I was thinking about the grocery store industry this morning and how much of what we buy is dependent on brand name recognition. The grocery industry has been in the news a lot lately. Amazon's entrance into this sector has a lot of very big companies shaking in their boots. They've never had to compete with someone who doesn't care if they make a profit.
(In many ways this is like the grousing we used to see on this forum about garage shops undercutting the "pros" with their guerrilla type tactics, except this time it's the monsters with the 400 lb gorilla type tactics.)
I notice that my favorite brand of Bush Family Beans is getting harder to find. They are migrating it closer and closer to the floor. Their hope is that I will get tired of looking for it and reach for a house-brand instead. I first tried out that bean because I thought it was cool how the family dog would come out during the commercial and talk with us. I know that it won't be long until I can only buy the beans with the soviet style labels.
I don't think this is necessarily such a bad thing. Narrowing the focus to fewer vendors will require Kroger to compete on quality instead of graphics.
This lead me to thinking about branding in general. Take a walk down the cereal aisle and look at the metrics they compete with. You have a buccaneer pirate doing battle with a cornflakes rooster and right next to both of them is Tony the Tiger and some kind of bird of paradise sitting on colored cocoa puffs. The entire focus is on branding. There is a reason when you open the 14 inch tall box it only has 9 inches worth of contents.
This is about to change.The 400 lb gorilla summoned a lot all of the food manufacturers to a meeting last May to discuss packaging. KingKong told them they should stop focusing on graphics and instead design a package that can be delivered to your house in two hours.
This kind of packaging means more product can fit on a truck and more parcels can fit on a pallet in a much smaller warehouse that is more centrally located.
I wonder how this will eventually affect custom cabinet shops. My company has never done anything but residential work but I have hired many people over the years that came from the store fixture industry. The shakeout in brick & mortar has to be just killing this sector. If not now then soon.
The grocery store business is brutally competitive, they used to average a 2% profit.
Any grocery stores left today will fare just fine.
Amazon doesn't have any special moat because of what they do. IOW I just don't see people ordering groceries on the internet in any quantity.
The facts are that retail continues to grow at the mall and elsewhere.
But a brick and mortar is not as attractive an investment as an online store with practically no investment. So the big growth is in online stores.
If you find a winner (not easy, from what I understand, even then how do you build a following when things are so easy to change with competition) the profits can be huge with hardly any investment.
The reviews on Amazon are dubious because of shills, although Amazon has started putting "purchase verified" tags on the reviews which helps.
Anyway your dour perspective doesn't match reality.
The cabinet business seems to be doing fine. Although at some point surely there will more and more factory built houses which will surely bite into the cabinet business. K&B and Toll Brothers have already invested heavily in manufactured homes.
New home requirements will probably be mitigated by Boomers dying, but there is still going to be a large increase in home purchases.
The bean zone in this (Kroger) grocery store used to have a really wide range of beans. Right now the bulk of the shelving is generic store brand. In fact much of the store contents are migrating to store brand. In this respect I would guess they are buying product placement from themselves.
For 50 years the shelves were dominated by brand name merchandise and today it is primarily becoming store brand generic.
What do you think has caused this shift?
Pat: You wrote "The facts are that retail continues to grow at the mall and elsewhere." I would disagree with you here. The big push now is to repurpose mall real estate away from retail and into other uses , in some cases warehousing for online businesses.
I am not sure how much of the cabinet industry is dependent on store fixtures. I would, however, still suspect that this niche is joined by the hip to brick & mortar success.
You are entitled to your opinion but you are not entitled to your own facts.
The changes in mall traffic is most likely about demographics, anecdotally the malls in younger family areas seem very busy, the ones in older communities seem slow. And of course online sales impact this as well.
88% of retail sales are still to brick and mortar stores. (albeit mostly groceries and gas)
I believe some of the activity on the shelves may be what Alan has talked about in the past, the benefits of the short menu.
"I just don't see people ordering groceries on the internet in any quantity."
