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STUDY FINDS HAPPY CUSTOMERS WILL SPEND $100 OF DISPOSABLE INCOME EVERY MONTH WITH BRANDS THEY LOVE

Harris Poll Study Commissioned by Lithium Finds Great Customer Experience Means More to Consumers than Great Products

What makes customers happy? And what’s a happy customer worth? Eighty-three percent of U.S. consumers say having a positive customer experience with a brand is more important than the product itself, a new study by Harris Poll of 2,000 respondents reveals. Consumers are willing to spend one-third of their disposable income – $100 per month on average – with brands they love based on a great customer experience. That’s around $31 billion up for grabs every month to brands who make their customers happy.

Experience Over Product

Brands work relentlessly on product design and features, but today’s consumer increasingly values how a brand treats them as more important than the product they sell. The Lithium-commissioned study found 43 percent of consumers would actually buy an inferior product from a brand that they had a great experience with, and 73 percent will spend more on a product if it is from a brand they love. But this works both ways, with 71 percent of consumers unlikely to ever use a brand again after only one bad experience. Worse, 44 percent would share their negative experience with friends and family, potentially leading to even more customers fleeing.

Value of A Happy Customer

The following Lithium infographic summarizes the major findings and insights from the Harris Poll:

Click Image To Enlarge

And checkout what people on the street had to say about what a great experience with a brand meant to them:

What does a great experience with a brand mean to you? from Lithium on Vimeo.

Rob Tarkoff, President and CEO of Lithium Technologies says.

“Customers’ increasingly high expectations of brands have reached a critical point. When two-thirds of consumers say they are unwilling to stick with a brand that has treated them badly even if they love the brand’s products, it’s time to sit up and take notice.  Brands need to dig deeper to understand how they can create awesome experiences for their customers across platforms.”

What’s A Brand To Do?

Brands can no longer dictate terms. They must connect with the customer in the channel of their choice, which is increasingly digital. The study reveals 29 percent of consumers prefer to engage with a brand via its website/blog/social channels, compared to 17 percent who prefer in-store engagement, and 16 percent who prefer to connect over email.

Tarkoff said.

“This study shows that as consumers reach out on digital channels, they are highly sensitive to how and when brands respond to them.  It’s a wakeup call for brands to realize that providing great experiences on digital is the surest path to attracting and retaining happy customers.”

Path To Happy Customers

Harris Poll, on behalf of Lithium, conducted the “Value of a Happy Customer” survey of over 3,000 adults in the United States and the United Kingdom to help us understand what it really takes to make customers happy today.

Here are a few of the highlights:

• 86% of adults in the U.S. and 74% of adults in the U.K. say they are willing to spend more on products and services from a brand they love.
• 71% of adults in the U.S. and 64% of adults in the U.K. would share a positive experience with other consumers
• After one bad experience, 71% of adults say they would likely never use that brand again.
• 55% of adults admit they place more value on a positive experience with a brand than on the product purchased.

Key findings from this survey include:

• An Emotional Connection Matters - People tend to have love/hate relationships with brands. Savvy brands today understand that creating an emotional connection with customers is the best way to keep them in the “love” zone. The majority of adults surveyed said that they would be likely to spend more on products and services from a brand that makes them happy (80%), a brand they love (80%), and a brand to which they are loyal (80%). The message is clear: when a brand is able to create an emotional connection with consumers, a stronger sense of loyalty results.
• A Digital First Mindset - When consumers need to search for something specific, they flock to digital – especially via their mobiles phones – to do it. The same can be said about how consumers engage with brands. A brand’s website, blog, or social channels are typically the first stop when searching for information about products and services. About one-third of adults say they are likely to spend more on products and services from a brand that communicates with them (32%) and shares entertaining and engaging content with them (31%) via social media.
• No Such Thing as Second Chances - As consumer expectations become increasingly intense, brands have got only one shot to make a good first impression. Otherwise, customers will gladly move on. They no longer have to tolerate a bad brand experience. Over 8 in 10 adults (83%) say they would stop using a brand after one bad experience while nearly 9 out of 10 adults (87%) agree that they would look elsewhere if a brand made them unhappy in any way.

COMMENTARY:   In-store shopping beats the e-commerce experience across numerous customer service and relationship measures, while online shopping wins for research and pricing, according to the results of a survey of consumers who have used their mobile devices to shop. The survey, conducted by Dimensional Research and sponsored by Wanderful Media, identified several shopping-related activities and asked respondents whether they thought those experiences were better in-store or online.

Respondents more often chose the in-store option for measures such as a great customer service (40% vs. 16%), having their questions answered (50% vs. 13%), and establishing a relationship with the merchant (51% vs. 12%).

The biggest gap in favorability, though, was for the ease of making a return (64% in-store vs. 12% online). Frustrations with the return experience certainly appear to plague online shoppers, per results from a ShopRunner survey conducted by Harris Interactive. About 7 in 10 online shoppers surveyed feel that returning items purchased online is a complicated process, while an even greater proportion (81%) said they are not likely to make additional purchases from websites that charge shipping on returns.

Online Shopping Makes the Grade for Research, Savings

Further details from the Wanderful Media survey suggest that consumers who use mobile devices to shop may favor the customer experience in-store, but they prefer the research and savings possibilities offered online. The online shopping experience was overwhelming favored for the breadth of information available to research purchases (71% vs. 12%), the ease of finding a specific item (59% vs. 14%), and getting the best price (57% vs. 11%), among others.

Store Browsing Leads to Impulse Purchases

Notably, respondents were far more likely to favor the online path for discovering a previously unknown product (40% vs. 16%). Still, more respondents had made an impulse purchase in the last month in a store than had done so online (74% vs. 65%), suggesting that while they find new products online, they’re more likely to try something new while shopping in a store.

In fact, browsing in a store (60%) was the leading driver of impulse purchases among respondents, ahead of email promotions (42%) and window shopping (36%). Interestingly, newspaper circulars (23%) influenced more shoppers than social media channels such as Facebook (22%), Twitter (13%) and Pinterest (13%).

9 in 10 Have Visited a Store Due to An Online Experience

Of the shoppers surveyed, the vast majority (91%) said that something they have done online has spurred them to visit a store. Emails held the biggest sway: 60% said they had visited a store after receiving an email about a special price or promotion. Close behind, finding a coupon (59%), seeing an online ad for a sale (56%), searching for a product and finding a store location (55%), and browsing an online circular (52%) also did the trick for a majority.

Other Findings:

• Of various factors that may contribute to a positive experience when shopping in-store, respondents named the absence of shipping charges (64% citing as “very important”), the ease of making a return (60%), the ability to touch, smell, and see the item to be purchased (55%), and getting the item immediately (55%) as the most important.
• To get the most positive online shopping experience, respondents were most likely to say that the ability to compare prices from a broad range of sources (63% citing as “very important”), the depth of information to research purchases (59%), and the ability to stay home to shop (54%) were very important.
• Generally speaking, respondents preferred buying books, gifts, and consumer electronics online, and clothes, personal care products, shoes, and furniture in a store.

About the Data: The Wanderful Media data is based on an online survey conducted in December 2012 of 1027 consumers. All participants live in the United States and use a mobile device for shopping. 62% of respondents are female and a plurality (40%) are aged 36-50.

The ShopRunner survey was conducted online within the United States by Harris Interactive from December 7-11, 2012 among 3,036 adults ages 18 and older. This online survey is not based on a probability sample and, therefore, no estimate of theoretical sampling error can be calculated.

Courtesy of an article dated March 20, 2017 appearing in Lithium.com and an article dated March 30, 2017 appearing in MarketingProfs and an article dated December 17, 2012 appearing in Marketing Charts

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4 TACTICS YOGA WEAR RETAILER LULULEMON USES TO LEVERAGE WORD-OF-MOUTH FOR THEIR BRAND

Founded in 1998, Lululemon is a yoga and sports apparel company from Canada.

Although its first store was opened in 2000, the company sold $350 million worth of products in their 113 retail stores 8 years later.

In 2012, Lululemon was reported to have the third most productive retail stores in the US, only behind Apple and Tiffany & Co..

According to Nina Gardner, Lululemon’s community relations manager, the company achieved all this almost entirely via word-of-mouth, and with ads in only two publications:

We don’t do ads. All of our marketing is done word-of-mouth and grassroots Gardner said. The only place you’ll see ads is in ‘Yoga Journal’ and ‘Runner’s World,’ two national publications.

Let’s take a look at how a company that started off selling yoga pants managed to grow so big from leveraging on word-of-mouth:

1. Lululemon’s customers are eager to show off their inspirational-poster themed shopping bags, just as they might on Pinterest.

Lululemon is all about living an active life, evidenced by their goal to “sweat every day”, and other activities like breathing deeply, drinking plenty of water and going outdoors.

These values promote a very positive and healthy image, something that customers can relate to and aspire towards. And customers who shop at Lululemon are given tote bags that have the company’s manifesto emblazoned all over them:

Lululemon tote bags image by John Lucas, Postmedia News (Click Image To Enlarge)

The feel-good quotes on the bags serve as a form of “social snack“: something we look at to make ourselves feel better throughout the day.

By associating the brand with these values, customers would feel as if they’re “connecting with her best self” as they buy their yoga pants.

Word-of-mouth action tip: Make something about your product worth showing off to others.

2. Lululemon staff feel more like your yoga or gym buddies – they’ll happily talk to you more about yoga and goal-setting than their products.

Lululemon store staffers wear yoga pants so they feel more like yoga or gym buddies (Click Image To Enlarge)

Lululemon’s store employees “are encouraged to discuss exercise goals with customers and take into account their feedback written on chalkboards in the fitting rooms.” This ensures the staff are better equipped with more information to give personalized recommendations to every customer.

They are also instructed to dress like they were going for a workout, so customers would see them more as people you see in a gym or yoga class, rather than a store employee.

Plus, most people who work at Lululemon are athletic and fit individuals, so they have a lot in common with their customers. This relatibility and similarity makes them a lot more likeable, and customers are more comfortable trusting them.

And this building of relationships is exactly what Nina Gardner is trying to achieve:

"Making sure we’re really building those relationships (with customers) — that’s what really sets us apart from being just another retail store that’s opening up to sell clothes. Absolutely we sell clothes, but we are building relationships. We are supporting communities.”

Word-of-mouth action tip: Don’t rush into selling your products – connect with your customers like a friend, so they’ll like you more, and open up to you.

3. Retail stores transform into fitness and conversation hubs on weekends for free lessons, to give back and get people involved with the brand.

One of Lululemon's in-store yoga classes (Click Image To Enlarge)

For one of their stores in Burlingame, California hosts free yoga classes on Saturday mornings and Sundays, as well as a weekday run club. This practice originated from Lululemon founder Chip Wilson, who used his office space as a yoga studio at night to help pay for rent back in the day.

