Wednesday, April 3, 2013 | Edited by Daniel Moores
||Drugstores See Growth Potential in Upscale Services
Upgrades Aim at Competing Against Big-Box Retailers and Online Merchants
At a spot on Sunset Boulevard and Vine Street in Hollywood, visitors scoop up sushi, taste frozen yogurt and order lattes.
But this isn't a restaurant or even a fancy supermarket. It's that Main Street staple: Walgreens.
"It's like an amusement park," gushed West Hollywood resident Brent Leonesio, 30, as he eyed the line of people waiting to pick up caffeinated drinks to go. "They've kind of made this into a destination. It's actually fun to come here."
Once mainstays for late-night snack runs and toilet paper emergencies, drugstores are shaking off their stale image and going upscale.
Walgreen Co., for example, is opening glossy stores that feature sushi chefs and enormous alcohol selections. CVS stores have added fresh sandwiches and produce. Rite Aid Corp. has been revamping its locations and bringing in packaged organic and gluten-free food.
"Drugstores are trying to figure out what their role is," said Ken Martindale, chief operating officer of Rite Aid. "We're in a new environment where everyone is selling everything."
Drugstores aren't just competing with one another; they're also taking on brick-and-mortar retailers of all sizes, analysts said.
The $220-billion industry is up against big-box chains such as Wal-Mart and Target, which are expanding their grocery sections. Even dollar stores are offering steak and fresh fruit.
On yet another front, drugstores are fighting online merchants that cater to tech-savvy customers who are comfortable ordering mouthwash and prescription medication over the Internet.
"Shoppers are just getting more savvy and into buying things online, so drugstores have to evolve to keep customers just like other traditional retailers," said Dane Leone, a senior research analyst at Macquarie Bank.
"They're also learning that in places like L.A. and New York, people want the option of picking up high-end fresh food when they go fill their prescription."
In an earlier time, of course, drugstores such as Schwab's Pharmacy and five-and-dime chains such as Woolworth's employed waitresses to dish up ice cream to teenagers on dates and quick lunches to working stiffs.
Now they have morphed into cafes catering to on-the-go customers who expect gourmet fare made before their eyes.
But not all forays into fancy pan out.
Last year, CVS Caremark Corp. pulled the plug on its high-end Beauty 360 stores, an experiment conceived in 2008 to carry more prestigious brands and offer spa-like services such as express facials and hand massages for the "time-starved woman." Industry watchers say those women never took a liking to getting plucked and rubbed under fluorescent lighting.
To succeed, chains have to dedicate time to changing shoppers' expectations of drugstores, said Judson Clark, an equity analyst at Edward Jones & Co.
"There is an adjustment period," he said. "But back in the 1950s, Walgreens had full-blown restaurants where our grandparents ate, and as they went away entire generations forgot about them. But 10 years from now, people could very well think 'How could CVS not have sushi?'"
At the Hollywood Walgreens, which opened in November as the chain's West Coast flagship store, shoppers can pick up $300 bottles of tequila and consult a "virtual bartender" (a touch-screen panel in the liquor section) that dispenses cocktail recipes to aspiring mixologists. The fresh food section offers luxe fare such as octopus salad and green olives with hummus. There's also a juice bar whipping up smoothies.
Hollywood resident Alisa Taylor, 24, is a fan. Initially a skeptic of "fancy" drugstores, she now stops by the Walgreens almost daily to stock up on wine and pick up sushi and other meals when she doesn't feel like cooking.
"I just like to say I had dinner at Walgreens, and no one understands what I'm saying, or they just think I ate chips and soda," said Taylor, who works as an assistant at a talent agency.
"You can make a nice meal out of stuff you find here, and no one knows you didn't go to Trader Joe's," she said, adding jokingly: "The convenience is a little dangerous."
Bryan Pugh, a Walgreen vice president, said the chain has six so-called flagship stores open and 10 under construction in dense cities including San Francisco and Miami. Walgreen also owns the New York-based Duane Reade chain, which has debuted locations with salad bars and shoe shining services.
"The main thing is it makes us more relevant," he said. "If we are more relevant to customers, that makes us more successful."
At rival Rite Aid, a serious remodeling effort over the last two years has changed the look of 800 locations, adding more spacious layouts, better lighting and lower shelves. Kiosk machines, where shoppers can order contacts and eyeglasses, have been plopped down near the pharmacy, while organic and gluten-free snacks can be found in the aisles.
"There is definitely a move within the (drugstore) channel to upgrade stores," Chief Operating Officer Martindale said. That was a sharp departure from the chain's previous strategy for growth, which entailed opening new stores and spending little money keeping current locations up to date, he said.
