Taking Stock Of Amazon Abroad

E-commerce giant Amazon has experienced soaring profits at home in recent years while consistently losing money internationally. This is counterintuitive, since the smaller business in expansion markets should have more room for growth.

I’ve recently spent time in Mexico and India – two countries where Amazon is surviving but not thriving.

Amazon’s journey in both is a good reminder that while the U.S. sets the pace for retail around much of the globe, companies also have to evolve (sometimes dramatically) to succeed in diverse markets.

Amazon learned this the hard way in China, where efforts to establish American practices did not end successfully. This makes strong performance in growth markets like India and Mexico even more important. India is the largest underdeveloped ecommerce market in the world, and Mexico is not far behind. With mushrooming middle classes and rapidly expanding access to broadband, both countries represent huge potential. However, there are also unique challenges since both are predominantly cash societies, where online commerce is not yet the cultural norm.

Amazon has had to actively customize their business model to survive in both, while contending with the fact that local players sometimes set the agenda.

In India, Amazon’s performance is still second to local player Flipkart (which owns 43% of the market). The Seattle-based giant is still investing heavily, to the tune of $1B per year, to build infrastructure and win trial and loyalty. A big part of their strategy has been finding ways to “localize” by adding cash-on-delivery payment options similar to those of competitors, a “Chai Cart” program to connect with small vendors over cups of tea, and a “seller university” to help small traders learn how to get online and growth their business.

In Mexico, Amazon has grown modestly since their 2015 launch, paralleling slow growth in online retail overall in the country. Here too, they have had to adapt to fit the local market.

Like in India, this has included following the lead of regional players like MercadoLibre and accepting cash-on-delivery payments. And, in a uniquely Mexican modification, Amazon accepting gift cards purchased from Mexico’s network of Oxxo c-stores. No doubt, Amazon would prefer their own offering but shoppers in Mexico’s largely cash economy have thus far preferred the already-trusted Oxxo name.

In both India and Mexico, Amazon has had to invest heavily in infrastructure to support fulfillment. Notably, this has included building warehouse locations to support Prime and same-day delivery. Despite their differences, international consumers across markets share a high level of expectations. All expect the same fast and free delivery now globally ubiquitous with the Amazon brand name.

Amazon has also had to contend in both markets with the fact that the cultural default is still brick-and-mortar shopping. (In Mexico, for example, 98% of retail sales still happen in physical stores).

The Amazon response has been two-pronged. First, the retailer has invested heavily in advertising to assuage concerns about the authenticity and quality of products ordered online. They have also created options that allow shoppers to pick up merchandise at the location of trusted brick and mortar retailers. This has created an interesting hybrid type of commerce, and it will be interesting to see how this might develop.

These modifications, and in fact Amazon’s very assertion that it is going to win new markets through “a lot more local market customization” underscore the magnitude to which cultural nuances still matter.

While it is very possible for global players like Amazon to succeed in international growth markets, they will need to find ways to stay carefully attuned to thinking global while acting local. 

Welcome 2017: Looking Forward & Back

It’s been unusually cold in Dallas and a great time to be introspective. Below I share a pair of insights I have percolating about the year ahead. Cheers to seeing these and other themes unfold in 2017.

 #1: Retail Brands Will Think So Consumers Don’t Have To

 In 2016:  I wrote about how Tesco’s IFTTT channel automates grocery shopping, paving the way for the ‘predictive grocery basket’ of the future.

In The Year Ahead:

To identify emerging trends, follow the money. AI applications are at a tipping point this year, with AI-generated retail revenue expected to skyrocket from $643.7 million in 2016 to $36.8 billion by 2025 according to Tractica.

Innovative retailers are already embracing their new AI-driven world. 2016 saw The North Face’s ‘expert shopper’ Lowe’s Pinterest-scraping interior decorator, and a Starbucks app that offers customized promotions by knowing when and where someone drives.

This march to AI-powered retail will fundamentally shift the role of brands and retailers in consumers’ lives from responsive to predictive.

Today, a brand (retail or otherwise) is a helper that makes it possible to fulfill my needs and wants. The best brands use data to offer curated selections or to delight with new, personalized suggestions.

As increasingly sophisticated bots and apps are launched in the year ahead, the role of retailer/brand will morph into that of a butler, which can proactively anticipate what I need and deliver. The most innovative will find ways to identify and fulfill needs and wants I didn’t even know I had yet.

This will shift the retail paradigm in diverse categories–from grocery to fashion, electronics and anything in between. Just ask Tesco’s grocery shoppers, whose carts are filled with items they are going to want–tomorrow.

There will be benefits for consumers, who will be able to shop more efficiently while offloading repetitive decisions. The upside for retailers and brands will be the ability to add true value to consumers while also driving frequency and desired purchase behaviors.

So, let’s look forward to a not-so-distant future in which we will all sit back while the bots do our shopping.

#2: Communities Will Find New Ways to Flourish

 In 2016:  Last year’s travels revealed that, even in our tech-driven culture, person-to-person communities are thriving around the globe. This is reflected in South Africa’s spazas, Brazil’s favelas, Shenzhen’s maker culture, and the social nature of global shopping days.

In The Year Ahead:

I will look for the ways in which the fundamental human need to connect and collaborate sparks new platforms and innovations.

Some suggest it will be the ‘year of the group chat,’ as people leave the increasingly corporate and drama-wrought spheres of Facebook and Twitter for smaller circles of virtual connections.

Because workers are people too, we will see the continued growth of enterprise-based communities like Slack. (Incredibly, the average user already spends 10 hours per day in app). While 2016 saw the office party go virtual, I wonder what other communal rituals might find online expressions in the year ahead?

The e-commerce sphere will continue to birth new commerce-based communities, like Amazon’s small-seller platforms, Handmade and Launchpad, and ShopClues, an Indian tech unicorn succeeding with a model that connects small-time sellers to rural communities.

And, I expect to see passion communities move from desktop to mobile, following so many other facets of daily life. This is something developer Amino Apps is banking on and investors are betting on their success.

Last year, seeing firsthand Detroit’s transformation from post-war auto hub to thriving tech town inspired me to think about how the digital world creates opportunities to reinvent community.

As we turn the page to 2017, retailers and brands – both established and emerging – will do well to think about how they can reimagine and facilitate communities for consumers craving authentic connections.

Best wishes for a healthy and happy new year to all. I’m off to get Alexa started on my to-do list…

International Discount Days: A View From Mexico City

I recently traveled to Mexico City, where the retail scene was just slowing down after a busy El Buen Fin.

The 3-day shopping holiday–loosely translating to ‘the good weekend’–was launched in 2011 by the Mexican government and the Council of Business Coordination in an effort to stimulate the national economy. Retailers throughout Mexico are encouraged to offer discounts and special payment plans during this late-November retail push.

By all accounts El Buen Fin has been a success. It has become the world’s third-largest shopping event (after American Black Friday and Chinese Single’s Day). In 2015 El Buen Fin sales grew more than 10% over the previous year, to over $10B USD. This year 11 retail centers and more than 6,000 businesses, double the number from last year, participated. These included not just retailers, but also service providers like restaurants, spas, travel agents, and pet hospitals.

While El Buen Fin is inspired by Black Friday, several characteristics make the Mexican holiday unique.

 It takes place over a long weekend vs. a single day like Black Friday. Typically falling just before U.S. Thanksgiving, it is pegged to Mexico’s Revolution Day.

This Mexican shopping holiday receives ongoing government backing. El Buen Fin is promoted as the “cheapest weekend of the year,” and it is supported by a dedicated website, Twitter account (#ElBuenFin2016) and Facebook page. During 2016, SHCP (Mexico’s tax collection agency) offered $27 million in cash prizes to shoppers who made purchases with a Mexican-issued credit or debit card.

