Archive

Posts Tagged ‘Reuters’

Taking flight – Opportunities and obstacles in democratising luxury

Vuitton, large, balloon, ad, print, louvre

I don’t think democratic luxury exists. I don’t believe in something for everyone… How can we possibly put these products on the Web site without the tactile experience of luxury?”

- Brunello Cucinelli

The democratisation of fashion took a beating this past week as news reached Zeitgeist that Fashion’s Night Out was to be no more. Spearheaded by Anna Wintour at the height of the global recession, the idea was for a curated evening; a chance for stores to open their doors late, inviting a party atmosphere and focussing spend on a calendar event. The Wall Street Journal wrote that last year, “Michael Kors judged a karaoke competition at his store on Madison Avenue, rapper Azealia Banks performed at the MAC store in Soho and a game night was held at a Kate Spade store.” The evening festivities were replicated across New York, London and other cities.
Zeitgeist happened to be on Manahattan’s Spring Street last September when the most recent FNO was held, waiting patiently for a perenially-late friend who works next door to Mulberry. While waiting, it was absolutely fascinating to see the sheer of variety of people out on the street. While the crowds were mostly composed of women, the groups ranged from college-aged JAPs and the avant-garde to hipsters and stay-at-home mothers. Most gawped excitedly as they beheld the Mulberry boutique, enticed by the glimpses of free food and drink, as well the sultry bass tones of some cool track. One elegantly dressed fashionista strode hurriedly past Zeitgeist, lamenting to her cellphone “Oh God, it’s Fashion’s Night Out tonight”.
Ultimately perhaps it was such feelings among the fashion set that caused FNO to come to an abrupt end. But Zeitgeist got the sense that, while undeniably a celebration of fashion and an opportunity for brands to showcase their attractively experiential side – particularly to those who might usually be deterred by luxury brands and their perceived sense of formality – there weren’t a great deal of people actually buying things. It’s quite possible that the whole strategy of attracting a crowd who would not otherwise frequent such stores backfired; they turned up, sampled the free booze, felt what it must be like to shop at such-and-such a label, then moved on to the next faux-glitzy event with thumping music. This then was a failed attempt to bring luxury to the masses.

On a macro scale, the cause for democratisation is hardly helped by the global financial crisis. Although over four years old, the ramifications and scarring done to the economy are still sorely felt. This is illustrated in the unemployment figures around the world, tumultuous elections and anecdotal tales of hardship. More starkly, they are being backed up by solid quantitative research that proves we as a world are less connected now than we were in 2007. In December last year, The Economist reported on the DHL Global Connectedness Index, which concluded that connections between countries in 2012 were shallower (meaning less of the nation’s economy is internationalised) and narrower (meaning it connects with fewer countries) than before the recession. Meanwhile, just this past week, the McKinsey Global Institute published a report showing financial capital flows between countries were still 60% below their pre-recession high. This kind of business environment hardly fosters egalitarian conduct, and indeed such isolationist thinking was on show at Paris Fashion Week recently, where designers clung to their French heritage as a badge of honour. Exactly at the time when art needs to be leading the way in cultural integration, as emerging markets not only continue to make up a larger part of the customer base, but also develop their own powerful brands, it seemed that designers, like the financial markets, retreated to what they knew and found safe.

McKinseyEconomistLessConnected

The world is less connected today than in 2007

Where the ideology of democratising fashion has seen more success is of course online. We’ve written before about how luxury is struggling with the extent to which they invest in e-commerce. One of the principle hurdles is that the nature of luxury – elite, arcane, exclusive – is more or less diametrically opposed to the nature of the Internet – open, borderless, democratic.
Yet the story of Yoox – the popular and, in online terms, long-lasting fashion ecommerce platform – and its founder is one of just such democratisation. (It is particularly stunning to read of the difficulties the founder, a Columbia MBA graduate, Lehman Brothers and Bain & Co. alum, had in attracting VC funding). It also, crucially, points to the importance of recognizing multiple audiences, and how they like to shop differently depending on context. John Seabrook, writing in The New Yorker, reports that when Federico Marchetti set up Yoox in 2000, the world of ecommerce for fashion was regarded as a not particularly salubrious environment. Rather, the magazine compares it to outlet stores like Woodbury Common, fifty miles north of New York. Luxury brands like Prada and Marni could be found there, offering deep discounts on their wares, and it was for that reason – and the lack of control over their own brand – that they didn’t like much to talk about such places. This, despite the fact that they attracted 12 million people in 2011, “almost twice the number of visitors to the Metropolitan Museum”. Yoox was likewise greeted with much trepidation by fashion retailers. The article quotes an analyst from Forrester Research:

“It was a matter of principle with luxury brands that only people who shop on eBay use the internet – and their only interest was in getting a low price.”

Marchetti’s only available source of designer clothing was from last season and beyond, as no brand would sell their current collection. He curried favour with some of them though by advertising the prices without noting the discount customers were getting. Other than that, luxury brands took little or no notice.