For now, Alex Marx, 40, wrinkles his nose at the idea of raw fish from the neighborhood drugstore. He sticks to buying toothpaste and shaving gel on his runs to Walgreens.
"Walgreens sushi? No," the Los Angeles cook said. "I would not eat that."
(Source: Los Angeles Times, 03/31/13)
||Tax Software Brands are Battling Hard for Market Share
Will Brick-and-Mortar Chains Survive?
While never a particularly enjoyable time for consumers, tax season has become fascinating from a marketing perspective, as do-it-yourself software brands have made an aggressive play for customers of the big brick-and-mortar chains.
Though the category has been competitive for some time, 2013 is turning into an especially nasty year. In the fight for market share, the gloves are off.
Intuit-owned TurboTax threw the first punch on Jan. 21, with TV spots featuring a ditsy fashion model and Bob the plumber, both of whom moonlight at the "tax store." The ads don't name a specific competitor, and yet H&R Block felt the finger in its eye and filed for an injunction, one that a Missouri district court judge ultimately denied.
An H&R Block spokesperson told Adweek: "We will continue to pursue all legal remedies available to fight...the disparagement of our tax professionals."
Meanwhile, H&R Block fought back with "Second Look," a series of spots featuring its own tax preparers promising to review customer returns from past years for overlooked deductions.
"H&R Block believes there is power in a tax professional sitting with a client," its spokesperson said, noting that 60 percent of taxpayers still seek a person to help with their returns. "They want more than just questions answered -- they want peace of mind."
The physical stores could use some peace of mind of their own. Their market share is down to 19 percent, per the National Retail Federation, and more than 37 percent of Americans have turned to software. (TurboTax just reported a 26 percent increase in sales versus 2012.)
"Tax software and online tax preparation are the fastest growing choice of taxpayers," said Intuit rep Julie Miller. "It's a tailwind for this business."
Don't tell that to the folks at Jackson Hewitt Tax Service, which inked a deal to open outlets inside 2,800-plus Walmart locations. Hewitt upped its game this year by offering to file its customers' 1040EZ forms free plus $50 off its services for anyone who defects from another preparer.
Did TurboTax's lampooning of the tax-prep chains threaten Jackson Hewitt? "No, it did not," said CMO Michael Williams. "Our preparers are trained professionals," he said, rattling off a list of financial and ethics classes they must pass to qualify.
Meanwhile, in the tax-prep skirmish, even the IRS itself has climbed into the ring, offering free software for those who earn $57,000 or less.
"The industry is going through an interesting period," said Dale Schmidt, an industry analyst with IBISWorld. Might we see the day when the human tax preparer might disappear? "Disappear is a tough word," said Schmidt.
But one thing's for sure, he added, "The heyday of the tax storefront is behind us."
(Source: Adweek, 04/02/13)
||Apple and Samsung Competing for Hearts and Wallets of Smartphone Customers
Last fall, college sophomore John Castro did what was considered the unthinkable among his friends: The devoted Apple fan bought a Samsung Galaxy S3, the closest thing to an iPhone killer.
The San Jose State engineering student's conversion reflects the growing muscle of South Korea's Samsung Electronics, whose array of fast-selling smartphones, from inexpensive low-end models popular in the developing world to its showcase Galaxy devices, have propelled it to the global leader, with a 29 percent share of the worldwide smartphone market in the fourth quarter of 2012 -- up from 8 percent in 2010. Apple trails in second place with 21.8 percent.
Samsung's gains, fueled by innovative engineering and an aggressive marketing campaign aimed at young people, present Apple with its greatest competitive threat in the mobile era. But Samsung's drive to put itself in the same class as Apple -- the world's undisputed leader in consumer electronics innovation -- could be short-lived if it can't keep pace with the company that has repeatedly upended the industry with disruptive devices, from the iPod to iPad mini.
Samsung's success so far has impressed analysts and raised alarm bells in Cupertino. On the eve of Samsung's recent unveiling of its Galaxy 4S, Apple marketing chief Phil Schiller gave rare media interviews, during which he criticized Android's "fragmented" software and Samsung's devices.
The battle between the two tech giants is likely to grow even fiercer, analysts say, because the high-end smartphone market is nearly saturated, meaning new growth for companies will come from stealing customers away from one another.
Apple and Samsung are slugging it out on multiple fronts. In the fourth quarter of 2012, the two tech giants were nearly tied for global market share for smartphone, tablet, desktop and laptop sales worldwide -- a category research firm IDC calls "smart connected devices." Samsung held a slim lead, with 21.2 percent of the market compared with Apple's 20.3 percent, up from 15.1 percent in market share from the third quarter -- a surge fueled by the fall release of the iPhone 5 and iPad mini.