This, according to former CEO Christine Day, positions Lululemon stores as a “fitness and conversation hub”. It also increases customer engagement, encourages regular visits to the store, and keeps the brand constantly top-of-mind.

What having similar-minded individuals for store employees and free fitness classes in-store does is – it evolves customers’ perception of the brand from being an apparel company to an entity that embodies your ideals, and a community to find like-minded people.

Christian Buss, a Wall Street analyst described Lululemon’s brand identity to a fitness partner:

"They’re selling a brand identity…the model that Lululemon is trying to build is, you’re pretty cool, we’ll be your partner in being your best possible self. And that kind of turns retail on its head."

Word-of-mouth action tip: Leverage your existing assets to contribute to your community.

4. Lululemon engages fitness trainers and athletes as brand Ambassadors to inspire and engage with their customers, so they can feel motivated to keep fit.

Nicole Katz from Yoga 216 is one of the many brand ambassadors of Lululemon (Click Image To Enlarge)

So if Lululemon organizes free yoga and fitness classes regularly all throughout the world, who exactly leads all those classes?

They are Lululemon’s brand ambassadors; yoga teachers and fitness trainers that have chosen embody the brand’s values and lifestyle.

These 1,500+ ambassadors host classes in Lululemon stores within their communities, and according to a yoga teacher from Australian fitness group OzSquad, get support from the brand to pursue any events and initiatives they desire.

Of course, they’re also outfitted with the Lululemon products, so they get to wear free gear while promoting their own yoga schools and the Lululemon brand.

Apart from local yogis and fitness trainers, world-class Olympic athletes are also part of the ambassador program, such as Olympic cross-country skier Sara Renner and Jaime Komer.

Word-of-mouth action tip: Celebrate and promote individuals who embody your brand values, so customers will think of you when they look at them.

Lululemon has always been a brand that connects their products with values that inspire their customers. People buy Lululemon pants because they agree with the values that Lululemon embodies and expresses.

And that can be a powerful thing, as branding expert and author Karen Post explains,

"They’re selling emotion and happiness and joy and feeling good about yourself, … and when companies keep their eye on that in a more focused way, and less on the features of the product, their chances of being a successful brand just go through the roof."

Questions to ponder:

1. What are some values that your target customers live by?
2. Does your company embody and communicate those same values in your marketing?
3. How can you create a positive and engaging community, where your customers can interact with your brand?

COMMENTARY:   Based in Vancouver BC, lululemon is known for their athletic apparel, including clothing for yoga, running and any other “sweaty pursuits.” Customers can not only buy clothing and merchandise but they can also sign up for in-store events ranging from workshops, runs and yoga classes, offered on a weekly basis and tailored to the local surroundings. To personalize the in-store experience, lululemon educators and community ambassadors can be found in every store to talk to customers about healthy living, yoga, exercise etc. The ambassadors program is composed of individuals who adhere to the same lifestyle and cultural ideals oflululemon, and can share their expertise with the local community.

Lululemon Athletica retail stores have taken the store and shopping experience to a new level.    Julia Brunzell, Manager of Store Design at lululemon atheletica discusses the unique in-store experience that the brand provides.

“We are constantly listening to feedback about how guests experience our stores and how they function for our educators. Every store designer works in the stores to experience firsthand how the space is used, what works best for flow, product visibility and efficiency.  In addition, we want every store to feel like a part of its community from the first day it opens; we invite our guests to hang out, chat with our educators and learn about local yoga/fitness studios. Every week, our stores push aside their product fixtures and open the store up to the community for a complimentary yoga class.

Our stores are designed to be conversation starters, while also being fundamentally warm, inviting, eclectic and accessible to everyone. Over the years our fixtures have become more streamlined, modern and modular which allows for flexibility and creativity with visual displays. We are known for our unique, creative and locally relevant storefront designs which range from making a big design statement to a fun reflection of the community we are joining.  For example, our Burlington, VT location is a strong ski community so we used two gondolas as benches outside to create an eye-catching and locally relevant storefront.  At our Houston Galleria mall location, we designed our storefront using glass windows that look like those from a space shuttle, a nod to the nearby Houston Space Centre.”

There have also been many changes within the lululemon brand. Recently, the brand has launched a new fast fashion clothing line, &Go. With apparel ranging from dresses to pants and tank tops, the line is set to be offered online and storewide. With this change comes another in the men’s clothing division. Lululemon is set to open a standalone men’s store by 2016. The brand offers a range of men’s clothing on its website, including jackets, hoodies, pants, socks and underwear. Finally, with lululemon’s latest expansion into the European market, it will be interesting to see how these developments continue to affect the stores and brands initiatives worldwide.

When Julie Brunzell was asked how these changes and expansions affect the store design concepts and whether consumers will begin to see larger stores, pop up shops etc. to showcase the new clothing lines, she said.

“As a company focused on innovation, we are always evaluating how we design our stores and with that comes continuous examination of layout principles, space planning, size and location. We aim to create community and shopping experiences that speak to our guests and settings which vary from city to city. Entrepreneurship is one of our core business values and as a business that is grounded in community, we enable and support store managers to have a hand in creating spaces that resonate with their guests and their community.”

Lululemon Store Of The Future

Lululemon just opened a new flagship store in New York City's Flatiron District. At 11,500 square feet, it's the brand's largest flagship location. Its Union Square location closed its doors.

The Flatiron District is home to many other stores that specialize in athleisure — Sweaty Betty and Athleta, to name a few. But that makes sense: The area has many of the most popular boutique fitness studios — Flywheel Sports, Exhale, SLT, Pure Barre, and two SoulCycle studios that are mere blocks apart.

And Lululemon is capitalizing on that. One of the new store's features, The Concierge, will dedicate floor space to helping shoppers beyond the sales floor.

The Concierge at Lululemon's Flatiron District store in Manhattan (Click Image To Enlarge)

The Concierge will recommend nearby classes and locations, so that the exercise-obsessed shoppers can don their new pants in class. To top that off, shoppers can book classes while they're shopping.

The Concierge will be a hangout spot — there will be a "community board" to help shoppers discover new places to run, new classes, and even new places to eat.

The Community Center located inside Lululemon's flagship store in the Flatiron District of Manhattan (Click Image To Enlarge)

Lululemon will make shopping a luxurious experience, with a coat check, water, a coffee bar, snacks, and a phone-charging station. You can also have your purchases delivered to your home, office, or hotel, so no need for lugging big Lululemon bags around during the day.

The company is focusing on expanding its already-strong community with a new space called Hub Seventeen. Hub Seventeen will be above the store's retail floor.

Carla Anderson, Lululemon's general manager of US retail, said in emailed comments.

"Our stores are inspired by community, from the design aesthetic and in-store guest experiences and classes to our ambassador and studio partnerships."

Chairs hang from the ceiling inside the Community Events Center of Lululemon's flagship store in the Flatiron District of Manhattan (Click Image To Enlarge)

The 5,000-square-foot space will be used for fitness classes, monthly dinners, concerts, art shows, and more.

Lululemon's stores already have yoga classes, but Hub 17 will take it up a notch.

Anderson said.  

"While all of our stores offer in-store yoga and fitness class and events, Hub Seventeen is the first time we created a dedicated community space separate from the retail experience."

The Community Events Center inside Lululemon's flagship Flatiron District store includes an area for yoga exercise demonstrations (Click Image To Enlarge)

Don't worry, Lululemon acolytes — there's a vast retail floor.

The retail floor located inside Lululemon's flagship Flatiron District store (Click Image To Enlarge)

There's a great chance that many other forthcoming Lululemon stores will follow suit.

Anderson said.

"Our flagship stores in particular are designed to elevate the community in new and unique ways, often serving as a testing ground for new guest experiences and retail innovations."

Courtesy of an article written by Samuel Hum appearing in Referral Candy and an article dated April 14, 2015 appearing in Mind and an article dated November 18, 2015 appearing in Business Insider

THE TOP PERFORMING FASHION RETAIL BRANDS ON SOCIAL MEDIA, AND THE TOP SOCIAL MEDIA PLATFORMS FOR FASHION

The climax of the famous speech by Miranda Priestly (played by Meryl Streep) in the 2006 fim, The Devil Wears Prada, is that the sweater Anne Hathaway’s character is wearing has slowly trickled down over the years from high-end runway to “some tragic Casual Corner where you, no doubt, fished it out of some clearance bin.” The implication here is also that the quality and design has declined in those iterations. But these days, Miranda Priestly’s premise would be totally irrelevant. 

Enter Fast Fashion. Fast Fashion includes brands like H&M and Zara, which bring runway looks to affordable retail stores quickly: no need to wait for trickle down as magazines select the best looks and publish them in glossies, or as retailers measure customer response. Now runway looks are live-streamed or Snapped or Instagrammed or live-tweeted by bloggers and influencers, and retail interpretations of those looks are available in your local Forever 21 within mere weeks.

The success of these fast fashion retailers depends in large part on their social media success: Are bloggers wearing your clothes in posts? Are digital influencers bringing in customers through in-store events? Are those customers sharing their own photos of your designs on social?

Thanks to Sprinklr’s new Benchmarking tool, which gives brands access to competitive analytics and insights, which are arguably the most crucial insights in any brand trying to scale, we can now look at the state of fast fashion on social. Sprinklr compared the top four fast fashion retailers—H&M, Zara, Topshop, and Forever 21—in terms of their social following, engagement, and brand perception.

A few takeaways from the infographic below:

• Instagram is the top platform for all four brands, though Facebook is far from dead for Zara. Twitter isn’t a major player for any of these brands.
• Topshop has the lowest amount of followers, but the highest engagement ratio and the best customer experience score. Perhaps this is part of a scarcity model, as Topshop’s stores in the U.S are few and far between, or that their price point is a bit higher and designs a little more cutting edge. In any case, their small but active audience is working for them.  
• Brand perception scores for Zara, H&M, and Forever 21 are fairly equal despite their varied price points and similar product quality scores, leading me to believe that fast fashion is simply popular in the social sphere. It makes sense that consumers of fast digital would be naturally drawn to fast fashion.

Also: check out the Sprinkler Benchmarking tool here if you think it could be useful for seeing where your business falls among the competition.

Click Image To Enlarge

COMMENTARY:   How is the fashion industry embracing social media? Despite the fashion industry coming fashionably late onto the social media scene, it definitely has wasted no time in making sure its presence was felt.  Top brands like Burberry, Urban Outfitters, and Louis Vuitton are promoting exclusive clothing and have become more accessible to the general public via social networking. This industry has embraced all that social media has to offer for it to grow in business. Today, ads are being replaced with blogs and marketing activities are centered on social advertising. Not only do brands and retailers use social media to communicate with their consumers, they use it to listen to them as well.

