Warren Shoulberg

About Warren Shoulberg

Warren Shoulberg is editorial director of several home furnishings magazines and has been reporting on the home business for a long time. He is currently working on his next book, Stupid Business.

I’ve Got Mail!

Monitoring a year of Macy’s email…and living to tell about it.

First things first: My e-hat is off to all the programmers, merchandisers, web technicians, copywriters, graphic artists and digital geeks who run the Macy’s direct email program. Well done, guys. I am in a position to make this evaluation after what seemed a rather simple task: I would gather and save all the promotional emails Macy’s sent me as a customer over the course of one year. I began moving those messages rom my inbox to a separate folder on Jan. 1, 2014, and filed my last one at 11:46AM this past Dec. 31.

Simple my ass…ortment.

As a customer who had made home, apparel and jewelry purchases from Macy’s over the years, my inbox became a breeding ground for a promotional onslaught that neared biblical proportions. By any measure — quantity, variety, creativity or just plain audacity — my year with Macy’s email was memorable. First, the volume, which was indeed voluminous. I received an email from Macy’s virtually every day. Some days I received two. Occasionally, I missed a day, which I attributed more to spam filters than any lack of enterprise on the part of the store’s promotional department. [Read more…]

Old McDonald’s and Its Youngest Customers

mcdonaldsWhile everyone is trying to figure out how to fix the troubled fast food chain, they are missing one very important ingredient…and it ain’t pickles.

My nephew David’s first word was “fries.” He learned it at McDonald’s. Two generations later, McDonald’s is the one getting fried.

The most ubiquitous export brands in America – Boeing, Levi and Walmart not withstanding– and the greatest ambassador of American culture to the rest of the world, McDonald’s is facing perhaps its biggest challenge since it was trying to figure out how to cut a sesame-seed bun into three slices. [Read more…]

Radio Sacked

radioshackWhen Woolworth went out of business and bought its one-way ticket to the great strip mall in the sky, I remember the great outcry from people who reminisced about the good old days of grilled cheese sandwiches and nickel Cherry Cokes at the lunch counter and shopping for notions.

Except when you asked these same people when was the last time they had eaten a grilled cheese sandwich or shopped for notions at Woolworths, they stared blankly and searched their memories to no avail.

We are now in the same mourning period for Radio Shack following its bankruptcy filing last Thursday. Certainly it was the retail demise with the longest build-up and least amount of surprise since the General Store closed in Dodge City.

Equal parts sad, appropriate, unforgiveable and tragic, Radio Shack’s bankruptcy has been forecast for years, despite new management, a handful of new concept stores and a Super Bowl ad that was every bit as dumb and ill-advised as Pete Carroll’s play calling. [Read more…]

Homeless in America

Young man holding teddy bear and taking a nap on couchThe home furnishings business should be hitting…well, home runs right now. The only thing is that it’s not: a couple of bloop singles at best.

Housing has rebounded and prices are approaching pre-Great Recession levels. Unemployment continues to drop, and more importantly, people with jobs feel less spooked that they’re going to lose them suddenly. Consumer confidence, despite the occasional outlier survey and Election Day polls, is generally positive. Gas prices are down, creating more disposable income for even budget-stretched households. And the costs of consumer goods, thanks largely to low inflation and a never-ending supply of third-world sourcing options, are a downright bargain in historical terms.

Yet sales of home furnishings products continue to struggle, even as sales of other perennial larger discretionary purchases – new cars and vacations – have rebounded from the dregs of their 2008-2009 levels.

Home may be where the heart is, but it ain’t where the spending is. What’s going on? As with most things in the universe, it’s not just one development that is causing a seminal change in the dynamics of home furnishings purchasing patterns. It’s three uneasy pieces.

1. Hello Muddah, Hello Faddah

With all due ethnic respect to Alan Sherman, the fact of the matter is that this generation of young people finishing up college is increasingly moving back in with their parents, rather than setting up their own households. And that’s a huge part of the home furnishings problem today.

The folks who keep track of such things say that there are 2.3 million so-called “missing” households in the country today. That is, new households that would exist if historical patterns of home formation had held true the past few years.

Before the Great Recession, about 27% of 18-to-34-year-olds lived with their parents. Now that number is 31%.

