Judith Russell

About Judith Russell

Judith Russell is a marketing and strategic planning consultant specializing in the retail apparel industry, and writes for several apparel and retail trade publications.

Urban Legend

Stocksy_txp50011d0dXEG000_Medium_456973_2For more than four decades, Urban Outfitters Inc.’s namesake brand has been a favorite among hip young adults in search of edgy products and a cool place to hang out. Though its brand ethos is the envy of many in the apparel world, sales have until recently been on the decline, and the company has had to face the fact that having customers spend more time chilling in its stores doesn’t necessarily increase sales. So what’s an iconic brand to do?

Urban Decay

At the new Urban Outfitters store in Herald Square, steps from the Macy’s flagship at the southernmost edge of New York’s historic garment district, two 20-something women with multiple tattoos and pink ponytails fondled a fur-trimmed suede coat priced at $248. “I love it,” said one, holding the coat up in front of a full-length mirror. “I just don’t know if I love it enough.” [Read more…]

Where Has All the Luxury Gone?

Coach StoreWe in the industry have been bandying about the term “luxury” pretty freely of late, but there is growing realization that if a product or brand is easily accessible and relatively inexpensive, it’s not really a “luxury” product. And the minute you add the term “affordable,” it becomes an oxymoron.

As the ever-widening income inequality gap illustrates, the rich are still getting richer. According to Pew Research, the top 1% of households in the US, or those making $400K or more annually, earn 23% of the total income in the country, and control 35% of the net worth. Both figures have been steadily growing for more than a decade.

One ever-present behavior in the spending habits of the superrich of any generation is opting for the special over the mundane. Makers of high-end jewelry and electronics, cars, exotic vacation hotels, and other products and services target this group of discerning consumers for a reason: They value, and are willing to pay a steep premium for, that which is appreciated by and accessible to only an elite few.

Milton Pedraza, CEO of The Luxury Institute, a research firm that tracks and advises the global luxury goods market, says that consumers consistently define luxury as the best of design, quality, craftsmanship, and service. Brands that always deliver against these attributes, including Audemars Piguet, Chanel, and Buccellati, also tend to have a compelling brand heritage story. [Read more…]

Holy Guacamole: Millennial Favorite Chipotle Turns Neurological Connectivity into Gastronomical Addiction

chipotleMy 16-year-old son John’s idea of a gourmet meal is a burger and fries, so I was surprised one evening a couple of weeks ago when, after a busy day that left me no time to cook, I asked him where we should get takeout, and his answer was: “Chipotle.”

Caught off guard, I had to think for a minute. “I don’t think there’s one nearby.”

“Yes there is, in Yonkers,” he said, then added sheepishly,“ and you told me I could choose where to go.” Sighing, I grabbed my purse and keys for the 20-minute drive.

Chipotle (named after a smoke-dried jalapeno pepper) is the wildly successful chain of casual Mexican-style restaurants known for its overstuffed burritos made from healthy and natural ingredients. It was founded more than 20 years ago by Stephen Ells, a graduate of the University of Colorado and the Culinary Institute of America who,  with the dream of someday opening his own restaurant, moved to San Francisco to work for a famous chef . One day, he noticed an assembly line of workers at a taqueria in the Mission District  efficiently serving a crowd of hungry customers. He decided he could open a similar place to generate the cash needed to fund his fancy dining establishment. He quit his job, moved back to Denver and, after borrowing $85,000 from his dad, opened the first Chipotle in mid-1993. The restaurant, which from the start operated on the principle that fast food doesn’t have to be low-quality and that delicious food doesn’t have to be expensive, offered crafted-to-order burritos made from fresh, locally-sourced ingredients. Within six months, the restaurant was reportedly selling 1,000 burritos per day, 10 times the level needed to break even. [Read more…]

Santa Will Be Leaving Coal in Retailers’ Stockings This Year

This week the Department of Commerce published September retail sales figures, and despite all the jabber about a solid back-to-school season, sales growth slowed considerably during the month.

