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Retail therapy is a real thing…

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Are you in a bad mood? Has the dark and cold Alberta winter got you down? Would shopping make you feel better?

Even small changes to a retail space can improve shoppers’ moods and increase their willingness to spend

According to research published in the Journal of Psychology and Marketing, for many people the answer is, “Yes.” In the study, published in 2011, researchers found that people could significantly improve their mood when they spent an average of US$59 on a treat for themselves. A follow-up survey indicated that those shoppers did not regret the purchase and did not experience a downturn in mood after the purchase was made. The authors conclude that “retail therapy” is alive and well.

This fact is not lost on merchants. Indeed, many retailers believe that their best defence against losing revenue to online sales is an enjoyable in-store shopping experience. Although e-commerce currently represents a very small share of overall consumer spending in Canada, it is growing rapidly and many businesses are seeing a steady year-over-year decline in store traffic. As a result, the science of the shopping environment is quickly becoming an essential component of consumer marketing.

An important part of this emerging field is atmospherics research – that is, the study of the impact of lighting, colour, scent and sound on buyer behaviour. The goal is to ensure that the shopper feels good about visiting a physical store, even if it doesn’t result in an immediate purchase. Ultimately, the research tells us that when you are in a good mood, you tend to spend more time shopping and spend more money. When you are in a bad mood, you are more likely to rush through the store and spend less money. In addition, people who enjoy being in a store are more likely to put up with driving, parking and shopping, and less likely to shop online. More than ever, stores are being designed to provide environments that engage you and make you a happier shopper.

Leaders in atmospherics have been designing environments to appeal to their target customers for years. One example you are probably familiar with is LUSH cosmetics. Even if you have never been inside one of their stores, you have likely noticed the scent of the retailer’s freshly made bath and beauty products from well outside their front door. Take a moment to glance inside and you will likely see a store overflowing with customers. It might not be for everyone, but LUSH has designed an in-store experience that is not easily replicated online or by the competition. In a completely different category, Bass Pro Shops and Cabela’s have also used elements of store design that aim to appeal to a shopper interested in hunting or fishing. From the smell of Cabela’s fudge shop to Bass Pro Shops’ giant fish aquariums, atmospherics is less about what the retailer is selling and more about an environment that facilitates sales.

Grocery stores are masters at using the bakery and the produce sections to engage your sense of smell and to create colourful displays. In Alberta, Safeway has for many years been an atmospherics leader in the grocery business with innovative store designs that use lighting and colour to create a more comfortable shopping environment, even going so far as to add a Starbucks or Tim Hortons to make your time in the store a more pleasant experience. Recent entrants from Loblaws’ City Markets to Freson Brothers’ grocery stores have designed shopping environments that improve their competitive position.

The growing interest in retail atmospherics is supported by a series of studies that indicate a clear effect on sales and profitability. For example, in a study of two IKEA stores with different interior designs – that is, layout, interior colours, recent renovations, and furniture presentation – German researcher Kordelia Spies and colleagues found that when a store’s interior is seen by consumers as more pleasant to shop in, it affected their behaviour. The store with a superior atmospheric design stimulated positive feelings in its customers. More importantly, when the store’s interior made customers feel better, they spent more money. My own research, conducted with colleagues at the University of Alberta, has demonstrated that even small changes to a retail space – such as adding windows or skylights to increase the amount of natural sunlight in a store – can improve shoppers’ moods and increase their willingness to spend.

Could it be that our dark and cold winters are part of the reason why Alberta has such a high level of retail square footage per capita? If you are feeling like winter has been too long and spring is still too far away, maybe a trip to your favourite store will cheer you up. Research suggests you won’t regret it. AV

The post Retail therapy is a real thing… appeared first on Alberta Venture.


Allison Grafton was destined for design

The Clean Tech Tsunami

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Illustration Mark Nipp

The Alberta government has launched a series of policies to reduce Albertans’ contributions to climate change. A carbon tax, the mothballing of coal-fired power plants, the capping of emissions from the oil sands and the tightening of regulations around methane are but a few of the initiatives that have put this province on a very different path from that which it had been on.

