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Some people presume that Amazon has only to open some physical stores and it would be unstoppable in terms of dominating shopping.  They may also think that the future for other retailers is looking distinctly bleak, but if my recent purchasing experiences are anything to by then Amazon still has a lot to learn from a chain of U.K. department stores which started business over a century ago.  Amazon has a reputation for being very hard on its employees whereas the John Lewis department stores are run as a partnership where the employees actually own the business.  You can hear John Spedan Lewis talking about why, in 1929, he gave his highly successful business to all his staff.  This generous ethos contrasts sharply with the mean-minded spirit that Jeff Bezos has demonstrated at Amazon in recent years. As November is the middle of the long build-up to Xmas it’s fitting that I should be reflecting on how the business of shopping is being transformed.  And also about the massive computing power of the mobile phones people now carry in their pockets.  The pre-Christmas period is always crucially important for all retailers as most of them make as much as three quarters of their entire turnover for the whole year in the last three months.  And that holds true whether the business is solely an online retailer like Amazon, or a brand that has a physical bricks and mortar presence like the U.K. based John Lewis department store chain.   I created the PowerPoint chart above using data provided by John Lewis in their Retail Report 2015  to show how increasingly complex typical purchase journeys have become.  A purchase journey is the route taken by a shopper from the initial period of considering what to buy through to the actual purchase and post-purchase process.   In truth, even before the advent of the Internet, this process has always been far more complicated than market research could reveal.  Now, with the help of Internet and smartphone data, we can at last begin to see the complexity involved.  As I mentioned last month: in any analysis there is a need to consider what data hasn't been captured.  In this case the missing information is how shopping takes place in the context of a John Lewis purchase journey compared with other brands, or other offline and online stores.  Online research and shopping has added a whole new layer in any purchase journey, and smartphones have further increased the level of convolution.  It is obvious that very few purchases are made in a straightforward and linear way, and from the chart above you can see that within different product categories the path from consideration to purchase varies greatly.  I anticipate that purchase journeys will continue to become even more complicated as the number of Google searches made for any retail product category has steadily increased year on year and shows no sign of levelling off.  Further evidence to support this view comes from Amazon where, for the last couple of years, in the crucial build-up period to Xmas, the total number of searches to read reviews about various products has vastly exceeded the number of people actually buying.  It would seem that the more choice and information we are given about a possible purchase leads us to want even more.  Our info-lust appears to know no bounds. Interestingly, the John Lewis data gives the number of interactions (touchpoints) they have with their customers across different product categories.  As John Lewis has a strong online, as well as an extensive offline, presence the data indicates that for large ticket items like computers or furniture the physical shops are important, whilst for men's and women's clothes purchases more interactions take place online.  I find the most striking aspect of this data is the number of delivery and post-sales interactions.  Any student of shopping behaviour will already know about the varying lengths of the “considering to purchase” phase for different product categories, but the extent of the delivery and post-sale interactions will come as a surprise for many. As Amazon pushes its prices higher, a purchase from John Lewis becomes much more competitive, and that competition is as much about service as it is price.  For several years John Lewis, as a U.K. tax-payer, has said it could compete better with Amazon prices if Amazon also had to pay tax in the U.K.  Other U.K. retailers clearly think the same and, after much debate in the EU, changes are soon due to be made to EU and U.K. tax regulations.  The EU has already ruled against Starbucks and Fiat for tax avoidance due to their trading via Luxembourg and the Netherlands, and it is currently busily investigating the exact trading arrangements of Amazon and Apple. John Lewis has always been competitive on price against other department stores in the U.K. with the maxim “never knowingly undersold,” meaning that if, after purchasing from them, you found the product cheaper elsewhere John Lewis would refund the difference.  Part of the strength of John Lewis is that throughout its history it has always considered the importance of the post- purchase experience.  Included in this is a generous returns policy.  If a product I've purchased develops a fault I would far rather be dealing with John Lewis than any other company.  This is why, among many other items, I've chosen to buy my last two laptop computers from John Lewis, even though they each cost me £10 more than if I’d bought them on Amazon.  My reasoning was simple - John Lewis had the laptops in-stock, they came with a two year guarantee rather than one year, and I know that if there is a problem John Lewis will sort it out quickly.  This contrasts with Amazon's post-sales service which borders on the illegal.  For example, a mobile phone memory card I purchased developed a fault and on contacting Amazon I was told by email that I have to return the item to the manufacturer for a replacement.  Why is this illegal?  Under the U.K. Sale of Goods Act the responsibility for a faulty product lies with the retailer to sort out, not the manufacturer.  In terms of post-customer service Amazon still has a great deal to learn from John Lewis.  The Amazon email had a pleasant enough tone but when negotiation doesn’t result in good service, no number of fine words will cut it.  To be strictly fair, on another occasion, a tub of almond butter which hadn’t been adequately packaged and had split, was replaced promptly by Amazon, but then they had parcelled it. The John Lewis Partnership has clearly been investing in a digital strategy for some years.  