Online shopping though would prove to be “one of the largest disruptions of the luxury-goods industry since the birth of the department store”. There are three kinds of online store today; those that sell deep-discounted goods on end-of-season wear, those that sell in-season clothing, and those that have flash sales of small numbers of clothing or accessories. It turned out there was an audience for all of these types of website. Bridget Foley, executive editor of WWD is quoted in the article saying “[T]here has been a sea change in attitude… I think [it] surprised the fashion industry… Just because you love clothes doesn’t mean you love shopping“. This struck Zeitgeist as one of the more important insights in the lengthy article. Though retailers often harp on about the importance of the retail environment, the need to touch the product, to be in an atmosphere where everything has been curated down to the finest detail, online neutralises all of that. This idea threatens those in the luxury sector, as the thinking goes that any such premium on products may seem less justifiable away from a Peter Marino-designed armchair and a nice glass of champagne. Such ideas are being challenged though. Not only is the nature of the store changing – from robotic sales staff to customers as models on the catwalk – but so is the view of the luxury customer as a homogenous, static group, devoid of context. Zeitgeist was at a Future of Media summit at the Broadcast Video Expo last week, where, as behavioural economics suggest, MD of Commercial, Online and Interactive for ITV Fru Hazlitt insisted that consumers had to be targeted in ways that were pertinent to them, not only as demographic groups, but in ways that recognised the context of how approachable they were likely to be at the time, given the programming they were watching. Fru admitted that in years past, broadcasters like ITV had seen advertising as “space to rent out”. Now they were thinking deeply about how and when is the right moment to reach their target consumer. It is the same in fashion. There is not one single way to reach the consumer; buyers of luxury goods do not want to be solely restricted to being able to buy your wares in a physical store.

chanelbagcambon

Chanel are one of the few remaining luxury brands to resist fully integrating online

Behavioural economics played a role in Marchetti’s initial framing of the audience for the website as well. He hired pedigreed fashion writers, as well as artists, architects and designers to make special projects that lent the website an air of curation, of something more special and rarefied that what one might find – or more importantly the way one might feel – at an outlet mall. Marchetti wanted the customers “to see themselves as connoisseurs, even if they were really just hunting for bargains”. The New Yorker article goes into some anecdotal detail about the way people shop on Yoox, which crucially differs not only from the way they would shop in-store, but also from other e-tailers. For online shopping in general, the experience is one where you can purchase ten items, and return nine of them with very little hassle, with credit for multiple rather than a single brand, and certainly no raised eyebrow from a pretentious shop assistant. Regarding specific sites, Yoox, unlike Net a Porter, for example, does not try to force a set of looks onto the user. Behavioural economics tell us that people irrationally value something more when they’ve been made to work a bit to get it. Such is the case now shopping for luxury items, which makes clothing not in-season (i.e. not currently in every shop window), both cooler and cheaper. It’s an act not to be discouraged. A Saks representative says customers who shop online as well as in store buy four times as much merchandise as customers who shop only in the store. What will worry retailers though is that the convenience of the online store outweighs the experience of the physical boutique. The New Yorker quotes a shopper: “I’ll never buy a dress at the Prada boutique again after getting these really amazing ones on Yoox.”

As well as setting up the Yoox website, Marchetti’s company now also powers the online stores of more than thirty fashion houses, including Armani and Jil Sander. Last summer, PPR joined in too, after conceding that their in-house expertise was not up to snuff. The latest development is making designs available to any customer as soon as it hits the runway. Burberry, as well as separate sites like Moda Operandi, have spearheaded this innovative change, which is effecting editorial as well as buying methods previously seen as unshakeable. The demand for this type of instant purchasing seems to be fueled by a niche – albeit a sizable one – that is not representative of the majority of luxury shoppers. The accessibility of a brand and its products is a tricky one to tread, one which Zeitgeist has written about several times before. Tom Ford performed a volte-face this year, after debuting his womenswear collection with no press and VIPs only, relented this year at London Fashion Week by letting bloggers write about the show. Chanel still steadfastly refuses to fully engage with online shopping. The tension is keenly felt in the New Yorker article, where Amazon’s new entry into the world of fashion is referenced. The CEO of Valentino is unconvinced: “Valentino is high luxury… People going to Amazon are not going to Valentino“. This smacks a little of pride and ignorance, for they most assuredly are, though perhaps not with luxury purchases in mind… yet.

It comes back to the idea that there are myriad types of luxury consumer. The industry has not fully acknowledged as of yet that the buying behaviour of a descendant of the ancien regime in Paris is unlikely to buy in the same way as a newly-minted businessman in Shenzhen. They may know that these types of buyers exist, and they may even create different products for each. Importantly though, they are not recognising that these people may go about purchasing in a different way. It’s not just a purchase journey that has changed massively in recent years, as McKinsey’s consumer decision journey illustrates above. It’s also, as ITV’s Fru Hazlitt insists, about recognising that different people shop in different ways, wholly dependent on context. Though Fashion’s Night Out may be on permanent hiatus, and though the global economy may be sputtering along in second gear, the opportunities to leverage deep insights into consumer purchase preferences are there for the taking. Yoox, along with a deeply complicated algorithm, are trying to tap into just this. But the process must start with realising that yes, actually, someone might want to pick up that Valentino dress while surfing on Amazon.

Selling the extraordinary

February 4, 2013 5 comments

sothebyssurrealismmenu

“Everything has become more experiential”

- Dante D’Angelo, brand and consumer development director at Valentino

It is an odd state of affairs indeed for the retail sector at the moment. On the one hand, consumers are flocking to digital devices like never before, particularly for their shopping. Conversely, this means that the physical experience of shopping becomes rarer, creating more opportunities for specialism. An article in the Financial Times a few weeks ago read as if a commercial plague had swept through the UK high street over the past few years. With 4,000 stores affected, 2012 was, according to data from the Centre for Retail Research, the “worst year since the start of the credit crisis in 2008″. Names of erstwhile stalwarts like Woolworth’s, Jessop’s, Peacocks and Clinton Cards have all fallen under the knife. As we wrote at the beginning of last month, what little salvation there is lies in embracing digital technologies.

The luxury sector however has its own special, gilt-edged cards to play. In St. Tropez, the Christian Dior boutique’s ample courtyard has recently been made use of with an all-day restaurant. Louis Vuitton have a cinema screening classic Italian films in their Rome boutique. It’s no wonder such brands have also branched into the hospitality sector, the former working with the St. Regis to develop branded rooms, the latter into full-scale hotel management. Ferragamo have been involved in the hotel sector for years. Two recent examples show how companies can extend the experience for visitors, and help drive revenue at the same time.