Then you must not know many millennials.
I don't know where it's going, and I wouldn't put _much_ money on it, but I'm _pretty_ sure that in the next 10 years a huge amount of non-perishable food items will be delivered by UPS or the equivalent (including the touted Amazon delivery vehicle).
>The point is that they are saying 9% of sales are going to online sales. It is growing but still a small percentage of total sales.
au contraire .... the graphs indicate
that 26% of sales are going to online sales.
>Bottom line most sales go to groceries and fuel. There is no way that is going to be taken over by online sales.
For a moment, let's concede the
fuel and food markets to bricks
and mortar, and consider all the
rest of the companies out there
selling stuff ....
Think about just how much higher
the online sales percentage then
The graphs you've shown do show
bricks and mortar sales increasing,
but at a far slower rate then online increases.
If one assumes that the disparity
between the two is 25%, and that
the online increase rate far outpaces
the bricks and mortar rate, common
sense would suggest that if you
wait just a little while, you'd be
smart to put your money on online
The concept is the grocery store sells space to manufacturers for placement, look at the end caps and display tables.
The placement is not a random event, its based on income which can be a loss before the reimbursement for space.
Grocery stores are evolving software wise to start presenting you with choice you make and similar items just like amazon does when you come in the store. Some of it involves facial recognition, some your mobile device.
They aren't just going to rollover to the online giant. They are working on the same concepts of merchandising and presentation. They may tell you where your beans are in a little bit.
You make some interesting points.
I noticed that my favorite brand of beer was $11 a six-pack last night. They are obviously testing the waters pricewise. This beer generally hovers between $8 & $10 depending on what day of the week you are shopping.
The triscuits come in a variety of flavors. The one that is always sold out is the "original" flavor. Despite it's popularity they put it on the very bottom shelf so low you sometimes have to grovel to get it. They are doing this to engender interest in the esoteric flavors on more convenient shelves.
You mention face recognition. I would not mind this obtrusiveness if they would also have some ability to dynamically price these triscuits based on my personal price-elasticity-of-demand. (I won't pay $3 per box. I will buy one box at $2.49. At 3 for $5 I will buy five boxes.)
In general, however, I will not trade personal information for a discount in price. The first thing I do when I get into the grocery store is go for the cash machine. I pay for my groceries with twenty dollar bills because I don't think it is necessary to help the actuaries in pricing my personal insurance premiums.
You also mention end-caps and display tables. This is kind of a different topic but a great segue into something called "Blue Ocean Strategies".
For many years in America the wine industry was dominated by four major players who controlled 90% of the trade and fifteen hundred vineyards that carved each other up for the remaining 10%.
They did their marketing on the basis of metrics that only made sense to them. They did their best to sell the public on the concept that wine is complicated and you need to be trained to appreciate it. They called themselves names like " Blah Blah Blah Chateau" or "Blah Blah Blah Estates". All you had to do was look at the label to know you were in good hands.
The parallel in our industry might be solid lumber dovetail drawer boxes. This is a feature that is only important to cabinetmakers and architects and that's only because they don't have very many ideas.
Despite all the combined marketing by the wine cabal the total number of bottles sold each year never really changed.
Until YellowTail wine came along.
YellowTail did not try to compete for the existing customers. They instead went after college girls who nobody was competing for. These kids didn't want to have to learn anything complicated, they just wanted to cop a buzz.
They differentiated themselves in one big important way. They used lean thinking to standardize the shape of their bottles. A typical white wine bottle has a tapered neck whereas a Bordeaux has more of a square shoulder. By standardizing the wine bottle shapes they could create packaging that presented both white & red wine in the same footprint.
Footprint was key to selling in convenience stores like 7-11. Kids are willing to roam the store on their way to the beer cooler but totally unwilling to get out of line for an impulse purchase. Standardized dimensions meant that you could easily reach over to add a bottle on your way out of the store. Since the wine labels didn't offer much additional information there was nothing to study before making the purchase.
