Robin Lewis

About Robin Lewis

Robin Lewis has over forty years of strategic operating and consulting experience in the retail and related consumer products industries. He has held executive positions at DuPont, VF Corporation, Women’s Wear Daily (WWD), and Goldman Sachs, among others, and has consulted for dozens of retail, consumer products and other companies. In addition to his role as CEO and Editorial Director of The Robin Report, he is a professor at the Graduate School of Professional Studies at The Fashion Institute of Technology.

Memo from the Grinch: The Gas Price “Bonus” is an Empty Tank

RL_11-18-14_1Economists, experts, analysts, consultants, a lot of CEOs, casual observers and even my friend and CNBC regular Jan Kniffen believe lower gas prices are going to goose holiday retail sales. In what some call the “gas bonus,” this means that some $40 billion saved on fuel will end up being spent over the holidays in the nation’s retail stores. This is certainly a happy thought. On a CNBC panel the other day, Kniffen was almost giddy about it. And then when you add in a falling unemployment rate, followed by an increase in consumer confidence — at its highest level since 2007 — stock traders are already chilling the bubbly.

Once again, I find myself the naysayer. Let’s start with the gas theory. The Robin Report Chief Strategy Officer Judith Russell looked at the monthly change in gas prices and retail sales for the past eight years. And as indicated in the chart below, there is neither a significant bump up, nor down, in retail sales accompanying rising or falling gas prices. She even looked at regressions with different segments in retail, and found that there simply does not seem to be a correlation, period. In other words, the gas theory is an empty tank.

Having said that, Walmart had a slight increase in third quarter sales of .5%, for the first time since 2012, which they believe was partially due to lower gas prices. So, one may conclude that the entire discount sector will gain from the gas bonus, putting more cash in its lower-income consumers’ pockets. On the other hand, one might conclude, as I did, that Walmart is clawing back its customers whom they lost to the thousands of smaller neighborhood dollar stores during the recession when gas prices were high and low-income shoppers had a shorter ride to those local stores, thus saving fuel costs. In fact, Walmart said in its 3Q conference call that the Walmart Express strategy (smaller footprint convenient neighborhood stores) is beginning to facilitate their clawback of market share from the dollar stores.

Therefore, this hypothesis would suggest that rather than the gas bonus lifting total spending among low-income consumers across the entire discount sector, it’s simply shifting shares around within the sector.

Click to Enlarge

Click to Enlarge

If consumers do take their fuel savings and decide to spend them, while the discount retail sector may minimally benefit, it’s more likely they will spend more on health care and entertainment, as well as home improvement. And since income growth is flat, they could just as well decide to save the gas “bonus.” In fact, the savings rate has been ticking up.

And there was certainly no additional gas bonus spending among the mid-to-higher income consumer segments. In fact, Macy’s CFO, Karen Hoguet told analysts a week ago, “shoppers are spending more of their disposable dollars on categories we don’t sell, like cars, health care, electronics and home improvement.”

Lastly, the low overall inflation rate, even disinflation in some major merchandise categories, is allowing consumers to get more value for their money, which doesn’t result in an increase in sales, because they’re not buying more stuff per se. Consumers and particularly the growing Millennial cohort are shifting toward a “less is more” mentality, eschewing buying more stuff to seeking more experiential satisfaction out of life, which is why restaurant sales and entertainment spending are strong. And now with a strong dollar, we might see people opt to travel more often. So these dynamics, much of which has to do with a demographic and cultural shift, will also divert any part of the gas bonus that might have made its way into mainstream retailing.

The final word: dream all you want about getting your hands on a piece of the $40 billion gas bonus, but when you wake up on January 1st with a hangover, it won’t be due to the bubbly that the stock traders are currently chilling. It will be due to the fact that the dream was really a nightmare about the passing gas bonus, pun intended).

Algorithms, “Malgorithms” You Go Figure

iStock_000017120352_DoubleI find myself in a quagmire of confusion about all these new tech concepts, phrases, words, and now the overwhelming stream of algorithms. This technology era we are living in is as mysterious as it is magical. For example, algorithms, the tools of geeky mathematicians for calculating outcomes and sometimes predicting success, are no longer confined to labs. Today if you’re running a lemonade stand along the side of the road, your mom or dad may be running algorithms to determine car and foot traffic, gender types most likely to buy, how many pitchers of the stuff you will need—and, oh, yes, whether you charge a dime or a dollar.