The auction house Sotheby’s will tomorrow auction a rather large collection of surrealist art. One of the few things that definitively puts it ahead of Christie’s is that it has its own cafe, which, last week and this week, is pushing the surrealism theme into its catering (see above menu). It’s a simple, creative idea that creates a cohesive brand, celebrates a big event, and ultimately hopes to drive revenue from peripheral streams around the auction. The RA’s current Manet exhibition is taking a leaf from this tactic, opening later but charging double the usual rates for a special experience, including a drink and a guide. The other interesting news of note was a new tactic being employed by the fashion company Valentino. Not content merely with having a major exhibition at London’s Somerset House, the label is also tinkering in an innovative way with its event structure. As detailed last week in Bloomberg Businessweek, Valentino is opening a new boutique in New York later this year, during which the typical glitterati will be in attendance. However, the new idea comes in the form of the company inviting prized customers to the opening for the chance to rub shoulders with said VIPs, for a steep price. Similarly, Gucci is offering its non-VIP customers tours of its Florence workshops for the first time.

Something that Zeitgeist has been noticing for a couple of years now, recently echoed by Boston Consulting Group (BCG) senior partner Jean-Marc Bellaiche, is the importance, particularly for those in their 20s – like Zeitgeist – that people place in defining themselves by what they’ve done rather than what they own: “In an era of over-consumption, people are realizing that there is more than just buying products… Buying experiences provides more pleasure and satisfaction”. On a macro level there is significant bifurcation in the retail market; not everyone will be able to afford in creating extraordinary experiences for their customers. A recent BCG report helps illustrate this, noting that while the apparel sector as a whole saw shareholder returns fall by 1.3% for the period 2007-2011, the top ten players produced a weighted average annual total shareholder return of 19%. Expect then for retailers – those that can – to increasingly provide exclusive experiences to their customers, beyond the celebrity, whether it be early product releases, tours, or events. Just don’t expect it to come without a pricetag.

On the contemporary art market – Expertise, Marketing and Money

December 18, 2012 1 comment
“If all signs are autonomous and refer only to one another, it must seem to follow that no image is truer or deeper than the next, and that the artist is absolved from his or her struggle for authenticity.”
- Robert Hughes, 1989

Tom Wolfe, one of America’s greatest living writers, recently had his latest work, Back to Blood, excerpted in Vanity Fair. In it, the author excoriates the miasma of power, money, influence and ignorance that surrounds the contemporary art market. Wolfe describes the billionaires descending on Art Basel Miami as a “raveling, wrestling swarm of maggots”. What has become of art, its pursuit and its collection?

The pursuit of excellence can sometimes can be a quixotic quest, all the more so when dealing with something as ephemeral as art, and particularly with the contemporary art market today. But how does excellence, or authenticity, in art cope with a nexus of questionable experts and highly liquid but bifurcating market, in a world where promotion is all?

Part of this problem resides in the question of expertise, its influence and its value. If one thinks of artists in the period of the Italian Renaissance, the quality of the fresco or sculpture is mostly self-evident in the verisimilitude of the work. Moreover, the media worked with often necessarily involved painstaking, long-term commitment and toil. What artists like Marcel Duchamp began and Andy Warhol perfected was the thought that works of art should be valued by their conceptualism. In other words, not necessarily how much time or effort was put into making an object, or whether it was any “good”, aesthetically speaking, but with more emphasis on the power of the underlying idea – representation – behind the work. “Art can be expressed purely as a thought or action”, wrote the FT recently. This postmodern concept has not evolved since the time of Warhol. Without being able to critique the amount of expertise in the manufacturing of an object, it becomes harder to address the worth of an object, unless you are in the presence of a designated ‘expert’. The situation risks creating an echo chamber of unedifying art that speaks to no-one and is so self-reflexive it loses all meaning. It also allows for an artificial inflation of prices, creating a false market that shuts out all but the ultra-rich, whose tiny but influential numbers can significantly skew the market. One need only look at how much the Chinese taste for wine is influencing global production to see such an instance in action.

Such points were neatly summed up recently by the prestigious art critic and lecturer Dave Hickey, when he announced he was leaving the art world:

Writers, dealers, curators, advisers have become “a courtier class – intellectual headwaiters to very rich people”. For this 0.01%, “art is cheaper than it’s ever been” but “nobody cares if it’s any good, and everybody hates it when something’s really great”

The ‘experts’ who assign value to contemporary art objects have come full circle. Rightly recognising that there is art worth shouting about beyond an arbitrary, Westernised canon, it has now gone too far in the other direction. As a brilliant FT article on the subject recently pointed out, “The market loves theory because it spares the need for discrimination.” Making matters worse, the article quotes gallerist David Zwirner lamenting, “connoisseurship is really not valued, sometimes it is even looked down upon”. All of which leads to a highly fragile concentration of expertise and financial capital sitting with a select few. If we look again at the wine industry, American wine critic Robert Parker was at one time so influential that growers in France began changing their product purely to suit his taste so as to earn a higher rating on his guide. Zeitgeist asked art critic Brian Sewell at a debate earlier this year whether influential patrons such as Charles Saatchi and Francois-Henri Pinault were playing a similar role in the contemporary art world; shifting value perceptions of art and artists according to their personal whim. It helps little when major collectors like Frank Cohen admit publicly that they have “bought a load of bullshit”. The quotation may sound flippant, but it underscores the massive influence the bullshit they have bought has on the broader prices in the art market.

artmarketgraphs

Auction turnover returns to pre-recession highs… just in time for slowing growth in BRIC regions?

