Is Groupon's Business Model Sustainable?

Knowledge@Wharton

What customer wouldn't want to score a deep discount on dinner, beauty treatments and other services, especially during a downturn? Barely three years old as an industry, online group buying sites are witnessing rapid growth, as more subscribers sign up, more partner businesses sign on, revenues climb and venture capitalists swarm to invest, further driving up business valuations as a result.

The most prominent group buying site, Chicago-based Groupon, has 2011 revenues estimated at between $3 billion and $4 billion. Google last December offered to buy the firm for $6.4 billion. After the acquisition was unsuccessful, the search giant launched its own venture, Google Offers. Facebook, too, is entering the space, joining the roughly 500 group buying sites that have emerged worldwide.

But much of that "wild exuberance" is miscalculated and could bring ruin to investors, warns Wharton marketing professor David Reibstein in an interview with Knowledge@Wharton. Taking Groupon as a case in point, he says the industry's current growth rates are unsustainable. Also, he faults the site's business model, arguing that it will leave customers, suppliers and investors disenchanted.

An edited transcript of the conversation appears below:Knowledge@Wharton: Online group buying sites are a growing industry. Competition is fierce. More than 500 group buying sites have sprung up even though the industry is in its infancy. What is driving all this action?

David Reibstein: Part of it is because the Internet has provided a lot of power to the customer. Group buying has provided the ability to pool customers together to give them much more collective bargaining power. There's been a long history of customers trying to pool resources so they can buy more. Often there would be resellers who pool together and form cooperatives or even franchises that would collect individuals, but now consumers are pooling their buying interests together. And so, it is turning a lot of power over to the customer. That's great.

Knowledge@Wharton: What are the strengths of this industry?

Reibstein: It continues to offer some value to customers in terms of pooling them together and providing them some strength. It has often been the case that businesses have been able to buy from suppliers and get quantity discounts. This is now allowing consumers to buy in groups and afford ... quantity discounts. That is fantastic. There's no reason why this notion of customers pooling interests to be able to do group buying should go away.

There is an advantage to the merchants as well. The advantage is, rather than sell one by one and customer to customer and doing the marketing effort one by one, it is really allowing businesses to be able to sell a significant amount of volume with more of it being channeled through one customer.

Knowledge@Wharton: What exactly do venture capital investors find attractive about this space?

Reibstein: Unlike the customer, the investors are attracted by the huge growth and the valuations that are going on in this industry. I firmly believe there's going to be a lot of money lost in some of these investments. What is it investors invest in? They invest in growth. They say, "Wow, this industry went from close to nothing [to] 500 suppliers." If you look at the total dollar volumes that are being passed through here, it looks like a tremendous amount -- and it is. But the question is will it continue to grow and particularly, will it continue to grow at the rate at which the number of suppliers is growing? The growth rate for [each] supplier will be negated by the number of suppliers. But investors are clearly attracted by the growth rate and the valuations.

Knowledge@Wharton: The biggest of these companies, Groupon, is estimated to post revenues exceeding $3 billion in 2011. What is it about Groupon's business model that is driving such growth?

Reibstein: The way this works is they go to merchants [and] say, "I am willing to sell some of your inventory and I am going to take a cut out of [the profit]. But you're going to have to give me a deep discount. If you don't give me a deep discount, we're not going to make it available to people." To some degree, they are operating just like a retailer. I am going to buy volume, I'm going to break that down and sell it to individual customers. And I'm going to sell it to those individual customers for more than what it cost me. That's exactly how every retailer operates. The difference is they are not buying any of the inventories. They are just a reseller.

Knowledge@Wharton: Why do you believe that business model will not support the current growth rates?

Reibstein: Let me talk about some of the fundamental weaknesses. Obviously, one is, however brilliant of an idea it is, there is also now a huge increase in competition. When Groupon had few competitors, it was more viable than it is now with 499 competitors.

But that is not the big weakness. The Groupon business model works better during a recession than it does during a vibrant economy. I will explain why, and this is where it gets intriguing. The reason some retailers might be willing to provide supply to Groupon is because they have excess inventory. That is particularly the case for services. One of the services I notice frequently [offered on group buying sites] is that of beauty salons. They have so many seats and so many beauticians. If I don't sell that 3 p.m. to 4 p.m. time slot on Thursday afternoon, I cannot carry that time slot in the inventory tomorrow. It perishes. It perishes in the same sense as an [unsold] airplane seat [once] a plane takes off down the runway. Because of the recession, there has been an abundance of people who are forgoing beauty salons and other sorts of luxury, discretionary services. Rather than let that airplane seat go [unfilled] and the beautician hour go with no revenue, [companies] would [rather] sell it for a little above whatever the incremental costs are. So there is a willingness to do deep discounting.

As the economy picks up and there is less excess inventory, the availability of supply will go down. The willingness of the merchant to offer deep discounts will go down. The business proposition to the customer will be less attractive if [the item or service being offered] doesn't have the same deep discount.

Knowledge@Wharton: A big chunk of Groupon's subscriber base is said to be made up of educated young women, and that is one reason why Groupon features many beauty and wellness offerings. How crucial is the makeup of the subscriber base for the success of the business model?

Reibstein: If you look at the nature of the customers who are buying from Groupon, they tend to be younger, more white-collar, they may be better educated and may be a similar profile to those who shop at [warehouse club chain] Costco. And so, they tend to be relatively savvy shoppers. Many of the merchants offer these deep discounts, not with the hope of perpetually offering them, but given that they have excess inventory right now, it would be nice to let people sample their product or service with the hope that they are going to like it and subsequently will come me back and buy it when it is not being offered on Groupon [and] is at its full retail price.

Unfortunately, the people Groupon is attracting are those who are referred to as "deal prone customers" -- who are, to put it differently, price-sensitive customers. These customers tend not to be the most loyal of customers. And because you have attracted them with a low price, you are more likely to lose them because somebody else offers a lower price. The merchant might say, "Well I am not making money on these customers, but hopefully I am building some future business." But there is the challenge of whether they are really building future business, because what they really getting is a fickle customer. Merchants are going to discover that the Groupon customer is not where you build your future business. Therefore, the savvy merchants are going to learn that this is not a good way for them to do business.

Knowledge@Wharton: How could this industry change customer expectations? What would that mean for retailers?

Reibstein: There is a real concern that [the model] takes regular customers and makes them more deal sensitive. Imagine the risk for a spa that has a set of customers who are willing to pay $120 each [for services]. Those customers either see or learn of a Groupon offering. It's one thing when [a Groupon deal attracts] an incremental customer who is paying $60 for what normally would have been $120, and [the business is] getting $60 it was not going to get [otherwise]. But it is disastrous when you take customers who were going to pay $120 and now you only get $60 from them.

You want [to attract] those customers who were not at all part of your existing customer base.... What would be really bad is if you make your Groupon offering frequently enough that the customer just sits around and waits, [thinking,] "Rather than getting my normal salon service, I am going to wait until they offer that 50% to 80% discount." [In that case,] the entire normal margin that the salon owner was going to make is totally gone.

Knowledge@Wharton: There have been cases where retailers have been swamped by customers with Groupon coupons and unable to cope. Also, there may be offers where Groupon does not attract the minimum required number of customers to "unlock" an offering. What are the downsides there?

Reibstein: Indeed, there have been some merchants that have been overwhelmed with the volume, and the correct solution is for retailers to be able to put a cap or a ceiling [on the discount]. That may create a little bit of frustration among customers, but that doesn't really hurt Groupon [because] it gets people to respond even quicker and buy it now before the deal closes. I think it works to Groupon's advantage to have a ceiling.

As for the floor, if you don't get a minimum number of people buying an offer, that makes sense, too. This is, again, in the same spirit of retailers buying from manufacturers; generally there is a minimum order that is required, and [group buying] is very similar to that.

Knowledge@Wharton: Wouldn't a supplier or retailer's existing client base feel shortchanged when others with coupons pay less?

Reibstein: The very loyal customer who is paying full retail price will start to resent [those who are using the Groupon discount], particularly if you go to a restaurant [and you are] willing to pay the full retail price. If everybody else who is walking in with a Groupon coupon is paying less, you will feel like an idiot. So retailers start developing some of that resentment in their best customers.

