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Holiday 2016: Retailers Should Focus on Value AND Price

BY CSA STAFF

Here’s some good news for U.S. retailers: Holiday spending is likely to increase again, with 44% of consumers planning to spend more than last year according to Accenture’s annual holiday shopping survey. However, retailers are going to have to work harder than ever before to earn their share of that spending. Our research also shows that consumers are determined to focus on value, both in terms of price and the broader shopping experience.

Shoppers are becoming more frugal and savvy, supported by 67% of our survey respondents saying they will shop around both stores and websites in order to secure lower prices. Seventy-two percent are prepared to shop at stores they’ve not used over the previous year in return for promotions or coupons. Even before holiday season gets underway, many consumers have made this shift; recent analysis from DynamicAction suggests there was a 65% increase in the number of orders using a promotion during the third quarter of the year.

How, then, do retailers meet consumers’ demand for value without getting drawn into a price war that destroys margins? The short answer is that retailers must now focus on building stronger emotional connections with their customers. Having competitive prices is the first step but adding both targeted and personalized offerings and also nurturing the engagement through a more refined, redesigned retail experience will truly matter this holiday.

In practice, that means building an ever-more detailed understanding of customers, leveraging data and analytics in new ways and investing in tools to generate actionable insight that will drive value forward.

First, maximize the information at your disposal. Shoppers are increasingly prepared to share their data, if they feel they’re getting something of value in return. Our survey found that the factor most likely to entice shoppers to share personal data is getting discounts or coupons in return, cited by 78% of respondents. Loyalty card points and promotions are also popular.

Second, focus on what’s actionable. Whether it’s optimized inventory, personalized marketing or seamless fulfilment, the challenge is to increase the profitability of each customer, every time they visit the store, online or in person.

Here are some suggestions for how to get the best from today’s fickle, promotion-driven consumers:

· Quality matters. It sounds basic but improving the quality of goods will give customers a reason other than price to shop. This may appear to be obvious but many offers today are only emphasizing price/discounts.

· Personalization will deliver. Look past mass marketing and develop 1:1 offers. Such strategies will be most effective when focused on those customers who most frequently swap between brands, and can be applied at a time of the consumer’s choosing.

· Sophisticate your pricing. More complex promotions – those based on bundles of products, for example – will offer customers additional value but also reduce the potential for commoditized price comparisons.

· Show inventory everywhere. Driving online consumers to the store adds to revenue. 71% of shoppers in our survey said they were likely to purchase additional items not part of their original transaction when going to a store to collect an online order. It also provides for a better experience. Retailers with poor visibility over in-store inventory may antagonize customers who arrive to pick up their orders only to discover their local outlet is out of stock.

Using such strategies, retailers have an opportunity to reinvent the shopping experience, offering greater value to their customers without having to move to ever lower prices. This will be crucial in a world where technology gives consumers simple ways to quickly compare prices and seek out bargains. Adopting more refined competitive strategies is the key to powering a more profitable business – during the holiday season and beyond.


Jill Standish is senior managing director of retail at Accenture.

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DESIGN/CONSTRUCTION

Story changes its story — just in time for the holidays

BY Marianne Wilson

Story, the innovative retail store in Manhattan that totally reinvents itself every few months, is ready for the holidays with a one-stop shopping experience that offers something for everyone.

For its new installation, “Home for the Holidays,” the store has reconfigured its space into a series of designated rooms that correspond to different recipients on a shopper’s list: a living room for her, a library for him, a playroom for the kids, and a kitchen with something for everyone.

More than 2,000 items from over 200 small businesses and brands, as well as exclusive gift items, are on display.

Story’s holiday space is inspired by midcentury modern southwestern architecture, and features custom built-in fixtures from Alu, a working fireplace (HearthCabinet Ventless Fireplace, area rugs by Flor, home accents and lighting by West Elm and a mural by artist Sydney Penner of A New Wall. (Interior designer Jason Bell provided creative inspiration.)

Founded by Rachel Shechtman, Story takes the editorial viewpoint of a magazine. It changes its merchandise and theme like a gallery, and sells things like a store.

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FINANCE

Starbucks ends its fiscal year on a high note

BY Marianne Wilson

Starbucks Corp. is feeling its oats.

The coffee giant topped estimates for its fourth quarter and gave a positive view for its current fiscal year.

Starbucks’ consolidated net revenue grew 16% to $5.8 billion in its fourth quarter, which was better than expected.

Net earnings for the quarter were $801 million, up 22.8% over the year-ago period, and resulted in earnings of 54 cents per share. Excluding special items, the coffee giant posted 56 cents in earnings per share, which beat the Street by a penny.

Starbucks’ U.S. same-store rose 4%, partially fueled by a 6% increase in average ticket (traffic declined by 1%). Mobile order and pay represented 6% of U.S. transactions in the quarter, up from 5% in the prior quarter.

Globally, Starbucks’ same-store sales rose 4% during the quarter. Sale rose 6% in China, which ranked as the strongest geographic area for the chain. (Starbucks recently announced plans to expand aggressively in China.

"Starbucks Q4 of fiscal 2016 was the most profitable quarter — capping off the most profitable year — in our more than 24 years as a public company," said Scott Maw, CFO. "The strength and health of our business enables us to both fund profitable growth and return significant cash back to shareholders — a record $3.2 billion in fiscal 2016 alone."

The company opened 690 net new stores in the quarter, bringing total stores to 25,085 in 75 countries worldwide.

For the full year, Starbucks reported $21.3 billion in revenue, up 11.2% over the year-ago period. Net earnings totaled $2.8 billion, up 2.2% year-over-year.

For its current year, Starbucks said expects to earn $2.12 to $2.14 a share with revenue increasing in the double digits and comparable sales improving in the mid-single digits. Analysts project $1.89 a share of earnings, with revenue increasing 8.4% and comparable sales increasing 5.3%.

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