Perfumery is very close my heart as a business and as a product.
Having spent over 20 years in the aromatic world, managing some of the biggest brands in the perfume sector, I am now sharing my insights on how using perfume flankers is one of the top business games.
If you analyze each of the middle eastern perfume player or even go ahead with western perfumeries, each one of them has one or two main- Best selling fragrance label under their kitty.
Perfume flankers are variations of an original fragrance, created by brands to capitalize on a successful scent’s popularity while attracting new customers.
Prerequisite for introducing perfume flankers.
The success of parent version of the fragrance is indeed the main requisite.
Success of parent fragrance both in terms of sales (units) as well as imagery Visibility in the market and continuous persistent demand from all the distribution channels and consumers.
The parent fragrance should have seen at least two seasons of continuous growth in the channels prior to embark on creating a fragrance flanker.
Using perfume flankers for growing sales dominance.
Flankers typically retain the DNA of the original perfume but introduce slight modifications such as different notes, intensities, or bottle designs.
This strategy helps brands maintain customer interest, appeal to evolving trends, and drive additional sales.
For example,
Chanel No. 5, an iconic fragrance, has seen flankers like Chanel No. 5 L’Eau, a fresher and lighter version for younger audiences.
Dior Sauvage, a bestseller, has spawned variations like Sauvage Elixir and Sauvage Parfum, offering stronger and richer compositions.
Carolina Herrera’s Good Girl line has introduced multiple flankers, including Very Good Girl and Good Girl Supreme, each with a unique twist on the original.
Similarly, Club de Nuit Intense by Armaf has expanded with versions such as Club de Nuit Urban Man and Milestone.
Davidoff’s Cool Water also boasts numerous flankers, like Cool Water Intense and Cool Water Parfum.
These flankers not only refresh a brand’s fragrance portfolio but also enhance revenue streams.
Since the development of a flanker requires less investment than a brand-new fragrance, it allows companies to maximize profits while catering to diverse consumer preferences.
It also addresses the common question from the trade – whats new and trade feels confident to invest in new flanker riding on the popularity of the parent fragrance.
Caution for Niche Perfumes using flanker as their strategy
To be honest, I haven’t seen flankers doing well especially with niche fragrances.
My personal view is since the fragrance is niche, both in terms of heritage, design, formulation and unique offering which commands a higher premium from the masstige or Premium brands.
In niche brand marketing, you speak and target to a smaller audience within specific target group (demographics, psychographics profiling is limited)
For a true niche brand that is speaking to a narrow audience, launching flankers can run the risk of cannibalizing sales of an existing scent.
Personally, I would feel cheated if my niche fragrance brings out a flanker at lower price point, then for me… the brand is no longer in niche luxury space.
I haven’t seen a flanker of Hermes -birkin bag as yet… (have you?)
Way out for niche luxury perfume brand
Niche fragrance can bring out more concentrated flankers as Extraits which would appeal and keep the brand loyalty intact.
Farm to fork or Fresh to plate – Niches make Money.
Farm to fork or fresh to plate food tech concepts can re-vitalize FMCG brands into their new avatars.
The only way for FMCG brands to thrive in the digital age is to focus on niches.
FMCG is an acronym for Fast-moving consumer goods.
My inspiration to write this article comes from my interaction with my LinkedIn friend, Shahid khan and I am going to share some of my learnings from the newly emerging sector “Fresh to plate” or “farm to fork”.
These two terms were unheard of in the early 2000s or even in traditional FMCG (fast-moving consumers goods) kind of business.
Thanks to evolving tech developments and changes in consumer behavior,
customers are now open to accepting fresh food delivered to their homes and convenience which comes attached to it.
Any company operating on a farm-to-fork business model controls the entire back-end supply chain, powered by stringent cold chain control to maintain the quality and freshness of each product.
This starts from the time of procurement, processing, storage to the time it reaches the end consumer.
Watch the video advertisement to understand the farm to fork business.
Hope the business proposition for “fresh to the kitchen” or “farm to fork” is now clear.
Is D2C (direct to customer) similar to ecommerce?
A traditional food Ecommerce site may contain various categories such as fresh foods, packaged foods – spices, condiments, etc.
But when you focus on one category of the overall eCommerce grocery retailer, you started aiming for a niche segment that forms the basic premise for any D2C brand.