Do that math and that’s almost one in seven more kids heading home rather than getting their first place.

Another study makes the case even more persuasively. In the six years before the Great Recession, an average of 1.35 million households were
created every year. In the six years since, that average has dropped to just over 550,000 a year.

Even with all the hand-me-downs and trash day curbside pickups resourceful kids usually repurpose, there are still a lot of dishes, toaster ovens, sheets, rugs and other household paraphernalia that are still not being purchased.

These kids who are moving back in with their parents, doing extended stays with friends, or otherwise camping out in basements and attics
of unsuspecting relatives are using somebody else’s existing home products. Let’s face it: chipped plates and somewhat frayed towels will do just fine when you’re looking at $80,000 in student loans and no job.

Small kitchen2. Going Rental Mental

Ok, so we know there are simply fewer people starting households. That wouldn’t be so bad if those that were starting up were choosing the great American tradition of buying a house. But they are not.

The number of people deciding to rent rather than own is at a level this country hasn’t seen since the Reagan administration. Between 2007 and 2013, the country added about 6.2 million tenants but only just over 200,000 homeowners. While new single family home construction is finally coming around again, it’s nothing compared to multifamily construction, which last summer hit its highest level since at least 2006 and maybe even further back to 1989.

And first-time home ownership is down 5% to 33%, the lowest level since 1987. These are staggering statistics for a country that has based a wildly disproportionate percentage of its economy around the idea of home ownership. In case anyone forgot, it was the boom in the housing market that fueled the boom of the first half-decade of the new century. And it was the housing collapse that drove the nation into its biggest economic downturn in more than 80 years.

So, maybe you’re thinking what difference does it make whether someone lives in an apartment or a home? They still need those dishes and towels. Yes, that’s true, but not all home furnishings products are created equally. A renter is likely to buy the same sheets as a homeowner. They each will want some cookware and a blender and some comfortable places to sit. But is a renter likely to put in wall-to-wall carpeting as a homeowner would? How about replacing the washing machine or getting a new fridge? Will they spring for the bedroom set of their dreams if they’re not sure it’s going to fit in the next apartment they move to? And they certainly aren’t going to put in new windows, doors or kitchen cabinets if they are just passing through.

3. Home Sweet Home… or Not

The Millennial generation that is increasingly becoming the prime consumer of stuff in America does not have quite the same love affair with their homes as their parents did. Most anecdotal studies will tell you that decorating their homes is not a priority for many Millennials, no doubt because they are still cash strapped with those student loans. And maybe even more to the point, storage capacity in rentals doesn’t accommodate large collections of stuff.

They eat more meals out, be it at Chipotle or the latest all-you-can-eat Quinoa place. Big fancy kitchens don’t have quite the same appeal as they did for their parents. They also don’t seem to have the interest in some of the brands – and their corresponding premium prices – that have characterized the home business for the past few decades. Which is not to say they don’t like Ralph and Calvin and Donna. They just may not love them. Or be as loyal to these labels as previous generations have been…at least right now, anyway.

Furnishings’ Future?

Put all of these things together – fewer households being started, an increasing number of renters with less need for some home products, and demographics pointing to an emerging less-home-conscious consumer – and it starts to make sense why the home furnishings business is not booming the way many thought it would.

That helps explain today. But what about tomorrow? Is this a fundamental change in the way America lives that will define the home furnishings industry for a generation or more? Or is it just a moment in time, and the more traditional patterns will slowly but surely return the natural order?

Tough to say, but somehow I think you shouldn’t throw in the towel and write off the home – literally or figuratively – quite yet.

Is IKEA the Most Influential Retailer of the Past 25 Years?

shutterstock_202577677Let me cut to the chase. Yes.

Because say what you want about Walmart SuperCenters, H&M, Uniqlo, Restoration Hardware or even Amazon, none of them— not one—would exist in their present form if Ikea hadn’t come along to totally change the rules of retailing.

Ok, you’re saying, Shoulberg, you’ve been downing too many of those Swedish meatballs and have clearly lost your retail smarts. That may be true, but I stand by my Ikea statement.

