Category Archives: Business

Toys ‘R’ Us Regains Ground On Wal-Mart


Citing a recent ReutersreportRetailWire editor-in-chief George Andersonkicked off  last week by bringing an oddity to the attention of our insider retail industry audience:  “Something unusual happened this past holiday season. Walmart gave up share of toy category sales.”

Apparently, a series of missteps, including cutting product selection and failing to add floor space before Christmas, contributed to a less than Walmart-like performance for the selling season. Toys ‘R’ Us took full advantage of the opportunity, in many of its stores offering a selection of 7,000 toys to Wal-Mart’s 1,800. Research by NPD Group pegged toy stores as gaining a half-a-point share during the holiday season while mass merchants lost three percent.

Further, Toys ‘R’ Us brought in a large number of exclusive toys to make sure there would be further differentiation from Wal-Mart and Target.

TRU, which filed for an IPO in May of last year, now has a solid holiday season under its belt. Its U.S. sales were up 5.4 percent in December. After years of learning lessons the hard way as Wal-Mart undermined its business, gaining a bit of market share back from the Bentonville Behemoth at a time when the retailer is looking to raise up to $800 million is good timing indeed.

We asked our RetailWire BrainTrust panel of retailing experts if they thought toy stores as a channel have regained the advantage lost over the past couple of decades to mass merchants.

“Walmart’s poor showing in the toy category and loss of market share can be, in my opinion, directly related to the lagging affects of John Flemming’s ‘Project Impact’ debacle,” wrote Charles P. Walsh, president, OmniQuest Resources. Mr. Walsh spent 15 years working in the Wal-Mart offices, specifically in its Global Procurement Division.

“Walmart plans and executes merchandising strategies a year in advance, and while able to affect assortment changes closer to events, the assortment and shelf space were determined under a different executive leadership direction,” commented Mr. Walsh. “In addition to the reduction in assortment and shelf space, Walmart also made a critical mistake in placing a large portion of their assortments in the indoor garden section which quite possibly rendered it invisible to many shoppers.”

TRU’s concentration on making exclusive deals was seen as a key strategic move by many of our commentators.

“TRU gained share by returning their focus to what they began with—the assortment,” wrote Bill Emerson, president, Emerson Advisors. “They returned to being the ‘toy expert’ as opposed to trying to compete on price with the masters of that game. There’s a lesson here for all retailers struggling to compete with the mass giants—it’s the product, stupid. Give customers a superior alternative in product assortments and you will succeed. Try to compete solely on price and you won’t.”

A number of panelists pointed out an element absent from the Reutersarticle; the influence of online sales on holiday shopping habits.

“As a retailer, toys are a hugely inefficient category,” commented independent consultant Gene Detroyer. “Inventory has to be built and can get out of balance easily; sales are concentrated, price-cuts are common and leftovers are more than prevalent. Given a choice between toys, groceries and consumer electronics, there is no choice. Why turn your store upside down to accommodate toys, especially when the consumer is going online?

“Walmart and Target are likely the winners here. They didn’t risk margin. They didn’t risk shelf space allocation and come January, they didn’t have to deal with toys.”

Certainly, not all BrainTrust panelists took TRU’s recent victory as a harbinger of a sustained trend, nor indication that the big boys are incapable of scrappy innovation.

“If sales were not up at TRU, it would be a death knell in the wake of previous losses and the deployment of hundreds of holiday pop-up stores. (What was the ROI on that?),” quipped Carol Spieckerman, president, newmarketbuilders. “I think Target has done a great job of differentiating its toy offerings through exclusives and going a bit old school/retro with classic and developmental toys while offering at-a-price options to keep traffic flowing. Walmart is not ceding its hard-won toy gains to anyone and a wee uptick from TRU certainly doesn’t prove that Walmart has.”

