Apple's Latest Acquisition Puts Them Inside the Building

Mitch Joel writing for the Harvard Business Review highlights a little-known story that Apple just bought a small start-up last week for $20M called wifiSLAM. Basically they provide GPS for indoors and it is thought this will help Apple to augment the shopping experience in or near Apple Stores (initially) as you walk around the Mall.

The interesting thing here is that we as consumers, are willing to share our most private data with stores and brands that we wouldn't want shared with security firms or government agencies.

"Internet Retailer reported: "80% of smartphone owners want more mobile-optimized product information while they're shopping in stores, finds 'The Shopping Experience in a Smartphone World,' a study conducted by ad agency Moosylvania."

And what that might look like:

"This aisle by aisle, real-time ability to flip offers, while getting a better understanding of how foot traffic flows, where consumers stop and engage is going to affect everything from pricing to shelf space to how end-cap placements are sold."

Apple might suck at Social Media, but they're at the leading edge of Social Business.

Playing the loyalty card with every acquisition.

There was a time when big was beautiful. When economies of scale for the mammoth supermarkets pushed more product out to more depots and into ever expanding trolleys in what became known as the 'space race' to become your one-stop-shop for everything. Soon this was mirrored by homogeneous coffee brands, casual dining chains and even monotone bed factories. While it does mean fewer rollout costs, staff and admin headaches, it also means fewer deviations from the plan. And eventually that has lead us all down a dark cul-de-sac of rancorous disapproval.

During all this empire building, the struggling independent operators lamented the lack of support from government, media and us the general public as we upped sticks and flocked to our new cathedrals of cheap. A few stayed, remaining loyal despite the treehugger label, but not enough to arrest the demise of our greengrocer, butcher and baker once so prominent on the high street. The holy trinity of shopping days gone by.

Recently however the trade winds have changed tack across the retail landscape. As high streets dwindled to resmble back streets, we found ourselves forced to forage further afield. It was a novelty at first, but everyone piled on and now it's just a bunfight at the till. And with petrol prices skyrocketing, the trip out of town for the weekly shop has lost it's appeal as well as any potential savings on that 2-for-1 voucher.

One of many documentaries on how suppliers are treated by supermarkets.

As consumers we read stories of how some of our favourite brands weren't paying their taxes fairly. Or were forcing farmers to dump veg that was the wrong shape. (One onion grower who frequented our old pub in Bedfordshire said he ploughed 3 tonnes back into the ground.) Or paying dairy farmers less than cost price for their milk. Every month there seemed to be another story of supermarket dominance until finally we got to Horsemeat, the daddy of all the scandals. Supermarkets had put so much effort into winning the race to the bottom, they finally scratched the barrel floor. Had we at last had a glimpse of the fat little man behind the curtain who convinced us he was Great and Powerful?

Tom & Barbara brought us self-sufficiency

Now add in a never-ending spate of unpredictable weather, changing work patterns and a grazing culture of dining out to see why some of those profit bubbles are bursting. Tired of jostling in the aisle, we have finally embraced the one-click browser experience and forced retailers to come to us instead of trundling out with our list and a bag for life. Younger shoppers are buying less albeit more frequently, baby boomers are rediscovering the Good Life and their joy of allotments (Fifty Sheds of Grey?), while pensioners conjure up that post-war spirit which has led to such popular TV shows as Super Scrimpers and Rip Off Britain. Heck, even my own work colleague Ian made the national press by shunning supermarkets for a year. Good on him, we cheer.

35 years later, it's back into fashion.

So where is all this heading? Well you could be forgiven for thinking the independent operators are finally on the up and up. The smart ones are, to be sure. However multinationals didn't get to be multinationals without adapting to market forces and consequently are very quick to learn, and emulate. This I believe is where the battle is morphing into something more deviant. The Big Four may have steamrolled their way across the shopping landscape, but they have made shedloads of cash along the way and now it's time to use that cash pile to beat the independent's at their own game.

Ever so stealthily, supermarkets (as well as fast food brands and PubCos) are moving into new markets in ways they haven't done before. Who could have imagined Tesco becoming a silent partner in an artisan coffee chain such as Harris + Hoole? Or as I mentioned in my previous posts here and here, buying out a standalone restaurant chain like Giraffe to install into larger stores? Or Sainsbury's going into the high street takeaway business? Or that king of consistency, McDonald's varying their decor and hamburger prices according to region?