"Samsung is very dangerous for Apple," said Clyde Prestowitz, author of "Three Billion New Capitalists: The Great Shift of Wealth and Power to the East" and a former counselor to the commerce secretary in the Reagan administration. "Samsung has a lot of money. It has the willingness to invest aggressively."
Samsung Electronics, a longtime components supplier to Apple, doesn't fit the Silicon Valley model of a giant slayer. Unlike Apple, started by risk-taking entrepreneurs Steve Jobs and Steve Wozniak, Samsung Electronics is part of the conglomerate Samsung Group, the largest of South Korea's massive family-run Chaebols that were the foundation of the country's emergence as a powerhouse Asian economy. The group sells everything from insurance to refrigerators -- and even semiconductor chips that power iPhones.
"They are pretty nimble for a huge company," said Daniel Sneider, a researcher at Stanford University's Shorenstein Asia-Pacific Research Center. "Samsung Electronics is the star of the Samsung Group."
Now Samsung is daring to try what many companies have failed to do: match the innovative magic of Apple.
While Korean companies don't have the culture of unconventional thinking found in Silicon Valley, Samsung has many of the credentials needed to challenge Apple, said Tim Bajarin, president of Creative Strategies. It has the technological sophistication to make the critical components of mobile devices -- such as chips and screens -- as well as manufacturing capabilities, which Apple farms out to companies like Taiwan-based Foxconn, he said.
A few years ago, Samsung "locked all its executives in a building" to hammer out a strategy to take on Apple, said ABI Research analyst Michael Morgan, who sees Samsung as a growing threat to Apple.
The new Galaxy S4, which goes on sale later this month, embodies the company's ambitions to directly take on -- and overtake -- Apple. The device comes with a 5-inch screen, gesture recognition and eye-tracking software -- the kind of enhancements Apple should be doing, he said.
"Samsung has moved the bar," Morgan said. "Apple could have done this. Why didn't they?"
Samsung Semiconductor, meanwhile, is spending millions of dollars to build a new San Jose campus and is recruiting local engineers with the aim of expanding cutting-edge research.
"They realize they are fighting a battle of innovation," Morgan said.
As impressive as Samsung's rise has been, the company still is not in Apple's league: Its devices lack the seamless integration Apple is known for, said Carolina Milanesi, a consumer-device analyst for research firm Gartner. As expectations for the Galaxy rise, consumers will eye Samsung's products more critically, she said.
Samsung is also losing the battle of profits. Apple accounts for some 70 percent of all smartphone profits, Morgan said, while Samsung has most of the rest.
Also, Samsung users don't show the loyalty for the brand that Apple enjoys from its customers.
The Yankee Group, which regularly analyzes consumer attitudes, said its recent survey of about 16,000 Americans revealed that 5 percent of iPhone users said they plan to jump to one of Samsung's many models of smartphones for their next smartphone, whereas 14 percent of Samsung owners were planning to buy an iPhone as their next device.
"What you are seeing in all this is a single phone model -- iPhone -- creating more loyalty than entire competing ecosystems of (Android) phones, or the 37 different models of Samsung smartphones," said Carl Howe, a researcher at the Yankee Group.
"People in focus groups say things to us like, 'If it's from Apple, I will buy it,' " said Alan Nazarelli, CEO of Silicon Valley Research Group. "I don't sense that Samsung has that today."
Castro, the convert, underscores Samsung's precarious position: Though he chose a Galaxy S3 over an iPhone 5 in the fall, he has not been completely won over by Samsung. His Galaxy lacks the software and app ecosystem of Apple, its messaging capabilities are not as "fluid" as the iPhone's and the device lacks the support system Apple offers at its retail stores, he said.
"They are on Apple's heels," Castro said. "But I don't see them ever catching up."
His next device purchase? It will probably be the next iPhone.
(Source: San Jose Mercury News, 04/01/13)
Daily Sales Tip: 'Listening' for the Solution
If you're talking, you're not listening, and as a result you're not learning anything that you'll need to reply in a way that progresses a sale, you're not earning your prospect's trust, and you certainly won't earn the right to ask for the business.
Ideally, you should talk 20 percent of the time; ask questions and listen 80 percent of the time. Then and only then can you tailor your sales presentation to the prospect's real needs, and in the process, earn their trust and the right to close the sale.
Keep your questions brief and concise. The more complex the question, the less likely you are to get the information you need. Simple sentences generate complex answers, and this is what you want to hear because the customer will be telling you how to solve their problem, but you'll hear it only if you're really listening and not multi-tasking mentally.
Until you know what they do, how they do it, where, when, with whom and why, you have no business -- or credibility -- telling them how you can help them to do it better.
Source: Business strategist/consultant Donna Saul