 


Bangalore Startup, Arrow Devices Develops Next Gen USB Chip


Arrow Devices is a semiconductor startup based in Bangalore that has developed a chip design for the next generation USB standard (called SuperSpeed USB 3.0) completely out of
Bangalore.arrow_devices

Arrow Devices’s USB 3.0 design transfers data at 5 Gbps , is 10 times faster than the existing USB standard and is capable of transferring a 25GB High Definition movie file in under 2 minutes versus 14 minutes taken by traditional USB implementations.

The company has bagged Nvidia, one of the top-5 semiconductor companies in the world as a customer for this chip design.

Started in 2008, the company plans to license their design to chip manufacturers for fabrication. As far as USB 3.0 is concerned, the next generation USB standard is expected to hit the market in the coming year, though companies like Intel have clearly stated that they will not support USB 3.0 until 2011.


Obama to Meet With Zuckerberg & Other Tech Execs During San Francisco Trip


U.S. President Barack Obama is paying a visit to Facebook CEO Mark Zuckerbuerg and a roster of other technology executives during a trip to the San Francisco Bay Area this week.

On Thursday, February 17, Obama is slated to sit down with Zuckerberg and other tech CEOs at a private dinner during his overnight trip to the West Coast. President Obama will not be making any public appearances in the San Francisco area.

According to White House Press Secretary Jay Carney, “The focus of the discussion is innovation and job creation, and these are representatives of businesses… who know a lot about private sector job growth.

 


Apple Now The Most Valuable Tech Company By $100 Billion


Apple as the most valuable tech company would be short-lived, let’s look at where we are today. As of market close this afternoon, Apple is now a full $100 billion past Microsoft.

Yes, Apple is the most valuable tech company in the world by $100 billion dollars.

 


Nokia Confirms Microsoft Partnership, New Leadership Team, Organizational Changes


Ahead of its Strategy and Financial Briefing in London, Nokia has sharedsome details on what it plans to announce at the event. As expected, the company is aligning its strategy with Microsoft.

By now, you’ve probably seen the ‘burning platform’ memo penned by the fresh CEO of the world’s largest mobile phone manufacturer, former Microsoft executive Stephen Elop

In it, Elop addressed the company’s formidable competitors (Apple and Google with its Android OS strategy), who are consistently out-innovating Nokia and steadily taking over its market share. Clearly, Elop was gearing up for the announcement of some significant changes with regards to Nokia’s strategy going forward. He delivered. (full press release below)

Here’s the meat:

– Plans for a broad strategic partnership with Microsoft to build a new global mobile ecosystem; Windows Phone would serve as Nokia’s primary smartphone platform.
– A renewed approach to capture volume and value growth to connect “the next billion” to the Internet in developing growth markets
– Focused investments in next-generation disruptive technologies
– A new leadership team and organizational structure with a clear focus on speed, results and accountability

Windows Phone to become Nokia’s primary smartphone platform = huge. Microsoft reportedly offered Nokia hundreds of millions of dollars to make that switch.

Nokia will use Bing for search functionality across its devices, while Nokia Maps will become core to Microsoft’s mapping services. Nokia’s content and app store will be integrated with Microsoft’s Marketplace.

 


EBay says PayPal revenue will double by 2013


The company expects PayPal’s revenue to reach $6 billion to $7 billion by 2013, PayPal President Scott Thompson said. Revenue in the unit was $3.4 billion in 2010.

PayPal, which is used by 59 percent of the top 100 online merchants in the United States and 40 percent in Britain, is on track to gain market share of up to 24 percent by 2013, executives said.

EBay investors are anxious to see stabilization and growth at the company’s marketplaces site, which represents the bulk of revenue — $5.7 billion in 2010.

PayPal mobile transactions are estimated to double to $2 billion in total payment volume this year, executives said. The company has already announced that mobile on marketplaces will double to $4 billion in gross merchandise volume this year.


AOL Acquires Huffington Post for $315 Million


AOL has acquired Huffington Post for $315 million in its biggest move since it became an independent company in 2009.