Total retail sales rose by 4.3% to $444 billion, their most sluggish rate in seven months on a 12-month smoothed basis. Every major sector of retail saw a decline in sales growth compared to earlier in the year.

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Automobiles, which if you’ll pardon the pun have been driving retail sales growth for the past four years, increased by 9.5%. Taking autos out of the mix, retail sales gained only 3%, and general merchandise sales rose by 2.7%.

Department and discount stores saw sales fall by almost one percent, while apparel specialty store sales rose by one percent on a 12-month smoothed basis. [Read more…]

Bursting the Bubble on August Retail Sales

BTN-9-16-14Last Friday the Department of Commerce released its August retail sales figures. Total sales rose 5% compared to August of 2013.

The business and economic media heralded the news and what it might mean for retail sales performance over the next several months. The New York Times decided that the 70% of GDP growth dependent on consumer spending would be buoyed by this clear message that consumers are fed up with being cautious and poised to open their collective wallet in a big way.

A look behind the numbers tells a slightly different story, however.

Auto sales were responsible for most of the gain. Sales at automobile dealers and parts stores grew by almost 9% to $90 billion, representing over 20% of total retail sales. Retailers of health and personal care products enjoyed an 8% increase, but represent less than 6% of all retail sales. Sales at non-store, or pure-play e-commerce, retailers grew by 7%.

Department stores, apparel specialty stores, off-pricers and other purveyors of non-auto and discretionary goods, however, posted sales growth that underperformed the average. Apparel specialty stores got only a 3.2% pop from back-to-school. Food and beverage store sales rose by 3.6% compared to last year, boosted by rising prices in some key product categories. General merchandise store sales were up by less than 2%, depressed by a 1% drop in department, chain and specialty stores. [Read more…]

The Hidden Message in How Americans Spend

Consumer spending increased by 3.7% in June, the highest 12-month smoothed monthly increase in almost two years, according to data released last week by the Bureau of Economic Analysis.

This year, Americans will spend $12 trillion on stuff, slightly more than the $11.7 trillion they spent on stuff last year.

These gross numbers are pretty meaningless and hard to wrap one’s mind around, but if we look behind the big numbers at what we’re spending our money on, and how some of those expenditures are growing, it’s not only pretty interesting, but can also tell us about how optimistic we’re feeling, about our consumer preferences as a society, and where we might be headed.

When the government tracks consumer spending, it creates two major categories: goods, which are separated into durables like cars and washing machines, and nondurables like clothes and food; and services, such as private school tuition, cab fare, eating in restaurants, and going to the doctor.

What I’d like to do here, though, is to categorize them a little differently.

pyramid2

Abraham Maslow (remember him from Psychology 101?) created the theory of the hierarchy of needs; simply stated that self-actualization is not possible until our basic needs are met. So, using a pyramid as a model, shelter, food and clothing (physiological needs) are the most basic needs at the base.

Fast forward to the top, creativity and artistic pursuits, are defined as self-actualization, or achieving our full potential as human beings. I’m super-simplifying here, but you get the idea. So if we look at trends in consumer spending through a redefined prism of Maslow’s hierarchy, and taking a few liberties with the climb to the top, some interesting patterns emerge. We can start with non-discretionary (need) categories like food, clothing and shelter at the base, and discretionary purchases, (more wants than needs) like restaurant dinners and new cars at the top.

So how have Americans been spending their money? And what’s behind these spending trends? [Read more…]

June Retail Sales: A Good News, Bad News Story for Merchants

Last week the US Department of Commerce released its most recent monthly sales and inventory figures for the retail industry. Total sales rose to almost $448 billion in June, up from $422 billion in June of last year, a seasonally adjusted increase of 5.2% on a 12-month smoothed basis (which is not a straight average, but a calculation that takes into account several months of data so that it conveys a more accurate idea of trend). Total retail inventory rose by 3.6% in May, the most recent month for which inventory data are available, and the smallest monthly increase in almost three years, sending the inventory-to-sales ratio edging down for the month.