The D2C market in India is at a growing stage and is expected to attain a size of $100 billion by 2025.
D2C sales in the middle east region are estimated to account for $17.75 billion of total e-commerce sales in 2020, up 24.3% from the previous year.
The pandemic has played a major role in accelerating growth for the sector.
D2C has the obvious advantage of direct consumer connect as they control sourcing, procurement, logistics, and distribution directly to customers, removing the channel margin-eaters from the value chain.
In D2C, the brand look after the entire supply chain modules of the business.
What is the margin-eaters for any FMCG player?
The answer is mainly the end retailers’ margins, distributors’ margins, fixed costs, below-the-line marketing activities, and costs & finally advertising.
So in D2C business, your margins (retail & distributor) are saved whereas your customer acquisition costs are increased which over a period of time comes down with an increase in online orders and volume.
Challenges in D2C business model like “farm to fork” or “farm to plate”
Building a robust infrastructure that can sustain growth and enable quick scale-up. This needs a bottom-up approach.
Tech tools to maintain the temperature of warehouses, transporting trucks between 0-4degree.
In the middle east, it is one such challenge wherein the temperature soars to 50% degrees during peak summers.
The “farm to fork” kind of businesses, need continuous investments.
Investments in terms of infrastructure creation, creating distribution hubs, trucks, Talent, digital initiatives, and most importantly tech support.
Farm to Fork- D2C model
Licious – brand’s core achievements in emerging unicorn startup in India.
Licious is 29th unicorn to emerge out of India in 2021
The latest funding would help it compete better with players such as FreshToHome and Zappfresh, as well as large players like BigBasket and Swiggy
Licious serves over 1 million orders every month
Fresh meat and seafood is still an underserved and unorganised sector that holds an opportunity of $40 billion
Technology tools in D2C or farm to fork businesses
Online Ordering Platform
In the D2C business, your online ordering platform or app is the front-of-house place where your customers interact with your brand.
From a profitability point of view too, it’s always preferred to get orders on your own platform so that you do away from the third-party commissions.
AI controlled logistics distribution cold chain.
Robust delivery systems within a hour within city limits.
Online ordering and processing – customer acquisitions
Customer retention
Online marketing
What the Middle East players like (al islami, alyoum, alain foods) must do to re-invent themselves?
Challenge themselves– first foremost thing the regional players must do is to challenge their core business model and practices.
Bring Fresh perspectives in thinking instead of shouting “freshness” in their advertising slogans.
Start thinking keeping 10-year horizon. Formulate strategies that can sustain the business for the next decade and command its leadership position in the marketplace.
Leverage their core infrastructure and combine it with the layer of technology innovation, keeping the customer centricity in mind.
Leverage their network of HORECA – not to sell the merchandise but in customer acquisition or pick up points.
Throw the modern trade thinking capinto the bin– Start imaging a world or marketplace wherein there exists no hypermarkets, supermarkets or power retailers. Then answer the question,
“How would you still be able to service your end customer?”
They formed a community of fishermen in south India or “solidarity-based agricultural undertakings” as called in the western world or as a “cooperative movement” in the democratic world.
Bringing fishermen online
The app works on a simple and gamified model.
Once a fisherman opens the app, the camera “reads” the fish, and detects the variety, size, based on which the fisherman puts in his bid.
At the other end, one or two “feet on street” bid at auctions, pick up the catch and transport it through the cold chain to respective hubs.
The app reads the fish based on neural network training that detects the kind of fish.
They use an AI-based, US-patented technology.
The consumer has to pick a product from the platform.
The produce is shipped from central hubs to distribution hubs, from where it is transported in vacuum-sealed pouches, cold boxes, and temperature-controlled trucks
“FreshToHome’s brand proposition is to provide food that is 100 percent fresh and with zero preservatives.
Definitely, not an easy feat to achieve in an unorganized sector such as the fish and meat industry in India.
India alone consumes USD 30 billion worth of meat products annually. The size of the market makes it attractive for the food tech players & investors.
Any FMCG brand that can disrupt itself first, disrupt its own processes and thoughts, have a better chance of survival in near future.
Any of the frozen food middle east players, seeking to get a fresh perspective on initiating their business plans for the food tech ventures, now know their GO-TO person (#retailritesh)
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.
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.