Whether this is good or bad for business is a matter of considerable debate. On the “it’s good” side – with caveats – is Jason Switzer, a former greenhouse gas engineer at Shell Canada and now executive director of the Alberta Clean Technology Industry Alliance (ACTIA). Switzer says the opportunity is there for a “clean tech” industry to thrive if the right policies are put in place. “The question is how to turn progressive environmental policy into successful industrial policy,” he says. “How do we create jobs and build companies that can help the country and, in particular, this province rebuild employment?”

Acknowledging that it’s a wooly term, Switzer defines “clean tech” as a technology or service that produces better environmental and economic performance than the default alternative. “Whatever the benchmark is today for how we do something, in the clean tech space you offer something better environmentally and economically,” he says. “It may have to do with reducing reliance on water or reducing the production of greenhouse gases or any number of things.” Companies in the field include those dealing with artificial intelligence, data crunching, alternative materials, advanced manufacturing and much more.

ACTIA recently wrapped up a survey of 220 clean tech companies in the province. The survey eschewed multinationals in favour of looking at smaller-scale and venture stage businesses. It found that the sector employs 1,800 people in the province and comes with an average wage of about $100,000, substantially above the province’s median of $58,000. Over half a billion dollars in investment has come into the province through these companies and they generate more than $300 million a year in revenue.

Switzer says good regulations will be a driver of further opportunity. “What we have to do is design the regulations as an enabler and not an impediment,” he says. “We have to figure out how we use our domestic market – in oil and gas, agriculture, forestry, fertilizers, specialty chemicals and so on – to help people commercialize stuff.”

He points to the government’s approach to methane reduction. Methane is a far more potent greenhouse gas than is carbon dioxide. “If natural gas is to be part of a low-carbon future, you have to make sure you’re capturing upstream methane emissions,” Switzer says. “If you’re venting due to leaks or a decision to burn or simply not capture – as Nigeria and Russia do – you may be making things worse rather than better.”

Alberta has committed to reducing methane emissions from oil and gas operations by 45 per cent by 2025. The province’s technology fund, Emission Reduction Alberta (formerly the CCEMC), has established a $40-million fund to support methane-removal technology. Both the U.S. and Mexico have adopted comparable goals, as has the federal government. The thinking is that the technologies developed in Alberta can then be taken to foreign markets.

Switzer would like to see government assistance focused on companies trying to progress from initial commercial demonstrations to large-scale production, rather than on startups. “It’s a whole different skill set and not something Canada has traditionally been good at,” he says. “We’re good at developing new technology, but what we haven’t been good at is commercializing them. We need to go from a pretty good idea to a globally dominant platform.”

The post The Clean Tech Tsunami appeared first on Alberta Venture.

Social media marketing fails

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big part of marketing is getting attention. People are exposed to thousands of messages every day and breaking through all that noise is no easy task. Successfully engaging potential buyers takes creativity and a deep understanding of the customer. As challenging as that may be, it is the goal of many social and new media marketing campaigns. As proof positive, we look to the success of WestJet’s “Christmas Miracle” or Proctor & Gamble’s “Old Spice Man” and sing the praises of technology that allows us to communicate directly with the consumer.

McDonald’s #McDStories campaign went awry when the hashtag was swamped with negative comments

But, of course, not every attempt to break through all that noise ends well. In fact, big brand marketers regularly run aground on the rocky shores of new technology. Take, for example, the time that Daniel Korell used his phone to scan a QR code on a bottle of Heinz ketchup. That code was originally part of a promotion that offered personalized ketchup, but when Korell scanned the code he didn’t get his name on a bottle. Instead, he was directed to a porn site. It turns out that after the promotion ended, Heinz failed to renew the domain name. The company apologized and Korell was more bemused than offended. The error that Heinz made, however, is symptomatic of a general problem: Marketers do not appear to fully understand the risks of the technologies they are using.