While the number of participants continues to grow annually, the discounts tend to be smaller than those in the U.S. And, retailers often discount items that are not moving vs. the U.S. custom of offering hot, new merchandise.

Some Mexican retailers use El Buen Fin to preemptively capture sales from Mexican shoppers that might otherwise shop stateside during Black Friday or Cyber Monday. However, traffic flows the other way as well. Some businesses, especially those in border towns, seek to attract U.S. shoppers during the weekend–a feat made easier this year by the strong value of the dollar against the peso.

From a global perspective, El Buen Fin is one of many “discount days” now crowding the retail calendar. It joins Single’s Day, the Dubai Shopping Festival, Australia’s Boxing Day, and India’s Diwali Shopping Festival. Not to mention a litany of new contenders like Amazon Prime Day, Small Business Saturday, Green Monday, and Free Shipping Day, all driven largely by e-commerce.

These manufactured shopping days clearly play into shopper Psychology 101, combining the power of a deal with time scarcity to spur purchasing.

The rise of the “Discount Day” also provides an interesting view into the inherently social nature of the retail endeavor.

The proliferation of national shopping days comes at a time when myriad factors such as media fragmentation, waning civic engagement, and a growing economic divide–to name a few–have decreased the occurrence of truly ‘shared’ events in countries around the globe.

The strong collective interest in Discount Days reminds us that shopping remains a shared cultural event. Whether people come together around traditional shopping days or newly invented ones, in a physical or online environment, shoppers are ultimately social creatures that thrive on the ability to browse, select, and decide in the company of others. Retailers could gain insight from recognizing and furthering this dynamic when developing Discount Day programs and offerings.

The Discount Day dynamic also has implications for the future of global retail. Will these shopping days remain largely concentrated within their countries of origin? Or will they leap across political borders, as social phenomena are wont to do?

In recent years, we’ve seen the Black Friday tradition cross the Atlantic, prompted largely by Amazon’s introduction of online deals in the UK. For their part, British shoppers and brands are increasingly cashing in on Single’s Day deals. As shoppers become more aware of and open to shopping other country’s deal days, could this dynamic feed borderless trade and perhaps drive increased price transparency on a global scale?

These consequences would require retailers to do some focused analysis and soul-searching. Are discount days a profitable and sustainable long-term strategy? Or, do they merely compress demand, cannibalizing from other time periods and training consumers to buy only on deal?

The one certainty is that Discount Days continue to proliferate and thrive, making strategic calendar planning a must-have for manufacturers and retailers and lending additional dynamism to the complex global retailscape.

Guest Post: A Case Study On Disruption

Since 1955, the Consumer Goods Forum has continued its mission of bringing together leaders in retail and manufacturing under the common goal of sharing best business practices and igniting positive change across the industry. In October, we had the opportunity to send couple of our awesome marketers, Kiren & Justin to participate in the 61st Congress of the Future Leaders Programme- one of CGF’s annual signature events for the “next generation” of leaders.  Kiren & Justin had a great learning experience. I invited them to post on their most important learning.

This year’s event was held in London, one of the world’s most dynamic and innovative digital capitals, which provided a unique setting that allowed us to explore new perspectives on growth and industry disruption. Over the course of the conference, we had the opportunity to take a deeper look into the UK grocery market which is a fascinating example of both growth and industry disruption.

Historically, the UK market has been known for its Best In Class grocers that many across the globe look to replicate.  Throughout the 2000s, The “Big 4” major retailers – Tesco, Sainsbury’s, Asda and Morrisons – dominated the UK market. Yet, sometime following The Great Recession, shoppers started to leave these trusted players for low-cost retailers, such as Aldi and Lidl.  Even as the economy rebounded and incomes started to rise, however, shoppers didn’t return to the traditional players.  As a result, the market was rocked by a sudden change of fortune as the top retailers started to realize year over year share declines as a new wave of low cost retailers stole channel share. This proved to be a surprise for researchers as the UK had traditionally been slow to respond to the discount model that other European markets, such as Germany and Switzerland, embraced. 

While initially perplexing, a deeper look reveals that a confluence of factors when taken in totality resulted in this seismic shift of the UK grocery category. Throughout the 2000s, consumers started looking for alternative retailers that offered a better value and simpler promotions. As their shopping behaviors changed, many were looking for smaller “fill-in” trips to the grocery store. At the same time, consumer’s lives became more fluid and less routine – making the “weekly shop” less essential and encouraging consumers to try value based retailers for fill-in trips. Deep Discounters quickly captured shoppers with their advantaged pricing, high quality private label offerings that eventually became a part of their shopping repertoires. While it is safe to say both traditional and deep discount retailers will continue to compete in the UK for the foreseeable future, the days of a clearly defined “Big 4” are definitively over. 

This small glimpse into the UK grocery landscape provides marketers around the world with a case study for industry disruption. Just as the deep discounters flipped the UK market on its head, we’ve seen signs of disruption across many industries with the advent of technology and the continued endeavor to make things more convenient, less expensive and overall more satisfying for shoppers.

How can we as marketers prevent ourselves from being “disrupted” by new players or new technologies, or even better, how can we cause disruption ourselves?  Peter Freedman, the Managing Director of The Consumer Goods Forum, outlined a process that helps organizations prepare for the inevitable – industry disruption.

Habit 1: Learning From Disruptors. Although specific circumstances may vary, history is full of examples of disruptors that provide learnings for current and future business leaders. Netflix is a classic example. Throughout the 1990s, the home movie market was dominated by powerhouse Blockbuster Video. Both Blockbuster and Netflix started as video rental services – Netflix even sought to be acquired by Blockbuster only 16 years ago – yet, only one company remains successful today. As Blockbuster grew complacent with its market share position, Netflix continued to adapt and evolve to provide consumers with new video-rental solutions. Even as Netflix became the new market leader, the company has continued to find new ways to innovate by creating its own original television series and movie content. Now, originally seen as a DVD rental service, Netflix has over 126 original programs under its portfolio – more than any traditional cable network. Disruptors, including Netflix, know better than to grow complacent. Disruptors continuously focus on how to improve their business model and stay ahead of competition. As Netflix Chief Content Officer Ted Sarandos famously said, "The goal is to become HBO faster than HBO can become us."       

 Habit 2: Listening To Customers.  To the surprise of no one reading this blog, Uber has changed the lives of millions around the world. However, Uber’s founders invented the breakthrough ride-hailing service by simply listening to their very own complaints while trying to hail a taxi in Paris in 2008. We can hardly remember the days before Uber, but back then, who hadn’t grown frustrated by trying to locate a taxi or not having the cash to pay the driver? What Uber’s founders did was solve a few really frustrating problems within a complacent industry. The taxi industry failed to recognize that consumers were looking for more in this relationship – more convenience, more transparency and more flexibility, and Uber was able to offer a better alternative. Now, the taxi industry will be hard pressed to ever return to its prior glory. Consumers will continue to evolve and have new frustrations and thus, we will be required to adapt. Once organizations lose sight of this, it is only a matter of time before consumers find a way to bypass them entirely.

Habit 3: Empowering Employees.  Industry disruptors recognize that breakthrough ideas rarely come from the top. Instead, ideas can come from any level within an organization. Companies must embrace the mentality that good ideas can come from anywhere and empower employees to bring new ideas forward. Just take a look at one of the hottest (pun intended) products from Frito Lay – the idea for a new flavor of Cheetos came from a janitor.

Habit 4: Collaborating With Others.  The benefits of workplace collaboration are well-known to many industry executives as we see many corporations shifting to new methods, including open office environments, to encourage teamwork and cooperation.  However, the brightest leaders will not stop at their own organization. Freedman suggests that industry collaboration is also important to ensure that companies maintain a forward-looking mindset.  The Consumer Goods Forum provides one of these collaboration opportunities.