Art adviser Lisa Schiff spoke openly about this recently to Forbes magazine, saying she was “worried that there are a lot of young artists that could really take a nosedive”.This influence is being felt keenly right now with small but highly influential – and influenced – groups of buyers in Russia, Brazil and China. But as the BRIC regions continue to stall, what will happen to arbitrarily in-demand art and artists if these markets suffer further losses or even a sudden shock? Such problems are further compounded by the massive rise and fear of litigation, as previous, bona fide experts able to certify works as being genuine are being scared away by the threat of legal action.

So there’s an expertise fallacy here, one which is not restricted to the world of art. Elsewhere, marketing, something that admittedly has always been part of the selling of art to an extent, is becoming increasingly essential for a successful artist or studio. The Montoya exhibition currently on at The Halcyon Gallery in London represents the epitome of this new trend. Full-page ads in The Economist and 30-second spots on CNBC (see beginning of article) are being taken out for the exhibition, placed seemingly without irony at the feet of the very audience the art seems to be mocking, or at least parodying. It is the increasing lack of ironic awareness that creates an emptiness in the purchase and reputation of some of today’s bigger artists, including Jeff Koons, Richard Prince and Takashi Murakami. Interestingly, the latter two have both seen stratospheric success that goes beyond the confines of the art world, helped in part by collaborations with luxury goods company Louis Vuitton.

Richard Prince's oft-repeated Nurse motif was used for the Spring/Summer '08 Vuitton show

Richard Prince’s famous Nurse motif was used for the Spring/Summer ’08 Vuitton show

The marketing of art is at its most visible at contemporary art fairs – of which there are now more than 200 annually around the world – mentioned earlier as a subject of Tom Wolfe’s new work. Frieze, which takes place annually in London, is one of the most well-known. It was intriguing to see that this year saw the debut of Frieze Masters, which some saw as an attempt to breathe new life into an event that had begun to lose its ability to surprise. It was also seen as a deliberate attempt to focus attention on more established names in order to avoid some of the volatility the market has seen with newer, less-known artists. So the market isn’t so insular that it doesn’t recognise the need for significant change.

Collecting art is something that few of us can turn into a committed past-time. Moreover, the vagaries of art over the past ten years-plus have been such that only a select few would be able to decipher the worth of a current artist’s produce. The value of their art has been dulled by demographic shifts and concentrations, by overly-excessive marketing tactics and by a reduction and muddling of the nature of what it means to be an expert. Regulation of the sector seems overdue, as conflicts of interest and an oligopolistic marketplace seem to cry out for legal oversight. Some of these problems are not restricted to the art world and it will be interesting to see if a paradigm shift sits on the horizon. The Internet is providing some antidote to this. Recent online-only auctions by Christies – one of ArtInfo’s top ten stories that moved the art market in 2012 – have made the process of bidding for items extremely popular, and small art-sellers like Exhibition A are illustrating there is room for innovation in the industry. Is the art market in an aesthetic and financial bubble, and will it burst? Time will tell.

Ai Weiwei Exhibition A

On motion picture marketing – Star Trek shows the way

December 15, 2012 1 comment

IMG_5503

Zeitgeist was lucky enough to be a guest at the BFI Imax the other day when a select few members of the press, film industry folk, hangers-on and, yes, Trekkies, were shown footage from the Star Trek film to be released next summer, “Into Darkness”. It was a mere nine-minute clip of the film – the rest of which is still under lock and key / being edited under the watchful gaze of J.J. Abrams – but it was deemed enough to hold a Friday morning event around, with a very well-catered brunch afterward. What made the morning special was the presence of two of the stars, Alice Eve and Benedict Cumberbatch, as well as the producer, Bryan Burk. The Q&A session, preceded by video salutations from J.J. and Simon Pegg, had many Trekkies in the audience aflutter and was a nice bit of promotion.

Regarding the footage itself, any excitement at seeing fleeting glances of futuristic shots brimming with portent were somewhat diluted by the fact that the same nine minutes were to be shown from that day before select showings of “The Hobbit”. Which of course means it was also pretty much immediately available on YouTube (if only to be removed, in an understandable but somewhat counter-intuitive move by the studio).

The status quo at the moment is one in which films often have longer life-spans than ever before (especially if more than one iteration is being shot simultaneously a la Lord of the Rings, or the studio making the film falls into financial trouble, as with the last James Bond film, Skyfall). If the production time isn’t longer, the lead-in for marketing certainly is. Disney’s Tron remake, which came out in 2010, was several years in the making. The marketing campaign was three and a half years long. One promotional tactic used was to give away free – but very scarce – tickets to select sneak peeks at the film, several months before its release, which at the time Zeitgeist took full advantage of.

This is not without drawbacks for the studio of course, as early bad press could scupper a film’s chance of commercial success. But in part perhaps recognising the need to constantly remind people of a product, in a society today that values instantaneous media and loves to second-screen, the risk is one worth taking. It’s especially appropriate if the film has a built-in, excitable fanbase, which both Star Trek and Tron do, and you can feed them occasional scraps to keep them satisfied. The TV series Lost, which invited similar nerdy inclinations – and was another brainchild of J.J. Abrams – made a similar move when the studio behind it released tantalising clips on YouTube in an effort to stir interest. Crucially, it also meant they beat the pirates at their own game. All in all it was a nice little bit of promotion by Paramount, creating coverage in media old and new as the stars gave interviews afterwards, and keeping die-hard fans on the slow-boil, ensuring the film remained top of mind while the final product remains a work in progress.

Olympic Winners and Losers – Empty Seats and Byzantine Ticketing

What a fantastic ad from Channel 4 advertising their showcasing of the Paralympic Games, beginning soon. Meanwhile, what of the Olympics? Though there have been tales of Tube and travel chaos, Zeitgeist has not personally experienced problems with public transport, either for commuting or for travelling to the Games themselves. And while our mayor may have been left dangling like a pinata the other day, he certainly seems not to have left London in the lurch in its preparedness for the Games.

