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…]

Making Athletes Better, Socially

under_armourOn the heels of a strong close to 2014 and annual sales and profits growth of 32% and 28% respectively, Under Armour hosted a meeting with the investment community, addressing its recent acquisitions that, when combined, create the world’s largest digital health and fitness community. Aptly named Connected Fitness, CEO Kevin Plank, along with the leaders of the newly assembled Under Armour digital team and CFO Brad Dickerson, spoke to rationale, strategy, and opportunities.

In true entrepreneurial fashion, Plank started Under Armour as a football player who couldn’t understand why there wasn’t a T-shirt on the market that was light and wicked sweat, which would improve his (and athletes generally) performance. The rest, as they say, is history. The guiding principle from his inspiration 19 years ago, to the more than $3 billion in annual sales just reported, is the goal to make the athlete perform better. This remains the goal with the MapMyFitness acquisition (in 2013), Endomondo (acquired January 2015), and the MyFitnessPal purchase (closing in the current quarter). In the digital world, Under Armour now has more than 120 million unique registered users in its online community. [Read more…]

What Can Luxury Brands like Louis Vuitton Learn from Lego?

legoImportant Lessons, It Turns Out

Fast Company just published an interesting story about Lego and its Future Lab, titled “How Lego Became the Apple of Toys.” Before the recession, Lego was in serious trouble. Fast Company sets the stage:

“About a decade ago, it looked like Lego might not have much of a future at all. In 2003, the company — based in a tiny Danish village called Billund and owned by the same family that founded it before World War II — was on the verge of bankruptcy, with problems lurking within like tree rot. Faced with growing competition from video games and the Internet, and plagued by an internal fear that Lego was perceived as old-fashioned, the company had been making a series of errors.”

What Lego Did Wrong & How Lego Made It Right

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What’s Missing From Online Shopping

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Last year, US e-retail sales hit $263 billion, according to Forrester Research Inc., representing 8% of total retail sales. The company predicts that by 2018, e-retail will reach $414 billion. While it’s a staggering number, it will still only account for about 11% of total retail sales. So why is online shopping still such a small piece of the retail pie? According to research from Cotton Incorporated, there’s room for improvement online.

Browse Before Buying

Though the majority of purchases still occur in-store, online is quickly becoming the first stop for consumers looking to shop for apparel. According to the Cotton Incorporated Lifestyle Monitor™ Survey, 84% of consumers say they browse for clothing online using a computer or laptop, while 45% say they use a smart phone, 39% use a tablet, and 18% use a smart television.

“We’ve seen strong growth in the percentage of consumers who browse for clothing online using smartphones, tablets, and smart televisions, and we anticipate those numbers will continue to grow as they reflect the behavior of younger consumers who were raised with the technology and are increasingly comfortable with it,” says Kim Kitchings, Vice President, Corporate Strategy & Program Metrics, Cotton Incorporated.

Indeed, according to Forrester Research Inc., 69% of US adults who regularly purchase items online end up buying about 16% of their products through e-channels, and both numbers are expected to grow as so-called “digital natives,” or those consumers born in the early 2000s after the advent of digital technologies, continue to increase their spending power. [Read more…]

Widening the Gap

shutterstock_192812690Having followed Gap and Gap Inc. for 25 some years, I’m intrigued with the many growth opportunities the $16+ billion company still provides. As an analyst, I’ve long applied a portfolio approach to Gap Inc.; when one brand is humming another is flubbing— and basically that’s been the case. Gap Inc. is accessible: luxury (albeit boring) at Banana; value at Old Navy; and just-plainclothes- with-a-hint-of-attitude (mostly from good marketing, not so much design) at Gap. Recent acquisitions, along with new global opportunities and a changing industry, begged another look at this behemoth. And I like what I see! [Read more…]

Are You a Fashion Titan or a Fashion Disrupter?

“Let’s face it, the fashion business does not attract the nation’s best and brightest…”

As told to me by one of the titans of retail, the ex-CEO of a major American brand.

Doubts about my own personal career choice aside, he was right. With a few exceptions, fashion is still somewhat a backward business. What other industry has so little pure product innovation and relies solely on fickle, fleeting consumer desires to drive business? Unfortunately for us, there are no real trends anymore, but gradual evolutions in style due to the way information is constantly leaked and diffused. Sadly, Jorgen Andersson, formerly with H+M and now CMO of Uniqlo, agrees, calling fashion and consumer culture “generic.” [Read more…]

How Equinox Could Save Your Mall

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The Great Recession turned most US consumers into necessity-based shoppers, eliminating their need to spend a day or even an afternoon impulse shopping at the mall. But these changing demographics and shopping habits across the country have real estate developers getting creative – in some cases, by filling now-empty anchor stores with non-retail properties like fitness centers. Ironically, this emphasis on non-retail may be what woos consumers away from the convenience of online shopping and back to the mall.