They were one of the first retailers to bring their search engine optimisation in house instead of using an outside agency.  They obviously realised early on that the core skill of getting to the top of the search results in Google is a labour intensive job, particularly if you want to sell thousands of different products online.  The company also understood that receiving goods bought online presents a serious difficulty for the majority of people who go out to work.  So five years ago John Lewis began having items purchased online delivered from their warehouses to their stores, (which include Waitrose, their grocery shops), so that customers could easily pick them up.  This has since been expanded beyond their own stores so that now, in conjunction with the German logistics group Hermes, John Lewis has over 5,000 collection points around the U.K.  As a result of this forward thinking, in 2015 online sales make up 34% of their total sales, and over 50% of those online sales are “click and collect.”  Contrast this with Walmart, the largest American retailer, which short-sightedly has obviously under-invested in its online service, as it currently only makes 2.5% of its total sales online.  It appears that Walmart completely failed to recognise how integrated online and offline shopping would become, especially in the smartphone era. Last month I discussed how people are becoming addicted to their smartphones, and how this addiction is changing many aspects of human behaviour, none more so than shopping.  At the moment over 60% of the visitors to the John Lewis website are using a mobile phone, so making life easier for smartphone customers has been given a priority in-store as well as online.  As a consequence stores now have free Wi-Fi throughout, and several stores have charging lockers offering free 30 minute battery top-ups for smartphones.  Naturally all the price tickets have also been made bar code app friendly. As you can see from the data, smartphones certainly feature heavily when women buy shoes.  Purchasing ladies shoes takes an average of six interactions with 14% of customers exceeding 10 interactions.  That's not far off the amount of consideration and interaction that goes into purchasing far more expensive items like a piece of furniture or computers.  By their very nature, women's shoes is a category where there is likely to be a high rate of returns, and this is something at which John Lewis excels.  When you receive online purchases from them, the delivery note conveniently comes with a pre-paid Royal Mail returns label, unlike Amazon.  John Lewis is exemplary when delivering large items, too.  When I recently bought a hefty television their service included opening up the huge parcel and taking the packaging material away.  For a nominal fee they also removed my old TV set for recycling.  That kind of service wouldn't have happened if I had purchased the TV at a similar price from Amazon, nor would it have included a two year guarantee. As shoppers become ever keener to search for a bargain, and prices are driven down virtually to the bone, I predict that it will be the convenience of the delivery and returns, plus the reliability of the pre and post-purchase service, that will determine how and where we choose to spend our money. November 2015
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Some people presume that Amazon has only to open some physical stores and it would be unstoppable in terms of dominating shopping.  They may also think that the future for other retailers is looking distinctly bleak, but if my recent purchasing experiences are anything to by then Amazon still has a lot to learn from a chain of U.K. department stores which started business over a century ago.  Amazon has a reputation for being very hard on its employees whereas the John Lewis department stores are run as a partnership where the employees actually own the business.  You can hear John Spedan Lewis talking about why, in 1929, he gave his highly successful business to all his staff.  This generous ethos contrasts sharply with the mean-minded spirit that Jeff Bezos has demonstrated at Amazon  in recent years. As November is the middle of the long build-up to Xmas it’s fitting that I should be reflecting on how the business of shopping is being transformed.  And also about the massive computing power of the mobile phones people now carry in their pockets.  The pre-Christmas period is always crucially important for all retailers as most of them make as much as three quarters of their entire turnover for the whole year in the last three months.  And that holds true whether the business is solely an online retailer like Amazon, or a brand that has a physical bricks and mortar presence like the U.K. based John Lewis department store chain.   I created the PowerPoint chart above using data provided by John Lewis in their Retail Report 2015 to show how increasingly complex typical purchase journeys have become.  A purchase journey is the route taken by a shopper from the initial period of considering what to buy through to the actual purchase and post-purchase process.   In truth, even before the advent of the Internet, this process has always been far more complicated than market research could reveal.  Now, with the help of Internet and smartphone data, we can at last begin to see the complexity involved.  As I mentioned last month: in any analysis there is a need to consider what data hasn't been captured.  In this case the missing information is how shopping takes place in the context of a John Lewis purchase journey compared with other brands, or other offline and online stores.  Online research and shopping has added a whole new layer in any purchase journey, and smartphones have further increased the level of convolution.  It is obvious that very few purchases are made in a straightforward and linear way, and from the chart above you can see that within different product categories the path from consideration to purchase varies greatly.  I anticipate that purchase journeys will continue to become even more complicated as the number of Google searches made for any retail product category has steadily increased year on year and shows no sign of levelling off.  Further evidence to support this view comes from Amazon where, for the last couple of years, in the crucial build-up period to Xmas, the total number of searches to read reviews about various products has vastly exceeded the number of people actually buying.  It would seem that the more choice and information we are given about a possible purchase leads us to want even more.  