LOCOG, however, have had to face two severe lines of questioning since the Games opened last Friday. The first, which became immediately apparent to anyone watching the first few days of events, was that thousands of seats were unoccupied, including for events LOCOG had deemed sold out. The fault, it seemed, lay mainly with the Olympic Family, who weren’t turning up to events. Seb Coe tried to shrug off the incident, saying it was normal for the few first events of an Olympic Games. It must be particularly galling for him though after the same thing happened in the 2008 Games in Beijing and he pledged to avoid such an occurrence in London. It is unfortunate then for all concerned then that, despite releasing more tickets, the problem is still not resolved as of today.

Moreover, this brings us to the second big problem. The selling of tickets. The whole balloting system originally set up was pretty arcane and inefficient to begin with. But now with tickets being released on a rolling basis throughout the day, the chaos is all the more apparent. Yesterday, eConsultancy published an excellent article with a blow-by-blow account of just why “the Olympic ticketing website is so bad”. Worst, for Zeitgeist, was firstly not having a mobile version / mobile-optimised site. Secondly it was not having anything informing users of when certain tickets became available. Thankfully, as in any well-functioning democratic society, where there is a market failure, substitute products or competitors will come in to correct the situation. Such was the case at the weekend, when the completely unofficial @2012TicketAlert account was launched on Twitter, which used automated tweets to alert followers when any Olympic tickets became available. It was a fantastic idea, and seemed much in keeping with the ‘hack’ trend we see nowadays, when companies like Microsoft and Transport for London open up their APIs for users to develop their own programs. Such examples clearly had not occurred to LOCOG though, and earlier this evening, after amassing over 8,000 followers, LOCOG denied the @2012TicketAlert account further access. As the administrator of the account, Adam, wrote,

“[I]t seems someone at LOCOG has taken exception to our idea (or the publicity it is getting) and instead of reaching out to us or addressing the lack of a notification system, they have simply blocked our access to their server. This means we are unable to check or post any new ticket alerts… we would point out that the alert was not against the Terms of Use of the http://www.london2012.com website, nor have these terms been updated to make it so.”

It seems a poor PR move on LOCOG’s part, and more importantly a poor operational move because it makes it that much harder again to check for newly available tickets. Taking into account the immense budget that must have been allocated to the ticketing website, the result is severely lacking, and many thousands of people have been put off the Olympic experience because of it. Ticketmaster, which has branding on the website, has also come under fire. These acts, as we predicted in an earlier article, may well be the undoing of those involved, for, once lost, a good reputation is hard to recover.

What Creative Destruction means for Kodak, China and Romney

February 27, 2012 1 comment

Some things are built to last. Some businesses are made this way. They are in the end ultimately just as susceptible to market forces as their counterparts. Originally a Marxist idea, creative destruction has found its way into popular economics. Former Fed chairman Alan Greenspan mentions the phrase often in his autobiography. Zeitgeist has previously mentioned the late, great economist Schumpeter, too. His notion of ‘disequilibrium’ was that within the market, though you may have a great product or solution, there are external forces that can render said product or solution redundant. These innovations often come in leaps of ingenuity that might initially seem to be extraneous to the current product or solution’s market. Finally though, the new innovation ends up eradicating any synonymous inefficiencies. Think first about Henry Ford’s famous quotation,

“If I had asked people what they wanted, they would have said faster horses.”

Along with the insight that customer research is not always the best way to go – Apple’s avoidance of it is a case in point – what this quotation also illustrates is our tendency toward myopia when it comes to seeing strategic competition from a seemingly unrelated field. Harvard Business Review have an excellent paper on strategy that covers this. It is unlikely that anyone thought the motorcar would replace horses, or that it would even be popular. This eradication of the other, more inefficient product or solution is a great example of creative destruction. Apple’s iTunes and it’s myrmidons, and the damage it has inflicted on CD sales, is another example.

Speaking of cars, attention on the auto industry was front and centre during half-time of the recent Superbowl in the US. The automaker Chrysler, which produced a similarly provocative commercial that aired during last year’s Superbowl, has caused much chatter over television, radio, print and social media. It’s an affecting advert, not least because it is built on a fallacy. Though Zeitgeist believes that bailing out the auto industry was the right thing to do, this commercial, and politicians of different stripes (including Newt Gingrich and Obama), have all been harping on about the manufacturing renaissance coming to the US: America Redux. The simple, horrible truth is that while manufacturing as an industry has room to grow it will not return to what it was.

Moreover, those jobs that will be required demand increasingly skilled, technical labourers, i.e. college-educated. There will be a great many people who are now out of work in the US who will be unlikely to find work again due to a lack of required skills. This is not President Obama’s fault, just as it is not Bush Jr. or Daddy Bush’s fault. Though some would point the finger at policies endorsing outsourcing, this would be incorrect. Insourcing is an increasing phenomenon as wages improve in regions like China. It is the way of things, as a recent editorial explains in the FT explains,

Mr Obama [has] bought into the fallacy… that manufactures are declining in the US, but his work suffers from conceptual flaws. Take just one problem: services splinter off from manufacturing even as vertical integration yields to specialisation. Over time, manufacturing yields to services. This gigantic change that is taking place has nothing to do with outsourcing.