Knowledge@Wharton: How would customers paying full price respond?

Reibstein: This piggybacks on what I mentioned earlier. You could anticipate consumers will start saying, "I see you offering it to [Groupon users] at $50 off, and I expect you to give it to me. If you don't, then I am going to be more irritated." That has not happened as yet that we know of.

But I am sure there have been customers who were normally going to pay full retail price who now aren't because they were able to get a Groupon deal. A savvy customer could say, "I am not going to buy anything at Groupon that I wasn't normally going to buy. I'll just go online and look to see what is on there. If I see something that was already on my shopping list and now I can buy it at a cheaper price, then it's great."

Knowledge@Wharton: You said this model works best in a recession economy. We've heard the same thing being said about Walmart. Shouldn't group buying work just as well, or better, when the economy is stronger and people have more disposable income?

Reibstein: It is the case that Walmart's market share grew during the recession. Walmart still works well, but it works better in a recession. There's no question that during the recession, consumers were looking for bargains. Previously, they were not as inclined to look for bargains.... If the economy were to recover, then just looking for the bargain becomes not as much of a selling point. Everybody's fear is when the recession ends, that they have trained customers to be looking for bargains.

Knowledge@Wharton: The group buying market globally is largely underserved. These firms could enter huge untapped markets. Wouldn't that help them continue to grow at the current rate or even better?

Reibstein: The answer is yes. They still have opportunities to grow by going into untapped markets. But then the question is going to be, how long will their growth continue, and what's going to happen in those markets as more and more competitors enter?

Knowledge@Wharton: Groupon's valuation was last put at $6 billion. Do you see any parallels between what is happening in this industry and the dot-com boom and bust of 10 years ago?

Reibstein: That $6 billion is what Google offered them [in December 2010]. I think Google was foolish to make that offer, and the only thing worse was for Groupon to turn it down. [Groupon later raised $950 million in fresh financing, giving it a valuation of $6.4 billion.] Groupon's value will not persist if it stays in its current model. There is this wild exuberance, because of the growth, that has gotten everybody euphoric. But the question is, will it persist? Obviously, I don't believe that it will.

I see a lot of parallels with the dot-com boom, and that includes the enthusiasm of growth and everybody running to the same spot. It's like a school of kids on a soccer field ... where they are all going to where the ball is. There are too many people in one spot, but that's where the energy is....

Knowledge@Wharton: What can Groupon and the other group buying sites do to fix the flaws in their business model?

Reibstein: There are lots of things that can be done to make the model even better. Groupon just announced one, which I think is big. There is Groupon Mobile, which is really cool. Groupon Mobile knows if you are near a merchant that is on Groupon, and it will message you that the pizza shop you are walking in front of is offering a 50% coupon....

The next enhancement that would make sense is to get down to individual information and be able to know that John likes pizzas and we're going to offer that to John. Or that John bought a new sweater and maybe a blue shirt would go with that sweater. If they start customizing offerings individually, it will be all the more powerful.

Knowledge@Wharton: Could the explosive growth of group buying become too big to handle for Groupon?

Reibstein: I am not at all worried about that. When you have growth, it is hard to manage it. But when you get the kind of valuations that you have seen [for Groupon], they can afford to find people to handle that growth volume. Everybody wishes they had that problem.

Unusual Fashion Highlights In The NBA

Kevin Durant's Backpack Emerges as an Improbable Postseason Star; Nerd Chic at Its Most Blatant.

Wall Street Journal
By Scott Cacciola

If the Oklahoma City Thunder can't beat the Dallas Mavericks Wednesday night, it will be knocked out of the NBA's Western Conference Finals. A loss also would end a compelling run by one of the postseason's most improbable stars.

Durant, Oklahoma City's standout forward, created a phenomenon when he began wearing his knapsack to postgame press conferences this month. Not only does Durant fasten the backpack's straps around his chest, he also has a habit of buttoning his shirt all the way to the very top—nerd chic at its most blatant. The clean-cut Durant looks more like an eighth-grader shuffling his way to social studies than a 22-year-old multimillionaire who led the league in scoring.

Durant has said this was never about making a fashion statement. He simply wanted to be able to make a quick escape to the team bus after meeting with the media—and to have easy access to his Bible, which he carries with him.

In his understated way, Durant also has used the backpack to express his style. And in the NBA, which has adhered to a strict "business casual" dress code since 2005, accessories such as these have become the easiest way for players to assert their fashion sense and become trendsetters.

Under the dress code, players are required to wear dress coats, collared shirts and slacks whenever tending to league-related business away from the court. Within these limits, players have still found room to show flashes of personal style through accessories ranging from headphones and glasses to backpacks and silk pocket squares.

Since NBA players are among the most visible and recognizable athletes in sports, it's not surprising that these subtle choices can have an outsized impact in the fashion world.

When Team USA traveled to China for the 2008 Summer Olympics, LeBron James gave each of his teammates a set of "Beats by Dr. Dre" headphones as a gift. The headphones, which were developed by the rap impresario, were big and flashy, and photographers shot the players wearing them when they arrived in Beijing. Almost instantly, the headphones became a status symbol and a fashion statement. Last year, the company says it sold more than one million pairs. "Team USA was incredible for us," said music executive Jimmy Iovine, who co-owns "Beats by Dr. Dre."

For Durant, the backpack has been such a hit that Eric Goodwin, one of his agents, said he called Nike this month to talk about including backpacks as part of Durant's fall line for the company. (Nike has yet to confirm any plans.)

Stu Vetter, Durant's former high school coach at Montrose Christian in Maryland, said he's gotten a kick out of the backpack, but has a hard time understanding the fuss. "All our kids wear backpacks," he said, "except we wear the Jordan brand."

Retailers "Like" Facebook, Twitter

Wall Street Journal
By Dana Mattioli

Retailers are trying to get customers to spend more than just time on Facebook Inc.

In the past six months, such companies as Starwood Hotels & Resorts Worldwide Inc., J.C. Penney Co. and GNC Holdings have invited customers to spend money by shopping on company fan pages without ever leaving Facebook.

The move to attract sales through social-networking sites comes as people are spending more time online and less time at the mall. E-commerce has been one of the biggest drivers of retail sales in recent quarters, with online sales rising 28% in the first quarter, compared with an increase of 4% for bricks-and-mortar stores, according tosurveys by the National Retail Federation.

J.C. Penney launched a Facebook shop in December, allowing its 1.6 million fans to shop directly from the social-media site. The Facebook store offers the same products as Penney's mobile store, a company spokeswoman said. But the Penney Facebook shop lets fans "share" items they like with friends with a simple click.

Fans are able to browse categories in J.C. Penney's Facebook store such as women, shoes and baby, and then narrow down each department by the types of product they are seeking.

"We need to go where our customers are," says Jeff Hennion, chief branding officer at vitamin-retailer GNC, which has been directing fans to the Facebook shop it launched in February through emails and its Twitter feed. The company recently sent an email blast that said, "Why leave the social scene to shop? Get what you need right on Facebook!" and then prompted recipients to "like" its page.

Revenue from the GNC Facebook store is slim, but Mr. Hennion believes it could become a "significant" source of online revenue in the future. "We have a very young demographic that is multitasking, and this gives them the comfort that they aren't leaving Facebook behind," he says.

While the portion of overall retail transactions coming from Facebook remains small—Forrester Research estimates Facebook accounts for less than 1% of overall e-commerce—companies like GNC believe so-called "social commerce" could become an important sales driver in the future. Americans spent 22 minutes and 10 seconds on Facebook in April, more than twice the amount of time they spent on the Web's top 500 retail sites combined.

Yet most analysts remain skeptical that consumers will want to spend money while they are socializing online. Forrester Research issued a report earlier this year that said there is little evidence that social commerce is a profitable growth strategy.

Without "measurable success" for large brands over the course of the next year, Forrester said, companies that herald Facebook as the next big thing in e-commerce have "the credence of a cultist who insists that the world will end next year."

