McDonald's, which stand among the American capitalism’s greatest success stories is now losing market share, losing sales, and suffering one heck of a identity crisis. McDonald’s CEO Don Thompson finally ran out of time to fix the restaurant chain’s deepening problems.Thompson would step down as CEO and board member on March 1, 2015 and be replaced by Steve Easterbrook, its chief brand officer who is responsible for fixing the fast-food operator’s marketing and menu. In addition to Thompson’s departure, the company also announced that Chief Financial Officer Pete Bensen will take on the newly-created role of Chief Administrative Officer, overseeing functions that support operations.The move comes a week after McDonald’s, the world’s biggest restaurant company, reported fourth-quarter and full-year results that made 2014 the first with a decline in same-store sales in a dozen years. So what has gone wrong? 1. Perception: McDonald’s is the quintessential quick-serve restaurant. It has risen to the top of the fast-food chain by being “fast” and “convenient.” Neither of these selling points, however, is as high as it was even a decade ago on Americans’ list of dining priorities. A growing segment of restaurant goers are choosing “fresh and healthy” over “fast and convenient,” and McDonald’s is having trouble convincing consumers that it’s both. McDonald’s has forgotten over the past decade that the consumer makes emotional decisions.When consumers choose you based on convenience and price, you’re just a commodity. McDonald’s should not confuse frequency with loyalty. For McDonald's it is a battle over perception, and they’re losing the game pretty fast. 2. Menu Management: One of McDonald's operational failures is to do with the menu creep. In 1990 McDonald’s menu, the restaurant offered 33 items and that was up 25% from 1980. Today the menu has 121 items, a 75% increase from 2004. Overall, McDonald’s brings in about $20,000 in sales per offering, per restaurant, on average. Compare that with high-end burger joint Shake Shack. Each of its 44 menu items average about $66,000 in sales per store—more than three times the average for McDonald’s. Menu management is like organizing a closet. When one new item comes in, another must go out or chaos ensues. McDonald's is trying to be all things to all people who walk in their doors. In truth, McDonald's thirty percent of sales come from just five items—Big Macs, hamburgers, cheeseburgers, McNuggets, and fries. The drawback is that both a new menu and a big menu slow down operations. 3. Pricing:McDonald’s business model is to incrementally grow average check and guest counts. Each year the company raises its menu prices to cover increasing food costs, but it generally keeps those price hikes below the rate of inflation for “food away from home” to stay competitive.When the company nudged up prices above food-away-from-home inflation in the first quarter of 2014 (a rare move for McDonald’s), the average check grew, but the number of customers dropped.To get around this constraint, McDonald’s employs a barbell strategy for pricing—Dollar Menu items on one end of the spectrum and premium items (the McWrap, Mighty Wings) on the other. The hope is that customers will be drawn into the restaurant by the Dollar Menu and then tempted to buy a product with better margins. That kind of trading up was easier for customers in 2002, when the Dollar Menu launched and a Big Mac cost $2.49. But over time the weights on the barbell have moved further and further apart refer to the chart below
Today the average Big Mac in America costs $4.80, which many believe is too much of a jump.As the premium products creep closer to the pricing of restaurants like Panera Bread and Chipotle—a relatively new class of eatery labeled “fast casual”—and even approach designer burger joints like Shake Shack and Five Guys, McDonald’s risks losing customers. The other option is to adjust the weight on the low side. About 15% of the company’s sales came from its traditional Dollar Menu—where for years everything cost a buck. To improve margins there, the chain in 2012 carved out a new roster (called Extra Value Menu), where some food cost more than a buck. No surprise, it flew as well as the Mighty Wings. However, after eliminating the Extra Value Menu last year, it launched the Dollar Menu & More, which is another hodgepodge of offerings by McDonald’s. Pricing, still remains one of the biggest conundrums for McDonald's.