Even the world’s most experienced and sophisticated brands have fallen prey to the siren call of social media. Coca-Cola had good intentions when it launched the “Make it Happy” campaign with a splashy Super Bowl commercial, designed to nudge the Internet towards a more positive tone. The company encouraged users to tag negative comments with #MakeItHappy and then it turned those negative comments into adorable ASCII images. In response, the now defunct website Gawker created a bot that tweeted out passages from Hitler’s Mein Kampf. When Coke’s website converted that text into cute images of dogs, cats and other characters, the company came under intense fire and was soon forced to discontinue the campaign.

Next example: McDonald’s serves millions of customers, and many of those customers have fond memories of time spent at McDonald’s. Following this logic, McDonald’s launched an online campaign asking people to share their #McDStories. Unfortunately for the company, that idea went wrong in a hurry as the hashtag was swamped by negative comments about the restaurant and its food. One of the kinder tweets read, “One time I walked into McDonalds and I could smell Type 2 diabetes floating in the air and I threw up #McDStories.”

The Coca-Cola and McDonald’s stories illustrate the dangers marketers can face even when they are trying to have a positive conversation. Other companies have brought the ire of the Internet on themselves when they use language and express opinions that many people find offensive. Kenneth Cole has on a regular basis used inflammatory tweets to gain attention, including such gems as “Black Pants Down – Our new looks are more slimming than a Somali diet!” and, when riots broke out in Egypt during the Arab spring of 2011, “Millions are in an uproar in #Cairo. Rumour is they heard our new spring collection is available online.” Meanwhile, Bud Light is spending a lot of money and effort on its #UpforWhatever campaign, even as it generates backlash from stunts like encouraging people to pinch others who are not “up for whatever” on St. Patrick’s Day. Undeterred, Bud Light went on to release a batch of bottles with labels that read, “The perfect beer for removing ‘no’ from your vocabulary for the night.”

Coming up with a great marketing idea and then implementing it in a way that grabs attention in an overcrowded marketplace is undoubtedly challenging. Campaigns like “Christmas Miracle” and “Old Spice Man” are difficult to replicate or even sustain. And it is probably a little naïve to believe that the online trolls and opportunists are going to go away anytime soon. But I do hope that more marketers will aim for the kind of success that WestJet had in 2016 with its “Fort McMurray Strong” Christmas message and that fewer will take the easy way out.

If the moral high ground is not incentive enough, consider the damage that can be done by a single poorly thought out social media post. For example, I suspect DiGiorno Pizza wished it had stayed off Twitter on Sept. 8, 2014. At the time, people were sharing stories of domestic abuse under the hashtag #WhyIStayed. Late that evening DiGiorno Pizza saw the hashtag trending and jumped on the bandwagon with “#WhyIStayed You had pizza.” Although they quickly realized their mistake and apologized, the brand damage was swift and substantial.

Clearly, there are worse things for a marketer than being ignored.

The post Social media marketing fails appeared first on Alberta Venture.

Carrie Langevin sought inspiration from her grandmother in the creation of Mother Earth Essentials

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Carrie Langevin
Owner, Mother Earth Essentials; Council member, Métis Women’s Council on Economic Security

Photograph Ryan Girard

Alberta Venture: Your business, Mother Earth Essentials, is influenced by your grandmother and great grandmother, who was a medicine woman in the Lac Ste. Anne area. How did that happen?

“At 18, I knew I wanted to have my own business, but I didn’t have the knowledge or support or confidence or pride of culture, so I didn’t realize I could do it.”
– Carrie Langevin, Mother Earth Essentials

Carrie Langevin: My grandmother, who was Cree, really knew the plants. She grew up traditionally. She had 12 children, and she lost some of her children to residential schools. Mom was one of them. Growing up with my grandma in Hinton, there was a lot of fear of the residential schools because my mom and her sisters were not treated well. We did not talk about that part of our family.