Sucharita Mulpuru, the Forrester retail analyst who led the report, says people often don't revisit fan pages after initially "liking" them, though she suggests that consumers might be lured back by offers of exclusive merchandise or special sales.

Mark Beccue, a senior analyst at ABI Research Inc., says that consumers buying goods online are very purposeful, and they typically rely on search engines or go directly to a company's website.

"People are just starting to engage with this concept and are testing it," concedes David Godsman, vice president of global Web services at Starwood, which added a shopping tab for its Westin brand in January after fans wrote on the company's Facebook wall suggesting the idea.

Mr. Godsman says only a handful of the hotel's branded "Heavenly Beds," which sell for $1,100 to $1,700, have been purchased through Facebook, but he says that smaller-ticket items like its $36 candles are gaining traction.

The Westin Facebook shop is identical to its online shop, but it doesn't have the same advanced search capabilities, Mr. Godsman says.

Visitors to Facebook fan pages can find shopping tabs on the left-hand side of the page, typically under the photo. Clicking the tab directs consumers to a shopping site built on the Facebook platform, which is often similar to a company's main e-commerce site.

Facebook doesn't charge retailers a fee to add the shopping function, nor does it take a cut of transactions that occur on its site. However, companies typically outsource the project to developers that charge at least $10,000 to add the feature.

"Rather than simply bringing their existing Web experiences to Facebook, we believe retailers who provide deeply social shopping experiences will see the most success," said a Facebook spokeswoman in an email.

Facebook also makes it easy for customers to trumpet their purchases by sharing them with friends in their personal news feeds. Most customers are given the option to post purchases to their news feeds automatically.

For retailers, selling on Facebook is also compelling as a market-research tool. Facebook offers retailers detailed information on customers, including "demographic information like age, sex, how popular people are and how much they share and 'like,' " says Jason Taylor, vice president of platform strategy for Usablenet, which develops Facebook shopping tabs for retailers.

McDonald's May Have No Choice But To Give Ronald The Boot

McDonald's Icon Ronald McDonald Reported To Be "Devastated" At The News -- Launch of New "Unhappy Meal" Contemplated. Hamburglar Expected To Be Next To Get The Ax

Jack from Jack-in-the-Box, Pillsbury Doughboy, Keebler Elves, Lucky Charm Leprechaun, Captain Crunch, Cookie Monster Also Said To Be "Nervous" Regarding Vicious Attacks On Fast-Food Favorites

Wall Street Journal
By Julie Jargon

More than 550 health professionals and organizations have signed a letter to McDonald's Corp. asking the maker of Happy Meals to stop marketing junk food to kids and retire Ronald McDonald.

The letter, slated to run in the form of full-page ads in six metropolitan newspapers around the country on Wednesday, acknowledges that "the contributors to today's (health) epidemic are manifold and a broad societal response is required. But marketing can no longer be ignored as a significant part of this massive problem."

"We are committed to responsible advertising and take our communications to children very seriously," McDonald's said in a statement. "We understand the importance of children's health and nutrition, and are committed to being part of the dialogue and solution. We serve high quality food, and our Happy Meals offer choice and variety in portions just for kids. Parents tell us they appreciate our Happy Meal choices."

The campaign is organized by the nonprofit watchdog group Corporate Accountability International, which has also targeted tobacco companies and beverage makers like Coca-Cola Co. and PepsiCo Inc. for the environmental impact of plastic bottles.

The McDonald's letter, scheduled to run in ads in the Chicago Sun-Times, New York Metro, Boston Metro, San Francisco Examiner, Minneapolis City Pages and Baltimore City Paper, has been signed by such groups as the American Academy of Child and Adolescent Psychiatry and the Chicago Hispanic Health Coalition, as well as by well-known nutritionists and doctors like Andrew Weil, a doctor and director of the Arizona Center for Integrative Medicine.

The campaign also includes an effort to get McDonald's to produce a report assessing its "health footprint." A shareholder's resolution, submitted by the watchdog group and The Sisters of St. Francis of Philadelphia, calls on McDonald's to tally the financial impact of fighting various measures like the San Francisco ordinance passed last year that established nutritional standards for kids' meals that come with toys. It will be voted on at McDonald's annual meeting on Thursday.

Food makers that market to kids are coming under increased scrutiny. Last month, federal regulators proposed standards to which they're asking food makers to voluntarily adhere when marketing food to children.

Food marketed to kids ages 2 to 17 would have to contain healthy items and limit sodium, sugar, fat and calories, according to the proposed guidelines issued by the Federal Trade Commission, the Food and Drug Administration, the Centers for Disease Control and Prevention and the U.S. Department of Agriculture.

The letter from the health providers urges McDonald's to cease marketing food high in salt, fat, sugar and calories to kids, from the use of Ronald McDonald to Happy Meal toys.

"It's not right to peg me as the villain," McDonald countered.  "Kids are going to go for a cheeseburger, not a side order of veggies and apple slices, whether I exist or not".  Concluded McDonald, "I am not a happy camper -- the next thing you know, they are going to say 'Ronald McDonald House' causes cancer. ." Added The Hamburglar: "They can have some French fries -- and kiss my fat ass."

Foods With Benefits, or So They Say

New York Times
By Natasha Singer
Published: May 14, 2011

Labels proclaiming health benefits of foods almost shout out in the aisles of supermarkets. But shoppers, and regulators, have their hands full trying to sort it all out.

Although The New York Times is charging for some of their content, readers coming through links from search engines, blogs and LinkedIn will be able to read any article without restriction.
Click here to read the entire article at www.nytimes.com:
Foods With Benefits, or So They Say

In Shift, Ads Try to Entice Over-55 Set

New York Times
By Bill Carter and Tanzina Vega
Published: May 13, 2011

After 40 years of catering to younger consumers, advertisers are broadening their focus to older people for demographic and economic reasons.

Although The New York Times is charging for some of their content, readers coming through links from search engines, blogs and LinkedIn will be able to read any article without restriction.
Click here to read the entire article at www.nytimes.com:
In Shift, Ads Try to Entice Over-55 Set

Top Tweeters: Social Media Champs

This group of companies is all about Tweeting, Facebook Liking and Linking In -- among other social media tools -- in order to better connect with and serve their customers.

Fortune

@google
Followers: 3,012,238
Google hasn't been able to come up with its own killer social platform, but there's not much else the masters of search haven't taken advantage of on the social media front. With nearly as many Facebook fans as Twitter followers, Google's approach seems to follow the same strategy as its search engine business: Attract a critical mass of users and engage them by any means possible
Follow Google on Twitter

@WholeFoods
Followers: 1,916,179
Whole Foods is using social media to engage its customers across the nation in conversations about food -- the kind customers used to have across their local butcher's counter -- without missing a step.
With over 300 Twitter accounts and 250 local-store Facebook accounts, Whole Foods Market has created an online community for useful exchanges between shoppers and their grocers. Beyond those accounts, Whole Foods' blog, online newsletter, mobile apps and flickr account all contribute to their booming online voice.
Follow Whole Foods on Twitter

@Dell, @DellCares, @Direct2Dell (and many more)
Followers: 1,584,837
There's a trend emerging among the savvy: social media listening. CEO Michael Dell is all about keeping an ear to the ground -- his company has an entire department dedicated to social media and community -- and connecting with customers all around the world.
With their Social Media & Community University, Dell now has 1,000 people certified to tweet, blog and post on behalf of the company (you need 4 out of the 14 courses at the university to become certified). Dell also launched the Social Media Listening Command Center, making sure the company is in tune with the 25,000 conversations happening a day focused on Dell, in any of 11 languages.
Dell's forward looking vision: "social radio." Every employee -- all 100,000 -- will in the future have a social radio (think widgets and smartphone apps) to tune to their specific part of business on a smartphone, notebook or desktop.
Follow Dell On Twitter

