Consumers as Co-Creators, Creatives as Curators

The Obama/Biden Presidential Campaign was awarded the prestigious Titanium and Grand Prix awards at the International Advertising Festival held in Cannes this June. David Droga of Droga5, who chaired the jury, cited the campaign’s sophisticated use of digital media, its ability to build community, and its willingness to allow the brand to be built from the bottom up by consumers rather than dictated by an agency as prime factors in its selection.

He went on to say: "[The campaign's leaders] were curators as much as creators. They created the framework and allowed others to contribute." By others outside the campaign, the jury mentioned will.i.am and the artist Shepard Fairey (for Shepard Fairey’s approach to art and advertising, see him on YouTube).

For quite some time (over 10 years at least), we have been hearing about how customers through customer-generated reviews, customer-powered search, and a host of wiki applications have assumed a dominant role in marketing communications (for those who have been willing to listen, that is). We have heard how new applications of technology—everything from Twitter to Flickr—are changing consumer and citizen behavior in ways we have yet to fully understand. Whether it’s the election in Iran, the sudden and enormous popularity of Susan Boyle, or the Dell Hell created by Jeff Jarvis (author of What Would Google Do?), the shift toward customer-controlled marketing and communications has occurred. And it’s our role as marketers, particularly in the retail arena, to make sure that we acknowledge it.

One of the comments posted by Kevin from Chicago on Advertising Age Online, where this story appeared, is particularly relevant: “Here’s to the new triple bottom line of branding: do great work, build community, listen to it, and let your customer tribe show you how to lead.”

(Illustration by Shepard Fairey)

More on Back to Basics: Curbing Excess

The embarrassment of excess continues. Bloomberg reports that Saks is cutting orders from vendors 20% this year and is forecasting improved gross margins:

“The cuts may rein in what Saks Chief Executive Officer Stephen Sadove calls the ‘enormous excess’ that existed last year in stores that cater to the wealthy.

Across the board you are going to find less of the sizes, less of the availability in almost all of the categories,” Sadove, 57, said yesterday in a telephone interview. “You are probably going to see less aggressive markdowns than you saw last year.”

Is anyone out there besides me saying, “duh?”

Put together the 20% reduction in pricing offered by D&G and other high end designers and manufacturers (previous blogs) with the, at least, 20% overstock issue and you might have a good indication how retailers and designers—not just the economy—have contributed to their own problems.

Now CEOs—from Nordstrom’s to Bloomingdale’s, Neiman-Marcus to Saks—are trying to point out that scarcity is a part of luxury, that their inventories have been bloated lately, and that “we’ll not see these levels of excess again.” Even Gucci CEO Patrizio di Marco chimed in:

“We don’t need 75 variations on the same handbag. Two or three are enough.”

The “greed-is-good” mantra—so eloquently stated by Gordon Gekko in the 1987 movie Wall Street—lies at the root of most of the issues we’re facing from housing to health care, retailing to manufacturing. No one wanted to listen to the voice of caution when the party was raging. It’s only now we’re hearing the plea for “enough,” as the luxury liner, the SS USRetail slowly sinks beneath the cold waters of excess.

BTW, the tagline for the movie Wall Street is “Every dream has a price.”

Back to Basics: Giving Customers What They Want at the Right Price

I might also call this blog entry—Hangover, Part II—or How Egotism Overwhelms Business Sense.

Over the past 20 years as a multichannel retail consultant, I have seen egotists willfully drive their companies out of business, close down healthy businesses prematurely, and choose the wrong path, simply because it was it was they path they had chosen. It’s dumbfounding, but hardly surprising.

I tend to be much more forgiving when entrepreneurs act out their bad behaviors than when professional managers do. After all, it takes a healthy ego to envision and start a business, execute it single-mindedly, and will it into success. I also extend this kindly forbearance to designers, who seek to impose their vision onto the world. Artistic vision, unless it is truly divinely inspired, like Mozart’s or Paul Klee’s, is systemically ego-centric.

