Earth Day in a Consumer's World

Earth Day is today, April 22. Everyone should be extra environmentally conscious in honor of Mother Earth, but if you need more motivation, it turns out that being "green" can save you a lot of money too. Just follow these easy tips from Consumer Reports and it will be a win-win situation for both you and our climate. Also, for those of you who have followed my posts on Apple or are just fans of the brand, they have been singled out as the "least 'green' tech company" according to a recent Greenpeace report. Everyone realizes the environmental impact of cars and plastic bottles, but often times they don't think about how the "paperless" technology we use effects the environment as well. All those iPhones have to be manufactured somewhere, and if leaving lights on in your house wastes electricity think of how much energy is used powering Apple's massive servers!

So get outside to day and connect with our beautiful earth, we only have one life and one planet.

Yo Quiero Taco Bell!

For all those loyal Taco Bell fans out there, like me, the fast food phenom's name has been cleared and the petty lawsuit against it has been dropped. Now let's all go enjoy a crunchy taco - who cares if there are meat fillers, we know it's not "gourmet", but that doesn't make it any less delicious!

So You Failed In China, Now What?

My Sophomore year, I attended a presentation by Mattel discussing the marketing initiatives for Barbie's 50th birthday. The crow jewel of the marketing strategy was the brand's expansion into China and the Shanghai superstore I discussed in my previous post. My favorite professor that year was also a former Mattel marketing executive who was responsible for much of the strategy behind bringing Barbie to China, so needless to say it certainly caught my attention when I read about how unsuccessful their strategy was after only a couple years. Around this time I also came across a Harvard Business Review article about "7 Remedies for a Bad Strategy Hangover." Although it's directed towards the individual, I think the same ideas easily translate for companies like Barbie, Best Buy, Home Depot, and any other company who has failed overseas. I know leaders at those companies heeded the advice of #7, to move quickly and get out of the bad strategy fast, but I'm curious if they followed any of the other suggestions.

American Retail's Final Frontier: China

The story is all too familiar; a prominent and successful American company seeks to expand its global empire in the world’s fastest growing consumer market, China, but within a few short years the giant pulls out of the country wondering what went wrong. The most recent company to fall prey to this unfortunate cycle is Mattel, who recently closed its $30 million Barbie superstore in Shanghai.

Barbie superstore in Shanghai

The six story pink Barbie wonderland opened in March of 2009 in honor of Barbie’s 50^th birthday with lofty goals of targeting China’s upwardly mobile, trend-setting elite, and turning the fashion doll into a full-blown lifestyle brand with a heavy branded-merchandise focus. The store had much broader offerings than any other Barbie store, with a cosmetics counter, adult clothing, spa, nail emporium, and even a wet bar. For the first time not just in China, but anywhere, Barbie was being targeted to women as old as their early 30s - decades after most girls in America probably “grew out” of the blonde bombshell doll. Regrettably for Mattel, the strategy flopped. Within eight months of opening, the store had to cut sales goals by 30%, and now it’s closing the store completely, citing a strategy change.

While the recession couldn’t have helped, it is important to point out that amidst Barbie’s failure, retail spending in China rose 18% in 2010 - clearly some shortcomings in strategy are to blame. Analysts have cited problems like poor store location, not localizing the brand, and overpricing for reasons why the store didn’t work.  As Shaun Rein noted on Forbes.com, “Chinese women tend to like cutesy, girlish pink clothes (think ‘Hello Kitty’), not the sexy and skimpy kind Fields (Patricia Fields: Sex and the City) designed,” which are more akin to the clothes that Barbie wears. This lack of localization isn’t the root of all Barbie’s troubles; however, since the dolls are still well-liked in the country, and Mattel did make efforts to localize the brand, like introducing Ling, a Chinese Barbie.

Other American companies have struggled to effectively take advantage of China as the biggest and fastest-growing consumer market as well - Best Buy and Home Depot recently pulled out of China. These failures also cannot be attributed only to lack of localization. Businesses often dismiss their struggles in China claiming that they’re caused because the Chinese prefer to haggle, but that excuse is faulty. A popular Chinese electronics store, Gome, has fixed prices and when it transitioned to that pricing strategy its sales actually rose because wealthy Chinese actually fear over paying and don’t want to bother with negotiating prices, so Best Buy was perceived as overpriced because its products could easily be found at local shops for much lower prices, not because Chinese people just wanted to haggle for lower prices. Apple has maintained a successful high price strategy in China – its Shanghai store sells more iPhones per square foot than any other Apple store in the world even with prices that are 30% higher-because its products are not easily substitutable.

The deeper issue that chains like Best Buy and Home Depot faced was that big box chain stores cannot maintain their price advantage in China. Local retailers are more competitively priced for things like standard electronics because the country has a prolific piracy problem that makes such goods extremely accessible, and the companies pay lower salaries, benefits, overhead, etc.

As Barbie, Best Buy, and Home Depot have shown, the flagship store model is difficult to pull off in China. The extreme traffic and lack of parking make such stores a logistical problem for consumers who consequently prefer to shop closer to home where they can walk to the store. Also, since the Chinese government banned free shopping bags, consumers tend to shop more often, buying less at each outing, which only perpetuates the preference for local stores. Even the world’s largest and most powerful retailer, Wal-Mart, must scale down its stores to succeed in China. As a Forbes.com blog pointed out, “smaller formats that appeal to consumers in emerging markets might be more appropriate to connect with consumers and establish brand presence.”

But Barbie’s problems may not be as simple as localization issues.  Mattel’s greatest downfall was lack of confidence in its strategy, not knowing how to balance localization with staying true to the American heritage that makes Barbie the most iconic fashion-doll in the world. Barbie’s expansion into Shanghai was more than a new location; it was also a foray into being a lifestyle brand. The Shanghai store was selling dolls, of course, but its vast other offerings seemed to take center stage, which was new territory for Barbie. The lifestyle concept may have been more successful if tested in the US first where only one variable of the brand was being altered instead of two.

Barbie branded makeup at the Shanghai store

Even though millions of dollars were lost due to the faulty strategy of these companies, they all moved quickly to end the bad strategy and cut their losses. Hopefully other companies can learn from their mistakes and effectively localize but also choose a clear strategy when expanding to China, or any other new market. 

Consumer Reports Take on the iPad

As a follow up to my post about the iPad 2, here is Consumer Report's take on the new gadget compared to other tablet computers.

http://www.consumerreports.org/cro/electronics-computers/computers-internet/computer/tablets/overview/index.htm

This electronics trend has exploded in the past year, much as the iPod did when it first came out. It will be interesting to see how the trend progresses and if it has the same immense cultural impact as the iPod and iPhone or if it gets surpassed by the next big thing, like e-readers did when tablet computers caught on.