But when my grandma got out in nature – and we went camping and picking berries a lot – you saw this whole different side to her. She would be smiling and happy. She would show me these plants and talk about them. It was beautiful.

Then, when I graduated high school in 1982, I loved the plants, but had no idea what to do with that. We were living in small-town Alberta. So I went to cosmetology school and worked over the years in all aspects of the cosmetic industry, from sales to merchandising and everything in between. I worked in merchandising for Procter & Gamble and in salon supply sales. I tried all of that but it wasn’t feeding my spirit.

So I went back to school and got an education degree from the University of Alberta in health and human ecology. I got my first teaching job at amiskwaciy Academy, the Edmonton Public indigenous high school. It was there that things really came together. They had beautiful gardens in the back and were growing some of the traditional plants. I taught career and life management, food, health and cosmetology, so I could incorporate some of those plants into my teaching and into some hands-on activities with the kids. I saw such a beautiful connection between these urban aboriginal kids and the plants. They would remind them of when they were young and using these plants as medicines at home. I found that inspirational and started creating products with them. We would make teas, we would make things in food and health classes.

Then, 10 years ago, I decided I had to pursue this business. I think I’m an entrepreneur at heart. I left teaching and it’s been an absolute blessing and stressful and fun and all those things.

AV: So how did you get going?
CL:
I started making products at home. We picked most of the plants ourselves out at Lac Ste. Anne. We use a lot of wild rose, berry seeds – which are rich in antioxidants. We use willow bark because of its anti-inflammatory properties and salicylic acid is an amazing natural aspirin. We use a lot of sweetgrass, sage and cedar.

The way I see it, our products became little teaching tools to teach people about the beauty of the culture and the contributions of aboriginal people. I grew up with so much shame around the culture, and saw so much racism. I thought, “Why isn’t this plant knowledge being appreciated and respected and acknowledged?” I wanted to be a part of making that better. Now, we sell to about 100 health stores and gift stores across the country and our products are in hotels – Sawridge, Great Eagle, Chateau Lacombe.
We sell from our website and have a storefront [in Edmonton]. My sister and I run things. Most days we’re rolling up our sleeves, packing boxes, preparing product and taking phone calls. We’re not out there with a sales and marketing team yet. I’m a teacher and I love the plants. Learning business has been an interesting challenge.

AV: You were on Dragons’ Den about five years ago. Did that experience help?
CL:
It gave us some credibility. If the Dragons like you, you must be OK. They offered us a loan but I never ended up taking it because the fine print was just ridiculous. But it increased our sales to the eastern parts of Canada.

AV: Now you’ve taken a role with the Métis Women’s Council on Economic Security. What are you hoping to achieve there?
CL:
The mandate for the council is to provide advice to the government on strategies that will help improve the lives of Métis women. Economic security is more than creating employment. We focus on access to resources and supports that contribute to our physical, mental, emotional and spiritual well-being. When those needs are met, then we’re in a good place to access opportunities to better provide for our families and communities.

A previous council provided two reports to the government. I’m still fairly new to the council, but some of the things government has done in response to these reports is they’ve created an indigenous services web portal to improve access to government services; they provided funding support for leadership for young indigenous women; they facilitated opportunities for indigenous women to sell their art in the Legislature’s visitor’s centre; and there was funding for an anti-violence campaign for men and boys called the Moose Hide campaign.

I’ll be looking at the role of entrepreneurship. I’d love to see young women having the confidence to start a business. It took me a long time and a lot of steps to become an entrepreneur. At 18, I knew I wanted to have my own business, but I didn’t have the knowledge or support or confidence or pride of culture, so I didn’t realize I could do it. So if I can help inspire an 18-year-old to say, “Hey, I have this idea,” to go for it, that’s the goal.

The post Carrie Langevin sought inspiration from her grandmother in the creation of Mother Earth Essentials appeared first on Alberta Venture.

