Physical vs Online: Less profitability, More competitiveness.

The retail preparation for the “new normal” is one of the central themes of the next management challenges.

Almost 70% of retailers express their intention to invest less in physical space than they had done until the pandemic entered. The fact that we live in a period of uncertainty contributes to this resistance, but it is above all the change in consumer behavior, which is increasingly digital, the main cause of this management option. It is that 75% of these retailers consider it imperative to invest in the digital area, as a way of survival and affirmation of their brands and businesses.

Indeed, we live in a time of great acceleration in the activity of e-commerce, which will surely affect the balance between sales in the physical and online space. Retailers believe that these will grow 15% to 20% in the very short term, with a tendency to assert themselves as the main option of choice in longer periods. It is, therefore, a trend that will affect countless stores in multiple sectors of activity.

The bad news lies in the fact that the online margins are significantly lower than the margins practiced in physical space, thus contributing to a compression of the absolute margin released in each business. Imagine a business that has its sales divided as follows: 90% in physical store with margins of 30% and 10% online with margins of 10%. If these increase to 20%, reducing the contribution of physical sales to 80%, the overall business margin will fall by around 2%.

This simulation will naturally be more severe in cases where there is a greater propensity for online shopping to increase significantly. A weight of 40% of online sales to those who only sold in physical space can contribute to a margin drop of around 8%, which, quite naturally, prevents the release of cash to cover the company’s fixed costs.

There is only one way to compensate for this abrupt drop in the margin, which consists of increasing the productivity of the fixed cost structure by more than 20%, through the introduction of simpler operations, better negotiation with suppliers, flexibility of the commercial teams and, above all, everything, the role they play in interacting with customers.

Before this scenario happens, those responsible for retail stores should take the field, in order to fine tune their value proposition and design the effective contribution that physical space can represent in the future, making it a pleasant place, to which it becomes desirable to return.

The main way, therefore, is to invest in an integrated way in an omnichannel strategy. As we have already seen, the main reason for facing this challenge head on is not to be found in the profitability of the operation, but in competitiveness, since that is where customers move. For this, it is necessary to know particularly well, and better and better, the preferences of consumers and provide a unique experience in the store, with unique products and unique service. Some measures will involve creating unrepeatable moments, exclusive launches and unique offers.

But it is good to remember that in order to develop an integrated omnichannel strategy, it is imperative to add value in both purchase channels, complementing them, that is, acting perfectly in a new BOPIS journey (by online pick-up in store).

Finally, for this to be striking and distinctive, it is time to adequately prepare employees, educating and training them to manage a customer, both present and absent. So yes, we will move from store centricity or product centricity, to customer centricity.

in https://linktoleaders.com/fisico-v-online-menos-rentabilidade-mais-competitividade-pedro-celeste

Strategy: Has long-term thinking become short?

From the ancient Greek, strategy means the art of leading the war, in order to defeat an enemy, chosen the battlefield. That is why we see many military terms associated with it in various bibliographic references (guerrilla, by pass, frontal, flank, siege, etc …). On the other hand, tactics represent all the variables that are put into practice to achieve the strategy and obtain an advantageous position in the field (number of human and material resources, choice of appropriate timings, management of communication, creation of the surprise effect, etc … )

In the business domain, strategy means the art of leading a business or a market and making it a winning project, through the construction of competitive advantages. The way in which this strategy is implemented is made up of tactics, which can include themes such as innovation, technology, pricing, service, management of distribution and communication channels, in addition to the management of human and logistical resources.

In the troubled times we are going through, it is always good to emphasize that the concept of strategy does not represent the long term, just as tactics do not mean short term either. Nothing like that. The first responds for “where” and the second for “how”.

Keynes said that “in the long run we will all be dead”. If the end of the sentence does not deserve much doubt, the long-term concept has much to say. Just look at the spreadsheets prepared in the last quarter of 2019, with sales and results projections for 2020, to understand two things: the numbers are all wrong and the temporal concepts run over.

However deep the prospective market studies on what will be the reality in a short time, there is no projection that seems reliable.