Seriously, as pointed out in a Wall Street Journal article, Big Data’s High Priests of Algorithms, “the good news about data science and data scientists with PhD’s in astrophysics, bio-statistics, partical physics, computer science and several other disciplines—is that they can make six-figure salaries from the get-go working for new startups like Airbnb, Square, Etsy and so on.”

In my opinion, the bad news is that we are taking many of these mathematicians and scientists away from professions where they might actually change the world for the better, and instead luring them into professions where they help shoppers find a better hotel room, a better mate, or a trendy pair of pants.

This is just one more example of our obsessive, consumption-addicted, ostentatious culture. Yes, many of our current traditional business models and even whole industries will be disrupted and transformed through the use of new technologies—perhaps for the better. However, so many of our new tech-based businesses are aimed at providing the purchase and pleasure of the moment.

If we devalue shared life-giving or challenging issues, such as the environment, and increase the value of making another buck by upselling another glass of lemonade, we’re going to be in a lot of trouble.

Human beings. We’re a strange species.

Value is in The Eye of the Beholder…Who is Blind

PrintThere is a binary system governing value. The first “beholders”of value are its creators and sellers. The second are its consumers. Unfortunately,the first beholders have become blind to what their intrinsic value really is, or should be. As a result, they are blinding the second beholders by devaluing their products, leaving these consumers to conclude that the default “real value” is the lowest price.

No, I’m not getting all philosophical on you. Or maybe I am, if you’re able to fully understand the magnitude of what I’m about to serve up. It’s an enormous message for all businesses and, by extension, our economy as well.

It’s about the real, universal, global and all-encompassing definition of value, not just for the consumer, but also how you define it and hold it for your products, services, business and, indeed, your life.

For starters, before I take on the task of defining value and explaining why its creators and consumers are both blind to any common understanding of what it actually is, I submit that the collective “we” have been marking down value for a long time. The devaluation of value seems to be accelerating, particularly with the explosion of online businesses that don’t yet make a profit, relying on waves of funding and price promoting to stay afloat. This business model simply exacerbates the “marking down” syndrome. And this fragile model is also exacerbated by ongoing overcapacity throughout our economy, in which price promoting and endless methods of discounting become “weapons of necessity.” The end of this vicious cycle, of course, is worthlessness—AKA, zero value.

[Read more…]

Retailers and Wholesalers: Yesterday’s Fish Wrap

Direct_to_consumerThe retail and wholesale business models, separately and in conjunction with each other, are collapsing. Along with their demise, the actual terms, retail and wholesale, will literally cease to exist. In fact, as I write this article, major traditional wholesale brands such as The North Face, Timberland and other VF Corporation brands, along with PVH brands, Calvin Klein and Tommy Hilfiger, among many other giant wholesale brands, are achieving faster and more profitable growth in what they are referring to as their DTC (direct to consumer, including e-commerce) business, than through their traditional wholesale to retail to consumer model. Essentially the DTC model that these wholesale brands are adopting is simply the branded apparel specialty retail model that was launched by the Gap, Esprit and other brands in the 1960s. A phrase often used to describe the model is “the brand on the door is the brand in the store.” Likewise, and to some degree in response to their branded wholesale vendors’ accelerating focus on the DTC model, traditional retailers — from Nordstrom and Macy’s to Walmart –- and across all retail sectors, will be forced to transform their business models to better control and accelerate their own brands’ direct engagement with consumers. In fact, Nordstrom and Macy’s, to cite two examples, are proactively beginning to transform their models. [Read more…]

Amazon Finally Gets It: The Next Big Thing For All Pure Digital Players

amazon_openingAmazon’s announcement of its first physical store opening on Manhattan’s 34th Street is not a surprise to me, as I predicted it four years ago in the first edition of my co-authored book, The New Rules of Retail, published in 2010.

The logic was the same then as it is now.  Amazon has a huge database, estimated to be larger than the Pentagon’s — and they know how to use it. The data provide them with laser-sharp knowledge, such as what Jane Doe — who is married with two kids and a dog and is living on the east side of Manhattan (or anywhere in particular) — is eating for breakfast; what brand of jeans she wears; the charities she gives to; the music she likes; and so forth. Therefore, as Amazon rolls out its stores nationally, it can assort each location precisely with those items that are preferred by specific shoppers. The stores will also have screens for downloading information and selecting from Amazon’s massive inventory.