Nowadays, the most trending topic in any networking is about Startup and entrepreneurial ventures.
Recently I attended the middle east retail forum 2019 #mrf2019 wherein I met with wonderful people, retailpreneurs, successful retailers and mall developers. It was a very well organized event, ( i shall write a separate blog on the same soon).
One interesting feature that caught my attention was a panel discussion dedicated to startups, for instance.
It was like a famous series called Shark Tank, wherein the startups would pitch their business proposal to a jury and get shortlisted for the awards or VC fundings.
There were some really good concepts that were really path-breaking, however, most of the entrepreneurs had missed on a few main points, which inspired me to re-purpose my earlier written blog on startups.
There is a wonderful saying “What got you here, won’t take you to next level”, you need to keep enhancing your skills, keep innovating yourself by breaking old habits ( point of caution- innovation is not always product-centric, it can be very personalized, even the way you think can be innovated)
One important point that I would like to convey to entrepreneurs is that the VC fund is something like “Vapour capital” it evaporates as soon as it comes into your business.
Try to follow the basics of business i.e. if you invest USD 1 into your business, you need to generate USD 2, re-invest this again in your business till your business becomes self-sustaining. If you follow the ratio 1:2, you shall never have cash flow issues in your business.
I am putting down the most important tips which would help upcoming retailpreneurs with their projects.
1. Start with your own Pain points:
The easiest and straightforward way to create a great product or service is to make something you want to use yourself.
As you build the project, you would soon figure out whether or not you are making any good.
Case study:
Coach Bill Bowerman felt the need for better lighter running shoes for his team. So he went out to his workshop and poured rubber into the family waffle iron. That’s how Nike’s famous waffle solewas born.
Key learning: “Start with your own pain point” and coming out with the solution, lets you fall in love with what you are making.
This very source provides you inner-motivation and go-getter attitude.
2. Keep customer focus through-out:
Always at the start of any project, keep your customer on focus, imagine what you would like your customer to say about your product or service.
3. Be Action taker:
You should feel an urgency about whatever you are planning to start or to do. If you are building a break-through product or service or even a Me-Too product, JUST DO IT(as Nike says it).
Don’t sit around and waiting for someone to make the difference that you would like to see.
Case study:
The Drudge Report, run by Matt drudge is just one page on the web run by one guy.
Yet it has a huge impact on the news industry- television, radio talk-show hosts, and newspaper journalists all visit this page daily to find out as to what’s the current stories.
In July 2016, the site garnered 1.47 billion Pageviews, as a result of US Presidential elections
The Drudge Report’s traffic beat out the likes of news sites from Disney Media Networks (which includes ESPN.com and ABCNews.com), Yahoo, Google, Time Warner, and Fox Entertainment Groups.
Key learning:
Make the difference that you would like to see yourself. Drudge’s report came from nowhere and disrupted the old models that had been around for decades.
Learn as to why good writers build great companies, read here.
4. Understand Your core “WHY”:
Great businesses have a point of view and not just a product or service. You have to believe in something. As you get going, keep in mind as to “why” you are doing “what” you are doing.
Frankly speaking, this is the real Mission and Vision statement of the business.
For instance, Big corporates shell out millions of dollars to copywriters to write it, ideally, it should be written by the founder himself because that is his or her vision.
Case study:
Wholefoods(now a part of amazon.com) stands for selling the highest quality natural and organic products available.
Their customers know and understand Wholefoods purpose, they don’t go to their stores asking or looking for potato chips or coke or junk food.
This very “WHY” adds rock-solid positioning for wholefoods and is one of the reasons for their success.
I shall be writing more about entrepreneurship and management leadership stance in my upcoming articles. I hope you would find these tips or pointers useful in your journey.
In case if any of my readers or LinkedIn connections want any help pertaining to their startup ideation, you are more than welcome to reach out to me at riteshmohan@yahoo.com.
(References: Just tell it – Nike’s story- fastcompany.com article; reference book “Rework” by Jason Fried and David Hansson; My learnings from attending Middle east retail forum, thanks to organisers & management of Retail Images group of Publications.)
Ritesh Mohan is a passionate retail professional with over 21 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, Brand management, Retail Operations, Sales Management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.
Recently, one of my blog followers asked me a question as to what makes Luxury brands so aspirational and different.
This question prompted me to write this article which will give you 4 “Must do’s” to build a luxury brand.