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Whether or not the news was good for you depends largely on what business sector you’re in. If you’re in a well-run business selling automobiles or health and beauty aids, you probably saw your sales grow. If you’re selling food, apparel, electronics, home furnishing or most other discretionary consumer products, then you’re probably having a considerably different experience. [Read more…]

CVS: Blowing Smoke? Or Truly Concerned for our Health?

Judy-CVS_FINAL-imageI resent the fact that I can’t walk down a street in New York City without breathing in a potentially lethal amount of second-hand smoke. So imagine my satisfaction when, on February 5, CVS announced it was going to cease selling tobacco products at its 7,600 stores by October 1.

CVS Loses a Loyal Customer

I became a CVS customer about 30 years ago. I found the stores conveniently located, bright, clean, and easy to shop. The product assortment was excellent and well-priced, and the ExtraCare loyalty program, of which I was a charter member, was terrific. I started shopping there for my prescription and over-the-counter medications, health and beauty aids, and vitamins, eventually expanding to cereal, juice, sundries, holiday candy, and school supplies. As the years went on, I did a greater portion of our family shopping there, and each quarter I would receive a generous coupon of “extra bucks” — free money to spend in the store. [Read more…]

Made in USA: Myth or Reality?

American FlagOn a recent afternoon I was stopped in the mall by a foreign tourist looking for American gifts to take back home. All the clothing and accessories in the stores were made elsewhere, she said, so they weren’t really American.

U.S. consumers are starting to feel the same way. Groups with names like Made in the USA Foundation and Buy American are launching advertising and social media initiatives to encourage Americans to buy domestically made goods. They’re reacting to a groundswell of sentiment that blames the sluggish job market on imported consumer products. Large companies are reportedly looking at their product lines to see whether even a little domestic sourcing is feasible. Several fashion startups are touting the fact that their stuff is made in the USA, and in some cases even successfully using crowdfunding to get their businesses off the ground. [Read more…]

FOMO & the Retail Experience

iStock_000018141330SmallA Nation of Smartphone Junkies

It’s a truism that an overwhelming number of people today are addicted to their electronic devices. According to Pew Research, the cell phone has been the most quickly adopted consumer technology in the history of the world. Over 90% of American adults (97% of the under-35 crowd) own them. It is estimated that by the end of this decade, all but the oldest, youngest, poorest and most technophobic among us will own smart phones.

We use our phones as camera, alarm clock, board game, metronome, magazine, map, bank, GPS tracking device, bank, TV, and more. Mostly, though, we use them for their original purpose: to stay connected. We can reach out to friends and family members instantaneously, and know where our kids are at every moment of the day or night. We can keep up on breaking news while hiking in the Adirondacks. We can watch a revolution unfolding in the city center of a Middle Eastern country thousands of miles away. Increasingly, we can do more than one of these things at a time. [Read more…]

The $2 Trillion American Rip-Off

There’s a growing disparity in the way some economic data have moved since the recession. On the one hand we have employment and income figures, which tell the story of a sluggish U.S. recovery with a long way to go to pre-recession prosperity. On the other hand, healthy retail sales and consumer spending have rebounded to, and even surpassed, pre-recession levels.

According to the Bureau of Labor Statistics, the population of working-age people has grown by more than 5 million since the beginning of 2008. The labor force has increased by only 1.5 million, and the total number of employed has decreased by 2 million, resulting in a steady decline in the labor force participation rate (see Chart 1).

shadow_economy_chart-1That doesn’t jive with the brisk pace of consumer spending (Chart 2), according to Bernard Baumohl, Chief Economist at Princeton, NJ-based forecasting firm The Economic Outlook Group, who noticed the sudden divergence between total personal consumption expenditures and the labor force participation rates that began during the Great Recession. [Read more…]

What’s Wrong With This Employment Picture?