The personalized knowledge that Amazon continues to build on, and that all retailers are pursuing, is collected over time across all accessible consumer browsing and transactional points, and it’s game changing. It tracks consumer-shopping behavior and can be drilled down to individual profiles.  This is the big deal part of the buzz concept, Big Data, because it tells the retailer not only what brands the Jane Does on the East Side prefer, it can also indicate what kind of shopping experience, environment and service they expect. Most traditional retailers have not yet scratched the surface on big data analytics and its laser-like ability to localize, even personalize the shopping experience. It will be interesting to see how Amazon uses its analytical advantage in this area. [Read more…]

Sears: Nothing Left But its Past

Lampert_Sears_logoEddie “fast buck” Lampert is squeezing the proverbial turnip for more cash — as the musicians aboard the sinking “Titanic” are now truly playing “Nearer My God to Thee.” The cash he’s squeezing out is his own, in the form of a $400 million loan from his hedge fund, ESL Holdings. And regardless of his sinking ship, he’s got a life saver in the form of a healthy interest rate and a loan secured by valuable real estate. So “abracadabra Eddie” keeps the ship afloat. For now.

Unfortunately the music is about to end, and as he continues to sell off the “deck chairs” (read: assets), Sears and its bleeding sister, Kmart, will finally sink into the briny. Some experts predict this will happen by 2016. Regardless of the financial predictions, these two retail brands are “dead men walking” as I write. [Read more…]

The Forecast: Share Wars For Rest of 2014

RL_Blog_9-10-14Forget about all of the holiday projections soon to be bandied about by the legions of economists, analysts, pundits, experts and faux experts. This is the one you can take to the bank, and it comes from none other than Macy’s CEO Terry Lundgren. Crisply, clearly and without hesitation, he nailed it at his presentation at the Goldman Sachs Annual Retail Conference.

“The rebound that we were all expecting in this year hasn’t happened. The consumer has not bounced back with the confidence that we were all looking for. And so the performance I think we had in the second quarter, and we expect to have in the second half, is going to be a continuation of what we’ve been able to do over the last several years — and that is to capture market share and get the most out of the consumers that are in our stores.”

In other words, folks, there will be no overall market growth this holiday season; only share wars in which the great retailers will steal share from the not-so-great, resulting in a zero-sum game. So, here you have it, The Robin Report official holiday projection: Zero Percent Growth. [Read more…]

Is Alibaba Really Worth It?

alibaba_newOn the verge of becoming the biggest initial public offering in US history, one has to wonder if it’s really worth the $187 billion some analysts are projecting. As we witness Jack Ma, former schoolteacher and founder of Alibaba, strut across a stage portraying himself as Jeff Bezos and Steve Jobs combined, at least he’s talking the talk. Walking the walk, as we all know, is a horse of a different color.

And to that point, off stage he’s been on a wandering and random acquisition binge, making some 30 investments since the beginning of the year, worth close to $7 billion. Whether or not he was just trying to find stuff to invest all of the cash gushing through the business, the deals he has made seem highly questionable. [Read more…]

Disruption Dysfunction

iStock_000034006880LargeThe Harvard Business School may have a different answer, but here’s my definition of a Disrupter:

The guy who comes into your market and screws up your business by doing something different.

While Disruption, Disrupters and the entire Disrupt Movement have gone to the front pages of the business section the past 18 months, when you think about it, they have been constants in retailing since…well, since the first general store replaced the peddler’s cart. After all, didn’t the first generation of department stores – John Wanamaker and others – disrupt the retail world of specialty stores? Half a century later, the first discount stores of New England disrupted the department store channel, forever changing their business models. Big box category killers, superstore national chains, even Apple stores: they all disrupted what had been going on before they showed up on the scene.

Which of course brings us to today and the disrupter du jour: the Internet, of course. Perhaps it truly is the mother of all disrupters, changing the rules the way none of its predecessors ever did. Certainly, it seems that way to those of us who have no life and are consumed with the ever-changing nature of the retailing business.