@SouthwestAir
Followers: 1,107,156
Most airlines are still just testing the waters with their social media initiatives. But Southwest's already figured something out -- they're the first airline with over 1 million fans on their Facebook fan page.
Maybe it's the Nuts About Southwest blog (Happy 5th birthday), their Luv campaign that launched on Twitter, or whatever catchy promotional phrases they've blasted across the Internet, but their small but growing social media team has earned airline bragging rights. With one person dedicated to Twitter and one dedicated to Facebook, they've managed pretty well thus far without a room full of social media gurus.
The fans and followers Southwest attracts ultimately become field reporters who submit feedback on travel experiences, weather conditions, and other real-time information.
Follow Southwest On Twitter

@CocaCola
Followers : 254,618
Coca Cola's social media strategy is, simply put, fans first. In fact, their Facebook page is completely run by fans. In late 2008, there were a ton of unofficial fan pages, but one that seemed to take off was run by Dusty Sorg and Michael Jedrzejewski. Curious as to where this would go, the company watched the page grow to have millions of fans, until Facebook, concerned about the copyright violations, was about to step in.
Rather than allow Facebook shut down the page, Coke claimed ownership, then approached Dusty and Michael and asked them to continue running it without interference. Today, the page has over 25 million fans, all dedicated to the brands behind the company making the fizzy drinks.
Follow Coca Cola On Twitter

@Delta, @DeltaAssist
Followers: 180,000
@DeltaAssist was a, um, pilot program for the airline to delve into the world of social media. Only a few weeks later they realized that their customers were clamoring for more. Demand took off, and @DeltaAssist evolved into offering a suite of services for customers who contact the company via Twitter.
From a virtual information booth to a full-service Delta customer outreach program, travelers can make reservations directly through Delta's Facebook fan page, 24/7. In their social media lab, Delta brings marketing, customer service and reservation agents in one space to craft their social media strategy, which the company says is evolving everyday.
Follow Delta On Twitter

@Target
Followers: 126,563
There's something for everyone on Target's Facebook page -- good since the chain curiously lacks national-retailer level heft on Twitter. Target's page holds apps designed for all types of shoppers -- newlyweds, bargain hunters and gadget geeks -- and has appealed to over 4 million fans to date.
One such feature is the MyTargetWeekly app, which allows fans to choose their interests from a list to help Target create a customized shopping list. The list will change from week to week, based on the company's deals and offers.
The app asks you to "love" items rather than "like," and if you don't want them showing up in your offers in the future, that's an option as well -- it essentially is like Pandora, but for Target merchandise, rather than music. The fan page has 4.2 million fans, and counting.
Follow Target On Twitter

@AmericanExpress
Followers: 120,343
The global charge card and service company has a duo of tweeps that constantly update and @reply followers of the company's Twitter page.
Whether they're redirecting cardholders to customer service or tweeting a hashtag for an AmEx member contest, Mona Hamouly (M) and Shari Forman (S) keep the conversation going with over 130,000 followers.
AmEx also maintains a Facebook Fan page which has over 500,000 fans who visit the page for deals of the week, member rewards specials, and other promotions and features. The company also runs a Small Business Saturday fan page with nearly 1,500,000 fans.
AmEx recently launched a partnership with Foursquare to drive commerce. Cardmembers simply check in to a business (restaurant, groceries, hotels etc.) and they'll unlock "spend $5, save $5" deals for their users. Foursquare and AmEx will be rolling out a national package of these deals so customers don't leave home without their credit card OR smartphone.
Follow American Express On Twitter

@McDonalds
Followers: 120,277
The home of the Big Mac has active Twitter presence, averaging 2,000 @replies to followers every week. McDonald's has more than seven million Facebook fans as well.
One recent campaign that was on social media's center stage was the introduction of the McRib, with ordinary users pressed into service as McRib Superfan spokespeople, and a video contest across the U.S. for fans to share their passion for the meaty sandwich. The sandwich launch ultimately boosted the company's presence across all social media, despite a small backlash among fans and followers who thought the McRib didn't taste that good, in real life. The lesson there is: No matter how good a company's social media presence is, it can't fix everything.
Follow McDonald's On Twitter

This Summer, Hollywood Could Use a Hero

Studios are betting on pricey sequels and comic book stars to revive growth

Bloomberg Businessweek
By Michael White

Hollywood studio chiefs were all smiles after the Vin Diesel-Dwayne Johnson testosterone fest Fast Five kicked off the summer box-office season with an $86 million opening weekend on Apr. 29. That was Hollywood's biggest debut since November, when the seventh Harry Potter movie took in $125 million. Fast Five also helped shore up hopes for an end to the slump in ticket sales that's dogged the industry since Christmas.

"I think we've jumpstarted the summer," says Nikki Rocco, president of distribution at NBCUniversal's Universal Pictures. "I'm very enthusiastic about what the future looks like for the rest of the year."

Despite all the Tinseltown buzz, it may be premature to break out the champagne just yet. The industry is starting the key summer movie season—increasingly dependent on teen fare and expensive action and sci-fi blockbusters—about a half-billion dollars behind last year's cumulative box-office level. Through May 1, U.S. motion picture ticket sales were down 14 percent, and attendance was off 15 percent. Studios and theater operators will need a lot more outperforming openings if they are to resume making annual box-office gains after last year's slight drop.

The studios also need to keep theatrical revenues growing to counter the continuing decline in home video, long among the most lucrative of a movie-maker's revenue streams. That's one reason why Hollywood is so aggressively pushing 3D and IMAX widescreen versions of this summer's films; moviegoers pay $3 to $6 more per ticket to see those enhanced releases.

This year started with optimistic assessments from analysts, including Jeff Bock at Exhibitor Relations, who predicted that the industry's domestic box office (which includes the U.S. and Canada) would hit $11 billion in 2011, up from $10.6 billion in 2010. Underpinning those forecasts are a record nine summer sequels, including installments of Pirates of the Caribbean, Transformers, and the final Harry Potter film, plus new movies such as Universal's Cowboys & Aliens and Paramount Pictures' science-fiction flick Super 8 from director J.J. Abrams. Bock is still positive, citing higher ticket prices from 3D and IMAX showings that have helped make up for a longer-term decline in attendance. "Prospects of $11 billion are good when you look at this summer's slate," Bock says. "If this isn't the biggest summer on record, there really is a problem."

Hollywood has generated $2.93 billion to date, vs. $3.47 billion at this time last year. Reaching $11 billion "looks possible," says Matthew Harrigan, an analyst at Wunderlich Securities. He says studios and cinema operators will need to outpace last year's record $4.35 billion summer season by about $500 million to eliminate the existing deficit by Labor Day. From there the box office will have to generate an extra $400 million in the fall compared with last year, when the holiday season was dragged down by clunkers like Yogi Bear and The Tourist. "It's going to be a challenge," says Mike Hickey, an analyst with Janco Partners. "You see a lot of franchises. You may have some fatigue."

Success at the box office is crucial because studios depend more on theater attendance since consumers are buying fewer DVDs. To adjust to the changing market, most studios closed their specialty divisions, which made smaller niche movies, several years ago and started making fewer, bigger films. That has made their bets on individual movies bigger—especially for sequels, where costs generally go up with each installment as stars demand more. Universal spent $125 million on Fast Five, adding Johnson to the cast, up from $85 million for the fourth Fast & Furious in 2009, according to Box Office Mojo. The last X-Men film in 2009 cost $150 million, double the $75 million production budget of the first one in 2000.

To make the summer gamble work, Hollywood needs to get consumers back into the habit of going to the movies—again and again. A major release is planned almost every week, from the May 6 debut of Thor, from Walt Disney's (DIS) Marvel Studios and distributed by Paramount, until the season ends with Shark Night 3-D, distributed by Relativity Media. A disappointing night at the movies can sour the public, says Jeff Blake, vice-chairman of Sony's (SNE) Sony Pictures Entertainment. "A slump continues because you can't sell the next movie off the current movie," he says.

Many studio executives think that momentum can be maintained this year because the summer releases include some of the biggest franchises in Hollywood's history. The first three Pirates of the Caribbean films averaged $346 million in the U.S. and Canada, and the seven previous Harry Potter movies averaged $287 million, according to Box Office Mojo. The year also will include at least 34 3D movies, the most ever. Some films, including Thor, will play in both 3D and IMAX. "Everything I've heard about the summer slate that we're doing, including the tracking data, makes me more confident," says IMAX (IMAX) Chief Executive Officer Rich Gelfond.

