Primark – changing the dynamics of The High Street

Had to visit Primark on Oxford Street twice last week for shopping with family !

I had heard this from two other informed sources: that Primark is killing the other retailers on Oxford Street. Of course, it’s not that black and white. But, after having visited the place, I believe it is more on the true side.

At a 70,000 square-foot location, Primark has (1) captured a lot of the competition’s share of wallet and (2) grown the market.  Many websites, including Time Out, advise you to stay well clear of the shop during lunch hours and school holidays.

Will a female shopper who used to go to Zara or higher brands spend a lot of time at Primark? Probably not, but those who used to go to H&M, Next, M&S surely seem like.

I think by providing amazingly low prices, even for their “premium” store, they have provided a new High Street business model that was missing till now. I believe a significant proportion of the mass market, who could not afford Oxford Street regularly till now, are now almost-loyal to Primark as it has let them access it. The quality is not great, everyone knows, but on many products, it’s not as bad as you might think. Volume has always allowed them to lower their margins, and they have made sure Oxford Street is no different. And the shopping experience: well, for me it’s unbearable but didn’t seem so for the 100’s and 100’s who were lining up to buy.

Is it sustainable – there are some concerns here (1) the always-present crazy crowd may start a balancing loop (2) the volumes they produce/sell in might make a certain customer segment dislike it when they see many others wearing the same top (3) the competition has already started competing on price; these competitors do have muscle, and leeway to have a price war though I doubt if they can win it

 

Promoting benefits vs. features

All marketing books/profs/theory talk about how one should market benefits to customers, not the product features.  For example,  customers care that their shoulders wont hurt while carrying a heavy bag; they don’t care that the carry straps are made by a new material and adjusted through a revolutionary patent-pending process. (easier example: fresh breath toothpaste and not contains this new molecule etc)

I have been thinking on this recently and I feel a significant proportion of promotion is still feature-driven. (Try to note this during the next hour of TV you watch) And a lot of this comes from mature agencies.

There’s obviously some more factors linked to this aspect of customer behavior that I should be aware of I guess.

 

An advertiser’s views on China

A group of us are doing a project for Profero, one of the world’s foremost digital agencies. We met with the UK management today, and afterwards went out for a drink with the MD Nick Blunden (who blogs here). Profero has a significant Chinese presence, and we all got discussing China (du-uh)!

Nick’s comments about the single grandchild of 4 grandparents got me thinking about the Fortune article from 2-3 years ago (Sorry can’t find the link after a lot of attempts). This social aspect of revolutionary change is sometimes forgotten amidst the 1-billion hype. First, it clearly shows how delays can be loooooong. The policy of 1-child was encouraged/implemented in 1960s!  Second, relative disposable income per child is huuuuge, especially in the dual-income families. Thirdly, and most importantly, this is leading to children growing up in a certain way: behaviorally (get what they want, thus stubborn) and their macro-view (China can only grow fast). Social implications of what I would call this waiting to explode volcano are anyone’s guess. I am not underestimating the strength of the Chinese to re-align; however, economic growth pangs always come with social ones – but these are real unique.

How does this lead to advertising – well such children and youth of China are much more digital than in developed nations (as a percentage); they get all the gadgets from their families and have a lot of spare time to spend on it. All of this started from the discussion of a Internet-dance game (adapted from the arcade step-to-dance game) in China that has 36 million registered users and almost 34-million of those are active!! Talk about an available market for advertising baby and move over Second Life!

I must go to China soon, my dad also keeps insisting

 

Steve Jobs & Bill Gates together and an update on London’s Carbon footprints

Steve and Bill came together after a long time at the D5 conference – text and video all available here.

100’s of bloggers have probably already analysed this for content: let me analyze it for style and personality.

- Steve Jobs was so much more confident of what he was saying. This is not to say Bill Gates wasn’t confident; just a relative measure.   His concise answers were not at all beating around the bush

-  However, imho Bill Gates took to humor/wit/light-heartedness more easily; though in some bits of the video it might seem otherwise.

- It was quite incredible that they never spoke on top of each other! Good prep or what

- The interviewers, oh my god Walt was so speaking on top of Kara that it was making her seem like a child

Here’s another quick update on the Carbon footprint posting from a few weeks ago. Conrad, now an alumni of the school and a well-known figure in the business for social change scene in UK, had a chat with me about this. Conrad suggested that taking a city as the basis of carbon footprint is misleading and messy for various reasons (1) There are too many interdependencies between areas within a country’s legislation, way more than pointed out in the FT article (2) Cities are not accountable for their carbon footprint, countries are under Kyoto (3)  Understanding data on the basis of city can be manipulated easily and (4) Mr. Mayor of London is putting probably too much emphasis on London’s footprint at the expense of a bigger goal perhaps.

Finally, a lot of close family and friends have seen Chini Kum on my review & endorsement, and loved it as well; so go out there and enjoy it!