But there’s disruption and then there’s disruption, and nobody can quite come to a clear agreement on which is which.

Dyson DC33 Multi Floor Upright Vacuum CleanerA Chinese Fortune, Cookie

Take the recent coverage of Alibaba – the huge Chinese online business that seems to be a combination of Amazon, Google and a Monopoly game – when it announced it was going public. Two New York Times stories couldn’t quite decide if Alibaba and its czar Jack Ma were disrupters or not. Consider this description from one of the two stories that ran on the same page on the day of the big deal:

“He (Ma) has also proved to be a serial disrupter – an outsider with a knack for creating new markets by reimaging old industries like retailing and finance.”

Contrast that with this next story: “Alibaba’s IPO filing breaks with that well-worn theme. Instead of     promising to disrupt an existing market, the Chinese e-commerce giant wants do something more straightforward, but potentially far more lucrative.”

So, disrupter or not? If the Times can’t figure it out, what chance do us mere mortals have?

Disrupters Clean House

Maybe you read Luke Williams’ 2011 book, Disrupt, which no doubt helped create the entire disruption disruption. Williams provides a classic home products example of what disruption is all about: the Swiffer mop. The basic premise with a mop is that it uses water to clean. But sometimes too much water retards the cleaning process. So what happens if you come up with something that cleans but doesn’t use water at all?

Presto, the Swiffer.

Presto, disruption.

The home furnishings business – never a hotbed for cutting-edge anything – has nonetheless had its share of disrupters…barely. Consider the Dyson vacuum cleaner. When it came out in the American market a decade ago, the average selling price of a better vac was about a hundred bucks, maybe $125. Hoover was the best-selling brand and the headlight was probably the biggest advancement in technology of the previous 20 years. James Dyson came along with a machine with advanced (though not totally original) technology, a huge advertising budget and a $400 price tag. Eighteen months later the Dyson was the number one selling machine in the business by dollars and another year or two later, it was number one in units too.

The other vacuum suppliers were not only disrupted, they were sucked dry.

A more recent poster child following the same path is the Nest thermostat. Talk about a product that virtually nobody was paying any attention to! Enter some guys who used to work for Apple with the classic Steve Jobs approach: design a gorgeous product that addresses an underserved category and, oh by the way, charge a lot of money for it. How much did Nest disrupt the home thermostat business? About three billion ways, which is how many dollars Google paid for the company this past January.

Does Domino Know?

Home disruption is also occurring on the retail side. Take a look at Domino magazine. Once the darling of the Gen X set for its irreverent takes on decorating, the publication was a Great Recession victim when owner Conde Nast shut it down in 2009 after just three years. An online version was maintained and there were some one-shots of repackaged content but it wasn’t the same. Late last year Domino Redux debuted, once again under the leadership of its original publisher Beth Brenner, now reinventing herself as chief revenue officer. As an online-only product that planned a print companion down the road, it set out to chase the holy grail of media convergence: read about products and decorating items and then buy those very same things right through the magazine. The old Domino sent you to someone to buy what it featured on its pages. Domino the sequel is cutting out the middleman.

Is it working? It’s too early to tell. But in a world where the line between journalism and commerce is increasingly not just fuzzy but often erased, Domino is certainly out to disrupt the way things have been done in both fields.

Then there’s Crane & Canopy. Started by husband and wife Harvard Business School classmates, this disrupter is trying to turn the business of buying bedding upside down. Right now most of the things you buy to put on your bed – sheets, pillowcases, comforters, duvets, what-have-you, are made by Asian suppliers, most often in China. American importers bring the product in and sell it to retailers. It’s the way it works, whether it’s Bloomingdale’s or Family Dollar…or Amazon.

Crane & Canopy is trying something different. Working directly with Chinese factories, it is designing its own products and then selling them directly to consumers online. Its products are not sold in any stores and are only available on the company’s own site. And by streamlining the sourcing model, it controls the process virtually from start to finish while shaving some costs out of the process. Again, this is another disruption in process. Whether Crane & Canopy can do the volume necessary to sustain its model is the 64-Yuan question.

As with any good disruption, the reaction of those being disrupted is mixed. In the case of Dyson, Hoover, Eureka and all the rest of the established vacuum cleaner market, it is still struggling to catch up. They were clearly caught with their dust busters down and Dyson continues to set the pace.

