August Nineteen

We now share an additional midweek Fix, going deeper on core topics. Today Merchant and we alternate with newTV. We will get this onto a separate database - but if you want to unsubscribe but not lose Fix / Friday let me know. And I would love your thoughts on how we make this better  - hit reply.

The Covid effect
The FT headline captures the moment; A nation of shopkeepers shaken by the shift online
New stats on shopping behaviours give us more proof of the dramatic shift to online. As well as all the issues of dealing with this new type of demand, it has a colossal impact on the traditional retail model. As the FT says;
Because stores’ running costs are relatively fixed, profits quickly follow sales lower — independent analyst Richard Hyman thinks that as a rule of thumb, any retailer with sales below £200 per square foot will struggle to make much of a profit.
Benedict Evans has pulled together UK and US data to produce some insightful charts that illustrate the ecommerce surge - with indications that the behaviours are continuing even as lockdown eases. That is supported by some Google search data that the Economist has scrutinised; for example searches for yeast have dropped from the Sourdough frenzy, but are still 19% above average.
The sector that best typifies these changes is online grocery. In lockdown they saw business boom but couldn't deal with all the demand. They are all now building capacity and see this as a key part of their future.
Asda is a good example - after online sales doubled over the 3 months to July - and a quadrupling of online orders picked up in store - they are now targeting 1 million deliveries a week. Their delivery trial with Uber Eats is to grow from 2 stores to 25.
But another story on Asda has their CEO accepting the concerns over profitability;
“It’s true that when we are doing the picking and delivering it is less profitable than people coming into stores themselves,” he said.
But he added that the process was being constantly refined to make it more efficient and that “we find [online] customers tend to spend more overall and more in store, over time”.
Ocado are hoping they can profit from this surge but are about to switch grocery supplier from Waitrose to M&S - not the best timing and Waitrose are keen to switch customers from Ocado to its own delivery service. Watching new partnerships in this space is always worthwhile and the new Morrisons at Amazon service is interesting. I think Amazon need to buy a supermarket to achieve real scale in the UK grocery market and their closeness to Morrisons is evident. Morrisons has the advantage of being well integrated vertically, so their supply chain is one of the best in the business
As the online channel grows the app becomes more and more important. Switching supermarkets used to mean driving to a new destination and familiarising yourself with the store layout. Now it’s just a click to a new app. Something else to worry about.
This US news report on the Walmart partnership with Instacart highlights some of the key issues in grocery and covers trends like the involvement of Uber Eats etc. And this Twitter thread on this deal sees huge potential - and an intriguing role for Amex who were early investors in Instacart.
Action - do all your products have mobile hero images in all your retailers? Unilever know it makes a huge difference
Lifetime Value 
Perhaps the most contentious issue in commerce is the idea of lifetime value - considering the revenue or - even better - the profit earned from a customer over a number of transactions. Turning this into a lifetime value can encourage wishful thinking in projections and can overestimate the closeness of any relationship or loyalty.
But if you can engineer a sense of belonging for the brand and the customers, this can be really valuable.
A FT story on the demerged wine businesses Majestic and Naked covers lifetime value, with the FD of Naked saying;
“We look at what percentage of customers remain with us, how often they shop and at what sort of margin, and we project that forward,” he said. Over a 20-year period, the company estimates the average customer will return at least four times the cost of signing them up.
The slight flaw in this is (possibly) that the business has been running for just 12 years. So yit’s still a forecast. The article is worth reading as it shows you can take quite different approaches as a Merchant - both the store focused Majestic and online only Naked are doing well.
This McKinsey article on loyalty for a new generation is good background on this topic
Italic are trying a membership model for their luxury clothing and this podcast with their CEO is interesting. DTC agency Common Thread have a long post on Lifetime Value with some good case studies and they share 10 strategies.
CRM isn’t enough but email can be a valuable tool - this Twitter thread from eComChat has some good advice
Action - Can you develop a profitable dialogue with your customers? It helps drive revenue and reduce ad costs
Acquisition & Ads
Getting customers is the lifeblood of a good Merchant and making digital ads work has to be a priority. Good founders stay close to this.
A Fix friend shares the work Mars is doing to measure the effect of their ads and how they are solving the conundrum of shorter time lengths.
This Twitter thread is a good collection of thinking of what to try and what to avoid with social ads.
You need some story telling for your brand? You can call WPP. Or you can work with Disney
If you didn’t read this yet I highly recommend it; How to Use Creative AI to Crack Your FB Advertising
Action - How many ads are you testing and learning from? Could you accelerate this?
Epic battle
The squabbling about the app store rules has erupted, with Epic taking Apple on in a lawsuit over the new Fortnite payment system. Back story here; The Cuban Missile Crisis of mobile
This is quite a complicated issue and fortunately both Benedict Evans and Stratechery have covered it too.
Both agree that the app store is a good thing for everybody. But if you are Spotify or Fortnite, it’s an expensive thing.
A new Matthew Ball podcast covers Epic in some detail and after listening I sort of understand why Epic are taking this stand  - less about their greed and more about their desire to eliminate friction - so the market grows.
In the first week of February, for every dollar shoppers spent with the two rivals, 66 cents went to Walmart and 34 cents to Amazon, according to Facteus, which tracks credit and debit-card spending for millions of shoppers. In the first week of August, that gap narrowed to 55 cents to Walmart and 45 cents to Amazon
QR Codes
Instagram roll out QR codes globally as a way to share profiles. And this is a great piece on the return of QR codes. So much opportunity here. Especially as majority of chains call local-digital marketing an ‘untapped opportunity’
Action - Where could QR codes improve your customer journey? How could you test this?

European Fashion powerhouse Zalando reveals surge in sales and customers in first half of 2020
How UTA builds DTC businesses for influencers like Emma Chamberlain
Shopify have their first reality TV show on Discovery - made by a Shopify team
And in China, a TV show “Nothing But Thirty” drives fan interest in Luxury Brands with a follow up livestream selling the bags featured.
Good whitepaper on Defining Interactive Commerce - using Pinduoduo as an example.
Lots more on Pinduoduo the Chinese mashup of "Costco and Disneyland" in this podcast
Interesting report from Wunderman on ecommerce platform software
Action? There is so much opportunity for smart Merchants right now - I have expertise, experience and an extensive network. Lets talk about how I might help you - hit reply
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