Brands Create Customers

Consumer Reports has performed a series of tests comparing store brands with name brands in 29 categories of foods. They concluded that store brands more than held their own in terms of quality and value.

The inherent power of store brands

This isn’t big news, really. In previous posts we’ve discussed the inherent power of store brands and their many (potential) advantages over manufacturer’s brands. See our posts on Costco, Trader Joe’s (here, here and here), and Whole Foods (here and here).

Retailers define the customer experience. A strong store brand is on the same page as its customers–and it’s a page they’re writing together. Store brands should be the rule, rather than the exception.

Test results

From Consumer Reports:

In blind tests, our trained tasters compared a big national brand with a store brand in 29 food categories. Store and national brands tasted about equally good 19 times. Four times, the store brand won; six times, the national brand won.

What’s more, the store-brand foods we tested cost an average of 27 percent less than big-name counterparts—about what you’d find across all product categories, industry experts told us.

The retailer as the customer’s agent

In recent years the creative thrust of retailers has been to create their own customers through their own brand identities and brand relationships. Retailers position themselves as agents of customers, rather than agents of far-off factories. (That’s the secret of Costco, Trader Joe’s, and many others, in a nutshell.)

Old retail: the shelf. New retail: the platform

What we’re seeing in retail generally, and in grocery retailing specifically, is a transition from a shelf-focused business to a platform-focused business. In other words, it’s not the can; it’s the customer. When the store becomes a customer platform it can then discover its own brand potential, connecting with customers in many new dimensions, and moving them to new market spaces that competitor’s can reach.

Photo: SaCaSeA — Flickr

A current Fast Company article examines how different approaches to employee training can lead to very different retail brand experiences at the customer level. Apple comes out a winner; Gap and Starbucks less so.

Companies treat their employees like they treat their customers

These results are not surprising. Most companies treat their employees the same way that they treat their customers. Companies with strong, proactive brands (that lead by example) will usually foster employees with like qualities. Employees that can’t pass muster will be culled. Such companies will also tend to create strong, proactive customers with whom they can partner to advance the brand. This is all part of the brand chain that extends from the classic value chain forward.

Cursory employee development leads to cursory brands

Conversely, retail firms that treat their employees as “costs” are usually the same brand-challenged companies that treat customers as passive “targets” to be sold to. Their approach to employee development is cursory, and not surprisingly, so is their brand. In many cases, their “brand” is part of the sales pitch, and effectively terminates at the register. Such firms stand to reap little or no brand benefit from their employees—who should be one of their primary brand-building engines.

Building the Internal Brand

In our New Brand Glossary, here’s how we define Internal Brand Building:

Successful brands are built from the inside out, as an organic expression of company leadership, culture and capabilities. Employees are conditioned to “live the brand” when company leaders exemplify brand values through their actions. Internally and externally, brands are built by example.

Brands are culture first, then commerce.

Creating a brand means creating a culture

The key point to remember is that when you’re creating a brand you’re also creating a culture. This is a texture of personal interactions far richer than “messaging,” symbols and attempts to drill brand doctrine into anyone within earshot. In many respects, a company’s culture is its core brand platform. From strong cultures come strong brands.

Photo: openeye — Flickr

Home Depot has announced the creation of Orange Works, a new innovation and design venture with Arnell Group to design home products featuring sleek design and enhanced functionality. The products will appear under new Home Depot brands, such as Home Hero (TM). The idea is to boost sales at Home Depot stores with a line of nifty products that you might see in an Ideo link, or in Kevin Kelly’s Cool Tools.

Home Depot retail certainly needs a shot in the arm. Sales have been falling.

Design chic in a warehouse?

There’s some precedent for adding a high-style line to otherwise utilitarian offerings. Target has done well with a design line by Michael Graves, which has helped differentiate Target from the bleakscape of Wal-Mart. But Target is an accessible venue from the get go. Home Depot stores are impersonal navigational nightmares. Venturing into a warehouse designed for forklifts to look for objects of design would seem rather daunting, if not implausible.

Innovative home products with design chic would be much more accessible at Home Depot’s Expo Design Centers, where they would fit right in with the stylish kitchens, bathrooms, lighting, appliances, and the like. Unfortunately, the Expo centers don’t have the traffic of the Home Depot warehouses.

Towards an “Apple Store” of home products

The real solution would be neither A or B above. It’s for Home Depot to reinvent home product retail by creating a new venue for high-design, high-functionality home products. This would be an “Apple Store” of home products, expertly designed for customer interaction, showcasing the best-designed tools and home products that any mall tripper might be expected to buy. (No forklifts allowed.) It would also be a premier “gift store for guys.”

Arnell Group could certainly handle the design end. The key issue is whether Home Depot would be ready to take this next step up in retail.

On Friday, May 19th, Apple opened its stunning Fifth Avenue store in Manhattan. The large underground store is entered through a striking glass “cube” aboveground in a spacious urban plaza, making the entrance itself an iconic beacon. It’s an immediate landmark.

The Fifth Avenue store is a showcase of the Apple brand. It has lessons for all brand builders.

