If you ask shoppers to describe outlet stores, it is pretty safe to conclude that most will say these stores sell products that are discontinued at the main retail store and are priced well off list price. They may also say that to visit such stores requires customers spend time traveling, often because outlets are located outside of major metropolitan areas.
Yet, there is more to outlets than what most people think.
As discussed in this story from Harvard Working Knowledge, outlets have been around since the 1930s. In most cases, the outlet was a single store located near a company's headquarters or factory. They started as a way for companies to sell slightly damaged or irregular products that were viewed as not sellable in regular retail stores. Most were, and are to this day, associated with product manufacturers and, more likely, retailers who offer their own brands (though these products are often manufactured by a third party).
In the last 30 or so years, the concept of outlets has changed with the growth of outlet malls. Companies with outlets now support multiple locations and are not necessarily selling castoff products. As the story explains, research suggests outlet stores continue to serve an important role though not necessarily the role of being a bargain basement. Instead, outlets attract a certain segment of customers who want to own the brand but may not be the primary target market for more expensive and higher margin products sold in the regular retail stores.
Thus, what we see in this story is an excellent study in market segmentation. Companies now see that outlets are not just a place to dump old products, but a location for attracting a market that would probably not come to the regular retail store.
At one time, the field of pharmaceutical sales was booming. Entry-level sales opportunities were plentiful as the industry contained a large number of firms who needed help spreading the word about their products. As we note in our Types of Selling Roles tutorial, most salespeople engaged in drug sales fall under the category of missionary sales. This type of salesperson is not so much involved in taking orders as they are in talking with people (mostly doctors) who can influence someone else to make a purchase. The best example of this being when a doctor writes a prescription for a patient, it is the patient making the purchase and not a doctor. From the drug firm's point of view, the key target market for their sales efforts is not the person buying the medication but the doctor who recommends the purchase.
However, in the early 2000s several developments began to change how sales occurred in this industry. One development involved U.S. Federal Government regulations that place restrictions on what salespeople can do to gain a doctor's attention. For instance, before government regulation, drug reps would overwhelm doctors' offices with product samples. Dropping off samples gave reps an opportunity to speak with a doctor even if they did not have an appointment. Another development came from doctors who began enforcing new policies limiting the number of sales calls they would accept due to the large number of reps visiting their office each day.
It now appears this profession is facing another issue. As discussed in this Wall Street Journal story, pharmaceutical salespeople are now looking at a change in who they target with their sales message. Because more and more doctors are joining health care systems, such as large group practices and hospitals, decisions on drug choice is beginning to shift away from doctors and, instead, is being handled by someone in management, who may not even be a doctor. In these situations, sales reps may find that speaking with a non-doctor about a drug may be more important than speaking with a prescribing physician. But doing so may require salespeople make significant adjustments in their sales approach to appeal to health system managers. Additionally, shifting the sales message away from a large number of doctors to just a few executives likely means fewer salespeople will be needed.
In addition to discussing the implications to the industry, this story also presents several notable statistics including how employment of pharmaceutical sales reps has changed over the last 20 years; the growth of doctors employed in health systems; and the percentage of doctors agreeing to see sales reps.
Several years ago, we mentioned how the Internet and mobile technology offered the promise of changing how coupons will be delivered. The idea was that electronic coupons will be highly attractive to consumers due to the ease by which they can be obtained and redeemed. Yet, in late 2014 the delivery of coupons via methods other than free standing inserts (FSI), such as coupon included in newspapers or in the mail, remains relatively low. In fact, couponing company Inmar reports that 91% of coupons are still distributed using a print version, with much of this still coming from coupons cut from newspapers. (The Inmar site also has useful statistics on various methods consumers use to locate coupons.)
The fact electronic coupons are taking time to be widely accepted should not be viewed as a rejection of this delivery method by consumers. More likely, it is about habit and the routine people follow when retrieving coupons. Strong coupon users tend to have a high affinity for gathering these in a physical way and actually enjoy the activities involving in leafing through printed material and then tearing out the coupons they want.