When Domenico Dolce and Stefano Gabbana announced this week that they were reducing the price of their products approximately 20% across the board, I was very encouraged. Here were two creative people recognizing that their vision is realized through the labors of over 3,000 other people, whose lives and livelihoods are an integral part of their art (see yesterday’s blog entry). They also stressed that fashion, life, whatever, has come somewhat unglued, that there needs to be a return to the more centered life that they found roughly 20 years ago when they entered the business.

Actually, their sense of when consumerism began to overtake rational commerce is a bit off, but that is irrelevant. Both designers and retailers were heavily entrenched into excess in the ‘80’s. The party had long been underway.

It should be no surprise, then, when companies, like Aeropostale, score a magnificent 19% increase in same store sales from May 2008 to May 2009. Many observers might say that it is the promotional policies of Aeropostale that have ensured its growth during these downtimes and that discounting is the root of all evil in retailing, a practice that has conditioned consumers to buy on sale and has ruined retailing in America. Partly true, but consumers were buying on sale precisely because everything was overpriced.

Why Aeropostale is racking up huge points is simply because Julian Geiger, CEO, and his team know how to execute the basics as professional managers. Look at these remarks from a 2004 interview in Business Week:
“We have a promotion going on all the time. We match supply and demand and demand and supply every day by seeing how many weeks of supply we have of an item. Under this umbrella we can fine-tune the elasticity of demand to know what the price should be. If something is selling too fast, we'll actually raise the price. Of course, it's still on sale.

Everyone else tries to dictate what they feel the customer should wear. We generally want to listen to our customer and give them what they want at the right price.”

BTW, are Supply and Demand and Basic Marketing still taught in business schools?

Designers, More Upscale Stores Cutting Prices: Too Little, Too Late?

American consumers, designers, and retailers seem to be waking up with a very bad hangover. The twenty- year-plus spending binge is over. Here are Dolce & Gabbana speaking in the WWD article of the past week:

“The idea is to peel off the superfluous because there are too many clothes, too many seasons, too much advertising — too much of everything that is tacked onto the final price. We want to go back to how things were 20 years ago. It’s about drawing the line,” he said.

Gabbana doesn’t believe customers will feel betrayed or taken for a ride by having paid more in the past. “Our goal is the consumer and to keep the thousands of people that work for us,” he said.

Added Dolce: “This is the only way to save the market and our companies. It’s time to turn the page.”

What most interests me is WWD having asked the question “whether or not they feel their customers will feel betrayed.” Of course they will—in proportion to the amount of guilt they felt when the purchased the overpriced product in the first place. The “I’ve-just-gotta-have-it days, the “IT” bag, the name brand jeans, the whatever—none of this matters much in the New Wave of Retailing. What matters are quality and value, sustainability and responsibility.

D& G designer jeans will now cost $450 instead of $695. Did they get the message?
(Photo credit: www.freedigitalphotos.net).

Demand A Bit of Luxury in Every Product You Buy or Produce

Nicolas Ghesquiere, creative director of the House of Balenciaga, is quoted in the current issue of Vogue, as saying: “We can’t keep making more, more, more to keep people craving newness. That’s not the value of luxury. It takes time to make something well.”

Ghesquiere, along with Stella McCartney and Francois-Henri Pinault, chairman and CEO of PPR, were three of the speakers at a conference held the end of March in New Delhi on Sustainable Luxury, which was sponsored by the International Herald Tribune.

Each of the speakers underscored something that I believed to be self-evident—that luxury goods represent the finest in craftsmanship, that they are timeless creations, that their luxuriousness lies in their extraordinary value in terms of their beauty, the skill on the part of artists and craftsmen and –women in their execution, and their respectful use of some of the world’s most precious materials.