4. Health Scares and Geopolitics: McDonald's business in Asia—where it makes nearly a quarter of its global revenues—has been hit by several health scares. Sales in China fell sharply after one of its suppliers was discovered last July to be using expired and contaminated chicken and beef. More recently, several Japanese customers have reported finding bits of plastic and even a tooth in their food. Geopolitics has not helped, either. Last year, some Russian outlets were temporarily closed by food inspectors, seemingly in retaliation for American and European sanctions against Russia over its military intervention in Ukraine. Some politicians in Russia have even called for the chain to be thrown out the country completely. Though, McDonald's has not much control on geopolitics but it can certainly put a hold on the health scares through stringent quality assurance. So what does McDonald's stand for and it's quest for Future? A survey in Consumer Reports showed that McDonald’s customers ranked its burgers significantly below those of 20 competitors. McDonald's food is still genuinely good food. McDonald's needs to tell it story well...feeding 70 million people a day is no mean feat.McDonald’s classic offerings may have less fat and calories than some of its leading competitors’, but consumers still aren't buying that the restaurant is “healthier.” Consider Chipotle, a chain in which McDonald’s was an early investor (it sold its stake in 2006). Chipotle’s burritos actually have more calories than a Big Mac, but the company’s fare is seen as being natural, unprocessed, and sustainable—qualities that matter more to today’s consumers than “low fat” and “low calorie,” according to a recent survey by Technomic.That’s particularly true for two key demographics McDonald’s absolutely needs to woo: families with kids under 12—Technomic found that this group’s share in the McDonald’s visitor pool declined to 14.6% in 2014, from 18.6% in 2012 and the millennials. Read the story here McDonald's real problem: It is loosing millennials At McDonald's restaurants you can engage younger customers through mobile and other technology, but if you don’t give them something that more closely aligns with what they want to order, it doesn't matter if they’re buying it on their iPhone or iPad or using Apple Pay. Chipotle uses a more pragmatic approach, a the lowest-tech method for ordering: pointing with your finger. The competitive landscape for McDonald's is fast changing. Meyer’s sparkling Shake Shack chain, founded in 2004 and set to go public perhaps as early as this year, has entered the burger wars. So have niche players like Five Guys, Smashburger, Umami Burger, Elevation, and an ever-fattening roster of competitors in a new category called “better burger.” The twin ascendance of the "better burger" and "fast casual chains" [like Chipotle and Panera, Potbelly Sandwich Shop and Noodles & Co.) already accounts for more than $30 billion in annual sales, and it is likely to hit $100 billion in less than a decade.
McDonald's is not oblivious of these challenges. In fact, it is taking lot of actions that include - simplifying the menu - giving more autonomy to regional heads to make their own product choices - has brought in Boston Consulting Group to examine its pricing strategy - commissioned two consulting groups to look for $100 million in savings that McDonald’s can then put toward digital initiatives and a program the company is grandly calling “Experience of the Future.” Through this initiative, restaurant goers can build their own burgers, choosing from 22 toppings that they select on an in-store iPad or kiosk. Will it be a success, only time will tell.
I know that McDonald's is trying to reinvent itself but it has to do it very fast. Let's hope that McDonald's get its magic back and will sizzle up in the near future.
Mobile has changed the way brands and consumers interact and transact. The ubiquity of mobile devices has opened up a wealth of new opportunities for retailers to engage with consumers; thanks to mobile, brands are more embedded than ever before in consumers' daily lives. The key issues that most of the retailers are trying to address in their m-commerce strategies include - How mobile has become the linchpin of Omni-channel strategy? - How retailers are coping with mobile fraud concerns? - How to deal with shopping cart abandonment? Recently, eTail has published a whitepaper that covers these concerns in detail. Have a look!! 2015 Mobile Opportunity.pdf
An agency, 'We are social' from Singapore recently published a report on Digital,Social and Mobile trends in 2015. I found the report very comprehensive and a compendium of up-to-date digital statistics. Mobile increasingly dominates the digital world; mobile will help to push internet penetration beyond 50% of the world’s population during mid to late 2016. Though there are 376 slides available on Slideshare, I have compiled the following data points which you can download - Global and Regional Overviews - Global Internet Usage - Global Social Media Usage - Global Mobile Phone Usage - Country Snapshot: USA - Country Snapshot: Canada
To create more compelling and relevant shopping experiences, best-in-class retailers are leveraging mobile, digital and interactive technologies. An infogrpahic from STRATACACHE, outlines how retailers can leverage cutting-edge technology throughout the six stages of the customer journey. The 6 step Digital Customer Journey.pdf
Mobile is changing the landscape of the commerce at a very rapid pace. The figure below summarizes the Mobile landscape. Mobile is a key driver of
world economy, generating $3.3 trillion of global revenue.