The Blue Sky opportunity in our industry is transparent pricing. We leave a lot of sales on the table because we have not yet figured out a way to elegantly talk about what things cost.
This conversation is all very retail oriented. I'm curious what percentage of custom cabinet shops cater mostly to retail vs. wholesale?
I basically refuse all retail work, so most of the assumptions and conclusions in this thread do not apply to me. In fact I purposefully make it as difficult as possible for owner-contractors to find me.
I have to assume there are many others like me and therefore a whole segment of the custom cabinet business that caters primarily to custom home builders. These builders solicit bids, the shops are either awarded the job or not based on those bids, and we are never present when the bids are discussed with the homeowners.
Although price is a consideration, most likely the builder will sway the homeowner into selecting the cabinetmaker that best suits the needs of the builder. So our customer is in fact the builder, and in my experience builders are not impressed with slick marketing. It might get you a bid opportunity, which may in turn lead to a job, but if you fall flat on your face all the marketing in the world will not give you another opportunity with that builder.
I guess in this analogy we are the Bush's Baked Beans that you can't find as easily as the Kroger Beans.
I don't think this thread is so much about slick marketing as it is about how to make yourself relevant for any customer group you wish to sell to.
In the case of YellowTail wine they made themselves relevant by creating a kiosk that could hold both red & white wine within arms reach of someone standing in line to buy smokes.
In your case it is not exactly as simple as parsing whether or not it is a retail transaction or a wholesale transaction. The scenario probably gets muddier depending on the scale of contractor you are selling to and the size of project you are building.
What works for the behemoth contractor with Lieutenants & Sergeants & Corporals between you and the client would not work for a wholesale transaction with a GC from Romania who hires relatives that work on the weekend. Your product depends on a certain amount of cushion in the schedule commensurate with the layers of bureaucracy involved.
What is important to the minions you report to is that you keep their boss off their back. You need to provide a way of staying up on changes at the jobsite that impact measurements you took a month ago. If the HVAC guy ends up having to put his work in a different location than the greenhorn architect called out you have to hope that the memo makes it all the way to your desk in time to shrink the drawer banks.
Projects that are big enough to have a significant amount of protocol are typically produced by famous architects who hire indentured youngsters to draw the cabinets. The aspiring architect hasn't been in business long enough to understand that his long term success will depend on having good relationships with guys like you. And since this is his or her first time to ride the pony they are not going to be terribly receptive to your input. You can bill the contractor for these changes but now you have a harried site manager giving you the cold shoulder because his boss yelled at him over the $300 invoice you sent in for fixing the drawers.
One way you could differentiate your service is to come up with a list of things that need to be verified on each and every job. The site manager is a busy busy dude. He will tell you anything if it means you will leave him alone and he can have a sandwich. Little things like speaker wires or low voltage security are easily forgotten but will need an accommodation in your cabinets. Is real simple to not account for the thickness of plywood shear wall in a small space or remember to update you when the designer comes through waving his arms then changing the window casing to add a back band molding.
Fabrication is your simplest problem What your jobs suffer from are lack of timely decisions. There is also the battle of titans between the designer and architect. The architect has been on the project since conception a year ago. The designer comes on board after the plaster is in place and says "Have you ever considered....?" Her job is to wrest control from the architect and she is not at all adverse about cozying up to the homeowner and cutting him off at the knees. If a new sheriff comes to town is always best to realign your loyalties because the designer is always going to win.
Then, of course, there is the velocity in the economy to factor in. Under the scenarios I described your only fort is high prices. You can get these high prices until the economy starts to slow down. On that day you need to have cost under control. Try telling a contractor sometime that he needs to help you contain cost.
We always bad mouth and fight the Chinese because they supposedly sell their wares below the price to produce them.
Why doesn't the government do the same thing with Amazon and subject them to "anit-dumping" duties? They're doing the same thing WalMart did. Another race to the bottom all over again. This time we're preying upon the fact that Americans are now too lazy to even go to the store.