Having worked and being involved in leading the team that produced a luxury concept arising from United Arab Emirates (in beauty & fashion domain), I would like to share my wisdom acquired from my personal experience.
Foremost you need to understand the difference between non-luxury brands and luxury brands.
Most non-luxury brands succeed because they are marketed in terms of the problems they solve. These are their reasons for being. For example – Brand X of t-shirt whisks sweat away to keep you cooler; A Particular sweetener gives you the taste without the calories, brand car X gets more miles to the gallon so you spend less on over-priced gas.
Not so in the business of luxury. No one wears a Burberry trench coat merely to stay warm. No one forks over $200,000 for a Bentley simply to get from point A to point B.
No Luxury products exist for a much less rational reason. Therefore, the marketing of them must be much more emotional.
In short, mass marketing is the business of selling reality. Luxury marketing is the business of selling dreams.
Forget about positioning; luxury is not comparative. Advocate beliefs:
Luxury brands should advocate the beliefs of customers rather than simply rely on brand values. Beliefs go further; they’re more specific and, consequently, more segmenting.
Unlike mass brands, luxury brands should not strive to please everyone, but those customers whose beliefs align with their own.
A good example of this is Ferrari’s belief in high performance. The brand rarely advertises in mass media, but it invests significant amounts in Formula 1 events. It focuses on actions related to its belief to reinforce this tenet in consumers’ minds.
Another good example is Louis Vuitton’s belief in art. Among other collaborations, the fashion house linked up with Japanese artist Yayoi Kusama to create a limited edition of products.
In mass markets, brands distribute their investments across several efforts because they want to reach and please the broadest possible spectrum of customers. Instead, luxury brands’ investments are focused on the specific beliefs of the brand, creating a very focused experience for the right customers.
2) Bring a sense of exclusivity and experiential emotive:
A true luxury brand cannot stop their offering at the product itself; they must go beyond that to offer unique services or rituals. This can start with something as simple as attentive salespeople and prompt customer service, but it should really go beyond that to create a consumption “ritual” that allows customers to experience the brand.
Perfume brand Le Labo does this very well. Using the premise that the quality of perfume deteriorates over time, it revolutionized the consumer buying experience by offering a special personal experience: each Le Labo perfume is hand-blended and individually prepared in front of the customer at the moment of purchase. The glass decanter is then dated and the customer’s name is printed on the label. After taking the perfume home, the customer must let it marinate in the fridge for a week before using it. Through this ritual, buying Le Labo perfume becomes more than an exclusive product; it becomes a personal experience.
3) The store becomes the epitome of luxury for discerning customers:
Luxury brands must pay extra special attention to the way they sell and innovate at the point of purchase. Before, it was enough for luxury brands to use brick and mortar stores to sell their products, but they must now aim to design multifunctional, controlled spaces that create brand experiences and communicate brand beliefs.
BMW World in Munich is another example of a temple-like showroom, where consumers can “experience” the brand rather than simply buy the product.
BMW world.
4) Don’t respond to rising demand.
One of the key premise that Luxury brands work on is “Less is more”. Connoisseurs of luxury brands relish a sense of exclusivity that comes along with Luxury products, its emotional gratification that provides a sense of belonging to the elite club.
One of the most famous and highly successful brands that have mastered this point is Hermes. The bags are scarce, sought-after a simply the best, and they have the price tags that go along with all that exclusivity.
Hermes- Kelly Bag
Status… status… status.
If you’re looking for a bag to tell everyone who sees you that, not only have you arrived, but you’ve arrived with exquisite taste, Hermès will do that every single time
To summarize, I would like to end up with a famous quote by Hubert Givenchy, “Luxury is in each detail”.
I hope the above pointers would help my fellow retailers to develop their brands more luxurious for their discerning customers.
I would be more than glad to share my wisdom and knowledge with my retail fraternity. You can reach me on riteshmohan@yahoo.com
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. 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.[/vc_column_text][/vc_column][/vc_row]
Recently I was brainstorming with one of my good friend who is also a retail professional in developing a loyalty program. My inspiration to write this article comes from the feeling that how we (marketers & retailers) tends to get myopic and lose out on overall objective or big picture.
Securing customers’ loyalty goes beyond having a loyalty programme. Winning both Hearts and Minds is a big challenge for today’s Retailers.