According to Seock and Norton,

“With the consumers' increased use of retailers' Internet Websites for searching out product information and purchasing, the websites have become key tools for retailers to communicate with current and prospective customers and the attributes of a retailer's website are crucial for attracting shoppers to the site and convincing them to become or remain customers.” 

A perfect example of how the industry has embraced social media is Burberry’s campaigning strategy. Burberry, known to always be innovative and fresh, uses a mixture of different media platforms such as Facebook, YouTube, and Twitter. The most dominant of the three, YouTube, is being used by Burberry to broadcast its image and promote its campaigns. This specific media platform is a personal studio place for the YouTube user to express their self in a creative, dramatic and artistic way while being recorded.

Burberry’s theme used in this YouTube is high fashion, youth, style and innovation. In the video is Romeo Beckham, the 10 year-old son of Victoria and David Beckham, who was specially picked to represent Burberry’s spring 2013 campaign. What do you think Burberry is trying to pitch here? High fashion +youth+ fan= Burberry. The company’s vision is that a customer has total access to Burberry, across any device, anywhere. This example goes to show just how much the fashion industry has embraced social media. 

Burberry has become aware of the different social media platforms consumers use (especially young consumers), it’s created various advertisements using the social media platforms consumers use the most. Not only should a brand be aware of imagery when reaching out to consumers, but their overall content as well. The more unique a brand's overall content is, the more likely it is to receive a large amount of re shares and likes across social media platforms. According to Seock,

“Consumers across the age spectrum shop online, but college students aged 18 to 22 have been identified as the Internet's 'hottest' market and a prime source of future growth in online sales.”

For what reason did the fashion industry decide they needed social media as a marketing tool? One reason is that the fashion industry’s old way of marketing products and brands eventually went out of style! According to Winter,

“In a matter of minutes, eight cameras coupled with computer software can generate three-dimensional images of the human form, both clothed and unclothed.”  

Without social media, the fashion industry would definitely be behind.  The fashion industry is all about keeping up with the new and latest trends that are in, and social media happens to be one of the new trends in which they needed to take part.

The fashion industry used to be an industry that focused solely on the quality of its goods. This is still the case today, but this industry knew that it was time to take the next step forward in order to stay relevant, and social media was its solution.  The fashion industry functions sort of like your most popular high school clique:  A leader confidently undertakes something new; a few imitators carefully follow the leader’s get-up, and the rest then rush to participate before that trend dies out. Therefore, the fashion industry undertook social media, consumers follow the trends that the industry shares through social media and then next thing you know everyone wants to try it out to before it’s too late. The fashion industry’s reason for using social media was to keep up with trends and stay relevant so it wouldn’t be left behind.

To view "American Fashion Retail Brands Make It Big On Social Media" click HERE

What are some social media platforms that are most effective in the fashion industry today?  There are so many:  

• Fashion blogs
• YouTube
• Instagram
• Twitter
• Pintrest
• Tumblr

and many more social media platforms that are highly popular in the fashion industry today. Out of the many social platforms listed, blogging seems to be one of the most popular in the industry today.  According to Chittenden,

“According to Luman (2006), in 2006 there were approximately 27 million blogs in the world. Corcoran (2006) noted that some 2 million of these blogs were devoted to fashion and fashion/shopping-related themes. Fashion bloggers are now seen as leaders in the industry, and brands are now turning to them not only to check and offer feedback on their products, but also to act as a connection between themselves and their target consumers.”

Fashion blogs typically include a mix of images from personal photographs and professional photographs of runway shows or magazine shoots (taken from other websites), to images of products seen on websites, other blogs, or in the local neighborhood of the blogger. Written entries discuss events in the blogger’s day, their outfit choices, ‘things they like’, or fashion items encountered in other places or other media.  This social platform has a very big influence on how many people dress, shop, wear their hairstyles and even do their make-up.

The second most popular social media platform is YouTube; this social platform is used to create videos. Breen stated,

"As more people capture special moments on video, YouTube is empowering them to become the broadcasters of tomorrow."

This self-glorifying quote may have seemed far-fetched less than a year ago, but of late, YouTube has been discussed as a potential "sixth network”.  Various YouTubers upload videos about fashion, hair and beauty tips to share with people all over the world. These views benefit from these videos because they can do and watch at the same time, which gives them the leisure of playing and pausing when they want. Not only do the viewer’s benefit from these videos, the YouTuber does as well.  

Many YouTubers now earn six figures from marketing products for top companies in their videos and go on to owning their own fashion businesses and selling products of their own. A lot of the big designers you see today were discovered on YouTube.  Depending on how interesting and useful the YouTube video is, many viewers will subscribe and pass on by word of mouth, helping the You Tuber sell their own personally made clothing.

Last but not least, Instagram, Pintrest, Tumblr and many other apps that allow many to express their sense of fashion are highly used today to influence how one views and captures fashion. These apps target more towards the younger generation; it’s quick and easy, you just snap and go. According to Livingston,

“The most popular photo revival software is Instagram available for iPhone and Instaplus for iPad with excellent reviews. You can load images from your photo library or from your  iPhone and create stunning artistic compositions. Images are re-developed (digitized) replicating past analogue processes, before your very eyes, complete with original mechanical sounds of the Polaroid camera.” 

Instagram is a mobile app for photo sharing and accomplishes the same social, visual goals as Tumblr, but in a prettier, scaled-down way. Many use this instagram as a channel of self-expression. Like Facebook and Twitter, Instagram’s appeal lies in its number of provided utilities both for individuals that love fashion and for owners of fashion brands. Many use instagram to do several things like display their personal lines, make up tips, cooking recipes and many other skills they have, but fashion is the most seen on these networks.

Therefore, to conclude, the days of a brand’s success relying solely on the quality of its goods are well and truly over. As the fashion industry has embraced social media, brands are simply opening their doors to personal contact and adding humanity, emotion and opinion. Whether you are interested in fashion or not, it is difficult to escape the constant bombardment of information on the latest fashions and trends that we receive through social media and the internet. From the fashion blogs, to the live streaming of catwalk shows from the main fashion weeks and the social shopping where we get all sorts of opinions on different pieces of clothing through Facebook, and Twitter, the fashion industry will never be the same.We live in the digital age, where it is important that social media is used as a marketing tool to avoid being left behind.

Courtesy of an article dated October 18, 2015 appearing in Social Media Today and the research paper by Crista Washington titled, "Social Media's Influence on the Fashion Industry"

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HALLOWEEN 2015: 157 MIL AMERICANS WILL CELEBRATE, 68 MIL WILL WEAR COSTUMES, MILLENNIALS AND THEIR PETS PARTICIPATE

WASHINGTON, September 23, 2015 – Ready to embrace cooler weather, fall traditions and spirited celebrations, more than 157 million Americans plan to celebrate Halloween this year, according to the National Retail Federation’s Halloween Consumer Spending Survey conducted by Prosper Insights & Analytics. The average person celebrating will spend $74.34, compared with $77.52 last year. Total spending on Halloween is expected to reach $6.9 billion.*  

Click Image To Enlarge

NRF president and CEO Matthew Shay said.

“After a long summer, consumers are eager to embrace fall and all of the celebrations that come with it.  We expect those celebrating Halloween this year will look for several different activities to do with their family and friends. Consumers are ready to take advantage of promotions on candy, decorations and costumes, and retailers are ready to serve them.” 

Click Image To Enlarge

Consumers celebrating Halloween plan to spend an average of $27.33 on costumes for the whole family, and a total of $2.5 billion on store-bought, homemade, large and small costumes. Those celebrating will spend the most on adult costumes ($1.2 billion), and will spend a total of $950 million on children’s costumes and $350 million on fashionable and fun costumes for their furry friends. It’s estimated that 68 million Americans will dress up this Halloween and another 20 million pet owners will dress up their pet. 

Nine in 10 (93.7%) Halloween shoppers will buy candy, spending a total of $2.1 billion, and an additional 33.5 percent will buy greeting cards, spending a total of $330 million. Two in five celebrants (44.8%) plan to decorate their home or yard, meaning there’s no question consumers will see their fair share of pumpkins, hay bales and even life-size Minions and black cats strewn across their neighborhoods. The average person planning to buy decorations will spend $20.34 with total spending expected to reach $1.9 billion.

 

Click Image To Enlarge

When it comes to how consumers plan to celebrate, most will hand out candy (67.8%), or dress in costume (43.5%), though there will be no shortage of jack-o-lanterns lighting up windows this year with 41 percent of people planning to carve pumpkins. Nearly one-third of consumers (31.5%) plan to throw or attend a party with friends and family.

 

More consumers have decided to head to stores or shop online early to pick out costumes and decorations. More than one-third of consumers (34.1%) will start their Halloween shopping before the first of October, up slightly from 32.1 percent last year, while 40.9 percent will get started in the first half of the month and one-quarter (25%) of celebrants will wait for the final weeks of October.

Prosper Insights Principal Analyst Pam Goodfellow said.

“People shouldn’t be too surprised when they see Halloween candy and decorations available in stores as early as September first.  Given that more than a third of Americans enjoy taking advantage of early-bird deals to kick off their fall celebrations, it seems there’s plenty of appetite among consumers to enjoy a perfectly ‘frightful’ Halloween.”

Click Image To Enlarge

Similar to past years, the majority of consumers will find inspiration for their costumes online (31.4%) or will head to costume shops and retail stores (26.8%) before they make a final decision.. Pinterest continues to grow in popularity among those looking for costume inspiration (13.3%), as this year’s percentage is nearly double the amount who used the site for inspiration just three years ago (7.1%).

Millennials remain the drivers of Pinterest traffic around Halloween though with 24.9 percent of 18-24 year olds and 23.7 percent of 25-34 year olds using the site for costume inspiration.

About the survey

NRF’s 2015 Halloween Consumer Spending Survey was designed to gauge consumer behavior and shopping trends related to Halloween spending. The survey was conducted for NRF by Prosper Insights & Analytics. The poll of 6,754 consumers was conducted September 1-8, 2015. The consumer poll has a margin of error of plus or minus 1.2 percentage points.

Prosper Insights and Analytics delivers executives timely, consumer-centric insights from multiple sources. As a comprehensive resource of information, Prosper represents the voice of the consumer and provides knowledge to marketers regarding consumer views on the economy, personal finance, retail, lifestyle, media and domestic and world issues. www.ProsperDiscovery.com

Courtesy of an article dated September 23, 2015 appearing in National Retail Federation

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TOMMY HILFIGER INTRODUCES SAMSUNG GEARVR HEADSETS TO GIVE CUSTOMERS A 3-D INSTORE SHOPPING EXPERIENCE

To capture the all-around image, Hilfiger worked with WeMakeVR, a start-up, which used a special 3-D camera to capture an image with no blind spots. (Click Image To Enlarge)

With its clunky headsets and project names like Oculus and Morpheus, virtual reality has so far been the realm of hard-core gamers and other early adopters of cutting-edge tech.