Framing the customer
To aspire to greatness a brand must frame its customers on a plane of greatness. Apple knows how to do this. Through its innovative architecture, Apple makes a trip to this store the virtual equivalent of visiting the Louvre in Paris, where visitors enter through an equally striking glass pyramid. Apple thus frames its customers in the context of Europe’s greatest art. The “cube,” though, does not mimic the Louvre’s pyramid. It honors it symbolically while making its own distinct statement. It invites customers to become active creators of art using Apple technology, not just spectators of past creations. Customers who enter the glass cube experience both the homage and the daring break.

The event
A cardinal rule of retail is to make your retail space an ongoing event that awakens your customers to new experiences. Your store is a realm of customer connections, not just a door and four walls. And “event” means drama—lots of it. Thus, opening a store becomes an exponentially dramatic event, flush with new connections. Apple is a master of such occasions. The indefatigable ifoApple has some Fifth Avenue event details. Here is a snippet:

The short early line and thunderstorms translated into a huge line just before and after the opening. At 4:10 p.m. New York Times tech writer David Pogue showed up with a new black MacBook, with the iMovie recording feature running, and was interviewing people. At the same time, we could hear the store employees yelling and hooting inside the store. At 4:30 p.m. there were 915 people in line, stretching around the block. Security guards split the line at business entrances to keep them from being blocked.

At about 5:30 p.m. dozens of store employees came up the stairs and started working the waiting line, standing on the plaza and making like cheerleaders–the crowd yelled back. At the same moment, Steve Jobs appeared at the entrance, generating more yells, including from some young woman who told Jobs, “You hot!” Apple’s architects and retail execs also joined the group, standing to the right of the cube entrance. Johnson and Blankenship hugged again. The press had arrived and were positioned to the right of the entrance.

With just 15 minutes left before opening, the young man who was #8 in line turned to his female companion and proposed to her. She accepted, and that set off a ripple of “Awwww” back through the crowd, and up to the Apple staffers. Some came over to offer their congratulations.

The waiting line was in a perfect configuration to watch the show and create sidewalk buzz. The closest people were both those at the front of the line, and those at the end. Both groups were looking straight at the cube, which is raised up several steps, creating a stage. The pedestrian area was jammed, and there was a huge crowd of people across Fifth Avenue trying to catch a glimpse of what was occurring.

Retail as an expression of brand
Apple rightly considers retail to be an expression of the Apple brand, on par with other brand expressions such as “design” and “user interface.” In other words, “retail” channels the brand. It is not allowed to impose constraints that bend the brand.

Apple demonstrates that retail space is also a spatial extension of brand, a multi-dimensional platform for customer experience and growth. Retail is thus a workspace for brand. You build out from the brand. It’s what your brand does with—and within—that space that defines who you are, and where you lead.

More on the Fifth Avenue Store from Apple.

Photo source: openeye, flickr

UPDATE: ifoApple looks into estimated construction and maintenance costs of the Fifth Avenue Store.

Fortune magazine has an update on Gap and its continuing struggles to regain fashion relevance. On the business side, Gap has reduced its debt and improved cash flow, but on the fashion side much remains to be done. Gap is not a fashion leader anymore. Same store sales have declined in 18 of the last 21 months. Some top talent inside the company has left. And analysts question if Gap has simply lost its customer vision.

Levi-Strauss demonstrated that rising to fashion icon status is no guarantee of permanent success. Icons can easily become relics, effectively dead, rigid and remote.

Competitors make their customers look “special”

In San Francisco (Gap’s home turf), Gap now has very visible competition from nearby H&M and Zara. Visit those stores and you’ll see what Gap could be, but currently isn’t. Both competitors flash a fashion presence that reaches out and embraces the customer right at the door. It’s as if they’re saying to the customer: “We’re here to make you look special. Everything in here is all about you.” So in you go, gazing wide-eyed at all the new self expressions you had never thought possible.

While Gap makes you look like . . . Gap

At Gap, the brand still seems to say: “We’re here to make you look like Gap. Everything in here is us.

It’s a very big difference.

Singapore outclasses Gap along Orchard Road

Having just returned from Singapore, I saw first hand just how far Gap has to travel to get back into the global fashion game. Frankly, Gap has a long way to go. The spiffy malls and boutiques on Singapore’s Orchard Road make your average Gap store look like Old Navy. At the huge Takashimaya department store, the displays, presentation, styling and variety in the different “brand boutiques” are simply stunning. Style, cut, color and detail jump out at you from every direction. The same can be said for the dazzling Esprit store in nearby Wisma Atria. Gone is the famed super-saturated sub-teen panache that characterized the classic American Esprit. Now there are carefully tailored lines of Euro-sophisticated pieces designed to be combined and recombined, capable of energizing one’s whole wardrobe. And Esprit is growing attractive sub-brands, such as the ESP “sport” line, to plumb adjacent markets.

These brands have a life to them, a vibrant immediacy, even when hanging on the racks. They aren’t just “clothes,” and they’re certainly not “inventory.” They’re an incarnation of you, inviting you to touch. It’s as if you’re surrounded by palettes of potential as you walk through the store.

Limits of the Gap look

In the end it all comes down to what a business does with its design sense. The Gap approach seems intent on creating a merchandisable look, which it wants its customers to adopt. Its competitors seem headed on a different course, creating customers who are simply more fashionable.