Nest has certainly shaken up its temperature-controlled market segment, as evidenced by a new Honeywell thermostat now coming to market that is voice activated. But you have to doubt that Google’s checkbook is out for that item.

And neither the new Domino nor Crane & Canopy have anywhere near the scale to make House Beautiful or Bed Bath & Beyond feel threatened. At least, not yet. But I guess that’s the way disruption works. You don’t realize until it’s too late that someone has come in and screwed up your business.

Warren Shoulberg is editorial director for several Progressive Business Media publications in the home furnishings field and could currently stand a little less disruption in his life, thank-you.

Apple Addicts Still Mainline Steve Jobs

X Japan Wax Figure UnveilingExcerpted from the New, New Rules of Retail
By Robin Lewis and Michael Dart

On January 9, 2007, on a big stage at the Macworld convention at the Moscone Center in San Francisco, Steve Jobs unveiled the first iPhone. With the already unprecedented cult following of Apple—and for that matter, of Jobs himself—this would be the first of many launches that would further fuel one of the most powerful brand-consumer connections ever.

This unveiling, of course, was merely the warm-up. Steve Jobs’ grandly staged presentation would trigger an intense anticipation among Apple “addicts” that would be satisfied only by the actual sales release of the iPhone itself.

This would happen at 6:00 PM local time on June 29, 2007, as the doors opened at Apple Stores nationwide to welcome hundreds of cult followers anticipating their fix, so to speak. Some media sources at the time were dubbing the iPhone the “Jesus phone.” In fact, in New York City the line started forming twelve hours before Apple’s flagship store opened and ended up winding around two city blocks, or roughly a quarter mile, with more than a thousand avid cultists in it. Some had even camped out overnight. Obviously the Apple addicts had learned that if they wanted the new phone, they had better be present when that door opened, or be forced to wait for weeks.

Apple’s connection with its consumers has gone way beyond the simply emotional. It has succeeded by actually connecting with their minds. In our updated second edition of The New Rules of Retail, released on August 12, 2014, we called this neurological connectivity. [Read more…]

Whole Foods Market: Conscious Capitalism or Unconscious Greed?

wholefoods_webSo are we adding a luxury food brand to the “designer derby” of racers seeking more growth (for its own sake) by reaching down to consumers who are reaching up? Or is the CEO of Whole Foods, John Mackey, spreading his high-end food among the masses at prices they can afford, simply out of the goodness of his democratic heart? I’m speaking of the Whole Foods launch of pilot stores in more down-tier areas of Detroit, New Orleans and Chicago’s South Side. And about this strategy, Mackey made this rather magnanimous and altruistic statement: “For every penny we cut off the price, we reach more people who can afford to shop with us.”

What a wonderful thing to say. And, what a wonderful thing to do for the less well-heeled people living where the stores are being launched. And I suppose it will be a wonderful thing for new growth, at least for the foreseeable future. [Read more…]

Q/A with William P. Lauder

William_Lauder-1We sat down with William P. Lauder, Chairman of The Estée Lauder Companies, the $10 billion global beauty juggernaut, and talked about the evolving retail landscape, the importance of knowing your consumer and the opportunities and challenges of globalization.

Robin: William, we’re living in what we believe is the biggest transformation of the industry in the history of retailing, and therefore in wholesaling and branding as well. Some CEOs are saying it feels like the Wild West. Others feel like they are living in the chaos of technology that is far ahead of our capabilities to totally understand and use it.

And here is The Estée Lauder Companies, the undisputed leader in their space, right in the middle of it all. You served as CEO from 2004-2009, when you transitioned to your current role as Executive Chairman. During these ten years, the business has nearly doubled. So, I know you’re really smart, but is there also a bit of luck working here as well?

William: When I first joined this company in 1986, I perceived that my mission was to gain the experience to do what we needed to help the company be at the forefront of prestige aspirational beauty around the world. In 1996, more than half of our business was in North America. Now more than half our business is outside of North America. Emerging markets like China and Russia were very important, and we had a low share of market in those countries as well as in Europe, the UK and elsewhere. So, we saw a greater global opportunity where the pie was expanding, as opposed to our huge share of the US pie, which was static. [Read more…]