Theater owners have prepared for the onslaught of 3D films by more than doubling the number of screens equipped for the technology, to 9,609 from 4,001 a year ago, according to the National Association of Theatre Owners. Even so, competition for screens may limit the performance of some movies. Green Lantern, for example, an untested DC Comics-based film from Time Warner's (TWX) Warner Bros., opens June 17, followed by Disney's Cars 2 and Paramount's Transformers: Dark of the Moon. All will compete for those 3D screens. "It really is an embarrassment of riches," Gelfond says. "You'd like to have a little more time."

The bottom line: Hollywood will roll out big-budget movies almost weekly this summer in an effort to erase a $500 million box-office deficit so far in 2011.

Why Pay Full Price?

Stores Give Discounts, Sneak Peeks, Secret Sales; Just Hand Over Personal Data.

Wall Street Journal
By Elizabeth Holmes

It's starting to feel like you should almost never have to pay full price.

With retailers' rewards programs getting increasingly sophisticated, preferred customers can get discounts: points they can turn into store credit, coupons printed on sales receipts, the opportunity to buy merchandise before the general public—even secret password and birthday sales.



At Talbots, Black Card customers—anyone with a store-branded credit card who spends $1,000 annually—were given a sneak peek and chance to order the spring collection early. Old Navy, the bargain-priced division of Gap Inc., had a secret sale last year, with its $8.50 camisoles for $2. To receive the discount, shoppers had to flash a coupon or say to a sales associate "Cami for me." The clothing store Anthropologie offers discounts to Anthro card members on their birthdays. DSW does as well, along with another coupon on shoppers' half-birthdays.

What began as a barcode fob for grocery store coupons in the 1990s has evolved into a high-tech way for retailers to track the every move of their biggest, most-frequent spenders. Stores can market to shoppers directly based on the products they buy, aiming to win an even greater share of their wallets, in retailer parlance. Of course, to reap rewards, shoppers must first establish themselves as frequent customers. About three out of four Americans belong to a retail loyalty card program, according to ACI Worldwide, which handles electronics payment for hundreds of retailers and financial institutions.

This discounts are worth it to stores in order to keep the most loyal customers happy. Fifteen percent of a retailer's most loyal customers can account for as much as half of its sales, says Keith Jelinek, director in the retail division of consulting firm AlixPartners. It takes between 12 and 20 new customers to replace a lost loyal customer, says Keith Colburn, vice president, global loyalty practice leader at Dunnhumby, an analytics firm that works with retail giants Tesco PLC and Macy's Inc.

CVS/Pharmacy connected its rewards program with its social media efforts. Just before Easter, CVS/Pharmacy asked its Facebook fans to vote on whether they liked Cadbury Creme Eggs or marshmallow Peeps. Coupons for the winning item—$1 off two eggs—were loaded into the in-store coupon center for one day. "We delivered real value, instantaneously, on the basis of their interests," says Rob Price, chief marketing officer for CVS/Pharmacy, the retail division of CVS Caremark Corp.

To get discounts, shoppers must hand over personal data. Often, the more details given, the more discounts received, which brings up the issue of data privacy and the corresponding pitfalls.

Floor staff at J.Crew, Ann Taylor and other retailers routinely ask shoppers for their email addresses and nearly every chain store, from Walgreens to Wet Seal, has a spot on its website for consumers to sign up to receive store emails. It's a quick, cheap way for a retailer to tell shoppers about deals and discounts—and arguably the least invasive piece of information a shopper can give a retailer.

In order to receive their emails, many retailers also will require a name and, in some cases a ZIP code or a date of birth. Some take it a step further and ask users to set up an online account that requires a login, allowing a retailer to track how often they visit the site, as well as what items draw their attention.

At J.C. Penney, shoppers can give a cellphone number to receive as many as eight mobile coupons a month. Old Navy shoppers can receive text messages with details on the featured item of the week.

To sign up for a retailer's loyalty program usually requires name, mailing address and telephone number. These programs assign shoppers a number, often a barcode or a phone number, essentially applying a digital tracking number to each customer.

DSW uses this barcode-generated purchase data to make its marketing more relevant. "If someone is only interested in buying hiking boots, there's probably not a lot of point in talking to them about the latest high heels that have come in," says Derek Ungless, chief marketing officer.

Supermarket chain Kroger Co. sends individualized mailings to millions of its rewards program members several times a year. The packets of coupons from the store as well as its suppliers are based on each shopper's habits. "Like snowflakes, no two are alike," says Ted Sarosy, vice president of loyalty for Kroger.

Now, retailers are devising ways to track barcode holders outside the store. CVS, which has 67 million loyalty card members, recently offered fans of its Beauty Club Facebook page a free antibacterial product. For the voucher, shoppers had to enter their ExtraCare number and email address. "That's another way for us to fingerprint the customer to give them more personalized value," said CVS's Mr. Price.

More than 7,100 CVS locations have in-store coupon centers, computerized columns that, when shoppers swipe a rewards card, spit out personalized coupons. The center is designed to "influence their shopping visit that day," says Mr. Price. The deals attached to a receipt are meant to encourage another visit.

The most details a consumer gives are through a branded credit card, which provides detailed financial information. To encourage use of its credit card, Target Corp. began last fall offering shoppers 5% off every purchase with its branded credit card, the only loyalty program offered by the big box chain.

With Gap Inc.'s credit card program, shoppers get advance notice of sales, exclusive offers and 10% off all Tuesday purchases. Shoppers receive five points for each dollar spent at one of the company's brands.

Neiman Marcus Group Inc.'s loyalty program, InCircle, is a credit card that can only be used at Neiman Marcus's five divisions, which include Bergdorf Goodman and Last Call. The card allows the retailer to keep track of purchases, as well as shopping frequency and any cross-shopping among its brands. The loyalty program "can retain customers, it can get new customers, it could win back anybody who has lapsed," says Maggie Lucas, director of marketing.

Although the majority of apparel and accessories retailers tie their loyalty program to a credit card, some companies have begun to unbundle the two as skittish customers have shunned credit in favor of cash or debit payments.

By adding a non-credit-card loyalty program with free enrollment, retailers widen the appeal of the rewards program. Chains with non-credit card loyalty programs include Sears Holdings Corp., which includes Kmart, Modell's Sporting Goods and teen retailer American Eagle Outfitters Inc.

Women's clothing chain Talbots Inc. split its rewards program into three parts in 2009 as part of a brand overhaul. Along with its existing charge card, the company added a non-credit card, allowing it to capture information about its in-store shoppers similar to that of online shoppers. If someone makes a purchase online or through the catalogue, "we instantly capture her information," says Lori Wagner, chief marketing officer.

Most systems dole out points based on the amount spent. Members of the DSW Rewards program earn a $10 certificate for every 1,500 points earned. (Points differ based on full price or clearance items, but equate to roughly 10 points per $1 spent.) Customers who rack up more than 6,000 points each year achieve Premiere Rewards status. That top tier of customers can receive triple points on purchases two days a year of their choosing.

The company mails out certificates to its 16 million rewards members because customers have said they prefer that method. "It's not a bill," says Kelly Cook, vice president of customer strategy and engagement. "It is happiness."

Unrewarding

Privacy concerns: Each rewards program has a statement outlining a retailer's privacy policies. Read it carefully to know what information is being collected, where your information will be used and what other companies it may be given to without your knowledge.

To unsubscribe: Getting off a retailer's email list is usually pretty easy. Find an email from the retailer in question, scroll to the bottom and look for a link that says "Unsubscribe," often in tiny print. If you have an account on a retailer's website, login and search for the unsubscribe option in your account settings.

Opting out entirely: Opening a loyalty card is much easier than closing one. To opt out, shoppers often need to take their card to a store to speak to an associate or send a written request to the company directly to close an account. Ask the retailer to discontinue use of your information entirely, including third-party distribution.


Retail Rewards

No Money Down: Retailers are adding free loyalty programs in addition to store-branded credit cards.

Don't Shop Around: Shopping at just three or four stores racks up more loyalty points than buying at many stores.