As marketers, we all want to make sure we stay ahead of disruption. While this will never be a foolproof process, the tools summarized here and outlined at the annual congress of the Future Leaders Programme will hopefully encourage a mindset to ensure you and your organization are not avoiding, but leaning into, future change.

Authors:

Kiren Devereux, PepsiCo Marketing

Justin Schwarz, PepsiCo Marketing

China: Grocery Markets Are Thriving Online and In Real Life

The Chinese grocery retail market is one of contrasts.

Shoppers have flocked online in the past several years, and the $41B Chinese e-grocery market is the world’s largest by a wide margin. Retailers of all sizes have taken note and are making big bets in this arena.

Despite the explosive growth of e-commerce, brick & mortar grocery stores still play an integral role. While over half of Chinese households do buy groceries online, a full two-thirds still say that going to the grocery store is a fun, engaging experience.

I experienced this thriving retail culture during my recent visit to Shenzhen & Hong Kong, and have four insights to share about the dynamic Chinese market.

#1:  Traditional outlets dominate, but global retailers are making strides.

The Chinese grocery market is highly fragmented, with the top ten retailers accounting for less than 7% of the volume. Domestic players have leveraged their nuanced understanding of local consumers to outperform global competitors in recent years, but the multinationals are making strides to catch up.

Larger retailers are succeeding by finding ways to make the western supermarket format uniquely Chinese. They are introducing live food offerings similar to those available in traditional Chinese wet markets.

Store: RT Mart

Store: RT Mart

Many are developing new food and beverage innovations tailored to local palates and events, such as Chinese New Year.

Others are even re-thinking their footprints and building flagship stores in large shopping districts so they can be integrated into the daily retail experience. 

Store: Vanguard
Photo Credit: IGD Retail

#2:  Hypermarkets are struggling while small formats are flourishing.

Convenience formats are booming in large part due to their ability attract young, middle-class shoppers who are increasingly affluent and time-pressed. Big box retailers who have experienced slow growth in larger formats are testing smaller ones, like Easy Carrefour and Tesco Express.

Store: Tesco Express
Photo Credit: IGD Retail

 Global and regional players alike are succeeding by adding western concepts like ready-to-eat and carryout options to these smaller formats.

Store: Metro My Mart
Photo Credit: IGD Retail

And, in a nod to the multi-channel landscape, some small format stores like Metro’s My Mart are attracting shoppers by serving as collection points for online orders.

Store: Metro My Mart
Photo Credit: IGD Retail

#3:  Retailers are using “store within a store” concepts to expand offerings.

Categories like wine, cheese, bakeries and coffee are relatively new in China. Savvy retailers are building these out as destination areas within larger stores, in the process attracting a growing segment of middle-class shoppers.

Others, like CRV’s Ole, are creating specialized sections of imported products – another relative newcomer on the Chinese grocery landscape – often grouped by country or cuisine type.

#4:  A focus on food safety creates loyal shoppers.

China has been hit by a wave of safety scandals in recent years, and grocery retailers are finding success by reassuring customers about the provenance of their products.

Large players like Carrefour are leveraging their sourcing capabilities to expand private label offerings that carry a safe halo and are marketing that to their advantage.

Startups like Farm Direct are finding success via vertical ownership of farms and retail outlets, which allows confidence in the safety of their products through control of the entire growth/distribution/retail process. 

Store: Farm Direct

Tech-savvy competitors like previously mentioned MyMarket offer systems like Star Farm, a food traceability system featuring QR codes that allow consumers to track a product’s journey from source to shelf.

Store: Metro My Mart
Photo Credit: IGD Retail

The Takeaway

In my travels, a recurring theme is that a deep understanding of local consumers and their tastes engenders success.

As I’ve written before, brands can be global in their values but need to localize quickly to maintain relevance in a global world.

China: Shenzhen Redefining “Made in China”

Last week, I was in China.  It was my first trip to the city of Shenzhen.  I found some great learnings on the role Shenzhen plays to the Chinese economy vs. Beijing/Shanghai.  China watchers – analysts, investors and government officials alike – would like to see the country cement their superpower status by becoming a global innovation leader. The government has spent hundreds of billions of dollars against this goal, but, to-date, most agree that few distinctly Chinese “innovations” have emerged.

A recent visit to Shenzhen allowed me to consider what “innovation” really means in the context of China.

Academics Lindtner, Greenspan & Li argue that maker-entrepreneurs in Shenzhen challenge the commonly held binary of a western innovation (‘designed in California’) versus low-quality production (‘made in China’). They assert that Shenzhen’s burgeoning maker culture represents a new type of innovation, and one that is uniquely Chinese. After spending a week immersed in the city, I find this a fascinating viewpoint.

Western tech entrepreneurs have flocked to Shenzhen recently prompting The Guardian to dub it “China’s Silicon Valley.” The city’s vast manufacturing complex – situated in markets like Huaqiangbei – make it a one-stop-shop for turning an idea into a sellable product.  (Oculus Rift’s VR glasses & the Pebble smart watch were born here.)

Shenzhen manufacturers find various ways to capitalize on their infrastructure: make knock-off products that slightly improve a branded version, copy Kickstarter concepts before they hit the market, or even produce extra units of branded products to sell sans logo. Increasingly, the manufacturers create new brands aimed at the Chinese market like ascendant Xiaomi.

These practices stem from the oft-maligned shanzai, or counterfeit culture. In it, Shenzhen’s web of producers and makers operate as an informal network and a culture of sharing – much like the open-source software community in the U.S. New media platforms like WeChat mean they can collaborate to make new products 24/7 with unparalleled agility.

This is where – as Lindtner and others point out – Shenzhen maker culture gets interesting. The simplistic view is that Chinese factories simply crank out cheap copycats thus the narrative that the country needs to ‘catch up’ when it comes to innovation. On the ground, however, something distinctively more complex is happening.

As entrepreneurs engage in the process of bringing their ideas to life, they are transformed. Through tactile interactions with the parts, the components and the manufacturers who will put them together, the designs evolve. They get better and more interesting. And, their Chinese ‘makers’ gain their own unique views about ‘who’ the products should be for and the needs they could serve. Increasingly, they are inspired and equipped to bring related concepts to life.

These makers may be departing from others’ initial ideas but they are entrepreneurs in their own rights. They are constantly thinking about what ‘could be’ – what is upmarket, what the market needs, and how they could serve unmet needs. Using their knowledge of the manufacturing process and their connections in the shanzhai community, they move with speed impossible for more established companies to imagine. They take products to market in a manner akin to the celebrated “fail fast, fail cheap” mantra of Silicon Valley – a mentality that has yielded innovations like Siri, Tesla, and self-driving cars.

Shenzhen’s maker culture is increasingly on display in venues like the fast-growing Shenzhen Maker Faire (2016 show happening soon) and in an exploding number of maker and incubator spaces.  It is a culture represented by the phrase “innovate with China” that graces the walls of Seeed, Shenzhen’s first maker space (and now a $10M a year business).

This all suggests that perhaps Shenzhen (and China) is a culture with a very different perception of innovation, one that is collectivist (like many aspects of Asian life) versus the more individualistic western concept. Perhaps China doesn’t need to “catch up” but is creating its own unique culture of innovation. It is a nimble one that may have more in common with western software design protocol where products are shipped before they are perfect and companies look to “iterate fast” with consumers.

This culture might even inspire western entrepreneurs, who face the reality of needing to “just start” with a new innovation if they are to have any hope of staying ahead of the competition.

This leaves us to wonder what exciting possibilities emerge when design happens at the site of production? Where the boundary between imagining & making blurs, there may be new offerings, new brands and new consumer markets for the makers of Shenzhen – and their western collaborators.

Michigan: Detroit and Ann Arbor Emerging as Tech Towns

I spent most of my last week in the Midwest taking a market tour of Detroit and speaking at my alma mater, The University of Michigan. I was completely energized by my trip to Michigan after 10 years.  It is one thing to read about the economic resurgence happening in the area but it was another to experience it firsthand.

