Women’s Underwear is Difficult

Playtex_graphic-01A Brief History and Consumer Perspective

Women’s underwear, its euphemistic pseudonym ‘intimate apparel,’ or its more sophisticated sister, ‘lingerie,’ is difficult in so many ways. For all of us women consumers, it is a necessity; a purchase that must be made and replenished regularly. And, trust me, as a consumer who has been buying her own underwear for more years than I’d like to count, it is not always an easy, satisfying, fun, or self validating purchase.

Underwear is a category of apparel that gets us down to the bare bones of ourselves. Our bodies. Our comfort. Our sense of self. Our sex appeal. Our underpinning. The foundation for all of our clothes. Women’s underwear has been marketed to us for generations reflecting deep-seated emotions and attitudes about ourselves, our roles, and our history as women. From long before the time women discarded their bras in the late 1960s as a symbol of second-wave feminism, bras have had a history of women’s emancipation and independence. In 1873, writer and activist, Elizabeth Stuart Phelps, wrote: “Burn up the corsets! … No, nor do you save the whalebones; you will never need whalebones again. Make a bonfire of the cruel steels that have lorded it over your thorax and abdomens for so many years and heave a sigh of relief, for your emancipation I assure you, from this moment has begun…” [Read more...]

Reaching the Chinese Consumer

China continues to top the AT Kearney Retail Apparel Index, which shows the top 10 emerging countries viable for the retail sector. Strong growths in population and in income make it an increasingly attractive market for western brands looking to expand. Yet reaching the Chinese consumer poses unique challenges.

According to Euromonitor International, Chinese clothing expenditures are projected to nearly double within the next 10 years, from 1.2 trillion in 2012 to 2.2 trillion in 2020. Even in 2011, a year of slower than predicted growth, Chinese real GDP still amounted to 51.1 trillion RMB.

And while the Chinese population is expected to grow 2% by 2020, income growth will continue to outpace population growth — which means more consumers with more buying power. Per capita disposable income is expected to grow 75% between 2012 and 2020, according to projections made by Euromonitor International.

As the population continues to grow, though, it is also shifting towards more urban areas. This stands to benefit western retailers first expanding into larger cities, since urban consumers tend to spend more on discretionary purchases like apparel and textiles. [Read more...]

China Seeks Low-Cost Production

china_factory_main.top copyIn the United States

Beware of what you wish for. For all of the “pollyannas” who have been rooting for manufacturing jobs returning to the good old USA from low-cost countries such as China, they may just be getting their wish; but not in the way they intended.  It will end badly.

In a perverse kind of irony, it appears that the United States may be evolving into a low-cost country, wooing China-based manufacturers to set up shop here — at least in the textile and yarn industries — which the US lost to Asia and the Far East in the 70s and 80s.

In fact, several Chinese yarn and textile manufacturing businesses have already moved to the United States, primarily in the southern states where the manufacturing skills still reside and where most of those textile jobs were lost to lower-cost countries. The region also has state and local governments eager to boost their economies and decrease unemployment, and willing to provide significant tax breaks, bonds to defray project costs, grants, and job-development credits. [Read more...]

Now It’s The Post-Prep Digital Menswear Evolution?

nicksplash1Remember when Nick Graham launched a rocket into space with a pair of his Joe Boxer brand shorts in the nose cone? Or, were you there when he did the first live-streaming fashion show (from an airline hanger in Iceland?) Regretfully, I was invited but couldn’t attend. Or, how about when he launched one of the first fashion industry websites; wove the Joe Boxer URL into the elastic of his underwear; installed the world’s largest live ticker-email sign in New York’s Times Square; and sold the world’s first cyber-scooter in the Neiman Marcus Christmas catalogue.

During the early 90s, Nick Graham, an early adopter of technology, connected his cyber-vision to his meteoric Joe Boxer brand and one outrageous and hysterical event after another.  Indeed, his mantra, ‘The brand is the amusement park, the product is the souvenir,’ was the DNA of the Joe Boxer brand.

And, now he’s at it again. [Read more...]

Crime, Punishment & Retailing

African street vendorOrganized retail crime is escalating, but can law enforcement cope with a global crime spree and a new class of criminal?