Elite Perks: The Neiman Marcus credit card, InCircle, tracks what shoppers buy and how they cross-shop the company's different stores including Bergdorf Goodman.

Combine to Conquer: Avoid carrying all those rewards cards. The KeyRing app digitizes program barcodes onto a smartphone. At the register, just scan from the phone.

Digital Divide: Creating a separate email address to give to stores keeps a shopper's primary inbox clear.

Big Pharma: CVS/Pharmacy ExtraCare rewards program has 67 million members.
Rewards Reapers: About 3 out of 4 Americans belong to a retail loyalty card program.

Check Receipts: Retailers often tack some of the best coupons to the end of a receipt

The Tupperware Party Moves to Social Media

New York Times
By Stuart Elliott
Published: May 4, 2011

The Tupperware Brands Corporation plans to increase its presence on Facebook and Twitter.

Although The New York Times is charging for some of their content, readers coming through links from search engines, blogs and LinkedIn will be able to read any article without restriction.
Click here to read the entire article at www.nytimes.com:
The Tupperware Party Moves to Social Media

The Tastemakers

How Generation Y is helping to save luxury brands

Stores
By Fiona Soltes

Color the Millennial Generation in Burberry plaid.

In the first quarter of 2011 alone, the British luxury brand added more than 600,000 “likes” to its Facebook page. At that rate, it’ll reach 10 million by the middle of next year.

Respond with a shrug and you may encounter more than the disdain of your pals and their virtual “friends.” If you are a luxury brand, you may also experience a slow decline. Digital channels are no longer just about looking up past loves and posting pictures of kids; following the lead of those born between the early 1980s and early 2000s, they offer brands a way to connect, engage and build loyalty at the click of a button.

Combine that with the fact that the Millennials — also known as Generation Y — represent the largest consumer group in U.S. history, and luxury brands that “get it” have reason to perk up, experts say.

But not so fast. Millennials, as a whole, are making conscious choices with their cash. They’re more interested in value than heritage and authenticity vs. tactical marketing that rings untrue. And watching the way they’ve influenced fashion, technology and even workplace attitudes in recent years, the outspoken, DIY, anything-is-possible generation will leave its mark on luxury, too.

“One thing I’ve found is that, if you look at the younger audience, it tends to be a harbinger of the entire audience,” says Paul Hurley, CEO of flash sale site ideeli, which offers members-only access to luxury brands online. “What they do now, they will likely do when they’re older. But what they’re doing now gets communicated to other segments of the population, as well.”

Younger consumers are less willing to put up with “baloney,” he says. “And when you see that in action, through somebody you know in that age group, you start saying, ‘That makes a lot of sense.’”

So what is this younger consumer putting up with?
Milton Pedraza, CEO of research firm Luxury Institute, says “legacy” products are key, and that’s where luxury brands are gaining ground. Millennials typically view expensive purchases as necessary investments in themselves — falling more into the “need” than the “want” category — but “people still don’t spend as much on luxury as they did before,” he says.

“They don’t necessarily need a bag for every season.... There’s a differentiation between the trendy stuff and the classics. They’re willing to pay more for an item, but it better last forever with a capital ‘F’. They want durability: durability in design, durability in quality, durability in style and in materials.”

A gaze into the crystal ball

New York think tank L2 released a couple of eye-opening reports in 2010: “The Gen Y Prestige Brand Ranking,” followed by the “Digital IQ Index: Luxury.”

The first report asked close to 450 high-achieving and high-earning individuals with an average age of 28.5 to score “sentiment” for 105 iconic brands. They came from 45 countries, and 83 percent expected to earn more than $100,000 per year within 24 months.

Considering the generation’s response “the closest thing to a crystal ball for predicting a prestige brand’s long-term viability,” the report placed the Millennials as the “future” of luxury brands rather than their target market.

What L2 discovered was that the age group by and large considers itself “brand-conscious”; that it is more than willing to follow luxury brands on Facebook and Twitter and receive related e-mails; and that more than half of women purchase luxury goods via discount and retail sites, but only a third buy directly from brand sites.

The top five brands for women were Chanel, Ritz-Carlton, Four Seasons, Marc Jacobs and Cartier; for men: BMW, Ferrari, Porsche, Lamborghini and Audi.
L2 associate Tanuj Parikh says a commitment to making digital a “huge part of the strategy going forward” was a key differentiator for brands at the top, especially when those digital efforts are consistent with a brand’s heritage. Case studies from the report, called “Gen Y prodigies,” include the likes of Marc Jacobs, which offered behind-the-scenes tweets from its president and live online streams of the runway during Fashion Week 2010; and Audi, which introduced the compact, less-than-$25,000 A1 model (not available in North America) as an “entry point” for environmentally conscious young consumers, as well as creating mobile gaming apps and Facebook sneak peeks.

And then there’s Coach, whose recent Poppy Project won rave reviews for its collaboration with fashion blogger community “leaders.” Coach also was the first brand in the category to add user reviews to its site, further speaking to the Millennial Generation’s desire to be heard.

Parikh says the reports have been positively received by the brands involved — including those who were rated “challenged” or “feeble” in the Digital IQ Index.

“This industry has historically been perceived as one that has lacked rigor around the data-driven analysis of what worked and what didn’t,” he says. “The members we’ve signed up, the large cache that has opted in, is telling us, ‘We like the data and the insight it provides.’ They think it’s actionable.” Those in the lower categories, in particular, have been the “most eager grabbers” of the information, Parikh says, already looking for ways to call for increased internal resources.

And what that information is showing is that luxury may have been tied to the Baby Boomer generation for the last 20 to 30 years, but the home equity lines that helped make it possible don’t exist anymore. “Generation Y is the segment that will drive luxury,” Parikh says. “They’ll be the purchasers as well as the tastemakers.”

Implications for affluence

Pam Danziger, founder of the Pennsylvania boutique research firm Unity Marketing and author of the upcoming Putting the Luxe Back in Luxury, notes that the recent recession brought a lot of changes to the luxury consumer market. But in addition to surface decreases in spending during the downturn, there also has been an underlying attitudinal shift that will continue to impact the marketplace for years to come — especially in terms of the Baby Boomers, who are rapidly “aging out of the primary age of luxury acquisition.”

“As people mature, they change what’s important to them,” she says. “Their value systems change drastically. They’re often downsizing their homes and getting rid of stuff, so they’re not so materially focused.” This group helped bring about a boom in luxury spending. “They felt wealthy,” Danziger says. “The stock market was going up. Their homes’ values were growing and growing, and they were spending. But with the recession, all of that wealth went away. Reality hit, and now they’re having to spend against their real income.”

It might be natural to think the next wave, Generation X, would pick up the slack. But that group is so small compared to the generations that immediately precede and follow it, the experts say, that all bets are off.

As such, some retailers are hoping to hold on until the Millennials reach their full “window of affluence” — ages 35 to 54.

“But I don’t think you can bank on these young affluents becoming more materialistic,” Danziger says. “I’m not sure they’re going to be like any previous generation, because so far, they’re not.” For one thing, she says, the Millennials as a group are not marrying at the same rates as previous generations, and “that has serious implications for affluence,” she says. Dual-income households are much more likely to be able to afford the products offered in luxury categories.

Which is all the more reason, industry analysts say, that luxury brands must work hard now rather than simply hold on for the future. “The faster you can iterate and move,” Hurley says, “the better off you’re going to be. The world is changing at a faster pace, no question.”

Now that the country has entered a recovery phase, there’s a prime opportunity to reach what American Express Business Insights (AEBI) considers the “luxury newcomer” — those who are now trading up to high-quality products and services, even though they didn’t buy luxury before the recession. These newcomers represent 36 percent of luxury spend, and 43 percent of them come from Generations X and Y.

It’s enough to generate a mood of “cautious optimism,” says Ed Jay, AEBI senior vice president. “The introduction of this new customer set and a more even distribution of spending among active, occasional and aspirational shoppers have created a consumer market with significant spending potential.”

Not surprisingly, the newcomers’ spending channel of choice is online. Do note, however, that there’s also a rise in sites that allow rental of luxury goods — bagborroworsteal.com, renttherunway.com — allowing new levels of “access” to prestige goods.