And I’ve got the proof to back it up. But first, a quick refresher course on this Nordic retail operation that doesn’t easily fall into conventional models. Started in Sweden in 1943 by a 17-year-old named Ingvar Kamprad, named after a typical Scandinavian mash-up of his name and the farm and town where he grew up (take that, Macy’s and Walmart), the company opened its first American store in 1985 in the King of Prussia, Pennsylvania, area. [Read more…]

A Holiday Fable

‘Twas the day after Christmas, when all through the mall,
Every shopping creature was stirring in a big free-for-all.

The sale banners were hung in the windows with twine,
In hopes that black ink would show up on the bottom line.
The merchants were hunkered down like well-tailored elves,
West Coast dock slowdowns having bared all their shelves.

Warren_saleCheap gasoline gave the season a boost,
Proving to be many a retailer’s surprise golden goose.
Walmart trotted out Kelly & Michael clones in their TV attack,
Having decided the entire season could now be called Black.

Target did its usual mix of cheap and chic kerfuffle,
Trying to forget the ghosts of breaches and Steinhafel.
Macy’s ran a record number of one-day sales with flair,
Doing enough business to never muss up Terry’s hair.

Sears and Kmart were largely invisible,
Eddie’s vision rapidly becoming a sinking dirigible.
Mike Jeffries & Dov Charney were two December casualties,
Undone by H&M, Zara & all the other fast-fashion casual Ts.

Radio Shack watched as the clock wound down tic by tic,
It couldn’t be saved by a bizarrely retro Weird Al Yankovic.
Kohl’s tried kash and koupons in every denomination,
Making sense of them caused customer consternation.

And Amazon finally opened an in-town warehouse sorter,
Promising deliveries even before a shopper places the order.
Best Buy had all its consumer electronics at the ready,
Hoping not to go the way of Circuit City and Crazy Eddie.

Luxury brands kept their stores all orderly and neat,
Waiting for those big bonuses to come in from Wall Street.
JCPenney was still suffering from its Ron Johnson hangover,
Though the trouble was still too much merchandise holdover.

But no matter the channel, the site or the store,
The customer would only respond to more and more.
Now 10 percent off, 20 or even 30,
It took 40 or 50 for shoppers to get down and dirty.

In fact, only one store was sale-less and unflappable,
It bore the image of a fruit, of course, it was Apple.
So the endless sales and promos from very far to quite near,
Promised to stretch through well into the New Year.

It’s just how business is done in retailing these days,
Sadly, executives and customers are no longer fazed.
And longing for the good old days is just a wasted gesture,
Trying to do it any other way is meaningless conjecture.

So as the season ends and the stores turn out the light,
We wish you Happy New Year, it was one hell of a fight.

Serves Up, One Caffeine Wave at a Time

keurig2.0For big box retailers in the home business, there is no single merchandising classification they love to hate more than small electrics.

A cornerstone of the housewares business, it is – along with cookware — the workhorse of the promotional calendar, driving traffic and generally getting bodies to come into the store to the home department. It is also a train wreck when it comes to profitability. I remember talking with a new divisional merchandise manager for housewares who was downright flabbergasted by the tiny margins in the store’s small electrics business. If it weren’t for bad margins, small electrics wouldn’t have any margins at all. That said, you’re unlikely to see any of the major players in housewares retailing getting out of the category anytime soon. Like the old Woody Allen joke about the guy who thought he was a chicken, retailers need the eggs. [Read more…]

Housekeeping

Houskeeping_Collage_FinalThe summer is usually not a time for great reflection: more often most of us spend as much time as possible getting away from the real world, via vacations, trashy novels and the latest super-duper hero movie sequel. But for some reason, it seemed like the right moment to revisit some of the many retailers of home furnishings that have been injected, inspected, detected, infected, neglected and selected in this space over the past few years. Many of the stores have experienced some pretty important developments since last encountered, some for the better, many for the worse. So, in no particular order – OK, maybe in some order – lets see what these guys have been up to.

Target

What a mess they’ve made in Minneapolis recently. A big-time security breach of Snowdean proportions; a Canadian launch best described as the Great White North – Not; bad comps; and a CEO forced out of his corner office via the self-checkout line, Target is in free fall right now. [Read more…]

Dear Doug – An Open Letter to Doug McMillon, the New President & CEO of Walmart

doug-mcmillon-in-store

By now you’ve been in the corner cubicle in beautiful downtown Bentonville for a few weeks, so congratulations on being only the fifth president in the history of Walmart. It’s a big job, running the largest retailer — hell, the largest anything — in the world and you’ve got millions of employees and billions of customers depending on you to do a good job.