Most interesting were Pinault’s comments on corporate responsibility and its connection to sustainability in the luxury business:
“Because a luxury product is the result of such painstaking efforts to meet the highest expectations of quality, it is not subject to the whims of style or season.

Later: “Buyers of luxury goods naturally expect the best. From design to the point of sale, via the working conditions of those involved in the process, everything must be a model of transparency. From luxury, people expect perfection but also sincerity. By ‘sincerity,’ I mean faith in what is being created, belief in what one is doing, and rejection of deceit. These expectations of sincerity should guide the luxury business, make it irreproachable.”

To my mind, these are guidelines for all the products we buy and produce, whether or not they may be termed luxurious. (Pictured above, work by Janet Swartz from JBird Jewelry).

Slow Food Movement: An Example to Designers and Retailers

Re-engineering our product development and production cycles toward sustainability is a long-term goal and will require patience, compromise, and time getting there. A quick look at what has happened to the slow food movement—both in food production and retailing—provides some interesting lessons for designers and retailers that this blog will look at over the next two days. As this movement has built momentum over the past 40 years, it has extended from the rise of an increased number of organic farms to the flourishing of a number of artisan bakeries and dairies. It has included the national growth health food stores and restaurants, the rise of gourmet restaurants featuring locally or regionally produced menus, and an awareness among certain segments of the public about the nutritional and gourmet value of fresh produce and small harvests.

Small local or what we used to call “truck” farms are now selling produce at Farmers’ Markets in many major cities. Philadelphia, for example, has several farmers’ markets spread throughout the city, some are open seasonally twice a week; others, like the one in Rittenhouse Square, are open all year round. Two other markets—Reading Terminal Market and the Italian Market—sell a mixture of large commercially produced fruits and vegetables as well as local produce year round (with a strong slant toward the larger commercial providers at the Italian Market).

What interests me most about these markets—and their parallels to retail—is not the product being sold, whether or not it is produced by a large or small commercial growers or whether or not the products are organic, although to be sure these are important issues. What is most important is how much transportation is involved in getting the product to me, how much I have to travel to get it, and how much transportation affects pricing. I am also interested in the housing and warehousing issues around the selling of the product because that is another area where our carbon footprint becomes quite large.

The local farmers—many of them in Philadelphia being Amish or Mennonite—have relatively low transportation costs. Besides the transportation costs in harvesting, which in the case of the Amish is often horse feed or, for Mennonites, gas for small tractors, transportation involves bringing the goods to market in the cities. The produce is generally priced competitively with local supermarkets, sometimes higher. Only during peak season, can you find any real deals at the Farmers’ Markets. People shop there because they want to support local farmers, buy fresher, often organic food, and enjoy the give-and-take of buying at an open air market. The Philadelphia Farmers’ Markets also sell meat, eggs, milk, cheese, jams and jellies, bread, and other home-processed foods.

Some local farmers sell at Reading Terminal Market, where there is, for example, a large stand of Amish-produced foods, clothing, and souvenirs. Other produce vendors at Reading and the Italian Market buy from the Philadelphia Regional Produce Market or other produce market wholesalers. Their produce is offered without extensive packaging or cleaning for that matter—packaging and repetitive cleaning being other larger consumers of carbon energy.

Reading and the Italian Markets have no or low warehousing costs. The Reading Terminal merchants share space under the roof of the old Reading Railway Terminal building so that they do not require separate buildings, with separate heating and electricity. Many of the Italian market vendors started out selling their products from outside stands. Although most of them still sell from stands, many have built simple concrete block storefronts where they sell more delicate merchandise and maintain back inventory. Packaging is reduced. Many customers bring their own bags or buy from local deliverers like John (pictured above), who sells paper shopping bags at fifty cents apiece or will deliver your products on foot for an agreed upon price.