Pedraza believes that most consumers “still like to own their own luxury,” but he’s noted something else: a shift in the definition of the “luxury” shopping experience. Studies have shown that consumers under 40 often feel “perceived as lower spenders” by bricks-and-mortar store personnel, he says. Paradoxically, “they very often, but not always, are the ones who want to do things themselves.”

“In an ideal world, they will go into a luxury store, pick up a product, scan their card, put it in a bag themselves and go,” Pedraza says. “But a lot of luxury brands resist that, because they don’t think that’s providing a luxury experience.

“I would say that they have treated luxury a little bit as one-size-fits-all, and they haven’t yet transformed their cultures to take into account the needs of the Millennials and upcoming generations,” he says. “They know it’s important, but it’s like losing weight: You know you’ve got to do it, but you’re not eating less yet. It’s hard to transform, but they’re going to have to.”

Always In Good Taste -- Royal Wedding Promotions, From Dolls to Doughnuts

USA Today
By Bruce Horovits

Today's royal wedding has attracted precisely what some skeptics say it most deserves: lots of royally tacky promotions.

Toys R Us is selling Princess Catherine dolls that look like bride Kate Middleton. Baskin-Robbins is hawking royal wedding cakes. And Dunkin' Donuts is flaunting royal wedding doughnuts — heart-shaped, of course.

Such marketing super-silliness has become the national norm for high-profile events of political, athletic or cultural significance ranging from elections to the Olympic Games to papal visits. But a strong argument can be made that the marketing mayhem based on today's nuptials is breaking virtually all barriers.

"Nobody needs any of this stuff," says Pam Danziger, president of Unity Marketing. "But in marketing, perception is reality. If you perceive you're participating in the royal wedding in some small way, that's the reality the consumer is buying."

•Doughnuts. From last Sunday until this Sunday, Dunkin' expects to sell up to 500,000 heart-shaped doughtnuts — filled with jelly and iced with vanilla and chocolate — at 89 cents a pop. "This has probably been the most (media) interest we've had in one subject, ever, in the history of Dunkin' Donuts," says Nigel Travis, CEO of Dunkin' Brands, which is also parent to Baskin-Robbins.

Doughnut sales are up during the promo, but he won't say by how much. Oh, and if the doughnut looks familiar, that's because it's the same shape as the one Dunkin' promotes on Valentine's Day.

•Dolls. Toys R Us is selling the Princess Catherine Engagement Dolls made by British-based Champions of British Style — for $50 each. The dolls were air-freighted to two New York locations and will be sold, for a limited time, on the retailer's website. Toys R Us is the only U.S. retailer to sell the doll, says Lisa Harnisch, the toymaker's general merchandise manager. At about the size of a Barbie doll, it's "the mirror image of Kate Middleton," she says.

•Ice cream cakes. The Baskin-Robbins Royal Wedding Ice Cream Cake fetches a cool $29.99. The 6-inch-round dessert is made from vanilla cake and Chocolate Mousse Royale ice cream. The white and blue roses are supposed to look a bit like an English garden.

Baskin-Robbins and Dunkin' are selling the royal wedding goodies to lots of folks who plan to host royal wedding parties in their homes or offices today, Travis says.

•Wallpaper. Graham & Brown, the upscale wallpaper chain, is offering 20% off its Crowns & Coronets wallpaper line "to celebrate the royal wedding."

•Skin care. In need of a facial? For $200, you can get the 75-minute Royal Facial at the two Dallas-area locations of Renee Rouleau Skin Care. The facial is followed by English scones with berry jam, of course.

The facial also includes a scalp massage, says owner Renee Rouleau, "because when you wear a tiara or crown, your scalp might get sore."

Forever 21 Hosts Holographic Fashion Shows

Marketing Daily
By Tanya Irwin

Fashion retailer Forever 21 is hosting a series of unique fashion shows worldwide that use holographic images instead of live models.

The promotion, conceived and produced with the help of digital agency space150, kicked off last week in Vienna, Austria. A total of eight shows are currently scheduled, with the next two in Brussels and London in June and July, says Los Angeles-based Forever 21 Marketing Manager Kirstin Nagle. A New York show, currently the only U.S. show scheduled, will be in the fall.

The Vienna show, timed to celebrate the opening of the flagship Vienna retail store, gave invited fans and customers the chance to see breaking fashion trends in a runway show comprised entirely of holographic models. It was both a press and consumer event, she says.

"Consumers obtained invites to the event through becoming fans of our Facebook Grand Opening event page," Nagle tells Marketing Daily . "For our upcoming events marketing and outreach will also be done through social media. Depending on each market and size of venue, a certain number of consumer invites will be given."

The show features a runway first: no live models. Holographic models, wearing designs from Forever 21's new line, walk the runway, disappear into starbursts and climb invisible staircases that light up underfoot.

"We know that our customers are tech savvy and stay on top of trends in both fashion and technology," Nagle says. "These shows are a way of connecting with our consumers in both areas."

Forever 21's program of digital brand entertainment began in June 2010 with the introduction of an interactive Forever 21 billboard in Times Square, New York. Also conceived in partnership with space150, the board located on the site of the iconic Virgin billboard, features giant onscreen models interacting in real-time with customers on the streets outside the store. Models snap Polaroids of the crowd in real-time or pick people up and drop them into a store shopping bag.

The brand operates 450 stores in the United States with operations internationally in Bahrain, Canada, Indonesia, Japan, Jordan, Korea, Kuwait, Malaysia, Oman, Saudi Arabia, Singapore, Thailand and UAE (Dubai and Abu Dahbi).

Sites That Send Shoppers What They Might Like

New York Times
By Claire Cain Miller
Published: May 1, 2011

Rather than being greeted by an avalanche of shopping possibilities, Internet shoppers can subscribe to shopping sites that suggest items with the user’s style in mind.

Although The New York Times is charging for some of their content, readers coming through links from search engines, blogs and LinkedIn will be able to read any article without restriction.
Click here to read the entire article at www.nytimes.com:
Sites That Send Shoppers What They Might Like

A Teakettle With Star Power? The Upsides and Pitfalls of Celebrity Brands

Knowledge@Wharton

A little over 25 years ago, Kmart teamed up with Jaclyn Smith, the onetime Breck Shampoo Girl and star of TV's Charlie's Angels, for an exclusive line of fashionable, reasonably priced clothing and accessories. At the time, the discount chain was best known for its folksy "Blue Light Specials" -- where a store worker would light up a mobile police light and offer a discount in a specific department. The goal of the Jaclyn Smith partnership was to add a touch of sophistication to the chain. Today, the collection, which sells everything from faux leather jackets to silk table linens to velvet Christmas ornaments, is one of Kmart's most recognized and enduring brands.

But the collaboration signifies much more than the widespread availability of affordable wedge sandals and two-tone straw hats: It effectively blazed a trail for what might be considered the golden era of celebrities designing for big box stores. Today, for instance, Michael Graves, the architect, designs a line of hip teakettles and toasters for Target. Vera Wang, the A-list fashion designer, creates stylish shoes, sweaters and jewelry exclusively for Kohl's. Pop star Miley Cyrus has an allowance-friendly label for Walmart of tops, pants and graphic tees targeted at tweens. This summer, reality TV stars the Kardashian sisters will introduce their line of clothing, the Kardashian Kollection, at Sears.

In an otherwise price-driven economy, retailers are increasingly relying on a stable of private label and exclusive brands, according to Wharton marketing professor Barbara E. Kahn, director of the Jay H. Baker Retailing Initiative. These lines differentiate stores, give them more say over the marketing of their merchandise and perhaps most importantly, give retailers control over pricing, which leads to greater profitability, Kahn says. Profits on exclusive brands tend to be higher than national brands because chains are able to mark the lines down at their own speed.

"Retailers are in a difficult situation right now because the price of cotton is going up, as are labor and operating costs. But with private labels, they have many more pricing options and much more control over their brands," Kahn notes. "Attach a celebrity name to an exclusive store brand, and retailers get all that dazzle and panache along with all the profits. It's a way to create excitement in the store, and make it special."