No pressure, really.

But you also sit in perhaps the most revered seat in American retailing, the one once occupied by Mr. Sam himself, the man whose name is over the front door, the guy who put most of the stores in the United States out of business, and the hovering spirit who continues to both inspire and haunt everything and everybody at Walmart. But Doug, you and Sam Walton also have one other thing in common: you’re the only merchants ever to run Walmart.

And therein lies the greatest hope for a very troubled company. You see Doug, as you know better than anybody, Walmart is not quite what it seems to be. You know how certain businesses appear to be one thing and are actually another? Like movie theaters fronting as places to show films when in fact they are giant popcorn and snack emporiums? Or furniture stores appearing to be selling couches and credenzas when they are really finance companies charging usury rates that would embarrass organized crime? [Read more…]

Made Up in the USA

Made In The USAWhen Walmart announced last year it was going to launch a major push on domestically-made products—helping to fund some of the suppliers, in fact – it set off a jingoistic feeding frenzy.

All of a sudden everybody and his shopping brother was envisioning a plethora of product produced right here in the good old U.S. of A. Politicians jumped on the bandwagon, of course, visions of full employment and happy voters in their heads.

It was a wonderful story. And it would have been even more wonderful if it were actually true.

Because any discussion of wide-scale manufacturing returning to the United States needs to be put into context…and reality First off, this isn’t Walmart’s first manufacturing renaissance rodeo. Way back in the days of Mr. Sam, Made in the USA banners hung proudly in virtually every store the company owned. Many went so far as to single out exactly where the products were made, highlighting those in the immediate proximity of individual stores. [Read more…]

Hark the Herald Square Angel

macysIs there any store more associated with the holiday that Christmas has become in America than Macy’s?

After all, how many retailing corporations are the stars of their own legendary motion picture that celebrates the spirit of Christmas? And how many host their own parade that practically signals the start of the holiday shopping season?

So, as Christmas 2013 starts to fade from our consciousness, it seems only appropriate to unwrap a modest ode to Macy’s, specifically for their holiday home merchandising strategy and more generally to the overall management of the store and its position at, or near, the top of the American retailing pyramid.

That we are even doing this is rather remarkable when you think about it. It wasn’t that long ago that many retail observers were pontificating on the end of the great American department store as we knew it. As a business model, the channel was bloated with overhead; geographically-poor locations in declining regional malls; and competitively disadvantaged compared to its big-box discount and superstore brethren. [Read more…]

Down by the River…Amazon Style

Basic RGBThe next time you’re cruising the Internet, type in this URL:

Relentless.com

Surprise!

You’ve arrived at Amazon, courtesy of one of the early working names for the site that Jeff Bezos was considering way back when people were still referring to this thing as the information-superhighway. Just as it’s been a very long time since you’ve heard anybody use that term, Amazon has evolved over the past two decades as the dominant online retailer, much to the embarrassment of the rest of American retailing, which should be ashamed of how they let Bezos and company kick their e-butts.

As many wise and learned observers — not the least of whom is the namesake of this noble enterprise, my friend Robin Lewis — have noted, Amazon is far from done in changing the rules of how Americans buy stuff and its continued lack of profitability should be of little concern for the long-term viability of its business model. If most people are coming to realize the enormous impact Amazon is having on the business-to-consumer relationship, it is perhaps less well known how the company is also significantly changing the business-to-business model. It is every bit as radical a transformation.

Three Distribution Revolutions

You can make the case that there have been three major revolutions in the history of supply chain management in American retailing…the Wells Fargo Wagon not withstanding. The first took place in the 1920s when retailers first started to take ownership of their suppliers. Certainly Sears was in the forefront of that movement, owning major stakes in many companies, including ones that eventually became Kellwood and Whirlpool after being cut loose. Sears wasn’t the only retailer to go this route. The famous Fieldcrest towel began life as the house brand for one Chicago department store by the name of Marshall Field.