Mostly because cronies wouldn't allow it, the Chinese lobby group is the biggest on K street, and comparative advantage benefits everybody.
The US can build toasters etc, but it is more profitable to build other things and provide services. Remember the US is only slightly behind China in manufacturing out put. Ours is more automated as is Japan's
The unemployment rate is very low, who is going to build these toasters?
BTW the Chinese labor is now expensive to where they also will now be providing services.
We started getting some groceries from a farm to table dealer that delivered once every 2 weeks (to us - one could get once a month up to once a week, depending upon volume) - Green Bean. This was premium baked goods, boutique canned goods, fresh seasonal vegetables and fruits that were for the most part far better that Kroger. Some things, many things are phenomenal. All ordering is done online. Prices are higher for equivalent items.
Then the Kroger came up with Clicklist - an internet based picking service that had every item in the store online. I have not been in a grocery store for two years as a result. My wife makes the list online, and sets a pick up time, and I go get it all. Now, the quality is different and the offerings are different. Produce is an ongoing problem - they just don't pick it like my wife or I would. Fine for the basics and bulk of our needs.
But the BigStore down the road is talking about picking and delivery, and we are listening.
I agree that retail is not going away. However it will become much more specialized. For example in my area there are small independent boutique grocers that offer only fresh local meat, produce and milk cheeses etc. They don't compete in the packaged goods arena, something that can be easily shipped.
The biggest hurdle for most online sales is the final mile.
WSJ reported yesterday that Amazon has been working with real estate companies about putting in code-accessible storage lockers. The tenants of high occupancy buildings would be able to pick up their own packages with no labor on the part of client.
This might turn into something like the little boxes the milkman used to drop off full bottles and pick up empties. Could provide employment for the newly orphaned UBER drivers (unless, of course, AirBNB does not weld all their cars into a hotel and rent it back to them,)
FORUM GUIDELINES: Please review the guidelines below before posting at WOODWEB's Interactive Message Boards(return to top)
WOODWEB is a professional industrial woodworking site. Hobbyist and homeowner woodworking questions are inappropriate.
Messages should be kept reasonably short and on topic, relating to the focus of the forum. Responses should relate to the original question.
A valid email return address must be included with each message.
Advertising is inappropriate. The only exceptions are the Classified Ads Exchange, Machinery Exchange, Lumber Exchange, and Job Opportunities and Services Exchange. When posting listings in these areas, review the posting instructions carefully.
Subject lines may be edited for length and clarity.
"Cross posting" is not permitted. Choose the best forum for your question, and post your question at one forum only.
Messages requesting private responses will be removed - Forums are designed to provide information and assistance for all of our visitors. Private response requests are appropriate at WOODWEB's Exchanges and Job Opportunities and Services.
Messages that accuse businesses or individuals of alleged negative actions or behavior are inappropriate since WOODWEB is unable to verify or substantiate the claims.
Posts with the intent of soliciting answers to surveys are not appropriate. Contact WOODWEB for more information on initiating a survey.
Excessive forum participation by an individual upsets the balance of a healthy forum atmosphere. Individuals who excessively post responses containing marginal content will be considered repeat forum abusers.
Responses that initiate or support inappropriate and off-topic discussion of general politics detract from the professional woodworking focus of WOODWEB, and will be removed.
Participants are encouraged to use their real name when posting. Intentionally using another persons name is prohibited, and posts of this nature will be removed at WOODWEB's discretion.
Carefully review your message before clicking on the "Send Message" button - you will not be able to revise the message once it has been sent.
You will be notified of responses to the message(s) you posted via email. Be sure to enter your email address correctly.
WOODWEB's forums are a highly regarded resource for professional woodworkers. Messages and responses that are crafted in a professional and civil manner strengthen this resource. Messages that do not reflect a professional tone reduce the value of our forums.