Seventy-two percent of consumers say they prefer to buy separate apparel pieces at different stores, according to the Cotton Incorporated Lifestyle Monitor™ Survey, compared to the 28% who would prefer to purchase everything in one place.

“That number has really remained consistent over the last several years, indicating that the very nature of malls still holds strong appeal among consumers even as the traditional anchor store model has become outdated,” says Kim Kitchings, Vice President, Corporate Strategy & Program Metrics, Cotton Incorporated. [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…]

Dov Charney is a Joke: A Dirty Joke and a Business Joke

Dov Charney, Portfolio, November 1, 2008The media at large has publicly exposed enough of the “dirty” part of this “jokester” that I don’t need to pile on more. Although it might be a more titillating read to add more dirt to the pile, I’ll just sign off on his disgusting behavior during his tenure as CEO of American Apparel by saying it’s equally disgusting to me that the board didn’t kick his butt out of there a long time ago. It never ceases to amaze me that too many boards are still weak on proper governance in protecting the shareholders from the egregious, deleterious behavior of miscreant CEO’s. And American Apparel’s board seems to be one of those.

But for the moment, let’s forget about Charney’s sexual proclivities, including allegations of abuse. Many top executives have been caught with their pants down, so to speak, albeit not all as flagrantly as Charney. Many were fired, yet many others have just had their dalliances swept under the rug.

Charney’s real dirty joke is that he is a business joke of the tallest order. [Read more…]

The Coming Crash of Michael Kors…Take it To The Bank

MK_Blog_graphic-01Michael Kors, the brand, is becoming ubiquitous, and that’s the kiss of death for trendy fashion brands, particularly those positioned in the up-market younger consumer sectors. Its distribution is racing towards ubiquity, wholesale and retail (online, its own stores, outlet stores and internationally). Even worse, a rocket-propelled accelerant to ubiquity is its expansion into multiple product categories and sub-brands, so they can compete at all price points. Some would argue all of those segments will simply end up competing with each other, thus cannibalizing the top end of the spectrum. [Read more…]

Chico’s Reviving and Disrupting

Chicos_Volunteer_Day_Giving_Day_006My closet is filled with a variety of on-sale purchased high-end designer clothing and shoes, nearly all black and suitable for almost every New York occasion, but not for the trip to Israel I was planning in March, 2014. I consulted my chicest, best-dressed friend, a long time fashion industry executive and insider who’d taken a similar trip a year earlier. “What clothes did you wear?” I asked, searching for wardrobe clues. “Chico’s, I think. Mostly black, matte jersey.” Chico’s!!! I couldn’t quite believe it. This is a woman who is a fashion icon, but clearly not a fashion snob. So, I followed her lead and headed to Chico’s in search of clothes that would be comfortable, suitable for multiple occasions, seasonless, packable and, dare I hope, fashionable.

What I found surprised me.

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Is Joe Fresh Still Fresh Enough?

IMG_2103I heard good things about Joe Fresh from a friend a couple of years ago, so I visited the Madison Avenue store, which initially opened in October, 2011 as a pop-up. It was a bright, fun place in a convenient neighborhood location. I bought a cotton V-neck cardigan in orange, Joe Fresh’s signature color, for about $19. I returned several times to buy Christmas gifts that season. Joe Fresh seemed a good resource for low priced, colorful, clean looking, basics. A poorer woman’s JCrew, perhaps a bit younger, certainly much, much cheaper — decent enough quality for the price, with a teeny bit of a contemporary edge. Joe Fresh has a much narrower, more classic and basic-focused assortment than H&M, with equally low prices, and is a refreshing, lower priced alternative to the now muddy Gap.

In 2004, Loblaw’s, Canada’s largest retailer with 1000 corporate and franchised stores, serving 14 million customers weekly, reached out to Joe Mimram, the co-founder, of Club Monaco, to create a clothing line to be sold in Loblaw’s supermarkets. Loblaw’s had extensive and successful experience with private brands, including President’s Choice, the maker of the Decadent Chocolate Chip Cookie, the number-one selling cookie in Canada. But those cookies were not enough to meet the threat of Walmart’s ever expanding Canadian Supercenters. And so, a well priced, well designed clothing line for Loblaw’s made sense. Joe Fresh was launched with women’s apparel in 40 Loblaw stores in 2006 and exceeded sales expectations. Today, Joe Fresh is sold in 340 Loblaw’s stores and includes women, children and men’s clothing, shoes, accessories, cosmetics, bath and body. In 2010, Loblaw’s launched the first Joe Fresh stand-alone store in Vancouver, and there are now 16 in Canada. [Read more…]