Monthly Archives: October 2015

Source: http://www4.columbian.com/news/2014/feb/05/nordstrom-close-vancouver-mall-lloyd-center/

A couple days ago, the professors assigned a pre-reading about the Nordstrom expansion, and soon after, we had a debate in class over whether Nordstrom should expand into Canada. Throughout the debate, I heard many interesting insights for both the pros and cons of this expansion, but after doing a little more research myself, my opinion is that Nordstrom should not expand into Canada.

First off, Nordstrom already has a strong brand image in the United States, and their brand reputation, along with the loyalty of their strong customer base are some of the main driving points for revenue. That may not be the case in Canada. In Canada, Nordstrom will face competition from companies such as Holt Renfrew, which sells products in the same category and is already established as the go-to place for luxury shopping.

Second, operations and supply chain management will become much more difficult in Canada than in the U.S. The company already has to overstock their shelves just to accommodate for the time it will take for more products to arrive. This is a gamble that if sales do not go through, can result in excess inventory.

Lastly, as I mentioned in my last blog post about luxury department stores closing down in Hong Kong, and among other places, what customers seek nowadays is variety, not luxury. If a successful brand like Coach had to close down in Hong Kong, one of the busiest shopping cities in the world, then what are the chances that Nordstrom will last long in Canada? As an extension of this point, I definitely agree with Professor Paul Cubbon’s prediction that these large department stores will eventually all close, or change into something else. Therefore for the time being, I believe Nordstrom should stick with where they already have the reputation and customers, and avoid venturing into an unknown and unpredictable competitive market.

Source: http://www.bloomberg.com/news/articles/2015-10-27/hello-kitty-farewell-rolex-as-hong-kong-shoppers-go-downmarket

“In the past, four out of five shops were selling Rolexes,” she [Helen Mak] said. “In the future, a tourist will expect to see more varieties of retail shops in Hong Kong.”

Many luxury brands are abandoning their street-front locations as sales begin to decrease. Just this August, U.S. luxury handbag maker Coach Inc. terminated its store in Hong Kong central- with Adidas moving in after them. This has been the case with many luxury brands. As their stores close, mid-tier retailers are filling in the gaps.

A possible reason for the decrease in earnings for luxury retailers is the decline in Chinese mainland tourists to Hong Kong. After the anti-China protests last year, the number of Chinese tourists has decreased significantly, and in response, so has the sales of luxury goods, which the Chinese previously often splurged on. This decrease is shown in the graph below:

Source: http://www.bloomberg.com/news/articles/2015-10-27/hello-kitty-farewell-rolex-as-hong-kong-shoppers-go-downmarket

However, at the same time, this provides an opportunity for mid-tier, or discount retailers to break their way into these coveted retail locations. This is an example of disruptive innovation, where discount retailers are disrupting the shopping, and invariably, life styles of the people living in these areas. It will be extremely difficult for retailers to completely replace the luxury brands people used to buy, but perhaps this change reflects that what buyers want nowadays is not only brand reputation, but variety, and this information will be crucial for companies hoping to gain an edge in the competitive market.

Source: http://www.bloomberg.com/news/articles/2015-10-27/hello-kitty-farewell-rolex-as-hong-kong-shoppers-go-downmarket

Source: http://mix96buffalo.com/are-mcdonalds-self-serve-kiosks-a-sacrifice-to-customer-service/

McDonald’s is upscaling its products and customer service by introducing self-ordering kiosks and table service in 20 to 30 restaurants a year, according to Avi Goldfarb, a marketing professor at the Rotman School of Business. The digital kiosks will provide choices of premium hamburgers from over 30 options, including 5 types of customizable cheese and many more different options. This revamp of the giant food chain will create another 15,000 jobs by the end of 2017 as they follow through with their meal and service expansions.

Having worked as a cashier in McDonald’s before, I definitely agree that this is a big step away from the negative image McDonald’s has received in terms of their unhealthy food and unsatisfactory customer service. Self-serving kiosks will allow customers to order exactly what they want, and decrease the chances of them coming back to complain about wrong orders later. At the digital machines, customers will feel less rushed, which can lead them to order more, according to Mr. Betts, CEO of McDonald’s Canada.

Overall, I think this is a fitting example of Rita McGrath’s theory of the transient advantage, which states that achieving a sustainable competitive edge is nearly impossible in the fast-changing business environment. McDonald’s has demonstrated this by changing its operational strategy to create faster service and increased human interactions in order to stay competitive in today’s environment.

Sources:

http://www.thestar.com/business/2015/09/30/mcdonalds-canada-introduces-self-serve-ordering.html

http://www.bnn.ca/News/2015/10/1/McDonalds-rolls-out-upscale-options.aspx

http://web.b.ebscohost.com.ezproxy.library.ubc.ca/ehost/pdfviewer/pdfviewer?sid=f6c1d9ce-c2d5-40ff-8661-0134022e3a51%40sessionmgr198&vid=2&hid=101