The acquisition will create a new online media conglomerate that already owns news websites TechCrunch and Engadget. According to The New York Times, the deal is worth $300 million in cash with $15 million in stock.

As part of the deal, Huffington Post co-founder Arianna Huffington will be appointed president editor-in-chief of all of AOL’s content. She will not only run The Huffington Post, but will lead AOL’s news, tech, women, local, multicultural, entertainment video and community content businesses in an AOL entity that will be known as the Huffington Post Media Group.

The Huffington Post Media Group will also be in charge of MapQuest, AOL Music, AutoBlog, Patch, Engadgetand TechCrunch. Huffington Post CEO Eric Hippeau and Chief Revenue Officer Greg Coleman will be leaving Huffington Post, according to AllThingsD.

“By combining HuffPost with AOL’s network of sites, thriving video initiative, local focus, and international reach, we know we’ll be creating a company that can have an enormous impact, reaching a global audience on every imaginable platform,” Arianna Huffington said moments ago in a blog post announcing the acquisition.

AOL now claims that the combined entity reaches 117 million unique visitors per month in the U.S. and 270 million worldwide. AOL CEO Tim Armstrong says the new organization will be “a next-generation American media company” focused on content, community and social experiences.

 


Rising wages in China, Toy Industries in shock!


Rising wages in China are sending a jolt through the world toy industry, prompting a revival of factory capacity in the West, industry leaders are saying ahead of the Nuremberg Toy Fair.

The bulk of dolls on view at the annual toy expo, which opens Thursday in Germany, traditionally are western-designed and carry western brands but are churned out by low-pay, plastic-moulding factories in southern China.

Chinese factories saw timber into wooden blocks, they weld and bolt together ride-on tractors and scooters. They assemble diecast toy cars and electronic robots. In Germany, Europe’s biggest toy market, nearly 80 per cent of today’s toys are Chinese made.

But not for much longer.

For a start, western shoppers are suspicious after several toy-safety scares in recent years involving toxic paint and small, detachable parts that babies might swallow. Chinese factories were blamed.

Now inflation in China is also driving up both wages and factory- gate prices. Officially, Chinese inflation is running at 5 per cent for consumers, but the true figure seems higher. The renminbi exchange rate is up, and China’s supply of cheap labour is running out.

Retail toy prices in Europe seem likely to jump as much as 30 per cent this year, and vendors say China is a major reason for that.

German companies say the prices Chinese factories are asking are getting steeper, and some believe that manufacturing in Europe is affordable by comparison. European inflation and pay are flat.

The trend is likely to be a hot topic at the toy expo, which is only open to the wholesale trade. German professional buyers returning from China say the days when southern China’s factories could rely on an endless supply of cheap migrant labour are over.

‘The workers are leaving to move over to higher-value manufacturing,’ explains Martin Boeckling, chief of a German purchasing cooperation, Spiel und Spass. He says Beijing no longer recognizes toys as a priority manufacturing sector.

Although an estimated two-thirds of toys sold worldwide are Chinese made, the sector contributes only 1.5 per cent of China’s gross domestic product.

Beijing has decided that its available labour resources need to be redirected into manufacturing types that add more value, including cars and electronics.

China is leaving the low-profit toy business behind and there is no obvious successor in the low-wage countries.

In centralized fashion, Beijing would also like to spread factories back to the places where Chinese people live, and reduce the vast migrations by China’s job nomads at times of festivities.

Reducing the concentration of manufacturing in the south would help stop some of the snarl-ups on China’s roads and railways. The rebuilding of those same roads and railways is also sucking away labour.

Otto Umbach, chief of another German purchasing cooperative, Idee und Spiel, adds another point: ‘Chinese universities are graduating 6.5 million people per year. They don’t want to work on factory assembly lines.’

China, he forecasts, faces a shortage of unskilled manual labour. Toy factories will have to hike pay 10 per cent this year.