 

Contacting Alumni in business schools and refurbished computers

A lot of my classmates find it very surprising when I tell them that I regularly try to contact relevant alumni for discussion career opportunities in their companies. The first question is always “so what do you tell them”. I have found the school alumni very helpful; I tell them I like their company and would like to have a 5 minute phone discussion about exploring opportunities. And most of these people will get back within 2 days and give me a status check. I have initiated many discussions through these, and quite a few have gone somewhere.

Why are refurbished computers a much bigger business in US while they are only now becoming big in Europe? Can’t think of any relevant reasons, but I know from a reliable source that it is true.

 

The best advertisement… probably ever

This 1-minute TV advertisement has got to be up there in the best ads ever (ya the title of this post is a bit gimmicky). Have a look, believe me, you will love it. There are two huge things about this ad: 1. it’s extremely creative; makes you laugh, makes you remember it (so recall of presentation is high) and 2. it actually serves the business branding purpose superbly; you actually think of the message being given by the company and wonder if it’s true by relating back to their own memories; most people realise it is true (so recall of the message/content is also high)

On the sidelines of this topic: I obviously went to YouTube to search for this ad first. It’s almost a reflex. But within a few seconds spent there, I knew it would be difficult to find it there (too many Toyota ads, too dependent on user tags, lost concentration in checking other videos) . On the Visit4Info site above (a dedicated advertisement search service), I entered the brand name, the product category, keywords in the ad, ad medium and the ad was the only search result I got. Once again,  if you are searching for a specific thing, it’s better going to a specialist search engine.

(Note: This ad kick-started our Toyota case discussion today for Adv. Marketing Strategy)

 

The value in a slide’s bullet point and Blackberry-marketing

The easiest test of the usefulness of a given bullet point on a slide is saying the negative and asking whether this negative is also an option.  In the Advanced Marketing Strategy class today, some of the slides were completely useless. I mean having a CEO’s statement from the BusinessWeek cover  as a slide – the professor reading that statement, and moving to next slide how does that help me as a student. Anyway, some of the bullets had points like “Act on the most urgent concerns identified through the marketing audit first”. Reverse it “Do not act on the urgent concerns first”. I mean is that ever an option!!!

I met a family friend, Mr Som Mandal (owner/chief-executive of the largest Indian law firm),  and while we had many interesting discussions; one really piqued my interest. When I said that most of Blackberry received messages can wait till the next business day, I was surprised to hear his reply “Many of our potential clients approach an equal-level competitor if we don’t reply to them in the next few hours”. I found that almost disturbing: this is not a 20 dollar product the client wants to purchase, or a 10,000 dollar commodity service. It’s complex legal advice for their biggest decisions. Agreeably, the competition is also great, but still, you have come to the first firm because you were recommended by someone your firm trusts. Wouldn’t you wait; the guy you sent the email to might just be in the Himalayas trekking or just sick for a day having not handed the task of checking emails to his secretary. I asked Som what happened before Blackberries were available – he said Fax!! I mean these clients really should stick to Fox Mandal & Little a bit more time, especially it being the largest and most prestigious Indian law firm.

 

Food for thought from today’s FT

Views on 3 articles that really made me read them completely on FT today:

1. UK considering Tax on Virtual Income: Second Life is having multi-dimensional effects, isn’t it! UK regulators are wondering when should they start charging virtual income, generated and staying completely within Second Life. If you think this is a small amount, think again. Second Life Economy page keeps a running tab: $ 1.59 million was spent in the last 24 hours (that is not a typo, and that is US Dollars ) .Agreeably, almost everyone earning money in SL would be like a business person thus adding the extra complication of establishing Cost Of Sales.   The important issues are:should Linden dollars that remain completely virtual (i.e. are not converted to real currency) be taxable; does a cost-benefit analysis show any point of trying to collect tax on this; and what impact will this have on the users/avatars and their spending. This is just fascinating; FT quotes analysts that Second life may be the 21st century’s avatar of “offshore accounts”

2. MySpace establishing formal US Presidential candidate program:

News Corporation will soon be able to track and monitor online donations made to presidential candidates through its MySpace subsidiary, giving the media group an increasingly prominent role in the 2008 presidential election. This involvement in candidates’ fundraising is new territory for News Corp, which, until now, has limited its interest in presidential elections to media coverage via its print and broadcast outlets.

If you want to prove the power of social networking to anyone, use this data piece! A giant media conglomerate is taking the biggest (by far) online social network places. Wonder if this is what Chris DeWolf and Tom Anderson (founders of mySpace) envisioned! But, hey this is interesting. I will try to follow this more in the coming weeks. Just imagine how many entities are being put in a completely new environment here: the candidates themselves (mySpace giving them tutorials to develop good profile pages), mySpace (started and wanted to remain as a music-lovers social network), NewsCorp (what all can mySpace be leveraged for) and the political system itself (the voters!!)