Now, retailers are jumping for a piece of VR’s promise to immerse its users in virtual 3-D video. (The industry even has a new term for selling through virtual reality: v-commerce.)

Tommy Hilfiger introduces VR headsets in selected stores (Click Image To Enlarge)

Tommy Hilfiger became the first major retailer to make virtual reality a fixture in its stores this week, offering its shoppers a virtual trip, via a Samsung GearVR headset, to the label’s fall fashion show in New York this year.

The virtual reality headsets, which Tommy Hilfiger began renting out at its Fifth Avenue store in New York on Tuesday, give shoppers a three-dimensional, front-row view of the show, held at New York’s Park Avenue Armory.

Tommy Hilfiger introduces VR headsets in selected stores (Click Image To Enlarge)

During a preview, a reporter donned a GearVR and sat a few virtual feet away from models as they strutted down a football-themed runway. Visible above was the cavernous ceiling of the Armory; turning around revealed rows of guests, almost touchable.

To capture the all-around image, Tommy Hilfiger worked with the Netherlands-based start-up WeMakeVR, which filmed the show using a 3-D camera fitted with 14 special lenses. The lenses allow the camera to capture video in 360 degrees both vertically and horizontally, with no blind spots.

 

 Avinash Changa, WeMakeVR’s chief executive, is  reflected on the glass of the firm's Falcon virtual reality device (Click Image To Enlarge)

Daniel Grieder, Tommy Hilfiger’s chief executive, said the virtual reality headsets would allow shoppers who might never attend a fashion show to view and shop the season’s runway styles. He also said the headsets, which will be installed in the brand’s biggest flagship stores in the United States and Europe, would inject Tommy Hilfiger locations with an element of entertainment.

That is vital to brick-and-mortar stores as they fight to stay relevant in an increasingly digital world, he said.

Mr. Grieder said.

“These days, you can’t just wait for people to come into the store and try on your jackets. You have to provide entertainment.  It’s not about turnover by square foot anymore. It’s about surprise by square foot, or newness.”

'These days, you can’t just wait for people to come into the store and try on your jackets. You have to provide entertainment," said Daniel Grieder, chief executive of Tommy Hilfiger. (Click Image To Enlarge)

Tommy Hilfiger, which had sales of $6.7 billion in 2014 and is owned by PVH Corp, is one of many retailers exploring virtual reality as a sales tool as they compete with online sellers for shoppers’ attention. But actual adoption of the technology in stores has been slow, as headset makers iron out kinks and bring consumer models to the market.

Next month, Samsung is set to release the consumer version of its GearVR, which uses a smartphone as its processor and display. Facebook’s Oculus VR is expected to begin widely selling a VR headset next year. Sony will ship its own virtual reality headset for its PlayStation 4 console, known as Project Morpheus, during the first half of next year.

But there are still plenty of reasons to question whether virtual reality, promoted for decades as the next big thing, will finally take off in gaming or in retail. Reducing the discomfort that virtual reality can cause for some people, and downsizing the unwieldy headsets, are some remaining challenges.

Virtual reality advocates are quick to distance the technology from other fads that have since fizzled out.

Avinash Changa, WeMakeVR’s chief executive, said.

“Cinema in 3-D was a trick, a gimmick.  But VR can be relevant. We’re applying the technology beyond the gimmick.”

COMMENTARY:    The new Samsung GearVR headset technology launched on October 20, 2015 at the Tommy Hilfiger store on New York’s Fifth Avenue, followed by several addition locations including London, Paris, Milan, Amsterdam, Dusseldorf, Florence, Zurich, and Moscow. Shoppers will receive an immersive encounter.

The idea is to create the impression that one is sitting in the front row of Manhattan’s Park Avenue Armory at show time on February 16, 2015, which is when the collection originally premiered.  The experience will offer users an unhindered view of the runway and backstage—a section typically cordoned off from outsiders.

The installation lives in-store in a dedicated area that reflects the American football theme of the show alongside the Hilfiger Collection designs, which consumers can purchase immediately. The platform is also launching at wholesale with Selfridges, London’s iconic department store.

Daniel Grieder, CEO of Tommy Hilfiger. said.

“We are driven by a vision to exceed consumer expectations, inspire, and offer experiences they never thought possible. We’re using virtual reality to open the doors to a unique part of our world, directly connecting the consumers in our retail space with one of our largest brand events.” 

The showcase will be available on London’s Brompton Road and Regent Street; at Amsterdam’s P.C. Hooftstraat; Dusseldorf’s Schadowstrasse; Milan’s Piazza Guglielmo Oberdan; Florence’s Piazza degli Antinori; Zurich’s Bahnhofstrasse; Paris’s Boulevard des Capucines and Champs-Elysees; and Moscow’s Kuznetsky Most.

Courtesy of an article dated October 20, 2015 appearing in New York Times and an article dated October 20, 2015 appearing in World Branding Forum

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WALMART'S U.S. SALES ARE DOWN, ITS STOCK FELL 10% AND LOST $20 BIL IN VALUE, IS WALMART'S BUSINESS MODEL BROKEN?

This week, Walmart's shares crashed on October 14 after the company reported a disappointing profit outlook. Profits will fall 6% to 12% next year, the company said.

Walmart founder Sam Walton wrote in his 1992 memoir "Sam Walton: Made in America".

"Now, when it comes to Wal-Mart, there's no two ways about it: I'm cheap," 

If the notoriously cheap Walton were alive today, he would probably be surprised that his pioneering profit formula -- keep costs low so that prices are as low as possible and customers buy more -- is now virtually impossible to maintain. Full blame for that can be pinned on employees demanding higher wages and the rise of e-commerce giants such as Amazon (AMZN), which are open 24 hours a day, seven days a week. 

Walmart founder Sam Walton (Click Image To Enlarge)

Perhaps the retail legend saw some of this on display from up above on what was a dark day in Walmart's history on Wednesday. Walmart's usually stable stock price tumbled 11% as the company said at its annual investor day that higher wages for associates will dent profits by about $1.5 billion in the 2017 fiscal year, following a $1.2 billion hit this fiscal year.

For years, Walmart has had the upper hand with its employees, paying them state minimum wages, offering basic healthcare plans, and using computerized systems to control their hours. But with the rise of social media and the internet giving employees a free platform to express views, and the rising cost of living causing state governments to push through higher minimum wages, Walmart has had to change with the times.

As a result, it has lost a key element of its business model put in place by Walton that has supported the company's profits since its founding. Further, rising employee costs are arriving as online shopping is also limiting the ability of Walmart to raise prices at all to help deliver sustainable profit growth.

Walmart added on Wednesday that it expects earnings per share to decline between 6% and 12% next year. Wrote Sterne Agee analyst Charles Grom in a note to clients on Wednesday :

"What's surprising to us is that the new outlook is incorporating roughly $20 billion in share buybacks in the next two years, which implies significant margin contraction along with modest sales growth." 

Employee costs aren't the only line item on the income statement Wal-Mart is battling to control.

Walmart's investments in e-commerce and digital initiatives are expected to total about $1.1 billion in the 2017 fiscal year. This year, Walmart is projected to shell out $1.2 billion to $1.5 billion on e-commerce and digital.

These investments are a necessary evil to stay competitive with Amazon, as well as with Best Buy (BBY) and Target (TGT) , which are continuing down their own paths to reduce prices, improve checkout speeds and offer a range of delivery options.  

When Walton opened the first Walmart store in Rogers, Arkansas in 1962, though, it's unlikely he foresaw a day when a sweater could be purchased off a handheld device. Today it can be, however, and to make it happen seamlessly and at the lowest cost is proving to be a major profit headwind for the once mighty Walmart.

Even with such enormous investments in digital, however, Walmart still sees sales as being under pressure. Walmart said it now expects net sales growth for the current fiscal year to be relatively flat, down from a forecast of between 1% and 2% in February. Excluding the impact of currency exchange fluctuations -- mostly the stronger dollar -- net sales growth is estimated to be about 3%.

Goldman Sachs analyst Matthew Fassler in a note on Wednesday pointed out.  

"New guidance reflects that Walmart's competitive edge -- historically largely assortment and price -- has faded relative to purveyors of extreme value (warehouse clubs, hard discounters) or extreme convenience (dollar stores, hard discounters), as e-commerce has neutralized the impact of selection." 

The deterioration of Walton's pioneering business model has been playing out for some time in Walmart's numbers. 

According to Bloomberg data, Walmart's operating profit margins, which takes into account its costs to run stores and pay for wages and healthcare, has fallen from 7.1% in 1987 to 5.6% in 2015.  From 1988, Walmart's return on assets -- an indicator of how profitable a company is relative to its total assets -- has gone from 13.7% to 8.0% in 2015.

The alarming downtrends in these measures, partly fueled by investments to compete online and compensate workers better, have been overlooked for years by Walmart's investors who have focused on the retailer's healthy dividend and relative stability.

Walmart CEO Doug McMillon (Click Image To Enlarge)

But the stock's nosedive on Wednesday, and an 11% drop for the year prior to that point, suggests Walmart's investor base is growing concerned that the retail giant's business is broken. Wrote Stifel analyst David Schick in a note,

"The market is reacting to meaningful evidence that Walmart has substantially over-earned."

In other words, Walmart is now being forced to play catch up on investments it neglected to make in the past to keep the profits flowing. 

And if Walmart's business model is broken, profits are likely to stay under pressure for some time, and future dividend hikes may not be as robust as in years past. 

Now, Walmart has to find a way to channel Walton and become cheap once more. Indications have emerged that it may be willing to take drastic actions to return to some sense of frugality. 

 

Walmart CEO Doug McMillon said at the investor event.

"We are more than open to re-shaping our portfolio."

McMillon added the company continues to "evaluate its portfolio" of assets, and pointed to Walmart's history of exiting non-strategic assets and closing underperforming stores.

For example, the retailer exited Germany in 2006 and took a $1 billion hit to profits as a result. By shedding assets such as Sam's Club or lagging international operations, Walmart would also be shedding costs related to employees and maintaining physical stores. In turn, those savings could be used to offset the investments being made in core assets such as the online business and Walmart U.S., or simply be brought to the bottom line to appease investors.

Walton wrote.

"You can make a lot of different mistakes and still recover if you run an efficient operation -- or you can be brilliant and still go out of business if you're too inefficient."

Words of wisdom from beyond the grave for McMillon and the execs tasked with turning around the largest ship in retail.

Walmart did not respond to request for comment for this story.