And speaking of China, the country sits on the brink of mass creative destruction. While money poured into the country during times of less fiscal restraint, China funneled it into myriad infrastructure and planning projects. Now the easy credit is drying up, the country is in a difficult situation, not helped by mass protests across the land as workers demand remuneration that could almost be considered wages. As with the US, there will be an inexorable shift from a manufacturing industry to a services industry. How horrific this shift will be depends upon timing, among things, as a recent article in The Economist points out,

“The long-term plan is for China to wean itself off its reliance on exports and investment projects such as roads, railways and overpriced property developments, and for domestic consumption of goods and services to play a much bigger role in fuelling growth. But this rebalancing will be a long, hard slog. Officials do not want shock therapy because it could threaten the jobs of many of the 160m migrants who come from the countryside to provide the cheap labour behind China’s exports.”

Republican Presidential candidate Mitt Romney, as is the lot of someone frequently perceived as front-runner in the candidate race, has been the focus of unrelenting criticism from his fellow party members. Some of this criticism has focussed on his time working for the private equity wing of uber-consultancy Bain & Co., specifically on how many people’s jobs the man cost during his tenure there. Though Romney claims to have created a net sum of 100,000 jobs, he has since withdrawn that rather nebulous figure as his arithmetic has been questioned. His Republican opponents, as well as grass-roots Democratic lobbying group MoveOn (below), have been airing ads featuring blue-collared workers who were let go thanks to Romney’s strategies and implementations.

Mr. Romney, though his flaws and foibles may be many – he recently praised the height of Michigan’s trees as being “just right” – is not responsible for the trend of efficiency savings in America, as the Schumpeter editorial in The Economist points out,

“[I]t was also a symptom of a wider change. It was not just people like Mr Romney who were pushing American companies to shape up. It was also the new rigours of global competition. Firms of every description sought to squeeze out inefficiencies, sell off non-core businesses and close redundant operations, all in the name of shareholder value. [I]t was the shift from manufacturing to services.”

To attack Romney for such practices is to attack the foundations of modern capitalism. Which one is most welcome to do, but presumably something that most Republicans would want to shy away from, continuing as they do to bizarrely refer to Obama as a socialist. One can’t have it both ways.

Similarly caught unawares was the film industry back in the silent era, which underestimated the massive success it would have on its hands with the arrival of sound. While excellent news for film studios, many of the talent in front and behind cameras suddenly found their way of storytelling outdated and unpopular. The Artist, which won Best Picture and Best Director awards at the Oscars at the weekend, perfectly illustrates this change. The ceremony was a grand affair as usual, hosted in the same venue as it has been for years, The Kodak Theater. Reuters recently reported that Kodak has asked to have its name removed from the building as it tries to reduce its debts.

Kodak’s recent fall into bankruptcy serves as a superb example of the forces of creative destruction. The brand is surely one of the most famous of the 20th century. The Economist called it the Google of its day, and surely there are few companies that manage to enter the public lexicon. Until the 1990s it was “regularly rated as one of the world’s most valuable brands”.  The phrase “Kodak moment” has long since left the zeitgeist. The company built one of the first digital cameras ever back in 1975, the cheapest of which cost $1,000. Its share price has fallen 90% in the past year. Its competitor Fujifilm was cheaper and quicker to adapt. Creative destruction first made physical film cameras obsolete, and increasingly digital cameras as smartphones become equipped with high-definition cameras.

After trying to diversify into chemicals, George Fisher, boss of Kodak from 1993-99, “decided that its expertise lay not in chemicals but in imaging. He cranked out digital cameras and offered customers the ability to post and share pictures online.” This could have led to the creation of something akin to Facebook, but for one reason or another it did not. The Economist blames Fisher, and whatever the cause, the company has also suffered from inconsistent strategies due to a revolving door of senior management. Tony Jackson, writing in the FT, defines the creative destruction as one of “technological disruption… cheaper than the existing version and initially not as good. Faced with a cheap and dirty alternative… it goes against the grain to devote resources to it.” One of Kodak’s problems was also its passion; for physical film itself. This passion essentially made them blind to investing fully in the coming digital revolution. There was an acknowledgement that a change was coming, but it was underestimated.

Creative destruction works in terms of the stock market too, of course. What this clip, from the excellent film Margin Call, is alluding to, is that good times lead to indolence; crashes trim the fat. It is nothing new. The series is a cyclical, unending one, difficult to influence, let alone prevent. (That’s why it was so ludicrous when Gordon Brown, as short-lived UK Prime Minister, grandiloquently announced “no return to boom and bust”). Each new cycle brings new regulations, new ideologies and practices. New products, new solutions. The ways the booms and busts happen changes. The products we make and the strategies we implement change and become more and more innovative. But the cycle never ends. Enjoy the ride.

Cisco’s Internet of Things

Cisco is an interesting brand that Zeitgeist has briefly had the pleasure of working on regarding its IPTV offering. What’s that you say, Cisco are planning an IPTV offering? Well, yes, they were about 18 months ago; who knows now? One of the interesting things about the behemoth is that most lay consumers have probably heard of the company but couldn’t tell you what on earth they do, other than that they might be in the technology sector. The Economist bluntly assessed recently that Cisco had “vastly overdiversified”. This opacity has led to declining, if stabilising, stocks.

That doesn’t stop it from putting interesting infographics together, however. Spotted on integrated agency MBA’s blog, this lovely picture illustrates nicely the importance and ramifications when devices we use everyday are increasingly connected to the Internet and hence to each other, other seamless integration and communication. Nice one, Cisco. Of course this is the kind of thing that Bill Gates was writing about when he published The Road Ahead, when Zeitgeist was but a weedy 12-year old. We do finally seem closer to those imaginings now.