I suggested my friend to explore the following areas first to determine whether his company really needs a loyalty program:
Can you build customer’s loyalty using Top of Mind recall?
Can you win customer’s loyalty by providing him/her great in-store experience?
Have you evaluated the cost of acquisition of new customer vs the cost of retaining existing customer? (This ratio would vary from industry to industry, for example in the telecom industry (especially in the Indian subcontinent) the cost of acquiring a new customer is comparatively lower than retaining an existing customer.)
Will your customer pay in advance to become a member of your loyalty club? (Read the case study on this point at the end of this article highlighting this aspect)
If you have answered “Yes” to any above first 3 questions, then work on the same and delay launching any new loyalty program.
The reasons for me making this bold statement are as follows:
Traditional financially driven loyalty schemes can become a financial liability for businesses if not properly planned in initial stages itself. Your initial plan should very well capture the proposed sales expected by loyalty card and expenses that would be accrued to run it smoothly.
Traditional points-based schemes are often not agile enough to meet rapidly changing customer expectations in the same way that ‘connected stores’ and new technologies can engage with consumers.
Today’s customers are exposed to Gigabytes of advertising information daily that they no longer value the reward that is offered in the end (post-purchase). For example, Majority of hypermarket retailers offers approx. 1% of customer’s purchase as loyalty rewards i.e. On spending DHS 2000/-, a customer can expect a reward of DHS 20/- (approx.).
Retailers today are in kind of rat race… “Oh my competitor has a loyalty programme, why should I miss the bandwagon”. They tend to ignore their customer’s shopping habits, their frequency of store visits, their basket size, are they value seekers or discount lovers.
Today’s Retailers need to understand and accept the fact that “Loyalty” is overused, over-exploited concept and does not excite new age shoppers who are much more aware of the products & services and are more demanding. Although the word ‘loyalty’ is often associated with the points and financial incentive schemes that were launched over 30 years ago, these schemes have lost its relevance in current times.
How to be a disruptor then? (Simply by not launching a point-based loyalty card/app)
Loyalty should be about more than just collecting points. If not innovated, your Loyalty club would end up looking like Me-too offering.
Segment your customers, ask your store teams as to what is making their regular customer come back to their stores.
Use technology in making the customer’s purchase cycle Seamless.
Loyalty is often tied to routine, so any innovation that simplifies a routine while enhancing the customer experience is a reward in itself.
Understand from your customers as to what drives loyalty in them for your brand. Is it discounts, happy hours or convenience, customer service, good assortment of large merchandise offerings?
Winning loyalty in the Digital era needs a mix of Personalization, Engagement, and a sense of Exclusivity across all different channels (in-store, website, mobile app, social platforms).
As per a study conducted by Deloitte research when it comes to consumers’ attitudes to loyalty programmes, research shows that personalization and relevance are high on the list of what consumers expect from a loyalty scheme. The study showed 41 percent of consumers agree with “Loyalty schemes help brands know what their customers want and provide them with helpful suggestions and rewards, (e.g. receiving vouchers and coupons on products they buy regularly)”.
Case study: Amazon Prime.
Amazon Prime is an outrageously successful membership program with the stats to prove it:
80 million members
$1,300 average member annual spend vs. $700 non-member
60% of Amazon customers are Prime Members
Amazon Prime, which offers free streaming of thousands of movies and TV shows and, most important, free two-day shipping on most Amazon purchases. The service usually costs $79 annually, though it’s cheaper for college students ($39 annually, after six months free).
Subscribers not only ordered more often but after paying the $79 fee, they started buying things at Amazon that they probably wouldn’t have in the past. Since shipping was always speedy and free, members saved themselves a trip to the store for things like batteries and coffee beans.
Can your loyalty program boost of statistics like Amazon’s Prime. If not, then your loyalty program is on its way to becoming a liability for your business. It’s time to run a timely checklist & overview of your loyalty program.
I would end my article with a quote from Sir Terry Leahy: “The true source of loyalty is to create benefits for people.”
My article is my attempt to help retailers who are either planning to launch their loyalty program or looking forward to fine-tuning their existing program. I would be glad to share my wisdom with any of the retailers who believe in having an innovative loyalty program which can put them in a different league altogether.
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. 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.