The Cube at University of Michigan

In their book, “The Smartest Places on Earth,” co-authors Agtmael and Bakker assert that a handful of global cities like Detroit are transitioning from “rustbelts” to “brainbelts.” These locales, most of which are anchored by world-class universities, boast a cohort of innovative, young entrepreneurs who are attracted by affordable living, a burgeoning cultural scene, and the opportunity to collaboratively solve 21st-century problems. I definitely found this to be the environment in greater Detroit – one aptly expressed by a local clothier’s slogan, “Detroit Hustles Harder.”

I was especially intrigued to learn more about how Ann Arbor (Detroit suburb and UM’s hometown) has grown into a formidable tech hub. This makes intuitive sense. Michigan and nearby universities mint thousands of eager young graduates every year and the city has recently taken steps to retain them and support their endeavors. This includes efforts by organizations like Ann Arbor New Tech Meetup, Tech Brewery, Ignite Ann Arbor and A2Geeks. These investments have paid off yielding companies like Mobiata (now an Expedia company), the more fledgling Clinc and even new publications dedicated to reporting on the region’s start-up culture. And of course, where there is tech-generated income, new retail businesses emerge. I was delighted to encounter a mix of classics, like Zingerman’s Deli, and thriving new businesses, like Today and The Session Room, in Ann Arbor’s tree-lined downtown district.

I return to Texas invigorated and eagerly anticipating the next innovations to come out of this bustling Midwestern brainbelt. And I am hoping this serves as a road map to revitalizing towns that had suffered the loss of manufacturing jobs over the last decade. 

Brazil: Deals & Splurges Driving Growth in Retail

I recently had the pleasure of visiting São Paulo, Brazil, for a market tour, customer immersion, and team meetings. I returned with fresh insights about the consumer & retail landscape in this vibrant country – the world’s 8th largest consumer market.

The Context:

Between 2009 and 2013, Brazil was a hot growth market with a booming economy. The retail real estate environment was almost speculative and grocery retailers raced to expand their presence. Growth has been more modest in recent years as the country faces a deepening recession marked by high inflation, rising unemployment, and falling wages. However, Brazil is still a market with a lot of potential. It is a populous nation of 203 million, where young people under age 34 account for over half of the population. It is the third largest grocery retail market in the world, with spending of close to $70 billion USD in 2014.

The Insight: Growth at the Low & High End

Brazil has a high level of income bifurcation and this was apparent when traveling through São Paulo. I learned that the country has the #1 Ferrari dealership in the world. And, it is #1 in private helicopter ownership – a necessity for those with the means to avoid the challenging traffic. Conversely, Brazil is a very poor nation, where the average GDP per capita is $12,100 (vs. $51,000 in the U.S.) and 21% of the population lives below the Brazilian poverty line.

Not surprisingly, I learned that the retail grocery landscape mirrors this split. Discounters and luxury grocery retailers have been rare growth spots in recent years, while formats in the ‘middle’ have languished.

“The Discounters”

Brazil is home to a unique format called the atacarejo, and it has been the country’s fastest-growing grocery segment over the past 3 years. The word itself is a neologism, a mix of atacado (wholesale) and varejo (retail). Atacarejos offer bulk sales of food and other items that can be paid for in cash. They are no-frills outlets that keep prices low in large part through low operating costs. Most employ a tiered pricing strategy, offering the best deals for those who want to buy volume. Traditionally this model attracted wholesale customers but in recent years it has appealed to everyday Brazilians with shrinking disposable incomes.

According to Supermercado Moderno magazine, the number of atacarejos grew from 299 in 2013 to 436 stores in 2014. In March, Nielsen reported that sales in atacarejos grew 12.1% in 2015 over the previous year – more than double sales in the industry as a whole. These outlets have been a boon for large retailers, who are investing heavily in the format. For example, Carrefour bucked the trend of sluggish grocery sales in 2015 posting 8.5% growth in sales at existing stores driven largely by growth at Atacadão, the country’s biggest cash-and-carry chain. More recently, Grupo Pão de Açúcar’s atacarejo format – Assaí –reported 37.6% sales growth year-on-year for Q2 2016. Based on the success of the atacarejo in Brazil, retailers are opening similar formats in other countries throughout Latin America including, for example, Columbia.

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The atacarejo model undoubtedly appeals to price sensitive consumers dealing with the implications of recession. However, it also resonates culturally because consumers enjoy the shopping style. Credit-shy shoppers feel comfortable dealing in cash. Brazilian families, which tend to be larger, are able to pool together to buy in bulk and share the cost savings. The largest shopping day is Sunday and shoppers appreciate the bazaar-like atmosphere, where there is space and variety for the whole family to explore.

This format seems poised to retain a presence and relevance even after the country begins to recover from the recession.

The Luxury Purveyors

A second arena of growth has been at the high end. The Italian retailer Eataly opened its first Brazilian (and also first South American) location in 2015 amidst the deepening recession. Fast Company aptly described Eataly as an “Italian grocery market-cum-restaurant emporium-cum-enoteca slash bakery slash cheese shop.” Eataly’s New York outpost opened in 2010 to the delight of consumers and food journalists alike and there are locations in Italy, Tokyo and Munich.

The São Paulo store is located in the Itaim neighborhood, an upscale area near several business districts. It is a two-story luxury emporium that offers fresh and local fare not to mention a Nutella bar, a roast meat counter, and a place to purchase handmade pasta.

Upscale offerings in Brazil are not limited to large multinational retailers. Brazilian retailer Super Muffato opened its first gourmet store in Londrina, Paraná earlier this year. Industry group ABRAS describes the outlet as a “gastronomic paradise” complete with a 700 bottle wine cellar and sommelier, sushi bar, imported cheese shop, and a global cuisine section. This is the third opening under this concept, highlighting the room in the market to provide a more premium retail offering in Brazil, despite its continuing economic challenges.

These outlets capitalize on the “food as hobby” and “food as entertainment” trends. For affluent consumers looking to economize, Brazil’s growing gourmet options offer the ability to procure ingredients for cooking at home rather than spending the money to dine out. Further, they show that Brazilian consumers are willing to spend on categories that engage them even during tough economic times.

My Takeaway:

The Brazilian grocery landscape is one of juxtapositions, like city of São Paulo itself. Growth at the bargain and luxury ends of the spectrum shows no signs of slowing anytime soon.

For retailers, particularly those without plans to grow through these formats, it will be important to find ways to infuse elements of both the atacarejo and the gourmet grocery into everyday shopping experience across formats.

Further, retailers who continue to struggle in the middle will need to find new ways to create value for customers. This is not unlike the situation of U.S. fashion retailers who are looking to loyalty programs, unique shopping experiences, technology and even product scarcity to lure buyers back to the middle. 

Brazil: Exploring Favela Culture

I’m in São Paulo this week, where more than 2 million people, about 11% of the population, live in working-class settlements called favelas. Global media coverage of the estimated 1,643 favela neighborhoods usually focuses on the negatives: gang violence, drug culture, and lack of infrastructure. These are real and pressing issues that residents and community organizers work daily to address.

There is another narrative that needs to be written about the favelas. They are Brazil’s cultural incubators – vibrant spaces that influence the larger city and with growing influence in their own rights.

The favelas are “alive with sound and movement.” They are unique, walkable spaces with a blend of retail and residential property use; something urban planners strive to create in other cities. Gatherings tend to happen outdoors and create a lively street culture. Living in close proximity to neighbors encourages the exchange of ideas, and “incubates” novel blends of culture and commerce. For example, I saw in my visit many an ad hoc musical performance outside a grocery store, where an enterprising entrepreneur was leveraging that to sell drinks and snacks to curious on-lookers.