But there are pitfalls to these partnerships. Exclusive lines represent an enormous amount of time, effort and expense from retailers. If stores do not properly execute the line in any way -- by stocking an ill-considered miniskirt or a shoddily manufactured appliance, for instance -- they are left with a large and costly inventory.

Retailers are also vulnerable to the personal foibles of their celebrity designers: If one misbehaves or becomes embroiled in a scandal, sales could fall. For example, now defunct retail chain Anchor Blue failed to score with a clothing line by reality television star Heidi Montag, better known for her multiple plastic surgeries and other controversial off-screen behavior. Finally, celebrities can find themselves susceptible to the declining fortunes of their retail partners: The bankruptcy of budget chain Steve & Barry's left exclusive lines by Sarah Jessica Parker, Amanda Bynes and Venus Williams without a place to call home.

Cutting Through the Clutter

One of the biggest challenges facing retailers is the lack of differentiation among the major department stores. Walk into any two strip malls in America and the monotony of merchandise on the shelves is apparent: shelf after shelf of the same trousers, toasters and tea towels. But an exclusive brand -- particularly one with a celebrity name on the label -- helps separate retailers from their competition, according to Stephen Hoch, a Wharton marketing professor.

"This is just one of the ways we're seeing that branding is more important than it used to be," he says. "What is new is that retailers are doing it more often, and these exclusive lines represent a higher percentage of their sales than they ever have before."

Last year, for instance, Kohl's garnered about 48% of its sales from exclusives, up from 44% the previous year. Exclusive brands at Saks Fifth Avenue stores until very recently made up less than 10% of the products for sale, but last year the up-market retailer announced several new product lines that will make exclusive items about 20% of its offerings over the next several years.

Celebrity lines are an obvious way for retailers to generate buzz. They also put a face on the brand and help crystallize the target market, notes Hoch. "It's a way to borrow some equity from the celebrity -- a way for stores to sell the same stuff, but with a measure of exclusivity.... Plus, everyone else is doing it. Stores reason, 'If my competitor is doing it, I have to do it to stay in business.' That's why it's more ubiquitous now."

Famous clothing and product designers are also much more open to the prospect of having a line at a major retailer, he adds. "Every designer is interested in the middle market. If they are only designing for the runways and doing haute couture, they will be famous in Women's Wear Daily, but they won't be rich. They know that the money is in the mass market. This is where they will get scale."

A second reason retailers seek out celebrity partnerships is to enhance their image and build loyalty among customers. Stores' own private label brands do not inspire allegiance because "there's an enduring notion that store brands are cheap and not as good," according to Jonah Berger, a Wharton marketing professor. But consumers feel better about brands with a "name" attached. "They feel better about wearing them, and they feel better about giving them as gifts. This is why name brands are more resistant to a downturn."

Consumers feel a personal connection to famous-name brands. Martha Stewart has lines at both Macy's and Kmart, and if you are a Stewart fan, "You know something about Martha Stewart as a person, you already have a connection to her, you get excited about her and you have a quality association with her," Berger says. "People buy celebrity brands not just for what the products do, but what they mean. Part of the reason people like celebrity brands is because they want to be associated with celebrities."

After all, celebrity sells. Take, for instance, Jessica Simpson, the pop star and actress, who has an eponymous line of moderately priced shoes, handbags, coats and clothing. According to Women's Wear Daily, the Jessica Simpson Collection took in $750 million in retail sales last year. At its current rate of growth, it could be the first ever celebrity clothing line to top a billion dollars in retail sales next year.

These labels not only add flair to the stores, but they also cause a "spillover effect." Customers are attracted to a certain retailer because of the cache of a given celebrity brand, but they may ultimately buy other items they hadn't intended -- a phenomenon known in the retail realm as "cross-shopping." "If you go into a Kmart to buy Martha Stewart pots and pans, you're more likely to buy other things as well because the very fact that they sell Martha Stewart -- a brand you have a connection to -- makes the rest of the store seem even better," according to Berger.

Gaining Control

In addition to differentiation, retailers seek out celebrity partnerships to gain control of their supply chain as well as control over how their products are marketed and sold. At a time when retailers are just starting to recover from the near-collapse of the financial sector in the fall of 2008 and the ensuing consumer slowdown, they are coming under new pressure from higher sourcing fees in China and the rising cost of materials and labor.

Exclusive brands enable retailers to gain more control over manufacturing costs, says Kathy Doyle Thomas, chairman of the Retail Advertising and Marketing Association (RAMA). "It also makes it easier for them to control inventory. A retailer knows it sells a certain number of black pants every season, so it makes economic sense for them to control the supply chain, and make the manufacturing cheaper. And if something is not working, the stores know what their margins are, so they know what they need to do to fix it."

This control over the supply chain also allows them to react faster to customer demands and trends, and enables big box retailers to be nimbler at creating so-called disposable fashion. Disposable or "fast fashion" is a specialty of retailers like H&M and Zara, which sell inexpensive, readily-available clothes designed to be worn a limited number of times before quickly going out of style. "The clothing may not be of the highest quality but it's very much in the moment, fun, and fashionable," notes Kahn. "Shoppers are not planning on wearing it forever so they don't mind that the product is not of the highest quality. It has a short shelf life."

There are other forces driving the movement toward private label brands, she says. Retailers are reacting to the fact that national brands -- such as Ralph Lauren -- are pulling out of department stores and instead selling directly to customers in standalone storefronts. "National brands want to have complete control," Kahn states. "When they have their own stores, national brands can be as persnickety as they want to be about their image. They can control how their products look on the shelves; they can dress the mannequins; they can determine how all the products appear in catalogs. And they also have a lot more control over price -- which is especially important when they are so vulnerable to prices of commodities."

When retailers launch an exclusive famous-name brand, they are able to wrest back some of that control over price. They are not beholden to national brands for markdowns, and the very existence of their in-house exclusive brand makes it tricky for customers to do a straight price comparison with similar goods. After all, it is hard to know the exact difference in quality between a Michael Graves lemon squeezer designed for Target and a generic one. And because there are no like-for-like comparisons, the product is no longer competing completely on the basis of price.

Of course retailers must pay careful attention to the marketing of their brands to make sure they don't become commonplace or over-extended. But generally speaking, these lines sell at a premium, says Theresa Williams, director of the Center of Education and Research in Retailing and marketing professor at Indiana University's Kelley School of Business. She estimates exclusive brands have a profit margin of about 50, which is 10 to 15 points higher than a national brand.

"Exclusive brands create a sense of urgency in the customer's mind about owning a particular product. A customer at Kohl's will pay $64 for a sweater with a Vera Wang label on it," Williams notes, adding that $64 is quite expensive compared with other Kohl's sweaters. "To that shopper, there is something there that tells her that sweater is worth it."

The Downside of Fame

Partnering with a celebrity does have some disadvantages, however. Exclusive brands are very expensive to execute and require a significant effort on the part of retailer. Chains often must commit to large minimum orders to get the best prices on their in-house products, and if those products don't sell, they could be left with a big and expensive inventory.

"The cost is substantial mainly because they have another partner -- the celebrity on the label -- to worry about," says Williams. "It changes the way retailers source manufacturing, and the approval process becomes much more onerous. There's a certain aesthetic -- not just a look or style -- that really is the entire essence of the line, and everyone has to approve. It puts a much greater responsibility on the part of the retailer to keep the brand partner satisfied."

Williams estimates that partnering with a celebrity for an exclusive brand increases the cost of a product line by about 12%. Add the advertising dollars to create customer awareness, and royalty payments to the brand partner, which typically range from 1% to 3% of revenue and, "for a retailer like Target, that's a lot of money," Williams points out. "And if you miss the mark, or make a mistake -- you own it. You don't have guaranteed profitability with these lines."

For this reason, retailers must choose their celebrity partners carefully. "They have to think hard about who best represents the brand, who makes sense and who excites the customer," says Williams. "They have to look at the demographic and psychographic of their target customer and figure out who has the greatest 'stickiness'. They don't want to just hang their hat on the flavor of the month."