  • What accounts did and do only a few months later all those who, more directly or indirectly, develop activities in the field of tourism?
  • How many millions of people have had to leave the countries they chose to work in, because so soon yesterday’s opportunities (almost literally) are not expected so soon and the currency’s devaluation seems irrecoverable?
  • What about the recent cancellation of orders for textiles from major fashion brands, worth US $ 3 billion, to countries such as Cambodia, Myanmar, Vietnam or Bangladesh, which is causing businessmen and workers to despair and may contribute to a unemployment in the sector that can reach 70% and brutally affect an activity that represents about 75% of exports?
  • In reverse, how do you interpret the staggering growth in Amazon’s share price from $ 1,670 in mid-March to around $ 3000 at the present time?

In fact, today we are witnessing major changes at different levels of business activity:

The markets have changed: they intersect, extend and reconfigure. Uber transports food, a Portuguese micro-company sells in China, USA and Brazil, the teaching method is no longer what it was;

Customers have changed: they have changed preferences, transitioned to digital, they defend causes, they react to everything and show their most funny side. It is the victory of the biological over the synthetic or of the paper over the plastic, they are the means of payment that each time have less coins and notes, they are the online donations regarding the birthdays, it is the football, political or public comment made to the extreme, it is a TikTok that was born a kid, but is already a big one and that promotes 15 seconds of great creativity to aspire to more likes than the previous post.

Communication has changed: in interaction, in marketing, in the transmission of information, in education: Zoom or Teams have become the boardroom, digital channels are overcoming traditional advertising, webinars proliferate on any and all subjects, he returned to Telescola, which the kids have to accompany and the adults take the opportunity to relearn.

Management theories have changed: will it be that with this level of uncertainty, matrix models such as BCG, McKinsey or Ansoff, which analyze markets and competitive positions, still have the same strength? And what about Michael Porter who advocated two types of opposing strategies, separating leadership at the price of leadership by differentiation, at a time when Amazon, the fastest growing brand on the world stage, shows that the path is made on both fronts and at the same time. Same time?

If everything changes and in a short period of time, the strategy has to change in its timing of execution. I am not talking about the value proposition and what should distinguish a brand from the others and that represents its identity. I speak of the need to reinforce a strategic concept from 1997, dynamic capabilities, which is nothing more than a permanent adaptation with great flexibility to abrupt movements in the market and the environment.

This response is increasingly realized with short-term actions (quick wins) and not with the expectation of crossing a line that supposedly guesses the future and that suddenly became invisible. It will be the ability to repeatedly multiply these quick wins that will form the strategy of tomorrow. Doing, doing, doing.

Everything seemed to be a straight line. It is no longer, and few will know its future configuration.

 

I would give everything I know in exchange for half of everything I ignore!, René Descartes

 

in https://executiva.pt/blogues/estrategia-pensar-longo-prazo-tornou-curto

Social media: Some more than others.

They have been part of our daily lives for more than 20 years and had the goal at birth to connect people, regardless of the distance they were at, to constitute an inclusive and, above all, sharing phenomenon. They are social networks.

In recent years we have witnessed different assessments of the purpose and merit of some social networks, precisely from 2016, when Facebook, via Cambridge Analytica, was connected as a platform influencing the outcome of the US presidential elections, the even occurring in the Brexit referendum. We know today that the epilogue to these episodes resulted in a $ 5 billion fine.

Since then, several social platforms have contributed to the controversy, be it Twitter, which brings together a set of more extreme positions on different subjects, or WhatsApp, which was accused of being the transmitter of fake news that interfered in the elections of Jair Bolsonaro, in Brazil or Narendra Modi, in India. The most recent example of these controversies is the fact that some brands have banned Facebook, considering that no objective measures were taken to limit racist behavior, through the content published there.

Political issues aside, which are not the subject of these texts, it is important to reflect a little on the specific characteristics of some social networks and to assess their contribution to the transformation of communication between people in a modern society and to a better understanding of consumers.

Among these, WhatsApp stands out, which represented the first option in the confinement period as a means of communication to bring people, families and groups (personal or professional) together. The platform was purchased in 2014 by Facebook for 19 billion dollars, with the aim of guaranteeing privacy in the communication between sender and receiver, either at an individual or group level, which did not happen on the other social networks. At the time, it had 450 million users, whereas today that number has risen to 2.5 billion.

Its success is due to the fact that it is positioned in a space previously occupied by emails, typical Facebook posts and SMS, precisely where texts, links, photos or voice are shared. The success was such that, since March this year, the number of WhatsApp users has grown by around 40% worldwide. Furthermore, its use entered the business domain sharply, placing project teams, functional areas of the company and interactions with customers under the same “antenna”. But always in a closed circuit.