Not unlike the far-reaching influence of U.S. hip-hop culture, the expressions and ideas that develop in the favelas trickle out to influence tastes in the broader Brazilian culture. They shape music, fashion, food, and language. Samba, Carnival, and more recently funk carioca all emerged from these spaces.

Brands and Retailers looking to connect with the country’s large, relatively young population would do well to take notice. This is especially true for foreign companies that seek to expand into the Brazilian market and need to tailor their offerings to local tastes.

In addition to sending cultural influences out, recent years have seen new occupants flowing in. Students, artists, expatriates, and middle-class Brazilians are taking up residence in favela neighborhoods – seeking affordable housing and cultural diversity. They bring higher expectations about the rights and services they deserve, and favela dwellers are increasingly finding ways to make their voices heard. In the last few years, they have been empowered by the ability to use social media for connecting, organizing, and problem-solving. Taking notice, Google recently launched a mapping project with the goal of giving Rio’s favela communities visibility and, therefore, louder voices in the complicated politics of the country. By the way, one interesting observation on my trip was the very high frequency of use of waze app by Brazilians to navigate their challenging traffic situation.

Amidst this change and growth, new business models are developing in many favela communities, including tour operators, hostels for young foreigners, and community art projects.

One start-up, Friendly Mailman, is taking on the problem of unreliable mail delivery. Because residences and businesses lack street names, much less physical addresses, it is almost impossible for government carriers to reliably deliver mail within the favelas. The company’s founders used algorithms to create a proprietary digital “map,” which their private carriers use to deliver parcels to customers who pay a modest monthly fee. This is surely the tip of the iceberg when it comes to innovative tech platforms that could serve favela residents in meaningful ways.

I do not wish to detract from the complex history that created Brazil’s favela neighborhoods or the often-difficult conditions of daily life within them.

However, I am enthused to think about how they also embody the power of human creativity and ingenuity. Forward-thinking companies have an unprecedented opportunity to consider new ways to meet the needs of Brazil’s growing working- and middle-classes. I’m particularly fascinated about the potential to use technology platforms to cater to emerging consumer needs and aspirations. For example, could a retailer use a click-and-collect model to improve food access within a larger favela neighborhood?

True, there may be missteps and there is no one-size-fits-all model. However, success in this arena represents the dual opportunity to simultaneously create company value while also bringing value to a currently underserved market.

In a Global World, Think Local

Consumers in the global economy have access to a dizzying array of products from around the world. Shoppers find Mexican spring water in Canadian supermarkets and U.S. fashion labels in Kenyan shopping malls. Goods unavailable at brick-and-mortar stores can be ordered online or even virtually via retail ‘teleportation.’

Paradoxically, in this context of unprecedented availability of global brands, many indicators suggest that shoppers increasingly prefer local offerings.

A simple statistic got me thinking about the trending interest in all that is local. According to data from MasterCard Advisors, U.S. small-business retail sales have risen 5.4% this year, outpacing growth in total retail. The trend is more marked in categories like apparel, where small businesses enjoyed significant growth against a declining category.

CNBC reports that property management companies are following the money by actively pursuing locally-owned concepts – reversing a three-decade trend of favoring national tenants. This shift is a win-win for them and their tenants. Shoppers are drawn to the unique merchandise and dining experiences, the easy shopping formats, and more personal service. Local businesses help landlords differentiate their shopping centers from more homogenous big-box-anchored centers and increase foot traffic.

National companies have started to recognize the trend, too. Retailer West Elm now features a curated selection of locally designed merchandise and supports the makers through community events organized by local store managers.

The increased interest in ‘local’ isn’t limited to retailers. In hospitality, Airbnb offers access to quaint, local residences in lieu of the homogeneity of larger chain hotels. And of course, grocery shoppers continue to express strong interest in local food, which is perceived as better quality, better tasting, more sustainable, and commands a price premium. 

The desire to buy local is not limited to the U.S. Here are a few interesting examples from around the globe:

In Asia, Trendwatching.com observes that “from Asia, by Asia, for Asia” is the region’s hottest consumption story. Regional tech brand Xiami is consistently outperforming global rivals. In China, luxury shoppers are opting for local fashion brands over the
ubiquitous international labels that have dominated the fashion scene for the last decade.

Entrepreneurs throughout Africa are finding ways to use their understanding of local needs and contexts to outperform global competitors in their market sectors. The Ugandan-based service app Yoza connects customers with entrepreneurs who offer laundry and dry cleaning service in their local neighborhood. Kenyan consumers have flocked to the M-Pesa mobile payment system, which has made the Western models of retail banks and credit cards all but irrelevant.

I tweeted several weeks ago about India’s Dabbawalas, a centuries-old food delivery service that has survived – and thrived – in the face of competition from global tech startups.

And, in New Zealand, half of Kiwi consumers recently said they try to buy local brands, both to support the local economy and because these companies better understand their needs and tastes.

These local-focused entrepreneur stories might be interesting, but why do they matter?

The “buy local” movement is driven by consumers’ relentless search for authentic goods and services. In a world where a consumer can have any good, at any time, purchasing a less-available, local item – be that a shirt, a piece of home decor, or street fare from a food truck vendor – becomes a source of pride and distinction. This tendency toward the local is facilitated by technology, which allows small, entrepreneurial players to launch, market, and scale their businesses with speed and success.

In reflecting on all of this, I can’t help but think that the old adage, “think globally, act locally” is as true as ever. Global brands will do well to think hyper-locally in order to maintain relevance with consumers in a glocal world.

UK: New application fills consumers’ baskets while they work, sleep, play…

Couple of weeks ago travels take me across the pond to the UK. While I’ll steer clear of adding my analysis of the Brexit vote, I am felt compelled to reflect on changing retail landscape in the U.K & implications here in the U.S. Specifically what was intriguing was the launch of an innovation aimed at making grocery shoppers’ lives a little easier.

Tesco recently leveraged the power of IFTTT (If This Then That) to create an automated shopping application. While it is powered by sophisticated backend technology, the proposition is simple: shoppers can join Tesco’s IFTTT channel to create “recipes,” or triggers that will automatically add items to their shopping basket at Tesco.com.  Yes, bots will do your shopping & take out the mundane tasks.

IFTT, eloquently described by Tesco Labs, is a “platform for joining together all your different online accounts to enable you to do clever things.”

Consumers sign up for a free IFTTT account and connect it to other applications (think: Facebook, Twitter, email, etc.). Registered users can then create “If, Then” recipes that proactively help accomplish a variety of tasks including controlling home appliances, staying healthy, connecting to loved ones, shopping smarter, or staying current. A tech maven can get an email whenever there is breaking news from their favorite publication. A health nut can receive a text anytime they fall short of their Fitbit goal. (Finger-wagging tone free of charge.)

Tesco’s channel offers a few recipes to get shoppers started. You can add milk on a certain day of the week, get an email if a product drops below a certain price, or even add burgers to your basket if it’s unexpectedly sunny.

Further, users are encouraged to create their own unique recipes. I can only imagine that these user-generated recipes will provide Tesco rich new territory for mining consumer insights and identifying unmet needs. 

This proactive technology is an example of the many “butler/bot” applications that are stepping up to manage the mundane and time-consuming aspects of people’s lives even when they are not actively thinking about them. (See: Google Alerts, Amazon Dash, and Brita’s wifi pitcher). Clearly, it has the potential to help consumers save time and money, and even make more satisfying purchases.

In addition to these consumer wins, I can’t help but think about what this application might mean for grocery retailers and their partners.

One innovation expert suggests that automation disrupts the typical shopping process (make a list, go to store, seek and select products) in a powerful way. It creates new imperatives to get a product into a shopper’s consideration set and basket long before they enter the doors of a store – if they ever do.

Conversely, as shoppers offload the job of shopping for weekly staples, they may enter retail grocery environments with more time and mind space to seek and sample novel products, creating new opportunities for brands and retailers to engage them.