3. US Buy-out funds bids go to record high of $82 billion in May so far: I am out of depth here, but by god these are big numbers.   May has been the month where US buy-out funds have made bids totaling 82 billion USD.

Next question in your mind – maybe the number of deals has gone up.
Answer:  No, they have reduced

Next question in your mind – maybe buyout-groups are bidding as a team
Answer: No, club bids have reduced, are reducing.

Basically, huger deals are being bid for. I guess these groups (1) have the momentum going in their favor right now, both in terms of invested capital and interest from the target companies (2) are confident that these bigger companies have bigger scope for streamlining (no double-edged sword intended) and extracting value

By the way, a small piece of trivia, an Interrobang is the punctuation symbol for combination of  question mark and exclamation mark

 

Surrealism by Dali and Market Research by Hardie

One way to make use of a miserable London early-summer day (temperature: 5 degrees!) is to stay indoors and explore one of the museums. Did that yesterday, visited the Surrealism exhibition at V&A yesterday.

Surrealism seems to be very interesting; somewhere between contemporary and modern art, it can be best defined as fantasy bound loosely by reality. Think of the old woman-young woman whom do you see picture; that is surrealism. But so is a lot more things. And this exhibition takes you the stages of development nicely. On the exhibition home page link above is the photo of the lip sofa; a sofa in the shape of lips deliberately made as glassy as possible by Salvador Dali, the biggest name of the surrealist movement. There’s also the arm chair (chair with the back’s edges in the shape of arms), lobster home phone (old-style circular dial phone with a lobster as the talking piece) and jewelery representing lion’s face sprawling out diamonds.

What I really liked was how surrealism was commercialized in interesting ways; by patrons yes, but also by advertising agencies, fashion designers and interior decorators.

And then today, I put myself to work for the marketing research assignment by Bruce Hardie, one of our really-good marketing professors. Gosh, he has made me sceptical about everything! I mean everything, I wonder if I will ever believe a market research result again. But beyond all that, an interesting bit of info for those who didn’t know (I surely didn’t before this class): Research findings by Forrester, the famous and oft-quoted technology market research firm, is not believed by serious academics and professionals because they do not publish the methodology undertaken to collect the data. Only when you know the methodology can you identify biases (talking to a non-representative sample) and sampling errors (not taking a large enough sample size for the given confidence) in research, and if you can’t do that, how do you believe what they say. So much for my using their data in many, many presentations over the last two years! Oh well, well-learnt for my future.

 

India Business Forum: what a day

India Business Forum 2007 was a class event.  The theme was Indian Infrastructure and speakers like Shanta Devrajan (Chief Economist, World Bank, South Asia), Mr Rajiv Lall (CEO, IDFC),  Praful Patel (Union Minister, Civil Aviation, Government of India) gave impressive keynote speeches while 3 panels discussed numerous issues. The panelists credentials were as impressive as the keynote speakers: The IOC Chairman, The Reliance Energy CTS CEO, Chairman of the SKIl Infrastructure, CEO of the Economist, Director of Morgan Stanley, Head of the JSW Jindal Group and so many many more

I was helping out in handling the media side of things, and we already have had many press mentions in The Economic Times, Deccan Herald along with the storeis being picked up by Rediff and Zee News. (thanks so much Mr. H.S. Rao at PTI and Ms. Sujata at Reuters) The TV coverage should follow in the next few days as CNBC TV18, CNN-IBN, NDTV and BBC were all covering the event and taking interviews.

A few interesting nuggets from the day:

• Shanta Devrajan  started the day in great fashion, by stressing an oft-forgotten theme: India’s infrastructure deficit can be significantly reduced through reforms that will help existing assets. In other words, don’t just keep thinking and talking of new infrastructure all the time; tremendous value can come out of current infrastructure. The case study of Andhra Pradesh spending more on power subsidies than on the entire state health budget every year for the last 5 years was a true eye-opener!!! Make your power infrastructure more robust and value generating by eliminating subsidies, the farmers dont want them; they would rather pay for power that reaches them than free power which is unreliable, stolen by middlemen etc. I was mesmerized by this point of incredibly useless subsidies that continue because it will be non-popular politics.
• Rajiv Lall spoke really well I heard but unfortunately could not attend his speech. He did talk a bit on the under utilized branch network of Public sector banks, that should help debt penetration in future
• The financing panel had very interesting views on how the Public sector banks are still not asset heavy as required, and there is huge shortage of quality PPP project sponsors like GMR etc. The technical details of how longer-term debt will help infra projects a lot but not given by Indian banks because of their asset-liability mismatch
• Praful Patel mentioned that the multiplicity of agencies needs to be simplified to make Tier II and III airports a success. He also said that our carbon footprint is not comparable to the developed world but we are still employing the best environmental practices for all new projects.
• The High commissioner of India to UK ended the day with witty comments about our choice of venue (royal college of obstetricians and gynecologists). He made many interesting remarks, the best being on grievance management; that India must manage the growing tensions that will come up with high-speed development, between regions, classes, industries.