These clandestine measures are more of a threat to independent operators than many realise because they are taking them on at their own game. The smaller operators could always differentiate themselves due mostly to some very niche targeted marketing, bags of energy, a fanatical focus on customer, staff and supplier relationships and of course by offering the one thing the big nationals couldn't replicate up to now, that personal touch.

But with the big conglomerates hiding behind smaller outfits which are tightly integrated into their local community, they will undoubtedly seduce people into believing the new brand cares about us more than the old brand did. I saw this very clearly demonstrated by the 1600-outlet Mitchells and Butlers group when they relaunched the Kings Arms pub in Cardington (our nearest competitor some years ago) in a re-branding exercise that termed the General Manager as your new "village pub landlady". A hugely successful move at the time and a sign of things to come.

Artisan traders can compete for sure, even if they don't have the safety net of astronomical hoards of cash to underpin their business model. But how are they going to tackle this newly evolving threat? I think this quote from Peter F. Drucker sums up that challenge very neatly:

“Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth."

As long as our independent operators continue to relentlessly innovate in meeting their customers' needs and exceeding their expectations, the multinationals will find it takes more than a cheque book and pen to re-write that Customer Service Promise which up to now hasn't really been worth the paper it's written on.

Seven reasons why Tesco prefers Giraffe

Rumours had only just surfaced when it was confirmed that Tesco had bought the high street restaurant chain Giraffe yesterday for £48m in small change. It was news met with surprise and a wry smile as people juxtaposed the thought of Giraffe in a world of Horsemeat news.

The comments in this Guardian story really demonstrate Tesco's dire issue with their brand's perception.

Through the Twittesphere, it has been mentioned that one of the minor shareholders in the Giraffe chain saw an eight-fold return on their initial investment, so the deal would seem like a no-brainer from that point of view. But what does the 800lb gorilla in the retail space get from such a deal?

On reflection, I think it is a very clever move by Tesco. Here are some of the benefits I can envisage playing out:

1) In the very short term, it moves the consumer and press focus off horse (negative PR) and onto a more family-friendly message conjured up by the cuddly Giraffe (positive PR). As the acquisition beds in (pun not intended) Tesco will have a number of business gains to reap if they handle the mechanics of strategy correctly.

2) Giraffe restaurants can be introduced in-house into the larger Tesco Extra sites. This will drive footfall to their stores as families make the weekly shop more of an outing. This could be a key differentiator from their retail competitors in delivering a great shopping (and dining?) experience.

3) The high street chain of restaurants itself can be Tesco's testing ground for newly branded products that they might want to introduce in-store. Such a move has been hugely successful for Pizza Express and Nandos with all those shelves of product in a market that traditionally didn't exist years ago.

4) And let's not forget all that 'free advertising' in-store even if the products don't generate huge revenues due to being sold as meal deals or offers. (How many times have you thought about booking a table at Pizza Express as you browsed the pizza selection in a supermarket fridge?)

5) The Giraffe brand itself is fun, colourful and kid-friendly; the complete antithesis to the bland, soulless corporate image that Tesco desperately wants to shake off. Finally they have their Madagascar moment.

6) By introducing the Clubcard into Giraffe outlets, this will no doubt lead to further loyalty. Don't be surprised if Mums and Dads paying the bill at Giraffe get Tesco vouchers as a way of saying thanks. Again, driving store footfall. More importantly however it will give the retailer a whole new raft of metrics to study as they gently ease their way into the food service business such as they have done already with artisan coffee chain Harris and Hoole.

7) Come to think of it, will we see Harris and Hoole coffee being rolled out in Giraffe restaurants thus creating a kind of cross-pollinating sales eco-system? One hand effectively washing the other.

Whichever way this turns out, Tesco are in a very good position to leverage this deal into something spectacular. By caring for and nurturing Giraffe's family customer base, retaining that colourful brand and continuing to invest in great recipes and supply chain values, they might just pull ahead of their competitors by a long neck indeed.

Updated Saturday 16Mar13 to accredit photo, add a couple of links and generally tidy up this little post written and uploaded at 4am on my phone.