Eventually, cart automation could pave the way for a “predictive grocery basket,” wherein algorithms would allow retailers to understand a shopper’s patterns and populate their basket with the items they want. While this may be a few years away, what a game-changer it will be if consumers can accomplish most of their grocery shopping without a single step, swipe or click.

For more on how Tesco is piloting technology to innovate the retail grocery space, read here.

Image Source: The Memo, 2016

Ireland: Living Experiential at the Guinness Storehouse

I know I’ve talked in the past about Experiential Marketing and how it works hand in hand with Behavioral Economics theories, but now I can say I’ve had the opportunity to put ‘theory’ to a real-world test.

 I visited Ireland recently, and while there, was not about to miss a tour of the world famous Guinness Storehouse. And, while I have never considered myself much of a connoisseur of dark beers, let’s just say I think I may have come out on the dark side.

 From the very start, the whole experience is designed as a journey. You walk into a converted Guinness factory, built in 1902, to a modern, glass and steel atrium in the shape of a pint of Guinness, and at your feet is a copy of the lease for the original brewery site granted to Arthur Guinness. 

 The first floor is really devoted to telling the story of the company and it’s ingredients, and it does so in extremely compelling ways. The Storehouse uses interactive, dynamic displays that let you follow both the history of the brewery, but also the processes that go into things like the roasting of the barley or the boiling of the hops.

 Ultimately, it’s great to learn about the company, but I was here for the beer! So after my history lesson, I went up to the tasting room.

The first thing about the tasting room, is that it’s not a room. It’s a sensory experience over 3 floors. You’re first walked into a dark corridor, dimly lit with a golden glow that lets your eyes adjust before you enter the next phase, a large, all-white room with ‘vapor pods’ that allow you to experience the aromas of the four ingredients that give Guinness it’s distinct flavor.

 An attendant is there to give you more details, both on the components and the actual tour experience. I found this welcome, as it was valuable insight on what is a great example of a marketing DO!

 After you’ve been served your complimentary glass, you’re moved to a beautiful tasting room. Coolly lit, with dark wood floors and walls, it’s meant to evoke the look of the beer in the traditional glass. Not only that, but it’s also a replica of Arthur Guinness’ home. A helpful guide was there to explain the proper way to sip Guinness, so if you have any questions, consider me an expert.

 I likened the whole experience at the storehouse to being metaphorically poured into a pint. You start at the bottom of the glass, learn the history and the ingredients in every pour as you climb, and you end at the top, sipping Guinness on the 7th floor, where the Gravity Bar gives you a commanding 360 degree panorama over Dublin.

 It was an experience to say the least, and, having been given a master class in both the craft and consumption of Guinness, I have to say…I have a new found appreciation for it. To be honest, I’m not really much of a beer drinker to begin with, but as I was saying, having the ability to truly experience the process and care that goes into it has made me a bit of a believer. I also never thought I’d appreciate a dark beer especially, but by this point in the tour I’d already learned how to appreciate the individual ingredients, so of course I’d enjoy the sum of the parts.

 If you ever find yourself in Dublin, I recommend taking the trip to the Storehouse. Especially from a marketing perspective, it’s exceptional; an inspiring bit of work that turned me into a believer. I may have joined the dark side of beer, but I was still illuminated by the experience. 

South Africa: The Retail & Brand Landscape

As some of you may already know, I’ll be traveling to Cape Town this week for the 2016 Global Summit of the Consumer Goods Forum. This year’s theme is “Seizing Opportunities in the Face of Disruption,” and I think that South Africa provides a perfect setting for the topic at hand. The South African market is both young and ever-evolving, and I’m excited at the prospects for innovative disruption in Africa’s second largest economy.

South Africa has a tremendous kinetic potential both within its borders and spreading out to Africa as a whole. With its high urbanization rate, both current and projected, and a quickly growing middle class, South Africa is primed for continued expansion. In fact, some of the strongest evidence of this is SA’s 2011 admittance into what is now the BRICS coalition alongside Brazil, Russia, India, and China.

Framing this potential is South Africa’s unique patchwork of traditional and modern outlets, which are ripe for disruption and innovation; especially in the ways we can apply eCommerce and other methods to shift the status quo away from traditional commerce. Through various sources I tried to educate myself on what is happening with retail in South Africa. 

The traditional market is underpinned by the ‘Spaza,’ a uniquely South African concept that originated from the necessity of providing goods to residents dealing with the sprawl of the townships in the country. A small, informal convenience store, generally run from the owner’s home, these shops are spearheading huge growth in SA’s traditional trade sector, leaping from 31,000 outlets to 134,000 in the past two decades. They offer a built-in location convenience that few other outlets can match, and the numbers are clearly bearing this out.

Table Top

Besides the growth evidence, studies show that consumers shop at spazas, on average, four times a week. While they’re still using supermarkets for total shops, they generally only do those large buys once a week, showing the huge frequency advantage traditional markets maintain. Also, studies show that the average Spaza consumer, faced with the stores’ often limited selections, tend to decide very quickly on purchases. They are far more likely then, to purchase established brands, which creates a difficult situation for new brands attempting to gain a foothold.

Modern trade outlets are showing steady growth however, with over 4,500 outlets nationally; and 70% of SA consumers using them for larger shopping trips. But close to 50% of shoppers are still using the spazas for small, frequent trips and top-up shopping.

What can modern trade stores and brands do to disrupt this market paradigm and reposition themselves to compete?

We know that modern outlets offer both wide varieties of goods, and the ability to purchase those goods in bulk to deliver better prices to the end consumer. This will always be the case, but it has much more novelty in an emerging market. And while modern outlets will always struggle to compete with the proximity convenience of traditional stores, it’s important to note that SA internet accessibility has increased nearly 4% from last year, making it much easier for consumers to make online purchases and pre-decisions.

It also allows brands a way to create awareness that will translate to sales both in traditional and modern markets, while giving consumers a new way to interact with both the brand and the markets. While only about 52% of South Africans have internet access, this will only increase. These first-time web consumers will be able to take advantage of eCommerce at an ever-increasing rate, while being highly sensitive to novel promotions and concepts that web access can bring.

If modern outlets want to compete with traditional markets, they will have to appeal to this rapidly growing group of shoppers. By leveraging emergent internet capabilities, they can create convenience that rivals the spazas while offering options that can’t be matched by a corner store.

Likewise, the smart play for brands is to utilize the web to get out ahead of established brands that have no presence outside of traditional markets, creating a brand recognition that will literally have consumers asking for them by name, in both spazas and modern outlets.

With such a large potential for growth, there’s going to be plenty of room for both traditional and modern outlets moving forward. However, only non-traditional outlets have the capability or wherewithal to utilize disruption to create a jumping-off point for competitive convenience and focused brand appeal. To miss this opportunity could be devastating.

I look forward to experiencing this ever-evolving market place for myself, and can't wait to hear about South Africa from Zelda La Grange who served in Nelson Mandela's government & the legendary South Africa team's Rugby captain François Pienaarat at the conference.

Era of Chief Marketing Technologist

I recently had the pleasure of reading an interesting article from SapientNitro covering the emergence, evolution and paradigms of Chief Marketing Technologists. I think it’s great to see people diving into this exciting new role, and this article certainly validates the need for the industry to move toward CMT leadership.

As I’ve advocated before, companies who crack the code on merging the roles of CMOs and CIOs into a new super-ordinate CMT role fare far better in our ever-changing marketplace. I think there is lot of synergy in thinking through make-move-sell-market through the lens of this combined office. Having a distinct CIO and CMO role in the future especially in consumer’s goods and retail industry will inhibit success in this digital world.  I would espouse combining both into a CMT role. Also quantifying the qualities that a successful CMT must embody is anything but simple. I love the seven archetypes they’ve created in this article, and as I’m sure you will see, the breakdowns are extremely helpful when evaluating CMT candidates.