Technology emerging as the savior for Beauty retail
Background:
As per figures released by Euromonitor International, Beauty retail or Beauty is one of the most promising sectors for the future growth of the retail segment & is valued at USD 9 billion in the Middle East alone.
Our generation is really blessed in terms of technology that we have at our disposal, especially computing devices in the form of smartphones.
My inspiration to write this article comes from a recently concluded webinar wherein I was on a panel discussion with industry leaders and I spoke on the topic of finding a competitive advantage amid cluttered & oversaturated beauty sector.
Making technology initiative – the core of the Beauty retail business.
With the emergence of Pandemic, covid19, the entire world of business has changed.
we are no longer in the world wherein we all had a good time, meeting our customers physically (physical interaction) and getting to know their preferences and behaviors.
The world is now embracing covid19 and adapting itself to live along with it.
The road to recovery is now slow and challenging.
Here comes our biggest friend i.e. Mobile and Web.
Both have the power to transform our current business model and the way we interact with our customers currently.
My article is my attempt to highlight initiatives of such beauty brands in adopting technology as an integral part of their overall strategy and how to find a niche for new aspiring entrants into the cluttered world of beauty.
As consumers embrace technology in their everyday lives, notably through the increasing use of smartphones, the boundaries between the virtual and real-world become increasingly blurred.
Who is driving this digital growth transformation for the brands?
Consumer’s preferences have gone under transformation during lock-downs which has resulted in giving rise to contact-less transactions using eCommerce.
Although discretionary spending has reduced post covid19, the market has witnessed a consumer behavioral shift towards safe, sustainable, and reliable products.
Purchase behavior is shifting from Specialty stores to specialized eCommerce platforms.
Technology playing its role
Skincare:
Demand for high-tech treatments at home has given rise to a range of electronic devices whose claims range from improving the efficacy of skincare products to replicating anti-aging treatments in salons.
Skincare diagnostic tools, from DNA testing to skin analysis, YouTube videos, and diagnostic applications, are all adding to consumers’ experience, both in-store and online, thus affecting purchase decisions.
Diagnostic tools have had a technology make-over and now come in the form of online questionnaires, apps, or in-store devices.
From Sephora’s skincare IQ to Harrods’ Ioma machine, consumers’ desire for customizing their skincare is stronger than in any other category.
Digital apps like OKU (an at-home device and app that analyses skin condition),
L’Oréal’s Make-Up Genius and Klara (an app that sends pictures of consumers’ skin to dermatologists) aim to offer professional skincare analysis in the comfort of consumers’ homes.
Technology in beauty cosmetics playing an integral role in payment processing
Sephora’s latest cooperation with Apple to combine Apple Pay with the Sephora app and create a Sephora Wallet.
Learn how lipstick is being used as an economic indicator, click here.
Customer engagement and Omnichannel experience
One such retailer that transformed its customer engagement and Omnichannel experience is Ulta Beauty, America’s largest beauty specialty store.
Its Connected Beauty vision has allowed Ulta to seamlessly manage real-time inventory across 20,000 products and 800 stores as well as serve customers with in-depth, personalized recommendations, crowd sourced reviews and how-to-videos.
The brand’s Beauty tip workshops actually encourage shoppers to play with products before making any purchases.
Ulta Beauty has taken their loyalty program to a different level by launching a social media platform specifically designed for loyalty members to talk to each other about products and have beauty-focused discussions.
Another brand that is spearheading technology-driven beauty engagement is SEPHORA.
In principle, Sephora’s success comes in part from the retailer’s reputation for always having the newest and best brands.
Both Sephora and Ulta have “really managed to crack what experience in beauty is.” “Experience & technology” is the core of their strategy.
Check out Sephora’s virtual artist cheek try on an app.
New Emerging trend in the Beauty Retail – Organic cosmetics or vegan beauty.
The global vegan cosmetics market size is projected to reach USD 20.8 billion by 2025. (global estimate).
It is growing at a rate of 7% currently (pre-covid).
Increasing concerns regarding health & safety, consumer awareness about the use of animal-tested products, and rising importance is given to environmentally viable products that are likely to stir up the demand for vegan cosmetics.
Beauty Retail – Brands investing in scientific research
Brands like Beauty without Cruelty, MU London organics, and Bare Blossom are investing heavily in research activities.
Using ingredients that are plant-based.