However, according to this Advertising Age story, the tide may finally be turning in favor of electronic coupons. The story notes how consumers are beginning to accept the electronic coupon in greater numbers, especially load-to-card coupons, which are added directly to a loyalty card a consumer has for specific retailers. The story also offers several interesting statistics on coupons including showing how coupon redemption rates are considerably higher for electronic coupons compared to FSI coupons.
When a company makes a decision to pull a product from the market, in most cases the decision is a final one. The product has reached the stage of its product lifecycle where it just does not make sense to continue selling the product nor are there other companies interested buying the product so it can continue to be sold.
However, it is not always the case that a dead product remains dead. For instance, a classic example is the revival of Classic Coke, which in the 1980s reentered the market after being displaced by New Coke. More recently television shows, such as Arrested Development and 24, have been brought back to life following requests from thousands of fans. And on a smaller scale, a regional candy product name Astro Pop, which had a strong following in the early days of the space race only to see interest in the product fizzle, was brought back to life by a fan that just happened to own a candy company.
The key reason products seem to be returning from the dead is almost certainly due to the power of the Internet and social media. Both make it extremely easy for likeminded consumers to voice their opinion on products for which they have a strong allegiance. Of course, from the marketers' side reviving an old brand sends a message that they care what their customers want and, if lucky, remarketing the product could turn out to be a profitable decision.
Another example of customers reviving an old product can be found in this NBC News story (via Today Show website). It talks about a Coca-Cola product called Surge, which is similar to Mountain Dew, that was pulled from the market in 2002. The soda giant is returning this product following high customer demand. What is interesting about the reinstatement of this brand is that it will only be sold online through Amazon at what appears to be a pretty stiff price.
The fact Coke is resurrecting Surge in this manner is something that raises several marketing questions. For instance, is Coke primarily testing distribution through Amazon rather than in retail stores as an experiment that may lead Coke to distribute other specialized products? For example, using Amazon to distribute Coke in special limited-edition bottles? Alternatively, does Coke just see Surge for its PR value rather than as a money-making product that will occasionally be available in the same way McDonalds treats the McRib sandwich?
Also, the relationship between Coke and Amazon is another interesting part of this story. If the sale of Surge is wildly successful, will Amazon share buyers' information with Coke so they can target these customers with other Surge products, such as tee shirts? Moreover, if they do, will future sales of Surge have Coke selling directly to the customer?
By all accounts, the writing on the wall at RadioShack reads "We May Soon Be Out of Business." Many news sources, including this one from the Los Angeles Times, are reporting RadioShack will likely declare bankruptcy fairly soon. The reports that RadioShack may fold should not be a surprise and only adds to a long list of retailers that have called it quits in the last ten years. As we noted back in 2011, undoubtedly the Internet is to blame for many of these closings. Online retailers have dramatically altered the retail landscape, and the store-based retailers that did not see this coming early on have found themselves in deep trouble.
Yet in the case of RadioShack, there are many more issues that have led them to this point, with much of it centering on not fully understanding how their customers had changed. When RadioShack was in its glory years, circa 1970s, their product line was heavily skewed to do-it-yourself electronic products that appealed not only to hobbyist and tech-nerds but also to the average consumer who needed an electronics part, such as a TV antenna. Back in the day, RadioShack was about the only retailer offering electronic products within a retail setting, though there were also many mail order firms doing the same. In fact, RadioShack was so well-known for specializing in electronics that it was quite common for customers of all types to think of RadioShack first when in need of electronic products and parts. Even more, back in the late 1970s and early 1980s, they were also were likely on most personal computer buyers' short list of sellers.
However, by the 1990s things changed. Namely, a company perceived as selling what were viewed as technological and somewhat innovative products failed to keep pace with evolving trends. As one example, for many years RadioShack continued to write receipts on paper rather than utilizing computer-entered transactions. For a company selling computers, this seemed very strange. This along with product offerings and staff that did not keep up with innovation in computer and cellphone technology led many customers to lose the mental connection RadioShack once had with technology. Of course, it also did not help that category killers, such as Best Buy and more recently online sellers, such as Amazon, entered and rapidly became the go-to retailers for tech products.
While declaring bankruptcy is no guarantee RadioShack will be out of business for good, all signals suggest this may be the case.