Messages are inappropriate when their content: is deemed libelous in nature or is based on rumor, fails to meet basic standards of decorum, contains blatant advertising or inappropriate emphasis on self promotion (return to top).
Libel: Posts which defame an individual or organization, or employ a tone which can be viewed as malicious in nature. Words, pictures, or cartoons which expose a person or organization to public hatred, shame, disgrace, or ridicule, or induce an ill opinion of a person or organization, are libelous.
Improper Decorum: Posts which are profane, inciting, disrespectful or uncivil in tone, or maliciously worded. This also includes the venting of unsubstantiated opinions. Such messages do little to illuminate a given topic, and often have the opposite effect. Constructive criticism is acceptable (return to top).
Advertising: The purpose of WOODWEB Forums is to provide answers, not an advertising venue. Companies participating in a Forum discussion should provide specific answers to posted questions. WOODWEB suggests that businesses include an appropriately crafted signature in order to identify their company. A well meaning post that seems to be on-topic but contains a product reference may do your business more harm than good in the Forum environment. Forum users may perceive your references to specific products as unsolicited advertising (spam) and consciously avoid your web site or services. A well-crafted signature is an appropriate way to advertise your services that will not offend potential customers. Signatures should be limited to 4-6 lines, and may contain information that identifies the type of business you're in, your URL and email address (return to top).
Repeated Forum Abuse:
Forum participants who repeatedly fail to follow WOODWEB's Forum Guidelines may encounter difficulty when attempting to post messages.
There are often situations when the original message asks for opinions: "What is the best widget for my type of shop?". To a certain extent, the person posting the message is responsible for including specific questions within the message. An open ended question (like the one above) invites responses that may read as sales pitches. WOODWEB suggests that companies responding to such a question provide detailed and substantive replies rather than responses that read as a one-sided product promotion. It has been WOODWEB's experience that substantive responses are held in higher regard by our readers (return to top).
The staff of WOODWEB assume no responsibility for the accuracy, content, or outcome of any posting transmitted at WOODWEB's Message Boards. Participants should undertake the use of machinery, materials and methods discussed at WOODWEB's Message Boards after considerate evaluation, and at their own risk. WOODWEB reserves the right to delete any messages it deems inappropriate. (return to top)
Forum Posting Form Guidelines
The name you enter in this field will be the name that appears with your post or response (return to form).
Personal or business website links must point to the author's website. Inappropriate links will be removed without notice, and at WOODWEB's sole discretion. WOODWEB reserves the right to delete any messages with links it deems inappropriate. (return to form)
Your e-mail address will not be publicly viewable. Forum participants will be able to contact you using a contact link (included with your post) that is substituted for your actual address. You must include a valid email address in this field. (return to form)
Subject may be edited for length and clarity. Subject lines should provide an indication of the content of your post. (return to form)
Thread Related Link and Image Guidelines
Thread Related Links posted at WOODWEB's Forums and Exchanges should point to locations that provide supporting information for the topic being discussed in the current message thread. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related Link that directs visitors to an area with inappropriate content will be removed. WOODWEB reserves the right to delete any messages with links or images it deems inappropriate. (return to form)
Thread Related File Uploads
Thread Related Files posted at WOODWEB's Forums and Exchanges should provide supporting information for the topic being discussed in the current message thread. Video Files: acceptable video formats are: .MOV .AVI .WMV .MPEG .MPG .FLV .MP4 (Image Upload Tips) If you encounter any difficulty when uploading video files, E-mail WOODWEB for assistance. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related File that contains inappropriate content will be removed, and uploaded files that are not directly related to the message thread will be removed. WOODWEB reserves the right to delete any messages with links, files, or images it deems inappropriate. (return to form)
The editors, writers, and staff at WOODWEB try to promote safe practices.
What is safe for one woodworker under certain conditions may not be safe
for others in different circumstances. Readers should undertake the use
of materials and methods discussed at WOODWEB after considerate evaluation,
and at their own risk.