints to the Advertising Standards Authority about a recent handbook showing a very wet woman wearing only knickers being embraced by a man in only jeans. The CEO, Peter Williams, who rarely gives interviews, claims his aspiration was to “hide from everybody” rather than generate unwanted publicity. Even so, the company made a profit of 17.4 million pounds on sales of 92 million pounds in 2010/2011. That didn’t come from hiding.

This company believes events are more important now that social networking is less cool than it was. After all, the parents of these teenagers are on Facebook too. Its “Seasonnaires” program is a strategy that keeps the brand fresh and cultish. The company recruits and pays young influential people who are cool and extrovert and will go to parties, circulate, and hand out free gifts. One industry observer claims “privilege” is currently a selling point: “posh is cool again”. Where there’s a Wills, there’s a way.

Cool kitchens for non-cooks

It’s a paradox that the people who buy the highest quality tools are often the ones who don’t actually use them. At a time of celebrity chefs, mountains of cookbooks, and access to foodstuffs from every distant corner of the universe, many of us just don’t cook much. Even so, our kitchens are becoming bigger, more luxurious, and bursting with premium appliances. What does this all mean?

In the 1950s, women spent about 20 hours a week in the kitchen compared to 30 hours in the 1920s. But the US Department of Agriculture says women now spend 5.5 hours (or 4.4 if in paid work) in the kitchen and men spend a mere 15 minutes. The NPD group found, in 1995, we ate more than a quarter of meals and snacks outside the home, compared to 16% in 1975. So the direction is definitely out of the kitchen.

One explanation from Jack Schwefel, the CEO of Sur La Table, is that a gourmet kitchen offers a sense of “romance”. This hardly describes a kitchen where real work happens. Few people would call a busy restaurant kitchen, or a kitchen that must feed 6 kids quickly, “romantic”. Perhaps it provides a modern “parlour” where friends can visit, particularly as kitchens are now so big they can accommodate large tables. Since there are no nasty cooking smells, it provides a welcoming place to hang out.

The main market for Sur La Table is women in their 40s and 50s, who presumably have more time because their kids are grown. For them, cooking is a leisure activity rather than a necessity.
We think gourmet kitchens are for people who have time to entertain their friends with the idea of impressive food. Or paradoxically, for people who want to entertain themselves with the idea that their cooking could be impressive if they did it.

The great mall of China

It used to be in the old days everything was “made in China”. Increasingly it will be “bought in China”, China being the world's fastest growing retail market at 18%. The difference between America and China is that America is dominated by Walmart and China isn’t dominated by anybody. Even the biggest chain, Shanghai Bailian, has only 11% and mainly within its home region. A kind of Walmart aspirant, Wumart, has only 469 shops with annual sales of $US2 billion (compared to Walmart’s $US7 billion in China).

Chinese stores have a very different style, whether it’s live fish and sea turtles in tanks, or sales assistants who wear shorts to appear familiar. Moreover, the middle class Chinese are not as rich as the middle class in the West. Only 1% make more than $US15,000 a year. They also love their low prices and any company that threatens the status quo there will be in trouble. (Unilever was recently fined for mentioning it may raise prices - and stoke inflation.)

Part of the trouble is getting food from paddock to plate, because 80% of farmers work on tiny plots. Supermarkets can’t keep prices low when the supply chain is so inefficient. The next challenge will be for retailers to buy land in the less developed cities without losing too much money. The market generally favours local firms; Carrefour and Walmart have little more than 6% of the total Chinese market. It sounds like a tall order for Western retailers to get the Chinese to their tills.

Are supermarkets still super?

Supermarkets are one of those consumer marketplaces that everyone loves to hate yet everyone shops in them. It’s common to hear someone complain, since Tesco or Sainsbury’s came along, all the shops in the High Street have closed down. It’s a tempting argument since many High Streets do seem to lack what David Cameron, the British PM, calls “bustle”. But whether it’s caused by a supermarket chain or some other influence (everyone’s at work?), it’s a problem.

As the columnist Bagehot notes, supermarkets have become “proxies for modernity itself”. Yet research at Surrey and Exeter Universities (UK) found chain stores and co-ops held half the retail market even in 1939. Middle class matrons preferred to shop locally because they could dress up and socialise while doing it but younger, working class women, liked the convenience of supermarkets. In 2008, the Competition Commission stated 4 chains fighting over 66% of sales was a good deal for customers. The issue seems to be whether we want a good deal or a lifestyle choice.

It’s tempting to imagine everyone on bicycles with baskets on the front collecting locally grown items from friendly shopkeepers. I think there’s a compelling argument for having a choice between this and Tesco. The problem is when there is no choice. But I can’t help thinking that, while nobody likes a McDonald’s in their town, they’re happy to go there on a long journey for cheap food.