European importers might be able to absorb that, but not combined with a jump in the price of raw materials and the cost of sea- freight.

‘At the start of 2009 you could land a shipping container in Europe from China for about 600 dollars,’ said Boecklin.

‘Today it’s costing 1,400 or 1,500 dollars.’

Several European companies are thinking of manufacturing closer to home.

Simba Dickie Group, a German company based near Nuremberg, has set up a new factory in France and has modernized its German plants.

Paul Heinz Bruder, head of a small German company, Bruder Spielwaren, is one of those who does not need to return. He never left. He said the logistics of supplying European shops from European plants always made better sense and ensured quick order fulfilment.

 

 


LinkedIn into IPO


The flotation, expected to value founder Reid Hoffman’s $21.4% stake at up to $642m, is thought likely to happen within the next few months and will involve the sale of at least $175m of new shares as well as the disposal of some existing stock by LinkedIn’s current investor

LinkedIn is growing at breakneck speed, almost doubling its membership to more than 90 million users last year in 200 countries. Speaking about the relative merits of LinkedIn and Facebook at an Internet conference in San Francisco in November, chief executive Jeff Weiner said the secret to LinkedIn’s long-term success would be that people like to keep their professional and private lives separate. “While many of us in college probably were at parties having a good time, I don’t know that many of us would look forward to having a prospective employer have access to pictures of those events,” Weiner said.

LinkedIn inched into profit in the first nine months of 2010, recording a $10m surplus, as revenues more than doubled to $161.4m. It offers a free service allowing members to create personal profiles emphasising their business qualifications, but makes its money through a premium subscription service, costing up to £63 a month, which gives members a greater level of contact with potential business contacts and employers and offers up its database to help users locate the people they need.


WHY CUSTOMER LOYALTY MATTERS A LOT IN RETAIL BUSINESS?


Last time I talk to you about customer acquisition cost. The lesser the cost, is better your marketing department. But what after that? Maintain a good affordable customer acquisition budget you have to maintain customer loyalty.  The research in this field had proved that highest customer loyalty companies grow at twice than their competitors. It is actually related with an emotional connection. There is no real value in satisfying customers without creating an emotional connection. As I am from a retail background, I had seen several instances like customer came and ask for a particular salesman for assistance. If he is not there customer will leave the showroom and will come back when he is there. There is an advantage in creating such a customer relationship but sometimes it may affect the other way if that salesman leaves the company. Mostly it is based on salesman attitude. The more he enjoy his work, the better he can create relationship with customers.

So we were talking about customer loyalty. By increasing customer loyalty, there are lots of advantages like you can sell your products in high value than market value. If a mistake is made by the company, still the loyal customers forgive this mistake. More over these loyal customers are also a way for marketing, marketing by WOM (Word of Mouth), somewhere we use this term as Mouth to Mouth marketing (MTM). This sort of advertising has more effect than usual advertising. The most impressive advantage is that these loyal customers will have the life cycle greater than other customers.

Raising customer retention rates just by 5% could increase the value of an average customer by 25% to 100%. 5% Improvement in Customer retention translates into a doubling of margins.

For gaining a better loyalty, the primary thing is to train your staff properly. This training must be a continuous procedure by analyzing the customer feedbacks and designing the strategies accordingly.

 

Customer retention is the basic of advantage of customer loyalty. You can realize that customer retention of 2% can reduce your cost 10%.  As time goes,  we will gain a lot from loyal customers as sales revenue and MTM advertising. Lets see how the customers will grow as time goes

By this graph we can see how the growth on sales happens. This will help to

• Increase the retention rate
• Increase the referral rate
• Increase the spending rate
• Decrease the direct costs
• Decrease the marketing costs
We will talk about the calculation of customer loyalty, how to analyse it etc. soon. Now I am hungry and I am gona take my lunch…
Good Day
ever Anu

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