If Facebook, Twitter or Instagram are open spaces where everything can be scrutinized and evaluated, often questioning the lack of privacy, security and identity, WhatsApp is a restricted access space.

Precisely for this reason, he invites his users, depending on the group in question, to communicate in a more authentic, intense, playful, emotional and creative tone, which is not always the case on open social networks. We know well that no one is as happy as he advertises to be on Facebook, as attractive as sharing on Instagram or as hostile as he proves to be on Twitter. And in many cases we don’t even know who shares it (remember that Facebook eliminated more than 5 billion fake accounts in 2019).

The election of WhatsApp as a privileged means of communication is related to the ability to segregate communication through the constitution of groups, regardless of their size, allowing to segment the community into small niches. It is as if it were several voluntary confinements.

But be careful, WhatsApp has a double facet: in addition to the transparency, authenticity, friendliness or hostility that comes out in personal communications, the platform can also assume a mass role and stop operating in a closed circuit. Just think that by allowing groups of up to 256 people to form, if each participant spreads the word of mouth to other groups of the same size, we will have an immediate effect of 65,536 impacts. This is not really a restricted circuit and can very well be used for political purposes, marketing, or even to generate fake news. Anyway, to get the message across, regardless of its purpose. Brand communication should pay more attention to this phenomenon.

There are more social networks than others. And there are people! Which, depending on the content, widen or tighten the bond that involves all those with whom one intends to communicate. It will be an excellent market segmentation algorithm in the future.

in https://linktoleaders.com/redes-sociais-umas-mais-que-outras-pedro-celeste

5G World Market Share

With each passing day we see an increase in tension between the two biggest world powers of the moment: United States of America and China. This confrontation is centered on the affirmation of who will lead the 5G market worldwide and all the logic of telecommunications, artificial intelligence and future automation, which will affect almost all sectors of activity.

For many years, the United States has tried everything to prevent Huawei from penetrating its country, connoting the company’s practice with political issues that could affect data security and individual and collective privacy. However, this fact did not prevent it from growing in many geographical areas and obtaining ever greater competitiveness gains, having reached US $ 123 billion in turnover in an operation that extends to 170 countries.

It is, by the way, the most valuable Chinese brand at the moment, according to Forbes or Interbrand, with a value close to 8 billion dollars. Leads the world in manufacturing telecommunications equipment with around 28% market share, followed by Scandinavians Nokia and Ericsson, with respectively 16 and 14% and as a smartphone product brand it gets about 20% of the market , second only to Samsung.

Its diversification into other business areas is part of its strategy. Huawei Technologies Cooperatief acquired 20% of Vision Semantics, a company that develops algorithms that allow people to be identified in a crowd and that serves the police and espionage market. It also holds a minor position in Graphcore, a company valued at US $ 2 billion, which operates in the field of artificial intelligence applied to the car of the future and which has a partnership with BMW or Bosch. Or at Oxford Sciences Innovation, which cooperates with Oxford University in the research area and is a shareholder in Vaccitech, currently trying to develop a vaccine to combat Covid 19.

The most recent US imposition on Huawei’s entry into its market is not limited to selling the brand, but extends to all product components, including its suppliers. More recently, the United Kingdom joined this position and pushed Huawei out of the market, which culminated in the dismissal of its CEO John Browne, former BP leader for many years. In addition to the Five Eyes (USA, UK, Australia, New Zealand and Canada), similar positions are beginning to be taken by other countries like India, at the same time that Singapore announces plans to work the entire 5G market with Ericsson and Nokia.

In this context of constant threat, the position of the European Union and its main countries in terms of economic robustness such as Germany or France may determine the degree of success of the brand in the coming years. Latest news reports that MEO, Vodafone and NOS will not use Huawei technology in their 5G networks.

It is curious that this tension occurs at a time when for the first time the CEOs of the 4 aces (Apple, Google, Facebook and Amazon) were testified at the North American Congress in order to ensure that they do not use the data, tools and other information they have about their customers and users to monopolize the market, thus preventing new companies from competing on a global scale in the areas of commerce, online communication and navigation. They all appealed to the need to value American patriotism, claiming that if they do not innovate, they will give way to the role of Chinese companies.

On the Chinese side, it is answered with proverbs: Whoever does not know how to endure setbacks will never have access to great things.