When I was eight years old, me, and two equally nefarious friends, decided to hit the local Woolworth. The objective? The new Duncan yo-yo and two green plastic, spacegun-shaped waterguns.

My guys—not exactly Goodfellas—were supposed to distract the cashier and stock boy, but took a powder when they saw the manager grab me by the shoulder. Half an hour later amid threats of prison, my mother picked me up, smacked me on the head and dragged me home where I faced the dreaded “wait ‘til your father gets home” scenario.

So much for my criminal career! [Read more...]

Going Hybrid: The Next Stage for Fashion Retailers

hybridToday’s fashion companies operate in a highly competitive environment, driven by increasingly fickle, price-conscious consumers, rising costs and clothing trends that change at light speed. With increased drops, the proliferation of SKUs and an incessant demand for newness, the big three—retailers, brands and manufacturers—are battling it out for market and wallet share.

We know we’re preaching to the choir. You know better than anyone that there is a need to control business activities as much as you can—control over everything from product concept to consumer purchase. What’s emerging is the hybrid business model, where the big three are integrating across the supply chain in an effort to protect margins.

Why is this so important for retailers? If you haven’t thought about going hybrid, chances are that your competition has. Wall Street demands growth and with increased competition, international expansion and the rise of omni-channel retailing, retailers are seeking new ways to maintain that growth and stand out from the crowd. [Read more...]

Not Too Big to Fail?

Consumer Insights From MasterCard Advisors

The Emergence of the Small Store Format

Robin_Report_Sep2013_stock6We’ve heard much talk about the waning era of the “big box.” In 2012, we saw many headlines relating to planned store closures by Best Buy, with similar stories for Sears and Office Depot, among others. More recently, of course, J.C. Penney made mega headlines. In all, from the announcements of just five Big Box retailers, anything from 1100 to 1350 big boxes could be shuttered over the next year or so.

Maybe this is not necessarily a bad thing. In some cases, we are seeing some of that big box space being reincarnated as two smaller stores instead of one. And from this, a pattern seems to be emerging, with growing retail buzz around how to make stores smaller, more selective, highly curated – in short, create a better customer experience.

Jonathon Graub, a principal in the Philadelphia office of A&G Realty Partners, specialists in the strategic consolidation and reassignment of store leases, confirms the smaller store trend. He attributes it in part to the lack of availability of large spaces in prime areas and the speed with which a chain can get to market when it enters with a smaller store format. But we must also factor in the continued growth of online commerce – Internet pureplays which desire a brick-and-mortar presence, while current brick-and-mortar chains may find there’s less need for larger spaces as their online businesses expand. [Read more...]

“Bargain Fever” Meets “The Age of Oversupply”

Like Abbott and Costello Meeting Frankenstein

If you read “Bargain Fever: How to Shop in a Discounted World,” by Mark Ellwood, you will roll on the floor belly laughing until you read “The Age of Oversupply,” by Daniel Alpert. Then you’ll understand the cause of consumers’ addiction in Mark’s ‘discounted world.’ It will not only make you start weeping, it will also scare the hell out of you. Kind of like Abbott and Costello giggling about those goofy consumers on Black Friday, pushing and running over each other to get their “fix.” When lo and behold, they round a corner and who’s staring them in the face? That would be Frankenstein.

Robin-Blog_Oct.-13_Rd.2.2Indeed, “The Age of Oversupply” is a global Frankenstein of our own making. And ironically, if we hadn’t over-stored, web-sited, over-stuffed the world, and printed money by the trillions — yes, if we hadn’t built an age of over-supply — Mark would not have had anything to write about. Alas, he has essentially been able to turn a truly horrific and deleteriously vicious cycle into kind of a comedic landscape of a compulsive and obsessed culture of consumerism with dysfunctional shoppers in a collective addicted frenzy to hunt down the best and biggest discount “rush.” And most often, the drug of choice is simply the “deal” itself. It’s become pretty clear that people really don’t need yet another product or service in our over-supplied world. But they can’t help themselves. Mark calls the addictive drug, “buyagra.”

In my opinion, the notion that the discounted price is, in fact, the drug, (not the product, which they don’t need), is why $5 billion in revenues “walked” out the door at JC Penney in 2012, locked away in consumers’ pocketbooks. And it’s why it didn’t “walk” across town to Kohl’s, Target or Macy’s. The revenues exited the JC Penney stores and disappeared because JCP got rid of the “drugs” (discounts). The disappearing $5 billion is a story deserving its own blog.