In Retail, while some predictions make tremendous headway, some take more time to progress. Mobile is such a case that made a slow and steady progress in the retail space. About 2-3 years ago, it all started with rumblings about mobile commerce and mobile POS and their potential use cases. It has been a long time since then but I personally believe that mobility is finally coming to fruition. Mobile is now, one of the top priorities for most of the retailers in the areas of marketing, commerce and in-store payments. After the data breaches that we have recently witnessed from the notable retailers like Target and Neiman Marcus, tying payments with mobile is the new trend that promises to secure the customer data more aptly. It is indeed safe to presume that Mobile is the new payment reality. Some of the key indicators in the mobile payment space - There is a growing acceptance of Apple Pay, NFC, Google Wallet and other apps. This is a key sign that consumers will continue to use their smartphones as a research and payment tool - There is no clear winner in the mobile payment yet. Everyone’s talking about Apple Pay but it seems as though the great mobile payment race will turn into a group activity. Because customers have different preferences and mobile devices, there is no ‘either-or’ approach. The norm moving forward is that retailers are going to offer a variety of different mobile payment options — much like how we have and use four or five different credit cards. - Lots of M&A activities are heating up the mobile payment space; the latest being the Google-Softcard acquisition rumors. Companies like McDonald's, Subway and Jamba Juice use Softcard as their core mobile payment solutions. So looking at this rumor overall, it seems like both Softcard and Google only can benefit from the deal. Softcard will receive some financial backing and a great name to help boost brand awareness. Google, on the other hand, will be able to increase the potential customer based of its own mobile offerings, allowing it to compete more effectively with Apple Pay. -With the immense mobile opportunities, Small and medium enterprises now can better compete with their larger counterparts.With mobile payment solutions, even SMBs have the chance to give consumers more options and send them more relevant coupons and offers.
In a recent survey, 51 percent of US consumers switched service providers within a year. Switching rates were highest among retailers, cable and satellite providers and retail banks, making businesses in these sectors the most vulnerable.
To counteract this trend, businesses need to act quickly and boldly. The next frontier in customer experience is engagement, because an engaged customer is much more likely to be a repeat customer.
Know more on the Seamless lifestyle experience here
A recent study by Forrester Consulting and Accenture shows that CPG executives see growth opportunities through digital transformation Some of the highlights of the study are - Although CPG executives are committed to increasing their use of digital technology to improve internal integration across marketing, sales, service, supply chain and research and development, many believe a number of real and perceived barriers – from emerging market restrictions and lagging customer analytics – may slow the process - To unlock the true potential of digital technologies that CPG executives have committed to, companies need to put their investments beyond the efficiencies created by the digitization of processes and channels, and enable them to become fully digital organizations. To achieve their growth targets, CPG brands need to deliver and market a consistent, personalized consumer experience across multiple sales channels to reach target consumers around the world and appeal to their anytime, anywhere shopping expectations Growth in CPG industry through Digital Transformation
Forrester Study: Retail Leads Shift To Modern Marketing
Marketers in a variety of industries could learn from retail, according to a recent study, titled conducted by Forrester Consultingand commissioned by Oracle.
The global study of 492 marketing decision-makers featured responses from executives in 20 industries, including electronics, energy, financial services, healthcare, manufacturing, media and telecom, in addition to retail.
As many as 46% of retail organizations currently are able to provide real-time feedback and advanced insights to enhance customer engagement and marketing effectiveness, compared to 31% in other industries, according to the study.
Additionally, 42% of retail companies are leveraging a fully integration cross-channel marketing platform vs. 14% from other industries.
Brick-and-mortar and e-Commerce are constantly fighting for consumers’ attention and dollars. While 94% of all retail sales still take place in stores, e-Commerce sales are expected to increase annually by 17%, reaching $414 billion by 2018.
Which channel will win this sparring match?
This infographic, courtesy of Whisbi, spotlights trends in e-Commerce and brick-and-mortar, and how both channels can come together to create a seamless omnichannel experience.