These archetypes truly showcase the diversity of backgrounds companies are turning to when looking to fill the CMT role today, and they demonstrate that, currently, there is very little synergy in the backgrounds of CMTs. Honestly, I don’t find this to be very surprising, given that we are merging two areas of expertise that currently have very different degree and career paths. It’s this lack of integration that makes SapientNitro’s new CMT university-level curriculum exciting because it is something sorely needed in today’s education landscape.

I continue to believe that if scoped properly, the CMT has the power to drive disruption in the marketplace by nimbly reacting to the ever-expanding variety of mediums we must operate in, while creating new sources of revenue around brands beyond their own products, such as subscription and content services, all while dramatically reducing the amount of assets required to do so. Most important, CMTs are perfectly poised to harness the true power of consumer behavioral data that we all have at our fingertips and bring it to bear, ultimately liberating us from the flaws of antiquated data-gathering methodologies.

We live in exciting times, and I hope you are as eager as I am to see this evolution of marketing function. Let the of era marketing technologist begin! 

The future of fatherhood from the retail level

I closed my last post speaking on potential. If you recall, my recent trip to Mexico was an eye-opening look at the untapped opportunities for growth that exist in a highly competitive market.

Well, I’m here again to talk about potential. This time though — and trust me here, I know it’s a tired term — I’m talking about Millennials. Specifically, Millennial dads. As these young adults are starting to age into fatherhood, they’re once again demolishing paradigms.

Marketers have always viewed women as the decision-makers when it comes to household goods and groceries. It’s an old-fashioned point of view perhaps, but it’s been a statistically relevant one. However, as we often see with an ascendant cohort, the numbers are on the move.

Women now make up 40% of the global workforce, and thus, alongside the rise of Millennials, we’ve also seen a correlating shift in parental responsibility towards equality in the sexes. In fact, over 50% of Millennial dads claim full or partial responsibility for major in-home childcare, as well as slating “being a good parent” as one of the most important things in life.

Of the 40 million Millennial men, 27% of them are dads. There’s that potential I was talking about, as that percentage is only going to increase for the foreseeable future. And these dads are shopping. In fact, 80% of them claim that they’re the primary or shared shoppers when it comes to groceries. That’s 9 million shoppers and an increase of 35% when compared to all dads!

So how do we take advantage of this? Well, we turn to what we know. Compared to women, having a child generally doesn’t change men’s shopping habits, even with Millennial dads, which gives us a solid launch point.

We know that men are more results-focused. The man-on-a-mission mindset still rules — even in the grocery store, where most men will shop the perimeter rather than browse up and down the aisles. Point-of-sale displays must play to this as well, offering an immediate response. Direct-result messaging wins with men every time, so marketers have to make sure we not only get their attention, but also keep them engaged long enough to see that it will fulfill a need.

Millennials have flipped the script once again. Moving forward, we must combine known male shopping habits with new data as it’s accumulated. It’s a wide-open market, and those of us who can apply what we’ve learned working for moms and make it relevant for dads will have an incredible advantage as more and more Millennials age into parenthood.

Sources for the stats in this post: 

• “Millennial Dads Real Spending Power”, AdAge, 2015
• “State of the World’s Fathers”, 2015
• “Marketing to Men”, Mintel, July 2014
• Iconoculture, “Millennial Dads: Breaking Into the Glass Nursery”, 2015
• Pew Social Trends 2014
• Path to Purchase Institute 2014, “Inside Her Pretty Little Head”

Recognizing potential is not enough

Everywhere I go, I find myself reflexively analyzing the marketing strategies and tactics around me. Much like a filmmaker at the movies, it’s hard not to notice the details under the surface and dive into a quick game of 20 Questions with the first person I see.

On a recent trip to Mexico, I couldn’t help but notice a lack of technology necessary to fully tap the next big thing for that region: e-commerce. With the increasing penetration of social media in Mexico, Amazon is recognizing the potential for tens of millions of new customers and is initiating marketplaces targeting Mexico City. However, aside from the major roadblock of scarce Internet access, the Mexican market is also facing the hurdle of roughly only 16% of the nation’s 120 million population owning credit/debit cards.

I also noticed a striking similarity in marketing content compared to that of the United States. It’s almost as if ads were merely direct Spanish translations of ads from the U.S., which in my mind is unacceptable. Culture, target markets and purchase triggers are drastically different in Mexico, and marketing should be tailored accordingly. A recent Path to Purchase study took us through the journey of the average shopper in Mexico and showed a deep-rooted existence of impulse purchases. While list-based shopping still has a traditional presence, there is a sense of collectivism infused into it, making the shopper experience more of an event than a chore to check off the day’s to-do list. The most striking example of this is the fact that when buying kid-friendly products, Mexican consumers tend to only purchase items that can expose their children to their heritage.

This was an eye-opening trip that could be summed up in one word: potential. There is a tremendous amount of growth potential in Mexico, not only with technology and online retail but also with the marketing we can and should be doing right now. I challenge my fellow marketers to listen to all the research we have available to us, and to use it to innovate beyond the mediocre, so that we’re truly unlocking potential based on culture, and not just going through the motions.  

Demystifying the ads: Crash the Super Bowl

When we recently said goodbye to Crash the Super Bowl with a send-off worthy of this landmark program, along with the emotions came a lot of memories to reflect upon. As we look ahead to introduce a bold, new legacy program for Doritos, one question nags at me: exactly what made the ads from our fans such a smashing success? I could point to any number of things, but arriving at a definitive answer still evaded me. So I reached out to the agency that created Crash, The Marketing Arm, and asked them to shed some light on the ad creative through the lens of behavioral economics. Here is what they had to say…

Advertising has strived to understand why consumers make the decisions they do in an attempt to tap into that mystery and drive preference for our client’s products. We get close, but if we were honest with ourselves, more of our successes have been driven by intuition than lessons learned from actual consumers. 
 
The intuition that we lean into in strategy development and big ideas resides in the same brain space as the intuition that drives consumer choice. The field of behavioral economics has brought a spotlight to intuition and built a framework to rationally explain it. 
 
If you ask any of the winners of the Doritos Crash the Super Bowl ads why they think so many people loved their ad, they would most likely say they just produced an ad they would like to see, or maybe “it just felt right.” But the biases uncovered in behavioral economics tell us that the ads felt right to make because of the unconscious biases that drive us all. And ultimately, we believe, those biases drove the popularity of the winning Doritos Crash the Super Bowl ads. 
 
We reviewed all the Doritos Crash the Super Bowl winning spots in the context of these behavioral economics learnings and identified the biases that most likely led to their popularity, a few of which are highlighted here.
 
Several of the winning ads leveraged the misdirect, a popular advertising framework used even outside consumer-created ads. The power of the misdirect lies within the biases our brains use to quickly classify a situation as safe or unsafe so that it may move on to another one of the 35,000 decisions it will need to make that day. 
 
The first bias that gives power to the misdirect has been labeled in the behavioral economics field as the stereotyping bias. Appropriately named, when we have experienced a type of person in the same way several times, our brain determines all people similar in appearance will behave similarly. 
 
So in Sling Baby (2012), as the viewer recognizes the grandmother and baby, their brain is unconsciously sending a message that these two are innocent individuals being bullied by a Doritos-loving boy. Because you believe this, when the grandmother uses the baby’s jumper as a slingshot, hurtling him to grab the Doritos, the shock of the inconsistent behavior causes your brain to pay attention and reassess the situation. Now you’re actively engaging with an ad that you were just about to ignore.   
 
Misdirection also makes use of the normalcy bias, the refusal to believe that something that has never happened before will happen, and Mouse Trap (2008) expertly demonstrates the power of this bias. After baiting a mousetrap with Doritos and placing it in front of a small mouse hole in the wall, a man watches patiently for what he (and we) believe will be a normal mouse to pop out. However, a giant, human-sized mouse bursts through the wall and attacks the man, stealing his Doritos. “Didn’t see that coming” is the shock-value response delivered by the normalcy bias.
 
