Oct 10, 2007

Lifestyle Retailing Moves European Retailers Out of Consumer Electronics Malaise

New-style retail leaders in key European markets are re-focusing their business models away from price discounting to consumer excitement and growth. They're returning to their competencies as merchants by driving new "lifestyle retailing" formats that can be married with equally exciting lifestyle product offerings from trusted branded product manufacturers.

We're seeing the fast decline of a long, painful period in which low price-obsessed category buyers at earnings-driven retailers drove the sector after sector into commoditized retailing. But consumers have balked at all the sameness and general lack of assistance and experience excitement that has followed the rush to low-cost private label blandness. Take a look at some new-style retail leaders in action:

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Boulanger, a major retailer of multimedia equipment and appliances in France and Spain is refocusing its growth strategy on making the company's stores a "window to innovative products and services". The stores now include a range of specialty "lifestyle retailing" sections:

  • Photo developing services

  • Cooking (which includes a selection of cooking utensils, recipe books and wines)

  • A 'nomad' section (which includes products such as mobile phones, cameras, MP3 players)

  • A cinema-style area (that demonstrates new personal entertainment products)

  • A space with consoles for gamers (to try out new video games)

  • A ‘Zen area’ for well being products.

  • An environmentally friendly products area (with Ecolabel EuropĂ©en certified goods)
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UK retailer HMV's stores are being reformatted to focus on "lifestyle retailing" with all sorts of new experiential elements for consumers. Says Simon Fox, chief executive: "if you have a store people want to visit you will sell more...this is not a refit, this is a fundamental rethink of how people should perceive us'
  • Interactive 'hub' area to log on to social networking sites like Bebo or Facebook

  • Minimalist and high-quality store personality (akin to Apple's stores)

  • A large plasma screen in the window showing promos for the latest music, film and games

  • Xbox machines in a dedicated gaming section for interactive play sessions

  • Internet kiosks to scan a CD or DVD and listen to or watch a clip before buying

  • Kiosks to order from HMV's website or download free songs to a memory card

  • Interactive screens which promote and cross-sell to shoppers

  • And there is a Lovejuice smoothie bar for the thirsty shoppers engaged in all this fun

While consumers are starting to reward innovative, helpful, enjoyable retailers with growth, the high road is not an easy one. Short-term financial market players will fail to see the magnitude of what's happening in market after market. Consider these comments from Nick Bubb, a retail analyst at Pali International, who had this to say about all the innovation at HMV (The Daily Telegraph, 9/13/07):

"how will it help restore HMV's profitability? It is not very
'commercial'.... there is no price promotional message and there is a lot of
space given to non-productive 'interactive' play areas...whether it [all] helps
sales at Christmas is another matter.

But longer-term, new-style retail leaders need only look across the Atlantic at Apple's stunning lifestyle retailing success in the U.S. After setting a U.S. record in 'speed to $1 billion", the retail chain has one of the most attractive financial performance records in any consumer market sector. They've achieved sales-per-square-foot and profit margins that make retailers (and analysts) giddy.

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