Why Krispy Kreme failed in Australia

No doubt you’ve heard the news about Krispy Kreme going into administration in Australia. Many people seemed surprised at the news given it was a such a successful launch. But when we look a little closer it’s pretty clear why they failed. They broke a few simple retail rules which are worth considering.

Why Krispy Kreme failed:

Firstly, they failed to understand that in this country they needed to operate as a specialty retailer. Instead they opened 50 stores in a few short years. When Krispy Kreme first opened their doors in this country (Sydney) it was a real treat and the store became a destination outlet. People would travel many miles to the store to buy a dozen doughnuts. You’d even see people returning on airplanes at Melbourne airport with big bags of Krispy Kreme doughnuts. It suggested that Kripsy Kreme had a strong novelty value in Australia. But it can be very misleading when people from wide spread geographies come you as a retailer of non essential items. Contrary to what the ‘spreadsheet’ might intimate, it’s rarely a good idea to take your retail offer to where they live.

To give you some perspective of the expansion folly, let’s consider this:

USA has 224 store serving population of 311 million. (1 store per 1.4m people)

Australia had 50 stores serving a population of 21 million. (1 store per 420K people)

The numbers are mind blowing and it doesn’t even take into account our vastly different food cultures.

The expansion was far too wide far too quick, and KK didn’t allow enough time to understand what their sustained demand would be prior to expansion. No doubt the temptation to expand rapidly during growth would be tempting, but sometimes the best decision we can make is to limit distribution and keep the brand exclusive.

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The authentic phone message challenge

I’ll start by saying the concept of getting customers to “hold” on a telephone is a pretty bad idea. Then I’ll tell this story….

Today I was on hold for Optus telecommunications, which gave me a reasonably standard phone message:

“Your call is important to us. At this time we experiencing high demand for our telephone support staff, and we’ll be with you as quickly as we can. Please hold the line for the first available operator.”

Here’s what I seriously would prefer to hear:

“We’ve made a deliberate choice to only have X number of people to answer our phones. They are incredibly expensive and having any more than this would impact our profit too much. We’ve done studies which have worked out the number of people that hang up for waiting too long, and how much revenue the average phone call generates or loses for us. The number of people employed to answer our phones is just about optimal. We check this every few months. The average wait is about 5 minutes, so it’s a cool idea to put the phone on load speaker while you wait. Then you can do other stuff. If we answer and you’re not at the phone immediately, we’ll do you the the same favour of waiting a bit while you run to the phone to talk to us once we actually answer. We hope you appreciate our honesty. We reckon it’s better than giving you a load of shit that tells you how important you are. Cheers.

And so the challenge goes out to any startup or business is prepared to develop the worlds first authentic phone message be sure to let us know here at Startup blog so we can spread the awesomeness.

There’ll also be a prize for the best comment with a phone number to a company that has a message of this ilk – and the prize is $100 Amazon gift voucher.

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Cool hunting – The tail of two movies

Yesterday I was sent links to two movies which were both entrepreneurial in nature / marketing related. Both revolve around the idea of paid brand ambassadors. One is a documentary on how clever ‘cool hunters’ are, and the other was a Hollywood fabrication of brand evangalists are infiltrating our circle of trust.

The Documentary trailer: The Influencers

[vimeo=http://vimeo.com/15595024]

The Hollywood trailer: The Joneses

[youtube=http://www.youtube.com/watch?v=n2Y3GoN2PGw]

The question it leaves in my mind is whether social media facilitates more authentic or inauthentic ‘hidden’ brand evangelists.

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100,000 eyeballs for $8

If you want to know how to get your brand exposed to 100,000 people for $8 then we need look no further than what David did.

You may remember this post where David go his Jarritos soft drink van all branded up. Well, he took the next step in exposure and got to the AFL grand final early for a front row car park near the MCG for a measly $8. As far as I can tell it’s one of the greatest media investments of all time – there were 100,000 people in attendance. See photo journal below. Great startup bootstrapping David.

Top 10 list – Words redefining business

Here’s a little list of words that keep ringing in my head that I feel are changing the way we do business. I’ve written them each with a few thoughts beside them to stimulate your own view.

  1. Gifting – an emerging gift culture started with sharing information freely (Blogs, photos, ideas on the social web). This will start to iterate into a culture of providing actual goods to each other as gifts
  2. Gaming – human existence is defined by counting and gaming. Currency, bank accounts, salary, frequent flyer miles… and now smart phones will turn many brand relationships into games we can play. In many ways it will replace currency.
  3. Real time – the web used to be a repository of information written, found and filed for later retrial. It’s evolving into a what’s happening now forum. With live check ins (four square), live video (Qik / Ustream), status updates (Twitter). This will change they way we buy and interact on a commercial level.
  4. Geolocating – will permeate everything we do, and all the messages we receive.
  5. Community – it took the democratization of media via the web and fragmentation of media channels before we could regain our desire to interact at a community level, not just a consumer level. And we like it. We’ll never let people break down our communities again. It’s a social requirement we have built into our DNA.
  6. Apps – software is now personal. The difference with apps is that they are malleable. We co-create the code as we interact with them.
  7. Screen culture – TV isn’t dead, it’s just changed. It’s now web enabled and everywhere we go. Count how many screens you see today.
  8. Global currency – we now have perfect information on currency and conversions via the web. Our ability to arbitrage is being diminished. It’s only a matter of time before we create a global currency that crosses borders and oceans and automatically adjusts prices of everything we buy to a single lowest global price delivered. This has already happened historically as our world got bigger. First at a tribal level, then state level then national level. The globe is next.
  9. Related revenue – We’ll start making money less from what we actually do (writing a blog? / Google search?) and more from the stuff we do that lives around the edges.
  10. Project careers – Our careers wont be about having jobs, but a number of smaller iterations of projects that interest us. They’ll be higher paying, with breaks in between. This will be more profitable for all parties. Companies wont have the overhead drain of full time staff, and humans wont have the social drain of turning up to a place of work when there isn’t much on. We’ll transform what we do more frequently and fluently, we’ll be projecteers.

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Promote yourself

I often wonder whether or not advertising on work cars is a good idea. Especially given it is in many ways one of the negative sides of business – distribution, busy road, pullution. It might remind consumers that the brand is part of a large corporate monolith. You get the picture. But I’m starting to think this is different for startups.

Firstly, we’re only likely to have one or two vehicles out on the road. Secondly, it’s a good way to create brand awareness cheaply. A colleague of mine who has started a beverage company Jarritos Mexican soda has done just this. At a cost of $2000, he’s invented $50,000 worth of advertising. Which is what branded cars cost via media agencies. See below.

The key element to doing this successfully is making sure the vehicle and advertising matches the brand. For example, an environmentally friendly business should really only partake in such branding if it’s prepared to invest in hybrid / electric vehicles.

Would you advertise your startup on your car? In addition is there an opportunity to start a business branding civilian cars and in doing so helping the general population pay for their transport?

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Kulula Air – Eyeball worthy

I was recently email some pics of Kulula Airlines livery. I’d describe it as eyeball worthy. Because it’s worth looking at, it’s worth talking about. There is no shortage of in cabin jokes from cabin crew while talking to passengers, but few have the courage to paint their personality on the fuselage like Kalula have. In an era of media proliferation, the trick any startup needs to master is the ability to be talked about. Nice work Kulula.

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