Last week’s employment data looked pretty rosy. The economy added 175,000 new jobs in May, according to the Bureau of Labor Statistics, more than many economy-watchers and investors anticipated, but not so many that the Fed might be tempted to tighten credit. Retail jobs comprised a sizable chunk of the increase, a net gain of 28,000, indicating an underlying bullishness on the part of retailers about consumer spending, since May is not typically a big hiring month for stores.

Looking behind the numbers, however, particularly in light of other recent economic data, a murkier picture emerges.

Job Growth is Slow

First, despite May’s jump, overall job growth has been painfully slow for the past year, ranging somewhere between 1.5% and 1.7% per month on a 12-month smoothed basis, as the chart below shows.

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Click to enlarge chart

 The unemployment rate, though close to a four-and-a-half year low, actually increased in May, from 7.5% to 7.6%, as news of the improving job situation caused many of the unemployed who had given up looking to reenter the job-hunting fray.

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Click to enlarge chart

And, as is usually the case this time of year, over a million newly-minted college graduates were thrust kicking and screaming into the real world (or at least back to their old bedroom at Mom and Dad’s). This year’s crop carried record loads of student debt.

New Jobs are Low-Level

Yet another problem is that the jobs that are being created are not exactly the most sought-after, and tend to earn less than those eliminated during the recession, a phenomenon that shows no sign of reversing itself any time soon.

For example, restaurants and bars added a whopping 38,000 jobs in May, evidence that people have finally started to eat out more, usually a sign of an improving economy.  However, these jobs tend to pay less than minimum wage – certainly not enough to eat out very often!

Professional and business services added a lot of jobs, too. But despite the media cacophony about a surge in tech and other math-and-science-related fields, only 5,000 jobs were in computer systems, and another 6,000 in engineering – hardly enough to satisfy the hundreds of thousands of recent IT and engineering graduates. The greatest number of new jobs in the professional services sector – 26,000, to be exact, was in the not-so-lofty temporary office help area.

Last month, one in every six new jobs was in retail. In fact, as the chart above shows, retail job growth has been outpacing that of total employment in the US since late 2012. However, most of these jobs are hourly jobs at the store level, and pay at or slightly above minimum wage.

Sluggish Income Growth

Income growth has been sluggish for the past several months, further evidence of the beating paychecks are taking, which means that the rampant price-and value-consciousness will persist for a while, and will continue to wield a huge influence on consumer behavior and retail strategy.

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Stagnant Spending

Finally, consumer spending is nothing to get excited about. Although sales of durables like automobiles and furniture have been brisk, spending on nondurables like food, clothing and personal care items has slowed in recent months. Much of the slowdown is due to lower prices on food and gas, but nonetheless threatens to intensify the share wars taking place at retail.

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Click to enlarge chart

It’s probably worthwhile to point out that while all this hiring was taking place, the Dow and S&P each continued their upward climbs, bringing year-to-date stock market gains to over 15% and reinforcing the wealth effect among the high-income folks. This has been fueling growth in luxury retailing and intensifying the polarization between haves and have-nots. How long this will last depends in large part on the financial markets. A big stock market correction could put the brakes on luxury spending.

Who’s Hiring At Retail?

Retailers, anxious to gain whatever share they can in this low-growth market, are making sure they are sufficiently staffed. General merchandise stores, including variety and the very popular dollar stores, have added the most jobs so far this year, at 44,000, as shown in the chart below, almost half the 93,000 new retail jobs. Dollar stores have been expanding their brick-and-mortar footprint faster than other channels.

Department stores have added 22,000 jobs, both in-store to provide improved service, and at the corporate level to fill expanding e-commerce and social media departments. Specialty apparel stores, many of whom are closing underperforming doors, have sustained a net loss of 17,000 jobs so far this year.

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Click to enlarge chart

Amid all the uncertainty, though, the tough job market has been a windfall for retailers in one key way. These companies have access today to some of the most educated, innovative, tech-savvy and creative talent ever. Retailers should identify the high-potential employees early in their careers, and begin grooming them to be the next generation of industry leaders.