Designer Baby Booty

Hello!

I hope everyone had a great holiday!  Mine was filled with parties, BBQs, friends from out of town, hot/humid weather and the requisite overeating...  Just as July 4 should be!

Right before the holiday, my friend A.M. (Bonjour!) sent me a short article to share on the 678 Partners Facebook page as she knows I have affection for the unusual.  And this article was about Cynthia Rowley designer Pampers.  No need to adjust your monitors, rub your eyes or check the lighting, my friends.  It's true that Cynthia Rowley, the American designer, was asked by P&G to design high end Pampers.  And design she did.  In all, there are 11 patterns that will be sold in Target stores starting this month.  There's no long term commitment but if P&G is happy with its performance, it's conceivable the line will expand.

And, I'm sure many of you have heard of or even seen the Huggie's denim style diapers.  Below is the commercial which has both amused some and turned off others.  Full disclosure: it gives me the giggles.

You know what I find interesting about the Cynthia Rowley Pampers?  Aside from the fact they had a serious conversation with her about this, that is?  The suggested price of these diapers is $15.99 which is $6 higher than the plain variety.  So, for 60% more, your baby can relieve him or herself in style.  I don't know how that's a good fit with the realities of today's consumer.  The Huggie's suggested price for a pack of 29 is $13.49 and is priced higher than the plan variety.  To be clear: I'm all for baby fashion and nothing is more hilarious or more fun than shopping for baby clothes, etc., so I don't judge dressing babies to maximize their natural cuteness. 

If you've picked up any sort of newspaper, you will have read stories about how private label (also called private brand or store brand) is taking the country by storm and how consumer mindsets are shifting towards value for money type of purchases.  Also, we've seen multiple articles and analyses about the seismic shift in purchase behavior of private label not only because of the unprecedented economic environment but that also, frankly, private label product quality has improved dramatically.  Focus Group of One: I used to be squeamish about buying private label but now, I give it nary a thought.  A peek at my grocery shopping cart will show a large percentage of private label canned goods, pasta, storage bags, etc.

Some data just published from Private Label Manufacturer's Association (PLMA) reinforces this.  Sales of private brand products increased by 1.8B units and national brand units decreased by 2.1B.  In grocery, private brands were 23.7% of unit share and 18.7% of dollar market share.  A recent BrandSpark study shows us that 59% of Americans think that private label products are good as brand name products, 66% of consumers (this is an international study) believe that private label brands are usually extremely good value for money and that 56% of Americans have purchased more private label products in the past 12 months.  

You could extrapolate these points to say that consumers will feel less risk in expanding their private label purchases into new categories.  After all, if you buy private label chickpeas and are consistently satisfied, you may start buying private label cereal, for example.  And many stores believe that.  Rite Aid just announced a whole new private brand line and Walgreen's attributes a portion of its latest positive results to its private label offerings.  It's safe to say that private label is here to stay and it's safe to say that the private label/value for money mindset is ingrained into the consumer.  

So let's talk about diapers again.  More specifically, let's talk about diapers that are 60% more expensive than its plainer branded cousin let alone way more expensive than its private label counterpart.  You could argue that these designer diapers are for the affluent whose wallets aren't squeezed like the rest of us.  True.  But then these would be in better packaging and sold at Bloomingdale's not Target.

So why does it seem like P&G is not in touch with what's going on in the consumer landscape?  After the novelty fades, how many newly savvy and savvier shoppers will want 60% more expensive diapers?  What's your angle?  Let me know!

Best,

Parissa Behnia

Idea Chef

678Partners@gmail.com

678Partners.com

LinkedIn

Pier 1's Cardiac Stress Test

Happy Thursday!

It's July 1.  Holy smokes where did the first half of this year go?

I saw a tweet earlier this morning asking if anyone was halfway to accomplishing goals for the year.  It's a question many ask but it assumes that goals only have a one year shelf life with the creation of wholly new unrelated goals the next January 1.  What about goals that span a few years to fruition, that force you to make some tough decisions which may seem weird or (gasp) that show you have looked at your business stressors in the eye?

In my last post, we talked about embracing failure and used cardiac stress tests as example of why seeking the causes of failure is actually a good thing.  I encouraged us to be marketing, really business, cardiologists to look for the stressors in branding, messaging, products, service, customer experience, etc., so that we can identify where we are failing and write our business prescriptions to save us from an untimely end.

It's not silly to stand up and admit the possibility of failure.  And, really, do you want to be known as the business version of the Emperor's New Clothes tale?  I certainly don't.

And, interestingly, neither did Pier 1.  The other day, I came across a brief (yet interesting) interview of Alex Smith, Pier 1's CEO.  What was striking to me was the decision to cease e-commerce sales in 2007 during a time in which everyone was selling online or starting to sell online.  Let's face it: selling online is like breathing.  Everyone does it.  And yet they still walked away from it.

This was because they understood the failure factors in their underlying business model namely store operations and profitability.  They were low on cash and the stores weren't operating at satisfactory levels.  And because they knew that when (not if) they fixed it, they'd be able to be open again for e-business.  Here's what he said:

"The pie is still there ... We had a very acute business situation that we had to fix.  [E-commerce sales were] de minimus, so we weren't giving up a whole lot by getting rid of it."

I wish I were smart enough to use a term like "de minimus" but setting that aside, I wish I were smart enough to understand broad, longer term vision as opposed to letting the desire to "keep up with the Joneses" to inform my business strategy.  In 2006, Pier 1's internet sales were only 8% of the total.  So, he was right to call it small in the grand scheme of things and to redirect funds to improving profitability and store operations which brought in the lion's share of their revenues.

In the meantime, Pier 1 has closed 200 stores and renegotiated rents on many others.  They've streamlined merchandising and improved inventory management.  Result?  In times where stores are struggling and desperate for positive same store sales numbers, they were able to report 14% same store sales increase in May with June numbers trending in the same direction.  Their shares have risen about 29% this year.  Juxtapose those numbers with some depressing consumer confidence numbers and market volatility we've seen recently and you'll understand that Pier 1 understands their mission to survive and are committed to it.

Pier 1 will be back into the e-commerce pool this year.  But, in another instance where they identify and understand failure, this won't be a cannonball jump -- more like a tentative toe dip into the pool to check the temperature like site to store shipping instead of shipping direct to the customer.  He further says:

"One of our greatest strengths is that we have got this great nationwide coverage of stores ... We believe that 70% to 80% of our target customer base lives within a very comfortable drive time of our stores.  We also know from our research that customers buying home product like to see and touch the product before they finally commit, even though they do a lot of research online."

What I like about this is that it's a realistic blend of the necessity of e-commerce presence while at the same time understanding the realities of their business model and also understanding their type of customer.  In other words, they understand the critical points where they might fail and are considering ways to mitigate or eliminate failure.

Would Pier 1 still be around if they didn't cease online selling in 2007?  Maybe.  But maybe not.  But it was also risky to cease sales in the broader "perception is reality" point of view.  They stopped selling while others ramped up.  They went on an e-commerce diet.  Think about when you've been on a diet -- you really want that piece of cake, that juicy steak or those fries.  But you know you have to stay away from it.  It's hard!

And so is acknowledging where you might be failing and doing something about it.  What's your view?  I'd love to hear from you!

Best,

Parissa Behnia

Idea Chef

678Partners@gmail.com

678Partners.com

LinkedIn