COMMENTARY:   When I heard that Walmart's stock had plummeted 10% in mid-October over its shitty earnings report, decling profit margins and the CEO's statements that earnings will continue to be stagnant due to higher employee wages and investments in ecommerce, I shed crocodile tears and managed a smile.

Walmart has been the "king of exploiters." For years it has exploited its employees, vendors and foreign suppliers.

Walmart has been the subject of numerous lawsuits from employees seeking payment for overtime and unfair labor practices, including paying female managers less than their male counterparts, among other sins.

For years Walmart has squeezed its vendors for lower prices, often forcing some into bankruptcy, while others have fled the retail giant, and swore never to return again.  

The pricing deals that it has extracted from Chinese suppliers has cost hundreds of thousands of US jobs, and many U.S. small businesses have gone out of business.

So, if you were to ask, I don't feel the slightest remorse for this disgusting company?  Nope.  

The Walton family, prior to the recent stock market decline, were worth $140 billion, the wealthiest American family, and representing the very top of that 1% which owns 90% of America's total net worth. After the stock price crash, they are still worth at least $125 bllion.  Now I hear they are blaming the far left's campaigns to increase the minimum wage for cause of their problems.

From my viewpoint, the cause of Walmart's problems is mostly about Walmart's values, and they are all about profits, and more profits, at any cost.  

Do you think the Walton family cares about all the small retailers they have put out of business, or the Chinese workers being exploited by suppliers so that they can pay bottom dollar for their goods, the US vendors they squeezed for lower prices then put out of business, or even their employees who are finally getting paid minimum wage (a paltry $9.00 per hour)?  

This is more of a condemnation of Walmart's values coming back to bite them in the ass.  It is not about their business model going to pieces.  You can bet that Walmart's CEO Doug McMillon and his team will find ways to restore the viability of their dirty business model by screwing somebody.  Stay tuned for more bad news about this indecent company.   

The Wharton Business Radio ran an excellent broadcast titled Marketing Matters Walmart, that details where Walmart fucked up, their failure to react to the dollar discount stores, their botched entry into Canada, their badly executed store remodelling, and failure to gain traction in online sales to combat Amazon, and what is really going on, to get them into this disasterous hole.  Definitely worth listening to.

Courtesy of an article dated October 16, 2015 appearing in The Street, an article dated February 19, 2015 appearing in Newsmax, an article dated October 16, 2015 appearing in Business Insider, and an article dated October 14, 2015 appearing in Fortune Magazine

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APPLE RETAIL STORES AVERAGED $4,798 IN SALES PER SQ FOOT IN 2014, AND HOW THEY GET CUSTOMERS TO BUY MORE

In 2010, the company opened a store in what used to be a bank, just across the street from Paris' famous opera house (Click Image To Enlarge)

The Apple Store is an incredible retail success.

On a quarterly basis over 100 million people shop at the company's 437 worldwide stores during the fiscal year ending September 30, 2014.  According to the San Jose Mercury News, Apple stores generate more revenue per square foot than any other U.S. retailer.  

Number of Apple Retail Stores Worldwide by Year - Fiscal Year September 30, 2005 Through September 30, 2014 - Statista (Click Image To Enlarge)

According to Fortune Magazine, Apple extended its lead over the top 10 U.S. retailers with its stores generating a staggering $4,798.82 in sales per square foot on an annualized basis at the end of 2014, according to brand new data provided to Fortune by eMarketer.

The store on New York's Fifth Avenue consists of a 32-foot glass cube that's entirely self-supporting. A glass staircase leads into the store below (Click Image To Enlarge)

That compares to $4,551 earlier in 2014 and well ahead of Apple’s closest rival on this front, luxury jeweler Tiffany & Co, which saw sales of $3,132.20 per square foot. (As a point of comparison, department stores such as J.C. Penney and Macy’s generate $160 to $200 per square foot — although to be fair, aisles and aisles of low-priced clothes and towels are less of a draw than than highly coveted electronics.)

Apple opened its first store in the southern hemisphere in 2008, a three-story shop located in the middle of Sydney's shopping district (Click Image To Enlarge)

Part of what has made Apple stores so successful over the years is the stunning design details put into each one. 

Inside, all of the stores look pretty much the same — Apple trademarked its store layout in 2013 — but each one offers its own unique look from the outside. 

 

In 2009, the late Apple CEO and founder Steve Jobs hired famed British architect Norman Foster to take over the design for its upcoming campus 2, dubbed the "Apple Spaceship" in Silicon Valley.  Foster has also designed Apple's future retail stores.  That development, along with the hiring of former Burberry CEO Angela Ahrendts as retail chief, is a sign that Apple's retail dominance shouldn't be ending anytime soon.

Apple's retail store in Istanbul is the first location designed by Norman Foster. It's recessed into the ground and looks a lot like a MacBook from above (Click Image To Enlarge)

If you own a piece of Apple tech there's a good chance you've visited one of their retail locations. Every detail of each Apple store has been designed and planned out to influence the customer into spending more money as they shop and browse. Here's how it works.

In Beijing's Sanlitun district, a large stainless-steel structure makes an imposing impression (Click Image To Enlarge)

COMMENTARY:  I've written about the Apple retail stores before, and came away amazed at the number of customers that visit the stores each day, the simplicity of the store design and layout of each store, high level of customer service they offer, and the way Apple products are displayed to appeal to evangelists who lust for their products.  It is all about offering a great customer experience from beginning to end.

The Apple store in Shanghai's Pudong district is one of its most stunning. A glass cylinder leads to the main part of the store, situated underneath the courtyard (Click Image To Enlarge)

Every detail of each Apple store has been designed and planned to influence the customer into spending more money as they shop and browse.  The following video explains how each store is deliberately designed to make their customers spend more money.

   

Apple store employees are known for their "insanely great service,"  They are not known as store clerks or associates, but as "Specialists," for their knowledge of all Apple products.  Apple hires Specialists for their "magnetic personality as much as, if not more than proficiency."     You can teach proficiency, but personality is a natural trait that you either have, or you just don't.  Here's a video that illustrates this point.

 

I had a look at Apple's Annual Report for the fiscal year ending September 30, 2014, and the company had 437 stores generating $21.5 billion in net revenues and employing 46,200.   The following table presents Retail information for the years ended and as of September 27, 2014, September 28, 2013 and September 29, 2012 (dollars in millions):

  Apple Stores, Net Revenues and Head Counts (Click Image To Enlarge)

The growth in Retail segment net sales in 2014 was primarily driven by increases in net sales and unit sales of iPhone and Mac, partially offset by declines in net sales and unit sales of iPad and iPod. With an average of 424 and 403 open stores during 2014 and 2013, respectively, average revenue per store increased to $50.6 million in 2014 from $50.2 million in 2013.

The growth in Retail segment net sales during 2013 was primarily driven by increased unit sales of iPhone and iPad following the new product introductions in the first half of 2013 and increased sales of services. With an average of 403 and 365 open stores during 2013 and 2012, respectively, average revenue per store decreased to $50.2 million in 2013, compared to $51.5 million in 2012.

The Retail segment’s operating income was $4.6 billion, $4.0 billion and $4.6 billion during 2014, 2013 and 2012, respectively. The year-over-year increase in Retail segment operating income in 2014 was attributable to higher net sales and higher gross margin primarily due to a higher mix of iPhone. The year-over-year decrease in Retail segment operating income in 2013 was primarily attributable to lower gross margin similar to that experienced by the Company overall, partially offset by higher net sales.

Courtesy of an article dated October 16, 2015 appearing in Business Insider, an article dated May 27, 2014 appearing in Business Insider, an article dated March 13, 2015 appearing in Fortune Magazine, the fiscal year ending September 30, 2014 Apple Annual Report (Form 10-K), and an article dated September 4, 2015 appearing in De Zeen Magazine

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THE DEATH OF GOLF: TIGER WOODS HAS LOST HIS MOJO, MILLENNIALS ARE NOT GOLFING, BABY BOOMERS NOT FILLING THE VOID

It's expensive, difficult, and demands the kind of time most people get only when they go on vacation — or retire. From the dried up fairways of Southern California to the vacant course-side condos on the Carolina coast, we survey the sport's demise — and the entrepreneurs hoping to reinvent it for a new, less patient generation. 

One night last September, my 15-year-old daughter, Esmee, told me her plan to try out for the girls golf team here in Pacific Palisades, California. While I was pleased with her interest in golf — which I'd played semiseriously, along with seemingly every other man under 40 in the Tiger-dominated late '90s — I felt I had to prepare her for the inevitable letdown. She lacked the requisite power and the repeating, compact swing I assumed were required of a varsity golfer. Do your best, I told her, but be prepared for the possibility that you might not make the team.

When she texted me a week later to say she'd made the cut, I was stunned. In the years I'd gone to the school, the golf team was a bunch of country club regulars whose swings were nice right-path whips, golfers who'd been playing for a half-decade by the time they got to high school. I asked the coach, James Paleno, what had changed.

Paleno says.  

"There just isn't the interest we used to have 14, 15 years ago.  Now I have kids showing up who have never hit a golf ball before. Kids are just less aware of golf. They have too many other options. And then when they find out it takes five and a half hours to play 18 holes, they're just not interested."

Click Image To Enlarge

By any measure, participation in the game is way off, from a high of 30.6 million golfers in 2003 to 24.7 million in 2014, according to the National Golf Foundation (NGF). The long-term trends are also troubling, with the number of golfers ages 18 to 34 showing a 30 percent decline over the last 20 years. Nearly every metric — TV ratings, rounds played, golf-equipment sales, golf courses constructed — shows a drop-off.  Oliver "Chip" Brewer, president and CEO of Callaway. says.  

"I look forward to a time when we've got the wind at our back, but that's not what we're expecting.  This is a demographic challenge."

During the boom, most of those 20-somethings who were out hacking every weekend were out there because of one man: Tiger Woods. Golf's heyday coincided neatly with Tiger's run of 14 major golf championships between 1997 and 2008. If you listen to golf insiders, he's the individual most to blame for those thousands of Craigs­list ads for used clubs. When Tiger triple-bogeyed his marriage, dallied with porn stars, and seemingly misplaced his swing all at once, the game not only lost its best player; it also lost its leading salesman. The most common answer given by golf industry types when asked what would return the game to its former popularity is "Find another Tiger."

         Golf's fortunes seem to rise and fall with Tiger Woods' play. He hasn't won a major since 2008.  Photograph by Robyn Beck-AFP-Getty Images (Click Image To Enlarge)

But you can't blame one man's wandering libido for the demise of an entire sport. The challenges golf faces are myriad, from millennials lacking the requisite attention span for a five-hour round, to an increasingly environmentally conscious public that's reluctant to take up a resource-intensive game played on nonnative grass requiring an almond farm's worth of water, to the recent economic crisis that curtailed discretionary spending. Brewer says.  

