A Lesson From the Past
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Some of today's most successful retailers have taken a page from a success story from the 1800's, the Singer Sewing Machine Company, the first multinational company. The machines, though expensive, were wildly popular and much of that had to do with the way they were marketed. A salesman would take a teacher along and have her give an introductory lesson to the prospect with the promise of further free lessons upon purchase. Within just a few years Singer had 90% market share. In later years it would give lessons at its bricks and mortar stores. By 1951 it boasted it had trained 400,000 housewives.
Face to Face in the Digital Age?
What companies still teach customers face to face for free in the 21st century? Some of the most successful doing business right now including: Apple (NASDAQ: AAPL), Whole Foods Market (NASDAQ: WFM),Williams-Sonoma (NYSE: WSM),and Lululemon Athletica (NASDAQ: LULU) .
Every single one of these names has outperformed in the 21st century. Apple must think it's worthwhile to offer workshops on using their products and offering a free 3 day youth camp where kids learn to make an iMovie. Now that is a bargain. People talk about why Apple is one of the greatest retailers ever and fail to mention these workshops. I took one a few years ago to learn how to use my then new iPad. While it was noisy as the class was conducted in the middle of the store on a busy Sunday, (when is it not busy?) I honestly learned so much more than trying to bungle along by myself.
Our teacher was enthusiastic and most importantly, not condescending. How many times have you had to call tech support about something simple and got the distinct impression that they were sighing and rolling their eyes at the other end of the line? Apple teaches you that something simple.
Friends of mine who have taken cooking classes at Whole Foods Market love it. It's another way of bringing the community into the store and giving them a chance to learn and meet like minded neighbors. Naturally it's a very effective way of accustoming shoppers to new products and new ways to use products that they can buy and try the same day. During the holidays the schedule is slowed some, but nutritionist Claire is teaching how to make a healthy butternut squash with sage and cranberries and Chef Charlie has a special class on Thursdays at my local Whole Foods. Is it any wonder that Whole Foods is up on the year when so many other supermarkets are dying a lingering death. (Supervalu, I mean you.)
Williams-Sonoma has taken the term demonstration to another level for the last 50 years. At a Williams-Sonoma demo you learn how to replicate a recipe or technique. You get to sample and often receive recipes and whatever items or products are highlighted are usually on sale. While web commerce is on the rise there is no substitute for the aroma of a fresh baked loaf of bread or a fall soup that now you know how to make at home. For December, the complimentary techniques classes feature Knife Skills and Gifts from the Kitchen.
Then there's Lululemon, the yoga and athletic wear retailer, a stock that has performed very well over the last few years. My local Lululemon offers community yoga classes and with the company's expansion into running wear is offering training for a half marathon this coming spring. Just to check I also looked up a store across the country in Santa Barbara CA and it too offers Sunday yoga and a fun run. These classes are usually taught by their Ambassadors, local yoga teachers, of whom the company website says," The Lululemon ambassador program is extended to unique individuals in our store communities who embody the Lululemon lifestyle and live our culture."
Even Staples and Microsoft are finally getting with the program, advertising free training on Windows 8 this holiday season with a purchase.
Does the Personal Touch Make Money?
You betcha. It's hard to argue with success. Over the last few years Apple has risen from $78 to over $700 a share while lowering their P/E, piling up free cash, and at long last initiating a dividend. This despite the loss of their visionary founder and CEO, Steve Jobs. Yes, it has pulled back but so have many other tech names.
Since 2008 Whole Foods has risen from below $10 a share to over $100 this year, a ten bagger in the supermarket sector. It too has pulled back from its high lately as has the market. The P/E is 35.93 but the forward P/E is 26.40 with a .90% yield. It has certainly benefited from the trend toward natural foods but their classes and tastings are a fundamental part of the appeal.
Williams-Sonoma hit a low of $5 a share at that same bottom in 2008-9 but hit $48.07 in November for a 52 week high, a whisker shy of a ten bagger. This year alone you could have had a 50% profit from the low of $32.67 to that 52-week high. And Williams-Sonoma offers a 2% yield and has an 18.08 P/E. The forward P/E is 15.28.
Finally, Lululemon is creating their own market as they grow. It's not just yoga practitioners who attend the classes, but also newbies who get hooked on that Llululemon lifestyle. Yoga was already gathering adherents like Whole Foods has in the pursuit of a healthier lifestyle, but the enthusiasm of the ambassadors and community involvment is what gives Lululemon a leg up (pun intended). In 2009 Llululemon was a two dollar and change stock, this year it hit $81.09. From its IPO in 2007 it's up 385.86%. The P/E is steep at 45.65 but is there any doubt this is a growth stock?
Teach a Man to Fish
You have undoubtedtly heard the saying, "Give a man a fish and he will eat for a day, teach a man to fish and he will eat forever." These companies are teaching and gaining loyalty forever from customers. It may be a 19th century idea but it's paying off big for these very modern names.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Whole Foods Market. Motley Fool newsletter services recommend Apple, Lululemon Athletica, Whole Foods Market, and Williams-Sonoma. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!