Our info-lust appears to know no bounds. Interestingly, the John Lewis data gives the number of interactions (touchpoints) they have with their customers across different product categories.  As John Lewis has a strong online, as well as an extensive offline, presence the data indicates that for large ticket items like computers or furniture the physical shops are important, whilst for men's and women's clothes purchases more interactions take place online.  I find the most striking aspect of this data is the number of delivery and post-sales interactions.  Any student of shopping behaviour will already know about the varying lengths of the “considering to purchase” phase for different product categories, but the extent of the delivery and post-sale interactions will come as a surprise for many. As Amazon pushes its prices higher, a purchase from John Lewis becomes much more competitive, and that competition is as much about service as it is price.  For several years John Lewis, as a U.K. tax- payer, has said it could compete better with Amazon prices if Amazon also had to pay tax in the U.K.  Other U.K. retailers clearly think the same and, after much debate in the EU, changes are soon due to be made to EU and U.K. tax regulations.  The EU has already ruled against Starbucks and Fiat for tax avoidance due to their trading via Luxembourg and the Netherlands, and it is currently busily investigating the exact trading arrangements of Amazon and Apple. John Lewis has always been competitive on price against other department stores in the U.K. with the maxim “never knowingly undersold,” meaning that if, after purchasing from them, you found the product cheaper elsewhere John Lewis would refund the difference.  Part of the strength of John Lewis is that throughout its history it has always considered the importance of the post-purchase experience.  Included in this is a generous returns policy.  If a product I've purchased develops a fault I would far rather be dealing with John Lewis than any other company.  This is why, among many other items, I've chosen to buy my last two laptop computers from John Lewis, even though they each cost me £10 more than if I’d bought them on Amazon.  My reasoning was simple - John Lewis had the laptops in-stock, they came with a two year guarantee rather than one year, and I know that if there is a problem John Lewis will sort it out quickly.  This contrasts with Amazon's post-sales service which borders on the illegal.  For example, a mobile phone memory card I purchased developed a fault and on contacting Amazon I was told by email that I have to return the item to the manufacturer for a replacement.  Why is this illegal?  Under the U.K. Sale of Goods Act the responsibility for a faulty product lies with the retailer to sort out, not the manufacturer.  In terms of post-customer service Amazon still has a great deal to learn from John Lewis.  The Amazon email had a pleasant enough tone but when negotiation doesn’t result in good service, no number of fine words will cut it.  To be strictly fair, on another occasion, a tub of almond butter which hadn’t been adequately packaged and had split, was replaced promptly by Amazon, but then they had parcelled it. The John Lewis Partnership has clearly been investing in a digital strategy for some years.  They were one of the first retailers to bring their search engine optimisation in house instead of using an outside agency.  They obviously realised early on that the core skill of getting to the top of the search results in Google is a labour intensive job, particularly if you want to sell thousands of different products online.  The company also understood that receiving goods bought online presents a serious difficulty for the majority of people who go out to work.  So five years ago John Lewis began having items purchased online delivered from their warehouses to their stores, (which include Waitrose, their grocery shops), so that customers could easily pick them up.  This has since been expanded beyond their own stores so that now, in conjunction with the German logistics group Hermes, John Lewis has over 5,000 collection points around the U.K.  As a result of this forward thinking, in 2015 online sales make up 34% of their total sales, and over 50% of those online sales are “click and collect.”  Contrast this with Walmart, the largest American retailer, which short-sightedly has obviously under-invested in its online service, as it currently only makes 2.5% of its total sales online.  It appears that Walmart completely failed to recognise how integrated online and offline shopping would become, especially in the smartphone era. Last month I discussed how people are becoming addicted to their smartphones, and how this addiction is changing many aspects of human behaviour, none more so than shopping.  At the moment over 60% of the visitors to the John Lewis website are using a mobile phone, so making life easier for smartphone customers has been given a priority in-store as well as online.  As a consequence stores now have free Wi-Fi throughout, and several stores have charging lockers offering free 30 minute battery top-ups for smartphones.  Naturally all the price tickets have also been made bar code app friendly. As you can see from the data, smartphones certainly feature heavily when women buy shoes.  Purchasing ladies shoes takes an average of six interactions with 14% of customers exceeding 10 interactions.  That's not far off the amount of consideration and interaction that goes into purchasing far more expensive items like a piece of furniture or computers.  By their very nature, women's shoes is a category where there is likely to be a high rate of returns, and this is something at which John Lewis excels.  When you receive online purchases from them, the delivery note conveniently comes with a pre-paid Royal Mail returns label, unlike Amazon.  John Lewis is exemplary when delivering large items, too.  When I recently bought a hefty television their service included opening up the huge parcel and taking the packaging material away.  For a nominal fee they also removed my old TV set for recycling.  That kind of service wouldn't have happened if I had purchased the TV at a similar price from Amazon, nor would it have included a two year guarantee. As shoppers become ever keener to search for a bargain, and prices are driven down virtually to the bone, I predict that it will be the convenience of the delivery and returns, plus the reliability of the pre and post-purchase service, that will determine how and where we choose to spend our money. November 2015

Smart moves

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