"Golf is an expensive, aspirational game, and a lot of millennials are struggling with debt and jobs. If you don't have a job, golf doesn't really fit you very well."

Combine the game's cost with the fact that golf is perceived as stubbornly alienating to everyone but white males — Augusta National, home of the Masters and perhaps the most famous golf club in the world, didn't accept black members until 1990 and women until 2012 — and it's no wonder young people aren't flocking to it.  Greg Nathan, senior vice president of the NGF, says.

"One of the major reasons golf hasn't been growing is because historically, it has not been welcoming enough.  We need to make people feel more comfortable."

Not long ago, the game could count on young fathers to hide out on the links, and weekend tee slots are still filled with plenty of off-duty dads. But it takes two to properly helicopter-parent a family these days, and that means parents are spending more of their weekends at the playground than at the country club.

During the Tiger boom, everything about the game seemed to expand, from the length of the putters to the size of driver heads to the scale of the courses themselves.  Gary Player, the only non-American to win a career Grand Slam, notes.  

"When I won the U.S. Open at Bellerive in 1965, the course measured 7,191 yards. It was a monster. Now, 7,500-yard courses are everywhere."

And those courses have raised their greens fees. Pebble Beach may be able to charge $495 for a round, but when your local public course wants $150, it gets steep. And many of those golf courses weren't designed merely for golf; they were the lure for tens of thousands of homes that aimed to deliver one version of the American dream: golf course frontage.

COMMENTARY:     

The symptoms of golfings decline are evident everywhere and can be found in many forms.

Decline in Golf Equipment Sales

Slow golf equipment sales over the past two years have created a glut of inventory at wholesale and retail outlets, forcing them to slash prices. Dick’s Sporting Goods(DKS) was selling some drivers, priced at $299 just a few months earlier, for $99, Chief Executive Officer Ed Stack said on an investor call on May 20, 2014.  That day, Dick’s reported it missed its golf gear sales target by about $34 million in the first quarter of 2014.  The news helped send the retail chain’s stock down 18 percent, its worst one-day tumble since the company went public in 2002.  Stack said.  

“We don’t feel we’ve found the bottom yet in the golf sales number.”

TaylorMade, a golf equipment maker owned by Adidas (ADS:GR), reported a 34 percent drop in sales in the first quarter 2014. And Callaway Golf (ELY), maker of the Big Bertha driver, delivered its own dim forecast in April 2014, warning that full-year profit could come in at the low end of its previous estimate.  CEO Chip Brewer told investors. 

“We anticipate a heavy promotional environment while the industry works through excess inventory.”

Callaway hasn’t reported an annual profit since 2008.

Industry insiders point to last year’s double bogey by sports retail giant Dick’s that crimped revenue and margins industry-wide. Dick’s, which is reportedly in talks to go private, last summer fired more than 400 PGA professionals at its namesake stores (the sporting goods retailer also owns the Golf Galaxy chain) and slashed prices on golf equipment as there wasn’t enough demand to meet the supply stuffed into the market; lower prices obviously mean less overall revenue.

TaylorMade’s Sharpe is mindful of that oversupply as the company has released new equipment and he prepares for his first spring on the job. Sharpe says the company will be “more deliberate” in its distribution to avoid an inventory glut, “which causes deflation and compromises the launch of the next generation.”

This deflation is training consumers to hold off on new purchases and weighing on equipment sales, says Tom Stine, co-founder of Golf Datatech. Stine says.  

“Overall golf sales are down, but that doesn’t mean they’re down because golf is going out of business.  Golfers are not going away, they’re more cautious in spending money and trying to get a better deal.”

Click Image To Enlarge

Economic Impact of Golf

The U.S. golf industry has an estimated direct economic impact of around 70 million U.S. dollars annually. This figure is based on several segments such as golf course capital investment, golf facility operations, golfer supplies, charities and tournaments and associations. 

It includes for example around 20 billion U.S. dollars from green fees and consumer purchases of golf equipment to the value of 3.4 billion U.S. dollars. These equipment purchases include items such as golf clubs (woods, irons, hybrids and putters), golf bags and balls. The average price for a set of golf clubs was at 40 U.S. dollars in 2011, golf shoes sold for an average of 66 U.S. dollars at the retail level. The wholesale sales of golf equipment had a value of around 2.5 billion U.S. dollars in 2011. 

Among the leading golf equipment companies in the world is Callaway Golf with revenues of 834 million U.S. dollars in 2012. Its drivers, fairway woods and hybrid segment contributed 24 percent to the total revenue. Irons (20%), putters (11%), golf balls (17%) and accessories (28%) are the other reported segments of Callaway Golf. Callaway’s main market is the U.S. where the company generated almost 50 percent of its revenue. 

Around 26 million people play golf in the U.S., at least occasionally, at approximately 15,600 golf facilities. Among the leading golf club operating businesses is ClubCorp. The company operates 102 golf and country clubs and 49 business, sports and alumni clubs mostly in the U.S. Overall the company has approximately 145,000 memberships and 350,000 individual members with total revenues of almost 755 million U.S. dollars in 2012. 

Consumer spending on golf equipment in the U.S. from 2007 to 2015 (in million U.S. dollars)

Click Image To Enlarge

The Generational Shift 

Although an especially cold winter and the sluggish economy are no doubt part of golf’s problem, a generational shift is a bigger cause for concern.  Jim Koppenhaver, president of Pellucid, says.

"The baby boomers were supposed to be the salvation of golf.  We’ve got to find a way to stem the decline in the golfer base.”

Millennials have left golf in droves, but the baby boomers have yet to take up the slack.  His company’s research shows the number of golfers today is lower than in 1990, even though the U.S. population is 27 percent greater.  

Changing Lifestyles

Koppenhaver calls the traditional 18-hole round “an anachronism,” requiring about six hours “door-to-door,” including more than four on the course.  Nor does the pastime have the social currency it once held. Explains Gerald Celente, publisher of marketing magazine Trends Journal:

“Everybody’s hooked up to their handhelds, so [today] it’s social networking instead of sports.”

Golf Courses Closing And Golfers Playing Fewer Rounds

Overbuilding in the 1990s led to a surfeit of courses as the growth that operators anticipated never materialized. Only 14 new courses were built in the U.S. in 2013, while almost 160 shut down, the National Golf Foundation reports. Last year marked the eighth straight year that more courses closed than opened.

Those sticking with the sport are playing fewer rounds. U.S. golfers played a total of 462 million rounds last year, according to researcher Golf Datatech. That was the fewest since 1995. Says Morelli:

“All the people under 35 are leaving the game.”

Marketing of Golf Changing

To attract more casual players and expand revenue, particularly among younger people, clubs are rethinking some of the sport’s tenets. The U.S. Golf Association, the PGA of America, and Golf Digest have launched a “Time for Nine” campaign to counter complaints that the traditional 18-hole game takes too much time. And some clubs are adding attractions such as yoga and hovercraft rides.

Then there’s Hack Golf, a movement to identify the parts of golf that aren’t fun and fix them. A standard cup is 4.25 inches in diameter, often making even short putts difficult to sink. Some courses have added wider holes to make the sport faster and easier, with a Golf.com story in April asking, “Could a 15-inch hole be the answer to golf’s growth problem?” TaylorMade in April sponsored a 15-inch cup tournament. The brand also co-sponsors a website with the PGA, hackgolf.org, with the goal of “crowdsourcing the future of golf.” The site has elicited 1,471 ideas. A recent suggestion: smartphone apps to reserve tee times, pay for services, and communicate with the pro shop.

Clubs in more than 30 states, including the PGA Country Club in Port St. Lucie, Fla., are even trying FootGolf, a combination of golf and soccer designed to capitalize on the growing popularity of the latter. The game is played with a regulation No. 5 soccer ball on a course with shortened holes and 21-inch cups. Wearing knee-high argyle socks is recommended.

The professional and marital decline of Tiger Woods, once the public face of golf, hasn’t helped. With neither Woods nor Phil Mickelson playing at the 2014 Masters, only 7.8 percent of U.S. television households tuned in—the tournament’s lowest TV rating since 2004, according to Nielsen. That was a 24 percent decline from the 2013 finale, when Woods and Mickelson played and 10.2 percent watched.

Courtesy of an article in the August 2015 issue of Men's Journal, an article dated June 19, 2014 appearing in Bloomberg Business, an article dated January 22, 2015 appearing in Fox Business, and an article titled, "The Economic Impact of Golf" appearing Statista

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CONTACTLESS MOBILE PAYMENTS REACH INFLECTION POINT; 5% OF 600-650 MIL NFC EQUIPPED PHONES WILL BE USERS BY END OF 2015

Deloitte predicts that by end-2015, five percent of the base of 600-650 million near-field communication (NFC) equipped phones will be used at least once a month to make contactless in-store payments at retail outlets.

Deloitte expects that 2015 will be an inflection point for the usage of mobile phones for NFC-enabled in-store payment, as it will be the first year in which the multiple prerequisites for mainstream adoption – satisfying financial institutions, merchants, consumers, technology vendors and carriers – are sufficiently addressed.

We predict that by end-2015, five percent of the base of 600-650 million near-field communication (NFC) equipped phones will be used at least once a month to make contactless in-store payments at retail outlets. This compares with monthly usage by less than 0.5 percent of the 450-500 million NFC-phone owners as of mid-2014. Contactless mobile payment will not be mainstream by end-2015, but niche adoption will be a major progression from near nil in prior years.

 

The core advantage with any contactless smartphone transactions is the potential for greater security, when payments are made with phones featuring either built-in (via hardware or software) or SIM-based tokenization capability. When someone pays using an NFC-device, the tokenization facility creates a unique code (known as a token) which is sent from the device to the merchant’s NFC-enabled till. The credit card number is not transferred which means in the event of a breach, only card information used for traditional transactions would be exposed. The card information is either stored with the issuing networks (such as Visa or MasterCard), or is stored in the cloud (HCE), or in a secure element on the phone. The token is only good for a single transaction and unusable otherwise. A fraudster who intercepted the transaction would only get access to the single-use token but not the card details.

Using a fingerprint, an eye scan or a heart rate sensor as an additional form of authentication makes the payment more secure still. The combination of biometric authentication, an embedded secure element and tokenization may provide more robust security than card swipes or chip and PIN.

We expect the volume of NFC-smartphone transactions and the range of spend value to increase steadily over time as consumers become more familiar with the process, and more banks and merchants in more markets accept this form of transaction. However, contactless mobile payments will likely co-exist for some time with all other means of payment, from contactless credit cards to cash. It will be a long while before the majority of us can jettison our physical wallets.