Using more fruit based ingredients instead of synthetic dyes.
The sustainability component in packaging like Use of glass containers and recycled paper, no plastic containers etc.
Steps that a beauty retail entrepreneurs or an aspiring retailer need to take to enter the market
-Using smart branding and carefully designed packaging, innovative brands are able to differentiate themselves from their competition;
– Focus the product USP on Vegan & organic ingredients in sync with governmental regulations and industry certifications.
-Using Stories To Stand Out And Get Ahead In The Beauty Industry
-Create your own audience, doesn’t matter how niche that audience is.
-Adapt the Omnichannel approach – sell online as well as a tie-up with some good distributor or retailer for on-ground presence.
They connect you digitally to the consumers who want to sample your product.
Later, you can follow up with that consumer and turn them into customers and evangelists for your brand.
-Keep pivoting your business by looking at various emerging niches in the segment.
Brand Sweat, provide beauty products to women who enjoy being active and don’t want their look to be compromised
Conclusion:
We are moving towards a reality where consumers can easily get anything, anytime, anywhere.
Retailers that do not take the essential first step to differentiate themselves through innovative customer engagement risk becoming irrelevant – forever.
Watch the video which summarizes the role of Artificial Intelligence in beauty retail
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 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. He specializes in Retail management, Product development, Brand management, Retail Operations, Sales Management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.
“What business is McDonald’s into?” was the question once asked by the founder of McDonald’s Ray Kroc to graduating students of a prestigious Management school. Most of the students quickly replied, “Selling hamburgers and fast food”.
founder of Mcdonald’s
Ray Kroc smiling replied, “We are a Real Estate Investment Trust (REIT)”.
A lot of us don’t realize that McDonald’s isn’t really a burger selling restaurant chain. Well, it is, but not purely. Peel back the layers and you’ll find that the corporate entity is actually one hell of a real estate company.
Former McDonald’s CFO, Harry J. Sonneborn, is even quoted as saying, “we are not technically in the food business. We are in the real estate business. The only reason we sell fifteen-cent hamburgers is that they are the greatest producer of revenue, from which our tenants can pay us our rent.”
The fast-food giant came from humble beginnings. The McDonald brothers, sons of Irish immigrants, first opened up a hot dog stand in 1937 in Pasadena before venturing out to open their first restaurant. Ray Kroc, after six years of working with the McDonalds brothers, elected to buy them out and became the owner of McDonald’s Corporation in 1961.
Core brand strategy was coined by their CFO, Harry J. Sonneborn,
Instead of making money by selling supplies to franchisees or demanding huge royalties…the McDonald’s Corporation became the landlord to its franchisees.
They bought the properties and then leased them out – at large markups. In addition to that regular income, the corporation would take a percentage of each shop’s gross sales.
Today McDonald’s makes its money on real estate through two methods. Its real estate subsidiary will buy and sell hot properties while also collecting rents on each of its franchised locations. McDonald’s restaurants are in over 100 countries and have probably served over 100 billion hamburgers. There are over 40,000 locations worldwide, of which only 15% are owned and operated by the McDonald’s corporation directly. The rest are franchisee operated.
It’s a brilliant strategy. Being able to collect on rents helps insulate them from the ups and downs of the business. You have to make rent after all.
The success of McDonald’s can also be attributed in part to the taste of the iconic fast food chain’s shakes and burgers. But the real secret sauce has everything to do with how the company has quietly become more a real estate company than a restaurant chain.
Additionally, in the last two decades, real estate values have increased, which means the overall collateral value of the company’s property has increased, too. So when McDonald’s wants to borrow money to make new investments, it can do so at relatively cheap rates.
McDonald’s is a great example of how diversification helps to not just grow a business’s income but also lower its financial risks. McDonald’s is both a fast food and real estate business.
Learnings from McDonald’s for entrepreneurs or start-ups is that whatever business you might be having, you need to plan for “Business Insulation” i.e. to insulate it from any external factors like economic recessionary pressures or from the competition. Always try to have a backup plan which can keep your business afloat even in turbulent times.
Does your Business has a backup plan?… (If not, then reach me on riteshmohan@yahoo.com, I would be more than willing to render help to my retail fraternity members).
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 Middle East region. He specializes in Retail management, Product development, Brand management, Retail Operations, Sales Management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.