From volunteer homebuilder to principal architect: Richard Isaac’s path to power

Vermillion Enery has strength in diversity

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The Play

Usually in this part of my monthly write-up I tell you about “the play” that the company I’m profiling is operating in. This month I can’t really narrow it down like that since I’m talking about a company with an extremely diversified asset base.

“When we started, we were drilling and casing those wells in 21 days. Now, we drill and case them in about nine days.”
– Anthony Marino, CEO, talking to Digital News Group about a play in Alberta’s West Pembina region

In investing, diversification is good. When it comes to running an oil and gas producer, I’m not sure that it is. This is an industry in which being a low-cost producer is critical for any significant level of long-term success. If you have spent any time investing in this sector, you will know this is the case.

Finding one good play to base your company around is hard enough, given what you are competing against. Trying to find several so you can offer a diversified asset base to investors is that much harder.

That makes the mid-sized company in focus this week a bit unusual. It has an asset base that is diversified in almost every way imaginable. In terms of plays, there is diversification since the company operates shale and conventional assets, and both onshore and offshore. By commodity there is diversification since the company sells both oil and natural gas, as well as hydrocarbons with different price points (WTI, Brent, Aeco, European natural gas). There is geographic diversification as the company’s assets are spread across not only countries but continents hitting North America, Europe and Australia.

Most importantly, all of this is diversification an investor should like.

The Pick

Vermilion Energy (TSE:VET)

This oil and gas producer is Vermilion Energy and it is a very well-run company. Vermilion has the kind of diversified assets that you might expect to find in an oil and gas major rather than a mid-sized producer. Vermilion receives significant portions of its production from Canada, France, Ireland, Australia and the Netherlands.

While diversified, Vermilion’s production combines for high after-tax cash flow netbacks. That is how much money each barrel of production generates after operating expenses. Having high netbacks means that you are generating a lot of cash flow from your production. On this measure, Vermilion ranks as one of the most profitable Canadian-listed producers.

That isn’t all there is to like about Vermilion’s production. It also has one of the lowest decline rates in the industry. Having a low decline rate means that you don’t have to spend as much cash drilling new wells to offset production declines. Put high netbacks with low decline rates and you can generate some serious free cash flow, something rather uncommon in this capital intensive industry.

Vermilion refers to its “effective” corporate decline rate as being at 13 per cent. Compare that to a pure-play producer like Raging River (a good company) which has a decline rate of over 40 per cent and you can appreciate
Vermilion’s advantage.

Vermilion’s effective rate of decline is lower than its natural rate because Vermilion creates the effective rate by restricting production in the Netherlands and Australia. By restricting production on those two properties (done to maximize long-term recoveries) the decline rate is zero.

Since good things come in threes, I’ll point out one more thing to like about Vermilion’s production: It doesn’t cost much to bring it online. In 2015, Vermilion’s finding and development cost was just $9 per barrel. That has come down from $35 per barrel in 2011 and is a level that Vermilion believes it can maintain due to reduced drilling times.

The Postscript

Add these three attributes together (high net­back, low declines, strong capital efficiencies) and good things are bound to happen. That is exactly the case at Vermilion, where free cash flow has surged in 2016 and will continue higher in 2017 and 2018.

By free cash flow I’m talking about cash left over after deducting all capital expenditures (including growth spending). Vermilion’s free cash flow will nearly quadruple this year from where it was in 2014, quite an achievement considering oil prices are about half what they were back then.

Vermilion shares provide a dividend yield of 4.7 per cent and the company expects to grow production by four to eight per cent in the years ahead. It will do this with a healthy balance sheet and its debt to cash flow should be under 1.5 by the end of this year.

After using free cash flow to improve the corporate balance sheet over the next six months I would expect that we could see Vermilion hike its dividend by up to 25 per cent near the end of 2017. That could be a welcome catalyst for Vermilion’s share price.

The post Vermillion Enery has strength in diversity appeared first on Alberta Venture.

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