Contactless Mobile Payments (Finally) Gain Momentum 

Deloitte predicts that by end-2015, five percent of the base of 600-650 million near-field communication (NFC ) equipped phones will be used at least once a month to make contactless in-store payments at retail outlets. This compares with monthly usage by less than 0.5 percent of the 450-500 million NFC-phone owners as of mid-2014. Contactless mobile payment will not be mainstream by end-2015, but niche adoption will be a major progression from near nil in prior years.

Looking further ahead, Deloitte expects the number of NFC-enabled devices being used for making in-store payment should rise steadily over the medium term, as consumers become more familiar with the process, and more banks and merchants in more markets accept this form of transaction. We expect the volume of NFC-smartphone transactions and the range of spend value to increase steadily over time.

TMT Predictions 2015

 

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While usage of phones to make contactless payments is expected to increase over time, they are likely to co-exist for some time with all other means of payment, from contactless credit cards to cash. It will be a long while before the majority of us can jettison our physical wallets.

The logic of using mobile phones to make in-store payments has long been recognized, and as far back as the late 1990s prototypes of vending machines equipped to take payment via mobile phones and over cellular networks were being exhibited at trade shows. The benefit of using short-range wireless technologies over a distance of a few centimeters to transmit payment information has also long been understood. Speedpass, the first contactless payment device (a key fob for use in gas stations) was launched in 1997. In the same year, the Hong Kong metro system introduced a contactless pre-paid fare collection system .

Indeed, the combination of contactless payment and mobile phones has existed for over a decade. The first phones with any form of contactless technology were launched in 2004 and the first phone with NFC went on sale in 2006. For many years, smartphones have been used to effect financial operations, such as checking balances, transferring funds, and transacting online.

But prior to 2015 the use of phones to make in-store payments using any technology (such as QR codes, or other short-range wireless technologies) has been minimal, with only a small proportion (ten percent or lower) of the smartphone base claiming to have paid in-store via their phone at any time.

Deloitte expects that 2015 will be an inflection point for the usage of mobile phones for NFC-enabled in-store payment, as it will be the first year in which the multiple prerequisites for mainstream adoption – satisfying financial institutions, merchants, consumers, technology vendors and carriers – are sufficiently addressed.

We expect the largest card issuers in the majority of the largest developed countries to have activated NFC-smartphone payments by end-2015, although adoption patterns are likely to vary by region, due to differing economics and technical (e.g. payments processing) models.
For financial institutions (card issuers and banks), NFC in-store phone payments offer continuity and improvement to their business models. They levy a commission on the transaction value, which they may share with a handset vendor or other entity. They underwrite the risk on the payment. Account holders are subject, with one of approaches used, to the same transaction limits as with a physical card and the repayment terms for credit card holders are the same.

The core advantage with any contactless smartphone transactions is the potential for greater security, when payments are made with phones featuring either built-in (via hardware or software) or SIM-based tokenization capability. When someone pays using an NFC-device, the tokenization facility creates a unique code (known as a token) which is sent from the device to the merchant’s NFC-enabled till. The credit card number is not transferred which means in the event of a breach, only card information used in traditional transactions would be exposed.

The card information is either stored with the issuing networks (such as Visa or MasterCard), or is stored in the cloud (HCE), or in a secure element on the phone. The token is only good for a single transaction and unusable otherwise. A fraudster who intercepted the transaction would only get access to the single-use token but not the card details .

Using a fingerprint, an eye scan or a heart rate sensor as an additional form of authentication makes the payment more secure still. The combination of biometric authentication, an embedded secure element and tokenization may provide more robust security than card swipes or chip and PIN.

What's In It For Merchants Adopting Contactless Mobile Payments

For merchants, NFC-equipped phones can enable fast and, with some systems, high-value transactions . All forms of payment have friction points: cash requires change and credit cards require PINs or signatures; but contactless payment requires only a card or device to be placed on a compatible reader. A fundamental benefit with some contactless smartphone payment systems is that the spending limit can be the same as the account holder’s credit or debit card limit. By comparison, contactless cards typically have a payment threshold (typically under US$50) and a transaction limit (the number of contactless payments made) before additional identification is required, so as to mitigate the impact of a stolen contactless card. As one example, the 23.8 million contactless card transactions in the UK in June 2014 had an average value of $11.03. This was about one seventh of the average transaction value of all credit and debit cards in the UK in the same month ($78.52).

Accepting NFC payment requires compatible point-of-sale (POS) terminals, and new POS terminals cost several hundred dollars. As of the start of 2015, there were already millions of NFC-ready payment terminals globally, out of the tens of millions of terminals in use around that world. Over the course of 2015 that base is likely to see a significant increase, particularly in the US where merchants are replacing their terminals to comply with the EMV mandate, these will most likely to be ones supporting NFC.

By end 2015, we expect a minority of merchants to be supporting contactless smartphone payments. These will often be retailers that have already made the investment in replacing POS systems, and will often be stores with a high volume of relatively low-value transactions, such as fast food outlets.

For most of the parties involved in the adoption of NFC mobile payments, the reason to adopt is financial. For consumers it is also behavioral. Using NFC-equipped smartphones to make payments will be adopted only if it can make the payment process simpler, sleeker or provide specific incentive in the form of digital coupons or discounts.

NFC applications covers a broad spectrum industries (Click Image To Enlarge)

The multiple components that enable NFC-smartphone in-store payments have been falling into place over the last few years. Hundreds of millions of smartphone owners have already submitted their credit card data (one or multiple cards) to a range of vendors so as to be able purchase apps, or download songs, or purchase additional cloud-based storage. Tens of millions of consumers have become acclimatized – over the course of many years – to the idea of contactless payments using their credit and debit cards, and in some markets their contactless transport cards. For most people, using a fingerprint reader is a rare requirement, typically occurring only when passing through border control in some countries. But as of early 2015 it has become an everyday action for approaching 100 million individuals using phones equipped with a fingerprint reader.

So for smartphone users who already have credit card data linked to their phone, have made contactless payments and are accustomed to submitting a fingerprint to unlock their phone or authorize an app purchase, submitting a fingerprint reading to authorize a contactless payment should not feel unfamiliar.

The existence of hundreds of millions of contactless credit and debit cards should not constrain the usage of NFC-enabled smartphones as an additional means of payment. We would expect that when offered a choice, about 30 million individuals may opt to pay using their phone instead of a contactless card.

For some, this will be because they are more likely to be holding their phone than their wallet. A few may decide to pay by smartphone to signal their status as early adopters. With some approaches, a smartphone may offer a higher payment limit than a regular contactless card.

Some NFC-based smartphone payment systems require pre-payment. We would expect these systems to remain popular, and co-exist with approached linked to debit and credit cards. Pre-pay would prevail among the under-banked.  

Bottom line

Contactless payment, initially in single-vendor closed-loop systems, has already been available for decades, but it is only in recent years that contactless cards have started to enjoy a surge in adoption. 2015 should see strong growth in contactless mobile and card payments usage, but the rise will be from a small base to a slightly less small base. Customer education and marketing will be essential to increase awareness of the ability to pay using a phone .

While we expect significant growth in usage in 2015 relative to the prior base, there many challenges remain before smartphone contactless payments can become mainstream, even in developed countries.

For financial institutions, smartphone contactless payments offer an additional way to transact which also may help maintain the current ecosystem, albeit at a cost in terms of commissions.

Retailers should consider four main benefits: reducing the need to protect customer data, the higher speed of contactless transactions relative to other payment means, the ability to attract consumers with higher disposable incomes, and the opportunity to provide more personalized experiences, for example by integrating loyalty schemes .

Handset vendors can differentiate their devices through the inclusion of components, such as a fingerprint reader, or a tokenization engine, that would enable contactless payments. These functionalities need to be offered as part of a payment ecosystem, and should be easy to use.
Over time, other contactless processes such as premise entry and exit could be incorporated in a handset; and contactless payment is likely to be combined with other processes at the point of transaction, such as collection and redemption of loyalty points .

All players should consider how contactless smartphone payments could be made even more secure. One possible way of doing this would be to use the location data routinely collected by smartphones as a security check . Deviations from a normal purchasing location could trigger a request for further verification, such as PIN entry.

In the medium term the impact of contactless mobile is wide: it provides the opportunity to deliver new customer experiences such as displaying special offers in store to NFC based devices, it may catalyze the removal of point of sales systems for merchants. And NFC may become incorporated into a wider range of devices beyond phones. 

COMMENTARY:   Although NFC technology has been around since the late 1990's, it has been tough slugging trying to convince merchants and phone users to adopt contactless payments.  There are several reasons for this as follows:

Fragmentation plagues the industry, hindering widespread adoption in the near term.

Many of the top retailers have their hands tied to CurrentC, a “clunky” retailer-led mobile payment initiative that, by relying on QR codes, keeps “friction” in the supposedly “frictionless” experience of paying with a smartphone. Some of the retailers that are not bound to a three-year exclusive contract with CurrentC will attempt to build out their own mobile-payment systems in an effort to keep a tight grip on their increasingly valuable customer data. And finally, existing players like Square and PayPal are building offerings to compete with the likes of Apple. That will all lead to a very disjointed space.

The mobile payment industry will be a tangled web for some time, delaying a universal change in consumer behavior. Mobile commerce will only take off once it is a habit — when people reach for their phones instead of their wallets to pay. “Habits, rather than conscious decision-making, shape 45 percent of the choices we make every day,” the New York Times reported, citing a Duke University study. If the stores people visit have various systems in place and differing capabilities for accepting mobile payments, consumers will simply forget to use their smartphones to pay, even when they are in a store that accepts the system they are signed up with (and people won’t use multiple systems). For widespread adoption, one or two power players that capture widespread consumer participation and work across different operating systems will need to be accepted universally.

Brands focus on integrating coupon redemption and loyalty programs seamlessly with payment.

One of the most critical things for mobile actions is simplicity. On smaller screens, every ask from a brand must be completed in one or two taps. People won’t start paying via mobile, then go into Passbook to dig out a saved offer, then go back to a brand app (or physical wallet) to pull out their loyalty card. Understanding consumer intolerance for hassle on mobile, retailers are working feverishly to automatically bring in all aspects of the transaction (offers, payment, loyalty) so that they can, say, automatically scan Passbook for a loyalty card or any usable retailer or manufacturer coupons. While this is not available publicly yet, the selling point of mobile payments to consumers is that it streamlines the checkout process. So until retailers take the thought out of it, adoption, engagement, and advocacy will suffer.

Consumer adoption and comfort level of mobile payments will be hindered as hacking continues.