Worldwide CMO Advisory predictions for 2015 by IDC
This IDC study features IDC's top 10 decision imperatives that CMOs must focus on for success in 2015 and beyond. Each imperative is described in terms of its potential impact on the organization, how quickly it will be a mainstream practice, and the relative effort needed to address it. Top imperatives include CMO turnover, designing content for the buyer's journey, the emergence of line-of-business (LOB) buyers, addressing marketing skills gaps, and CMO/CIO partnerships.
"CMOs must herd cats, juggle chain saws, and climb mountains," said Gerry Murray, research manager with IDC's CMO Advisory. "It is a challenging, exciting, yet precarious position requiring new skills and great focus on business performance. IDC's top 10 decision imperatives for 2015 will help CMOs transform their organizations to the world of always-on, real-time, digital-first marketing in order to drive revenue, margin, and market share."
While experimenting with the latest trends can be fruitful, sometimes, jumping on them still doesn't make a dent in your close rates, no matter how well you've implemented them.
So to make sure you're hitting your goals every month, sometimes it's smart to make optimization choices based on something that's been around for a while: human behavior. Read up on what makes people tick -- and adjust your strategy accordingly.
Thanks to Help Scout, getting up to speed on the most important research in psychology is easy. In the infographic below, they've curated and summed up some smart, science-backed tips for increasing your conversions. Check it out:
Welcome to the first edition of Retailnomics- January 2015. Explore the latest Retail stories under 'Top Stories' and 'Insights'.... TOP STORIES How Zappos Kept Shoppers Engaged During The Holiday Season
Zappos invests significant time and money in developing new tools and tactics that will surprise and delight customers. Within its internal innovation lab — aptly named Zappos Labs — the online retailer has a dedicated team of employees who focus on solving customers’ pain points, and creating compelling and customized experiences across all channels.
Out of a series of tests and brainstorming sessions, Zappos Labs has established a variety of innovative tools to make customers’ lives easier. For example, Ask Zappos allows customers to snap photos of items they see on the street and text, email or Instagram them to team members. A representative will then find the item and send a link to the customer to buy online. And new capabilities implemented in the Zappos mobile app allow consumers to shop and favorite items across different devices, as well as store their payment information in a secure environment.
While the above tools undoubtedly help make shopping more seamless and hassle-free, it is Glance that has helped surprise, delight and inspire consumers at the point of decision-making. Glance is an online shopping tool powered by Zappos stylists who pull the hottest items on the site and curate them in to compelling, easy-to-digest collections. Read more...
Epicor Completes ShopVisible Acquisition
Epicor Software Corporation has completed its acquisition retail order management and digital commerce solution provider ShopVisible. With the transaction, Epicor has combined its business software suite with cloud-based e-Commerce and order management software from ShopVisible. Platforms such as ShopVisible Digital Commerce and ShopVisible Order Management will now be part of the Epicor Retail suite of solutions. The new combined company will be displayed at the National Retail Federation’s Annual Convention and EXPO in New York City on Jan. 11-14, 2015.
“The acquisition of ShopVisible provides key capabilities supporting Epicor’s vision of a converged commerce platform to serve today’s connected shoppers,” said Noel Goggin, EVP and General Manager of Epicor Retail. “We now can offer retailers all the elements they need for omnichannel retailing through real-time interaction among our POS, mobile POS, Enterprise Selling, e-Commerce, Mobile Commerce, CRM, Sales Audit Merchandising, and Warehouse Management solutions.”
Sean Cook, CEO of ShopVisible, and Josh Lloyd, Co-Founder and Chief Technology Officer at ShopVisible, will join the Epicor Retail team to lead cloud-based order management and digital commerce initiatives.
With the purchase, Epicor will expand its user base to include retailers and manufacturers such as 3M, Atwoods, Tempur-Pedic and Plow & Hearth.
McDonald’s Implements Beacons To Boost Sales And Customer Satisfaction
McDonald's franchises in Columbus, Ga. have rolled out beacon technology fromPiper in an effort to improve the customer dining experience. With the technology, McDonald's can deliver coupons, offers, promotions, information on employment opportunities and customer surveys to consumers' smartphones as soon as they enter a restaurant.