All of the markets above cater primarily to inner city residents who walk, bike ride or bus to the markets, further reducing the transportation impact of the food consumption process. Any way you assess buying from these vendors, the reduced amount of transportation, either getting the product to you or you to the product, less packaging, and reduced warehousing and selling costs make these products attractive from a social and environmental point of view. Customers understand that and are seeking them out in greater numbers.

I have looked at the Farmers’ Markets in some length because it helps break down the real costs involved in the organic and slow movements. Because much of the real cost of buying goods in the United States is externalized—that is, we do not necessarily pay for the true social and environmental impact of production—we do not have a full understanding of the true price of products, be they grown or manufactured. As consumers become more conscious of consuming, they will begin to start making inquiries both about the costs of production, manufacturing, selling, and disposal. And we’d better be prepared for them. More importantly, we should start opening up about our practices now so that we do not lose our valued customers we worked so hard to get in the first place. More to follow.

Produce locally, think globally

Localization in the slow food, slow fashion, and slow architecture movements does not imply protectionism and should not be confused with the current push to “Buy American.” Rightly, in an editorial today in the New York Times—“The Peril of ‘Buy American’—the editors note:

. . . as the states and municipalities start spending stimulus money, the idea [of Buy American] is starting to look as counterproductive as it should have looked from the beginning. It is sparking conflict with American allies and, rather than supporting employment at home, the ‘Buy American’ effort could ultimately cost American jobs.

What is at issue is the simple fact that both domestic and foreign manufacturers cannot ensure that every piece of the products they make—including all of the components, the manufactured and raw materials—are made in the United States. Many producers of products are bowing out of bidding for projects funded with stimulus dollars simply because of the provisions in the “Buy American” clause. Efforts on the part of Obama to persuade local and state municipalities to be flexible about this clause or his assurances to the World Trade Organization and our international trading partners that we would not pursue a policy of protectionism go largely unheard.

Again, we have jumped to an emotional solution, not a reasoned one. Buying 100% American-made products is nearly impossible because we have surrendered our role as manufacturers through mismanagement, greed, and/or outsourcing, to name a few of the many reasons that turned the world’s greatest manufacturer at the end of WWII into the world’s largest importer of manufactured goods.

Take the once thriving American apparel industry. It now barely exists. Most apparel companies manufacture off shore although they retain a few domestic manufacturers of some items, primarily to ensure quick turnaround of popular choices. Increasingly, however, offshore production is becoming as expensive as domestic production when you factor in the high cost of transportation and energy, which now are beginning to offset the high cost of American labor. The high cost of American labor is itself becoming somewhat of an outdated concept as more and more Americans are now living in tents and asking to work for food.

Looking back when I was growing up in Oregon—hardly a manufacturing mecca—three apparel manufacturers dominated the region—White Stag, Jantzen, and Pendleton Woolen Mills. The iconic White Stag Sign that proudly displayed the “Made in Oregon” tag at the entrance to what is now Old City has dropped the “made in” to display only Oregon. Its use: to announce the Portland campus of the University of Oregon. Except for the sign and the recent controversy it engendered, White Stag is barely a memory in most Oregonians’ minds.

Jantzen—“just wear a smile and a Jantzen”—similarly was a well known national swim suit brand that was manufactured in Oregon. On the way downtown on the 33rd Street bus from Northeast Portland where I grew up, you could peer through the windows into the orderly factory where women (mostly) stitched away making the suits that bathing beauties wore. Still a thriving brand owned since 2002 by Perry Ellis International, Jantzen has long abandoned its Oregon facilities.

For localization to become meaningful in fashion, as it has become in the slow food movement, which has acted as the germinating force for hundreds of new, small truck farmers in the United States, we have to devote ourselves to job creation, training, and the rebuilding of our manufacturing infrastructure before we can ask Americans to even consider buying American. We need to encourage domestic production—local and regional—while taking into account the global implications—economic, environmental, and social—of all of the decisions that we make, not as some kind of knee-jerk patriotism, but as responsible citizens of our country and the world.