“Secure” has been a word that has been pitched with every mobile payment solution, and while mobile payments may well be safer than traditional transactions, consumers are not buying it, not wholly, at least. CurrentC was hacked before it even launched, and large retailers continue to be targeted. Mobile payments combine two things with which we all feel a heightened level of susceptibility: smartphones and our credit card information. As hackers become more aggressive than ever, security breaches are only going to continue. To ease consumers’ fears, retailers and providers like Apple must amp up their lines of protection and put generous resources toward educating shoppers on the many ways they are protected.

Mobile payments hold a lot of promise for both the consumer experience and merchant operations. As adoption accelerates, it will be important for brands to not look at mobile payments as just an exchange of funds between a customer and a company. The “ability to pay” via plastic or even phone has become a commodity, and brands need to instead consider payments as part of the overall customer journey. At this point, the real value is in enabling relationships via the always-on mobile channel where consumers are willing to have a conversation if the brand or retailer offers genuine help.

Courtesy of the Deloitte report titled "TMT Predictions 2015" dated August 1, 2015 appearing in Deloitte and an article dated January 10, 2015 appearing in VentureBeat

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THE RISE AND FALL OF FUBU: A LESSON IN BRANDING AND IGNORING MARKET SIGNALS AND CHANGING FASHION TRENDS

FUBU co-founders J. Alexander Martin, Daymond John, Carl Brown anKeith Perrind in 1998 (Click Image To Enlarge)

I’m a sucker for Shark Tank – in which wide-eyed entrepreneurs pitch their “once-in-a-lifetime” ideas to a group of rich men and women running the gamut from owners of an NBA franchise to some schmuck they call “Mr. Wonderful,” who I like to imagine made his money selling doll furniture. One guy in particular, Daymond John, always appealed to me. While most of his fellow gurus earned their massive fortunes in the tech space, John had built the fashion empire known as FUBU. I thought. 

”Holy shit.  If he’s sitting next to Mark Cuban who made enough money to own the Dallas Mavericks, Daymond must be swimming in it!”

The "Shark Tank" TV series cast for 2015 from L-to-R: Mark Cuban, Barbara Corcoran, Daymond John (FUBU founder), Kevin O'Leary (Mr. Wonderful), Lori Greiner and Robert Herjavec (Click Image To Enlarge)

But as we all know, FUBU isn’t exactly flying off the shelves these days. What exactly happened to the company before, during, and after its massive success?

Daymond John was raised in the Hollis neighborhood of Queens. He didn’t come from a family with money. His parents divorced when he was 10 years old, and he would never see his father again after the separation.  He says.

“We went from middle class to poor.  I became the man of the house and started working at that age.”

 

Prior to launching his own line, John still looked to fashion as a means to make money. According to the Washington Post,

“Initially, it was through printed T-shirts, but not my own brand. I went and printed up some shirts when the Rodney King riots were happening in Los Angeles, with lines like ‘What happened to poor Rodney King?’ Then Mike Tyson got incarcerated, and we did the whole ‘Free Mike Tyson’ shirts. We would sell them at events and on street corners. It showed me something about the reason people buy clothes – that when there’s an emotional slogan or an emotional connection, products sell quicker. That’s when I started thinking about this concept of ‘For Us, By Us.’”

The original founders of FUBU in 1998 from left to right -- Keith Perrin, Carl Brown, Daymond John, J. Alexander Martin (Click Image To Enlarge)

By the end of the day, he had sold out of the hats and turned a $800 USD profit. He knew he was on to something – although he didn’t exactly have the capital to immediately capitalize on the momentum he had seemingly conjured out of thin air.  He told CNN.

“The next step could be how do I finance all of this?  Do I sell one or two hats and then re-up? Do I take out a loan from a bank or do I get an angel investor? Do I just chug along at $50,000 a year, $100,000 a year? When do I go balls out? Quit the job. Mortgage the house. Sell the car. Do I do this at all?”

While those were all smart questions to ask, $800 USD dollars worth of sales didn’t necessarily mean that he should quit everything. But that would soon change. According to CNBC,

“During his off hours, however, John would hit music video sets and try to coax rappers to wear FUBU apparel in the shoot, a move that would ultimately pay off as millions of fans saw their favorite stars wearing FUBU clothing.” 

John explains, 

“First it started with Brand Nubian in one of their videos, then Ol’ Dirty Bastard wore it in a Mariah Carey video, then Busta Rhymes wore it on one of his videos, and LL Cool J decided to wear FUBU on the “Hey Lover” video with Boyz II Men. Our product was front and center on the biggest and most influential personalities for our core consumers.”

Daymond John (center) with model Tyson Beckford (left) and rapper LL Cool J at a FUBU event in 2000 (Click Image To Enlarge)

As legend has it, John also used a bit of guerilla marketing in his attempt at reaching the top. John remembers.

“One of the most well-known hits we had with LL was during a Gap commercial.  He was wearing a pair of Gap jeans and a Gap shirt, but he was somehow able to sport one of our hats during the commercial. Then during his thirty-second freestyle rap, he looks directly into the camera and says, ‘For Us, By Us, on the low.’ No one at Gap nor any of their ad execs thought anything of it. It wasn’t until a month later that someone at the Gap found out, pulled the commercial, and fired a whole bunch of people after they had spent about $30 million running this campaign.”

 

After an appearance at a trade show in Las Vegas, he and his partners – J. Alexander Martin, Carl Brown and Keith Perrin – had managed to sell $400,000 USD worth of clothes that didn’t exist yet. Ultimately, his mother took out a second mortgage on her home after John was turned down by 27 banks for a business loan.

Soon after, his partners moved in, and they turned the home into a makeshift factory. John remembers.

“It was a typical Queens house, the kind you see on All in the Family.  It had three levels: A basement, the first level with a dining room, living room and the kitchen, and then three bedrooms upstairs. After we took out the mortgage, we took all of the furniture out of the house, sold what we could, and the rest we burned in the backyard. We put all the raw materials down in the basement, and on the first floor, we converted the living room and put eight sewing machines there and we hired some seamstresses. In the dining room, we put a cutting table where we cut all the fabrics. The kitchen, well, the kitchen was still the kitchen.”

 

By 1998, FUBU’s reached its peak with sales over $350 million USD.  John and his partners had used hip-hop culture and stars like LL Cool J – a fellow Queens native – to put FUBU’s clothing in seemingly ever rap video at the time. John and crew thought to themselves, “we should put out a record too…”

FUBU released the compilation album The Good Life on September 25, 2001 which featured the likes of LL Cool J, Nate Dogg, and Keith Murray. It lost the company an estimated $5 million USD. John told Fast Company.

“We didn’t know our numbers, we didn’t look at our numbers, we were spending money like drunken sailors, we were getting caught up.  What was the reason we were doing it? Did we get exposure? Yes, but from the business model, we died.”

 

“Fatty Girl” was the lead single from FUBU’s The Good Life album, prominently featuring the apparel in the music video directed by Hype Williams 

In a book he co-authored, The Brand Within, John explained that one of the major factors that led to the company’s demise is that they had too much product. He writes.

“Once you hit mark-down bins, it’s tough to climb out, because you’ve lost the sense that your clothes are fresh and vibrant.”

By 2003, FUBU left the U.S. market completely – except for its footwear division – and built business in Europe and Asia. Additionally, they acquired up and coming brands Heatherette, Drunkn Munky, Kappa USA, Coogi, and Crown Holder. Worldwide sales for those brands reached $200 million USD in 2009. Despite being absent from the marketplace, there was no catastrophic collapse or new people coming on board.

NSYNC wearing FUBU when the brand went mainstream (Click Image To Enlarge)

In 2009, John announced that FUBU would be making a comeback after a six-year hiatus with an aesthetic similar to “Carhartt meets Abercrombie.”  In speaking with WWD John said.  

“I wasn't too worried about losing FUBU’s brand identity since the kids nowadays have a three-year memory span, so most don’t have a sense of the brand’s roots.”

COMMENTARY:   Daymond John blamed excessive inventories as the chief cause for FUBU's failure.  Excessive inventories is not a cause, but a symptom that something bigger is going on. It is my belief that John did not have a good understanding of fashion retail marketing and the need to identify changing trends in fashion.  In short, John's ownership of FUBU's marketing strategy and failure to listen to marketplace signals is really what did in FUBU.    

John started FUBU as a fashion brand that appealed to and targeted young urban black males. Young urban black men were the biggest fans of rap and hip-hop music when it began to take off in the late 1990's.  John's love of rap and hip-hop music and associaiton with several well known rap and hip-hop music artists like LL Cool J, Salt-N-Pepper, Run-DMC, and others, provided the perfect vehicle to reach his target market.

John did not have a marketing budget and relied mostly on guerilla marketing to get the FUBU brand recognized in the marketplace.   Providing many of these black rap and hip-hop music artists with FUBU apparel that they wore on stage and on music videos was a great strategy to gain brand recognition.  The FUBU brand quickly become part of the rap music culture.  Young urban black males wanted to become part of this music culture and the FUBU brand was the perfect way for them to express their association with that culture.  As the FUBU brand grew in popularity among rap and hip-hop music fans, the brand took off, eventually peaking with revenues of $350 million in 1998.  

Many nascent rap groups undoubtedly embraced FUBU and Cross Colours due to accessibility and their finger-on-the-pulse relevance.  Later on many hip-hop insiders launched their own lines, with Wu Tang and Wu Wear, Russell and Kimora Lee Simmons with Phat Farm and Baby Phat, Nelly with Apple Bottoms, and more.  This crop of urban wear newcomers quickly became the "next big thing" in urban and hip-hop fashion, and the results were obvious:  FUBU, Tommy Hilfiger and Abercrombie & Fitch, who had grown and prospered due to the early popularity of rap and hip-hop music, began to lose favor with young urban black males.  The handwriting was on the wall, and John either missed these market signals or completely ignored them.

Clearly, J0hn failed to realize that fashion trends can change quickly and dramatically.  Like many startups that experience dramatic and early success, John learned too late, that success is a lousy teacher.  Those that assume that success will continue by doing the same things they have been doing often have a rude awakening.   

John's announcement in 2006 that FUBU would make a comeback, obviously has not been realized. Market forces in the fashion industry quickly change, and young urban blacks no longer emulate their counterparts of the late 1990's.  Though urban brands certainly enjoyed their moment, their popularity seems to be waning. Instead of Jay-Z wearing Rocawear, you’re most likely to see him in Givenchy. Though Beyonce is the face of House of Deréon (and is wearing it in their new ad!), we know the R&B and pop songstress truly has a soft spot for Balmain,  Lanvin  and Alexander McQueen.   Nicki Minaj loves her Versace as much as Kim loves her Kanye West.     

Courtesy of an article dated June 30, 2015 appearing in TheHundreds.com, an article dated November 17, 2014 appearing in Business Insider, an article dated October 9, 2012 appearing in Fashion Bomb Daily, and an article dated March 27, 2009 appearing in Marketings411

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