Movie Moves

From industry paradigm shifts to Paramount trailers and viral websites…

Zeitgeist has had it’s eye on the UK production company Shine for some time, watching it grow into the powerhouse it is today, all under the stewardship of Elisabeth Murdoch. Elisabeth, married to Matthew Freud of Freud Communications, has seemed to want to keep her distance from the Murdoch dynasty since leaving the fold ten years ago, unlike her brother James, who worked for News Corporation in Asia before taking the helm at Sky in the UK. Indeed, Elisabeth’s husband has – strangely for a man whose career is public relations – made little to no attempt to keep his barbed views of News Corp.’s Fox News to himself, saying he was “shocked and sickened” by the content and bias of the cable network. So it thus came as some surprise to Zeitgeist to learn that a deal was recently completed for Shine to become part of the Murdoch empire for £415m. What this will mean to the independence and creativity of the group remains to be seen. But I suppose if the sustainability-themed Avatar can make it out of the notoriously arch-conservative News Corp leviathan, anything’s possible.

In other news, Netflix has been in the papers again. After announcing it would be partnering with several consumer electronic devices, (Mashable made the analogy of having a Netflix button on your remote control), this week the company announced it was trying to develop a remake of the classic UK TV show House of Cards, with Kevin Spacey starring and David Fincher directing, committing to 26 episodes, “taking it into uncharted territory that would put it in direct competition with HBO and other premium cable channels”, writes Mashable. This will be the first time that the company has commissioned and created its own content, further disrupting models of distribution, which itself is a bit of a house of cards. While Netflix pushes into other companies’ territory, Amazon encroached on Netflix‘s by announcing at the end of last month that they would be offering premium customers access to 5,000 TV shows and movies. Though Reuters points out that moves like these are attempts to “woo” companies like Time Warner and the afore-mentioned News Corp., the reality is more tricky, as the same article points out in the very next paragraph,

Media companies so far are cautious about allowing their content to be used on these types of services because they compete with cable operators that pay a premium to carry TV programs and movies. The fear is that people will drop pricey cable subscriptions — known in the industry as “cord cutting” — in exchange for streaming video offered by Netflix or Amazon for instance.

Yesterday it was reported that Paramount will release a film on DVD and on the peer-to-peer service BitTorrent at the same time, with the latter platform supposedly functioning to incentivise people to then buy the DVD. Might a ten-minute teaser have been better than releasing the entire film? Such a teaser is being provided at the moment by Warner Bros., which recently developed iPad apps for both Dark Knight and Inception, providing the first five minutes of the film for free.

Ten days ago, Facebook announced that it would be getting into the film-rental game, as reported by the FT. This is a broader stroke for Facebook in an effort to create a benevolent ‘walled garden'; an area for users to navigate the web, communicate with who they want and angage in the services they want, without ever having to leave the Facebook environment. Zeitgeist never thought they’d be mentioning the recently-released Chalet Girl on this blog, but Variety reports the film has made an interesting marketing move of releasing an interactive trailer on Facebook, where users have the option of “like”ing the trailer at various points. Peter Buckingham, head of distribution and exhibition at the UK Film Council, sagely points out the novelty of such an exercise for film marketers; “The film industry really has not woken up to how important metadata is”.

There are exceptions, however. This past week saw the release of a trailer for an eagerly-anticipated (by nerds) summer film, directed by JJ Abrams of Star Trek and Lost fame and exec-produced by Steven Spielberg – Super 8. And what is the best way to reach said nerds? Why, firstly by providing a super-nerdy website that doles out microscopic kernels of plot information on the film under the guise of hacking into a computer from the late 1970s, and secondly by releasing said trailer on Twitter (see top image). As Zeitgeist has said before, know your audience.

2011’s Retail Trends

February 11, 2011 3 comments

Zeitgeist was asked at the end of last year to write an article on retail trends for the coming year. The following is an altered excerpt of the original article…

It’s surprising to read editorial describing us as still being in a recession. If you’re going to use economic terminology, then you have to listen to economists when they say the recession ended months ago. The trouble now is dealing with the aftermath – impending cuts and taxes. Evidently it’s not all gloom though, as new stores Dior, Mulberry and Miu Miu join the salute to capitalism that is Louis Vuitton’s Maison on London’s Bond Street.

Look for more brand collaborations. Disney’s venture with Tesco is bold and innovative… Savile Row’s Gieves and Hawkes recently installed a space for barber Gentleman’s Tonic, and vintners par excellence Berry Brothers has a concession for Lock and Co. Both instances suggest a deep insight into who their shopper is; useful for the brand, flattering for the shopper. With empty high street retail spaces, the time is right for sage collaborations, bringing brands added security.

Digital integration will become more widespread, aiding both in brand building and simplifying the customer journey. More people are expected to be surfing via phones than computers by 2015. This swing constitutes an immediate opportunity for retailers and marketers. Since helping Obama to victory, crowdsourcing has only gained in popularity. The Louvre recently fundraised through thousands of individual donations online to buy a coveted Renaissance painting. The power of many, prognosticated in “The Wisdom of Crowds”, is driving ideas like Groupon, as well as its subsequent offer for purchase by Google.

It’s going to be a make-or-break year for Foursquare et al. There have been interesting campaigns by all sorts, from Marc Jacobs to McDonald’s. What’s missing is seamless integration of these services with retail environments. ‘Checking-in’ has got to become a utility for shoppers outside London, New York and San Francisco. Currently, opportunities to create conversations are being missed.

Twitter’s retail presence will continue to grow, evinced by Best Buy’s Twelp Force and Debenham’s Twitterers flitting about stores. Multi-platform interaction can be enhanced by the physical retail environment: Diesel pulled off a fun gimmick last year with a screen outside the changing room allowing customers to upload a photo of themselves to Facebook to query friends on their clothing choice. Neiman Marcus recently merged online and in-store inventories, a great idea that others should emulate. Allowing people to browse products in-store on an LCD screen without the pressure of exasperated sighs from sales assistants can make shopping enjoyable and convenient. Chanel’s Manhattan flagship has such functionality; it could be of equal use at B&Q.