Customers who install the Piper app are prompted to save an Apple Passbook offer to their device. The offer also is visible and can be redeemed through the Piper Android app. Through the platform, customers can customize their experiences based on the types of messages they want to receive.
During the initial four-week launch, which began in October 2014, participating stores saw more than 18,000 offer redemptions for promotions involving the McChicken sandwich and 10-piece Chicken McNuggets. The promotions improved McChicken sandwich sales by 8% and Chicken McNuggets sales by 7.5% versus the previous month.
The pilot program was rolled out in 17 McDonald's franchises in and around Columbus, Ga., according to Pezold. Due to the pilot's success, Piper is working on installing beacons in 263 McDonald's franchises across Alabama, Georgia and South Carolina. Read more...
INSIGHTS
Global Powers of Retailing 2015- Embracing Innovation
The 18th annual Global Powers of Retailing identifies the 250 largest retailers around the world based on publicly available data for fiscal 2013 (encompassing companies' fiscal years ended through June 2014), and analyzes their performance based on geographic region, product sector, e-commerce activity, and other factors. It also provides a look at the world's 50 biggest e-retailers.
Global Powers of Retailing 2015: Embracing Innovation is much more than a list, however. It considers strategies retailers are taking to cope with disruptive change in the industry. Ira Kalish, Deloitte's Chief Global Economist, provides an overview of the global economy and how it will impact the retail sector. There is also a section devoted to the "Q Ratio," which is a way of measuring non-tangible business assets such as brand equity and customer loyalty.
Among the key insights included in the report:
Five trends are reshaping retail: travel retailing, mobile retailing, faster retailing, experience retailing and innovative retailing.
Important economic issues having a global impact on the retailing industry include shifts in U.S. monetary policy, energy production in the U.S., the crisis in Ukraine, the slowdown in Chinese investment, shifting demographics, and the influence of technology and the internet.
Retailers of food and other fast-moving consumer goods continue to dominate the Top 250 in number and size of companies.
International expansion remains an important growth strategy for many retailers.
Despite rapid growth in the e-commerce arena, only two pure-play e-retailers were large enough to rank among the Top 250.
U.S.-based retailers account for a disproportionate share of those that have generated considerable value through their non-tangible assets; Japanese retailers, on the other hand, account for a disproportionate share of those that do not.
What Are The Greatest Challenges Facing Retailers In 2015?
Is 2015 the year for mobile payment saturation? Are retailers really improving the customer experience? What can we expect from advanced personalization initiatives? A total of 15 retail industry experts — including leading industry analysts, consultants and researchers — have shared their expertise and predictions for 2015 and beyond. Find this out here
A great compilation of 25 technologies to watch-out for in 2015-16 by Brian Solis
1) Social Media 1.0 is dead:Social media becomes part of a digitally transformed ecosystem Real-time and content marketing becomes more sophisticated and portable Social becomes key hub for shaping customer experiences Social connects the Zero Moment of Truth and the Ultimate Moment of Truth
2) The future of search and SEM also lies outside of Google: More than 88% of consumers are influenced by other consumers’ online comments. Customers are also starting searches in places such as Youtube, Pinterest and also in apps directly.
3) Messaging apps become the new social media
4) Asia and other foreign competitors will compete to gain share and push messaging forward
5) Notification windows introduce a thin layer for rapid engagement: Apps such as Yo, while a novelty at first, will redefine what an app is and will be...no kidding.
6) Chinese innovation is going to disrupt the U.S. from the outside in and the inside out
7) The Internet of Things is a hot and beautiful mess until it becomes the Internet of Everything: By 2020, the number of devices connected to the Internet is expected to exceed 40 billion.
8) Wearables will struggle to find their place in everyday life: The Apple watch will start create a rising tide. Wearables are all over the place, but most are single purpose, redundant, cute or just plain useless. They need a killer app!
9) Virtual reality experiments with killer apps for consumer and vertical markets.
10) Focus on the kids! Generation Z is mobile first and mobile only and they’re nothing like Millennials
11) Youtube, Vine, etc., represent “a” new Hollywood: Youtubers and Viners and the financial ecosystem emerging to support them is reminiscent of Hollywood in the early 1900s. More kids can name online celebrities than they can traditional movie and music stars. To capture attention, advertising and content will require an entirely new approach.