We’ve all heard that puppies and babies are solid attention-getters, and many Crash ads leveraged that general principle. But it’s actually how they’re used that made these winners. We are all subconsciously biased to characterize animals as possessing human-like traits, emotions and intentions, a bias that behavioral economics has coined as anthropomorphism.
 
This year’s Doritos Crash the Super Bowl winner, Doritos Dogs, tapped into that bias, showcasing a group of dogs that crave Doritos trying to break into a grocery store to get them. A wily manager catches them every time, until they brilliantly scheme to dress as humans and purchase them like everyone else. If people had not been willing to believe wholeheartedly that dogs crave Doritos, it never would have made the final selection pool.
 
OK, that’s probably all the behavioral economics you want to hear about for now, so we have identified the biases inherent in other Doritos Crash the Super Bowl winners below. You will see that there is some overlap, but thankfully behavioral economics scholars have kept their labels pretty self-explanatory.

Stereotype Bias: Middle Seat (2015)
Normalcy Bias: Pug Attack (2012)
Anthropomorphism: Man’s Best Friend (2012), Goat 4 Sale (2013)
Ingroup Bias: Live the Flavor (2007)
Confirmation Bias: Time Machine (2014)

As usual, I can always count on my friends at The Marketing Arm to shed some strategic light on consumers’ behaviors. Thank you to everyone at TMA who contributed to this post & more importantly to the success of Crash the Super Bowl program for the past decade.

Changing gears without losing momentum

“If it isn’t broken, why fix it?”
 
It’s a common mantra in many industries, but in marketing, this phrase is as good as a death sentence. In my view, you should always be thinking about the ‘next message.’ Consumer tastes are ever-changing, and as marketers we have to evolve alongside them.

I’ve had the pleasure of working with our Lay’s team for three amazing years on the Do Us a Flavor promotion. Along the way, we revolutionized the conversation between brands and their fans, and frankly, took flavor itself to new levels. It’s been an exciting ride, but it’s better to go out with a bang than the whimper of fizzling consumer interest.
 
Throughout the years, Lay’s fans have proven that they know, love and appreciate flavor, so this year we created a new program that would increase their influence from limited-time flavor offerings to actually impacting our core flavors. This evolution is what led to Lay’s Flavor Swap. We worked with our R&D team to develop some incredible new flavors, then we matched them up against four classic Lay’s flavors in a winner-takes-all showdown, leaving their fates in the hands of our fans. The winners will stay on the shelves, but the losers? Let’s just say their time in the spotlight will be fleeting. We’ve also created multiple avenues for consumers to vote, leveraging Twitter, Instagram, and even emojis to pick their favorites in each flavor match-up.

Speaking of emojis, we pushed a teaser campaign on Twitter, using emoji word puzzles to challenge our followers to guess the new flavors before the official announcement. This generated heavy consumer engagement and buzz, which fed directly into our digital campaign featuring the always funny Anna Faris, who lent her comedic talents to illustrate the ‘tough decisions’ our consumers will be making in the coming weeks. On a personal note, Anna was an absolute joy to work with, and committed to our concept wholeheartedly.
 
None of this would have been possible if we hadn’t stepped out of our comfort zone and mixed things up when nothing was ‘broken.’ As marketers, we should always be looking to stay ahead of the game, unafraid to step into uncharted territory. It’s natural to want to cling to the tried and true, but as marketing technologists, we need to keep our finger on the pulse of consumer interests, and never hesitate to rethink even our strongest programs. After all, momentum only works for you when you shift at your peak of power. 

Going out with a bang

Last weekend, Ten years after it first brought consumer-generated content to center stage, Doritos hosted its final Crash the Super Bowl, a program that in many respects shaped the brand in the eyes of consumers. How do you say goodbye to a decade-long program that was responsible for consistently producing some of the best content to come out of the biggest day of the year for advertising? You break world records and leave your name burned into the sky.
 
Although this program is near and dear to my heart, I’ll try not to get lost in the reminiscing about the details and instead just cover a few of my favorite activations.
 
First, Skymoji – a stunt so simple yet so effective that I’m amazed we’ve never done it before. I especially loved the Illuminati chatter on Twitter – rumors that I will neither confirm nor deny.

Second, I loved our war room and in-stadium activation. We redefined real-time marketing by being the only brand to establish a mobile war room for creating content from inside the Super Bowl itself. The team, armed with only phones and iPad minis, created gifs, pics and posts on the fly using fans in the stands, because after all, and what is Crash without our fans? They also managed to literally break Periscope by overloading their server during their halftime livestream. Talk about crashing!
 
Tied to our war room activities was our Crash the Second Screen challenge, which gave fans a chance to earn glory, Doritos and their share of $150K for coming up with the best tweet, pic or video showcasing their love for Doritos. The 5,500 entries were hilarious, the chatter it generated was unbelievable, and our influencers did an amazing job spreading the word and driving entries. 

And last but hardly least; we set three world records to kick off the Bold 50 program including my personal favorite, the Tallest Suspended Football Party. This feat was accomplished with Bold View, an amazing aerial dinner experience overlooking the Super Bowl from 140 feet straight up in the air. I hate heights, but I’d be lying if I said I didn’t want to be a part of that one.

At the end of the day, Doritos came out on top by virtually every single measure. All of these activities came together and sparked conversation about the brand to the tune of 316K tweets, reaching more than 657 million people!  I was floored by the team’s ability to tackle all of these different events and activations without a hitch. Would I have liked to take the top spot on the ad meter? Of course. But even without claiming the coveted number one ranking, I’d be hard-pressed to call our final year of Crash anything but an absolute success. 

Getting "out there" with Super Bowl 50

As a marketer by passion, one of my favorite things to do at this time of year is to hunt for the connective thread across Super Bowl ads. It’s not as if advertisers intentionally co-conspire, but, more often than not, patterns of uniform thinking emerge. Last year, we saw a lot of emotional work — celebrating dads, for example. This year, I think the dominant theme is “out of the box” or “out of the ordinary.” It seems like most advertisers are putting out spots that are a little bit edgier, a little more “out there.” For some brands, this approach is a natural fit, like Taco Bell showing elderly people getting tattooed and sporting bling, or Mountain Dew Kickstart’s pug/monkey/baby creation.

For other brands, this slant is a little more unexpected, like the Apartments.com campaign with George Washington palling around with Lil Wayne or Marmot’s, well, marmot “relieving” itself off the side of a mountain. If you haven’t seen it, take a look here.
  
Marmot is just one of many rookie brands who will take the stage this year. Out of the 41 total advertisers, 14 newcomers are looking to leave their mark, including LG, Pokémon, Colgate, Persil ProClean, Marmot, Amazon, Apartments.com, Shock Top, Bai, Buick, PayPal, SunTrust, SoFi and Quicken Loans. As a fan of Super Bowl marketing, I’m really excited to have some new blood in the running this year.

On the other end of the spectrum, some of the mainstay brands of years past are sitting out this year. Nissan, Ford, VW and Mercedes are hitting the bench. While many speculate about implications, I really don’t believe it’s any indication of Super Bowl ad interest declining. All of these brands had specific reasons to opt out this year. Nissan is leaning heavily into their college sports partnership. Ford, VW and Mercedes simply didn’t have any new news to justify the high price tag.

Will this new wave of far-out humor driven by a new crew of brands win with consumers? We’ll just have to wait until game day to find out. Oh, and go Panthers!

Here’s where my stats came from, in case you’re interested: 
1.    http://www.superbowlcommercials2016.org/blog/all-the-2016-super-bowl-commercials/
2.    http://www.usatoday.com/story/money/cars/2016/01/27/some-big-automakers-sitting-out-super-bowl-ad-game/79395034/