Getting someone to linger in your space and mention the experience to others is what counts. Pop-ups, if they serve a purpose rather than being a gimmick, can be a tremendously effective – not to mention fun – tool. Don’t underestimate fun. Emphasising convenience alone means most people – especially when the odd flurry of snow arrives – will shop online at home. There must be an element of excitement, innovation. This can be escapist, like Secret Cinema, or pure enjoyment like Muji’s vending machine (see top photo). Pop-ups can provide an excuse for an otherwise serious brand. They help in getting a message to new audiences (Gagosian’s pop-up), or taking the store to the customer (Natwest’s mobile truck).

So, more collaborations, more digital and more pop-ups; so what’s new? As William Gibson once said, “The future is here, it’s just not very evenly distributed yet”. Embracing digital won’t stop people price-checking and tweeting negative remarks, but it would be worse to keep it – and therefore the customer – segregated. If that happens, and you promote on convenience alone, that customer never comes to your store and never sees a physical embodiment of the brand. Last November, as Zeitgeist previously reported, Ralph Lauren was one of the latest brands making use of 4D projection mapping. People cheered at animated handbags and ties. In 2011, Mintel advises, “brands may need to get more creative to lure consumers into stores, offering more than just retail and be a venue, not just a shop.” I’ll leave you with that thought while I go and cheer at a sandwich in my local “venue”.

Marketing “Tron”

January 4, 2011 6 comments

Form follows profit is the aesthetic principle of our times

- Richard Rogers

You know your movie is knocking on the door of the cultural zeitgeist when razor brands are piggybacking off your product. Disney’s ‘Tron: Legacy’, released around a month ago, has accrued a great deal of spilled ink in newspapers and online. The reporting has focussed not only on the film itself, but also its unique design aesthetics and marketing formula across multiple platforms.

Zeitgeist has mentioned the film’s marketing activities before in it’s blog, including it’s three and a half year journey as a promotional campaign to screen, (surely a record). It was a good eighteen months before the December 2010 release of the film that electronic music duo Daft Punk were revealed to be composing the soundtrack. On a brand level, this was a good fit; those who were inclined to see Tron would find this news very exciting; it would hopefully also pique fans of Daft Punk’s interest in the film. The collaboration naturally allows for figurines, bears and awesome headphones to be created, too.

The razor mentioned earlier – the Philips Norelco Senso Touch 3D – could have been an exploitative gimmick launched without much thought of the product itself and how it connects to the movie or their audience. To it’s credit, as reported by brandchannel,

The maker of the new Senso Touch 3D electric razor is offering tickets to an advance screening of Tron: Legacy via a special website that includes a rebate offer, the ability to “customize your photo into the world of Tron,” and a sweepstakes with a $10,000 prize.

The above tactics all help build a connection with the movie itself, ameliorating the product in the eyes of the film’s audience, as well as building anticipation for the film’s release. The week of the release was when footwear designer Edmundo Castillo announced the arrival of a pair of LED ‘Light Sandals’ that, according to Luxuo “pay homage” to ‘Tron: Legacy’. They will retail at $1,650 at Sak’s from February 1st. The article also mentions eyewear manufacturer Oakley is releasing special 3D glasses to tie-in with the film’s opening. Nokia have employed a similar effort with the release of a new handset. More collaborations can be found in a very comprehensive article by brandchannel, here.

In the digital world, it would be ironic if Disney had dropped the ball. Similar to other recent accounts like that for the film ‘Inception’, the film featured several region-specific accounts on Facebook that were regularly updated, informal and promoted reaction and engagement. One of the best things that Zeitgeist saw on the account was the brief chance to attend a free 20-minute preview of the film in several locations around the country. Zeitgeist attended and found himself surrounded by a very particular type of demographic, who doubtless were exceedingly excited to be there, as evinced by their cheering when anything vaguely exciting happened during the select scenes shown. The other digital platform to be wisely exploited was that of videogames. We’re not there yet, but we are fast approaching a time when movies open to support the release of a new videogame, rather than the other way around. There has been a significant fanfare around the release of the videogame based on the film. The game(s) make the bold, yet logical and laudatory move, of differing greatly between platforms, based on the typical owner of such consoles, reports Reuters. For example, the more family-friendly Nintendo Wii’s version lets you race around on a variety of the vehicles featured in the movie. For other platforms, where hard-core gamers make up a bigger portion of the audience, the game delves deeply into the mythology of the films, providing a back-story only hinted at in the new film.

The film itself also sees a number of product placements, including Coors, Apple (so to speak) and Ducati. The latter’s placement seemed rather glaring to Zeitgeist, but to those not on the lookout for such placement it might blend in more easily and authentically. The prominent placement of the motorcycle was spotted by many on Twitter however, with mostly positive reactions:

Associating one’s brand or product with such a cool film is a way of adding to your cachet, to be cool by proxy. Most surprising of all the collaborations then, is that of Apple, who need engage in no such ‘cool by association’ tactics. Yet here they are with a very, very cool app on the iPad. Between the film and the tablet, which is promoting the other in this case is hard to divine.

All this talk of marketing ploys ignores the film’s greatest asset, it’s aesthetic beauty. The film is indeed a wonder to look at, hence how it has inspired so many product collaborations, particularly in the world of fashion. While Zeitgeist realised he was supposed to be feeling somewhat tense and anxious near the end of the film as the goodies race for home, the climactic chase scene is one of a stunning light display that leaves one fairly awe-struck. The design of the film as a whole has been influential enough for the Los Angeles Times to produce a feature on it recently.

You may of course just be looking for a Tron: Legacy Coliseum Disc Battle Play Set, or one of the 37 other items related (vaguely) to the film that Disney has commissioned. In which case, best to head here.

Follow

Get every new post delivered to your Inbox.

Join 67 other followers