12) Cyber security becomes paramount to prevent the next #Sonygate
13) Some companies are still greedy and believe the internet should not be open for the sake of profitability. This will impede innovation.
14) Music streaming will continue to undermine the music business and artistry. Artists will fight back.
15) Wall Street becomes influential again forcing brands to trump customer experience for revenue
17) There are 163 cryptocurrencies in circulation. Bitcoin is widely known. Though its market cap is down, The Bitcoin Stack will revive the movement. h/t Joel Monegro and Fred Wilson.
18) Mobile payments early today, but will soon skyrocket: In late 2013, just 6% of US adults said they had made a payment in a store by scanning or tapping their smartphone at a payment terminal. It will go up to 8% this year. Apple's introduction of the Apple Pay will be the key factor that will drive this percentage up. Mobile payments are already gaining traction. Nearly 15% of Starbucks customers already pay with their phones. And, 60% of consumers use their smartphones to pay because of loyalty benefits.
19) The Sharing Economy is really about renting or borrowing. Everything will become “on-demand.”: New supply will stimulate new demand. Mobile platforms combined with geoloco will continue to bring everyday people and businesses together to do interact with trust and efficiency serving as facilitators. “Technology has made renting things (even in real time) as simple as it made buying things a decade ago" – Fred Wilson
20) New enterprise drone management platforms change the game for logistics
21) Cyber Warfare: Political battles will play out in the 5th dimension.
22) Your privacy is Gone: It was traded for perceived security and also better customer experiences.
23) Big data and beacons: Connect online, in-app, and in-store experiences. Also opens the door to new forms of engagement.
- Footfall, visits online, visits through apps
- Regency and frequency of visits, behaviors and transactions
- Brand affinities
- Favorite products
- Demographics
- Location
- Loyalty program utilization
- Service quality, queue and abandonment
- Capacity planning and resource utilization
Beacons provide businesses with endless opportunities to collect massive amounts of untapped data, such as the number of beacon hits and customer dwell time at a particular location within a specified time and date range, busiest hours throughout the day or week, number of people who walk by a location each day, etc. Retailers can then make improvements to products, staff allocation in various departments and services, and so on.
24) Webrooming becomes more common than showrooming (69% to 46% respectively), according to Harris poll
- Millennials prefer webrooming
- Amazon remains #1 destination for both showrooming and webrooming
- Emerging connected in-store experiences link online and offline, leveraging both
25) Mass personalization and full funnel marketing suites reset vendor landscape and change how brands “think” and work: New adtech companies will focus on strategy + programmatic context, content AND ads.
Optimized mobile affiliate tracking capabilities.
Publishers will offer in-house capabilities for behaviorally programmatic targeting of premium advertising.
Omni-Channel finally becomes mainstream. Brands must think like their customers to create seamless omni-channel shopping experiences that keep customers engaged at all stages.
Digital technologies are reshaping both consumer demand and competitive dynamics in the CPG marketplace, irrevocably altering how people shop and how they decide what to buy. Digital innovation has created entirely new patterns of expectation. Consumers, who are enjoying the convenience and value of digital services in other aspects of their lives, expect these benefits in grocery as well. Pioneering companies, some of them old but most of them new, are creating enormous value by meeting fast-changing needs and expectations in the largest, and least penetrated, consumer category. In the process, they are putting retailers and suppliers alike under acute pressure to adapt. CPG companies need to understand and, to the extent possible, shape the shifting retail landscape, because ultimately they will need to participate in new distribution models. The Digital Future-A game plan for Consumer Packaged Goods
This IDC study summarizes IDC Retail Insights' outlook for 2015 and the 24-month planning horizon beyond through the lens of the 10 decision imperatives that make up the best framework as IT and line-of-business decision makers and influencers plan and execute technology-related initiatives in the year ahead. The team scanned the global retail ecosystem to identify critical economic, technology, business, political, environmental, and legal developments that drive the 10 most important decision imperatives facing the industry's IT and LOB technology buyers and influencers. Retail Trends 2015 by IDC