The second major revolution in how suppliers dealt with retailers came into its own in the 1980s with three initials: EDI. Electronic Data Interchange was championed by Walmart (then still porting the hyphenated Wal-Mart nomenclature). Orders were transmittedelectronically from the store to the supplier, eliminating the infamous order pad that had been the backbone of the ordering process since the days of the general store. With it came unprecedented access to data all up and down the food chain. Suddenly vendors could see what was selling and where and could anticipate their next orders. This transparency trickled down to other retail operations but nobody did it better than Walmart… and many vendors will tell you that’s still the case today. The third revolution in the supply chain came with the institutionalization of the product sourcing process from China. American suppliers were practically on the next plane to Beijing after Richard Nixon in 1972, but it was very much a haphazard process for many years until The Gap turned to a small Hong Kong trading company called Li & Fung to manage its supply chain process in China.

That model of course became THE model, still in use by virtually every company that sources product from Asia. All of these developments have several things in common. Each was initiated by a dominant retailer looking for a more efficient model. Each took place in a time when the scale of business was being significantly ramped up allowing for these greater economies of scale to be effective. And each gave the early adapters a tremendous competitive advantage that often took others decades to catch up.

If you’re starting to think that those conditions exist again in American retailing, you may be related to Bezos… except that as with many things, he’s way ahead of the rest of us.

And Now, the Fourth Revolution

Amazon has created the next great revolution in B2B supply chain management and it is part of the reason why no other retailer will ever catch up with them in the field of e-tailing. Quite simply, Amazon allows a vendor multiple ways to sell consumers under a system that in the parlance of today can only called distribution-neutral. It is this reason as much as its facing to shoppers that makes Amazon invincible.

There are slight twists and turns to all of these distribution models, but put them all together and one thing is unbelievably clear: Amazon is business generations ahead of the rest of retailing in managing the process of getting goods from the seller to the buyer. Walmart and others can talk about using their stores as distribution points and many stores trump the ability of consumers to place orders online and pick it up in their physical stores. These are valiant attempts to compete but they are so far out of their e-league compared to how Amazon manages the process. As with the other revolutions in the supply chain, it will take other retailers decades to catch up and by then it will be too late, the next revolution will already be here.

Relentless doesn’t even begin to describe it.

Consider all the ways vendors can put their products through the Amazon pipeline:

#1. Amazon Owns and Sells
This is the conventional supplier-retailer model where the store orders goods, takes ownership of the inventory and sells it to the consumer. A vendor gets their wholesale price and is then out of the rest of the transaction.

#2 Vendor Owns and Amazon Sells
Suppliers retain ownership of inventory at their facility until Amazon sells the product. The fulfillment of the order is done by the supplier under the auspices of Amazon, which takes a cut of the sale, generally between 15 and 20 percent.

#3 Vendor Owns, Amazon Sells and Fullfills
Again, the supplier retains ownership of inventory until the sale is made but now the product is physically stored at an Amazon distribution facility. This allows for the fast delivery that is a cornerstone of the Amazon strategy yet Amazon never actually owns the goods, adding to their profit margins. Again, Amazon’s cut is 15 to 20 percent but it also charges some fees for processing the actual order. The trade has come to call this model FBA, or Fulfilled by Amazon.

#4 Vendor Owns and Sells, Amazon Fulfills
Similar model except that the vendor is identified on Amazon as the seller through its own storefront. Amazon is still fulfilling and taking its cut but the supplier is getting some identity with the consumer. Goods can be kept at a supplier DC or by Amazon.

#5 Vendor Sells a Third Party, Amazon Fullfills
Yet another variation, the supplier sells its goods to another entity, sometimes an actual retailer, sometimes an online storefront. That seller then shows up on Amazon beyond the control of the supplier. This is often the case when products turn up on Amazon — often at a screwy price — despite the denials from suppliers that they are selling Amazon directly. In the old days, this used to be called transshipping. And while the tendency might be to think of this being smaller stores employing this strategy, you’ll often see online giants like Sears or Wayfair on Amazon, further muddying up the distribution picture.

Warren Shoulberg is editorial director of several Progressive Business Media business publications for the home furnishings industry. He made his first Amazon purchase in 1997 and hasn’t stopped since.