Anyway, with a wry sense of humor, Ellwood spews forth with one hilarious story after another, and pretty much runs the gamut of consumers’ rabid and nutty searches for every possible form of discounting drug known to mankind (with an enlightening historical narrative along the way). And of course, we also get a good look at the “drug lords” (retailers), supplying the fix, creating an equally bizarre array of discounting schemes.

For example, there’s the pastor’s wife who marshals an army of stay-at-home moms to help run her coupon-brokering business, netting more than $1 million a year. Or the socialite-only sample sale ‘Fight Club’ where discounts are secretly offered to an elite group, and membership is rescinded if you tell anyone about it. Not to mention the gas station operator that silently uses dynamic pricing offering discounts at certain times of day. Or the fact that Chanel, upon attempting a “liquidation” of some of its handbags via Neiman Marcus’ Last Call outlet stores, discovered they ended up on eBay. This begs the question: is this process just a new form of business-to-business discounting? If eBay can’t get rid of it, where does it go? Perhaps it winds its way down to one of those luxury “swapping” sites, or flea markets, or one day, maybe in 7-Eleven or Dollar stores?

And yet, as one crazy anecdote after another unfolds through eight chapters and about 200 pages, the underlying horror of reality begins to emerge for those with even half a brain in the retail business and just a modicum of interest in discounting’s ultimate impact on the overall economy. So I suggest you read the book. And, if and when you can see through your chuckles to Mark’s irony and the emerging head of Frankenstein, then pick up “The Age of Oversupply” to understand why retailers began such deleterious discounting in the first place, and why they are doomed to continue it in perpetuity just to survive.

From a macro-perspective, author Daniel Alpert’s thesis can be summed up with key points outlined in his introduction, as follows: “Via extraordinary monetary-easing measures, the developed world’s central banks have turned trillions of dollars of financial investments into so much cash that it is metaphorically bulging out of the pockets of banks and other investors. Yet it is not getting lent and it is not getting invested in new capacity. Why?

“In a nutshell, the reason that the enormous ocean of liquidity is not being deployed is that there is so much global supply and excess capacity of labor, plants, equipment, and goods and services relative to present demand that there is little reason for private-sector investment in the development of additional capacity to produce additional supply.

“What we have on our hands is a supply-side nightmare scenario.”

Alpert goes on to speculate that all of this “throwing easy money” at the problem simply creates valueless “bubbles” that pop into recessions (as we’ve witnessed), with the “Great” one being a forewarning of the “Apocalyptic” one that is sure to come.

Looping back to the micro-perspective and retailing, the discounting of goods simply began because of, well, over-supply. By default, it became the weapon of choice to undercut the price of hundreds of equally compelling competitors’ products. And perversely of course, retailers have now “hooked” consumers into their addiction, and thus, the race to the bottom perpetuates itself.

Furthermore, if you are savvy enough to understand the dynamics and futility of this conundrum, and the full-on global impact of “The Age of Oversupply,” you will also realize this is a death dance that will end badly, very badly. In fact, global economic collapse,“badly.”

And, in my opinion,(and perhaps the good news), since the world is now so financially and economically integrated, such a collapse would drive the ultimate “backs-against-the-wall” moment, thus, forcing some worldwide collaboration to create a new global monetary and financial structure based less on the profit and material growth motives of capitalism (which no longer works, even in its “managed” form, and essentially drove us to our current quagmire), but, more on some mechanism that will incentivize sustainable improvement of human living conditions based on some balance of nature. This may sound a little esoteric. However, I would cite the Patagonia apparel brand as a very real example of a business that eschews growth in favor of sustainability to the point where they would rather repair an item for one’s further use than selling a new one. And, every other aspect of their business focuses on reigning in reckless consumption and accommodating a healthy environment.

Anyway,  I do believe if some form of this kind of transformation does not happen, we will surely devour the planet or destroy our species while doing so.

As always, have a nice day :)

Elastic Pricing: Beyond Dynamic

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Hardly a day goes by without an article or discussion about “dynamic pricing.” By now, we all know that dynamic pricing refers to the ability to present prices to specific consumers at certain times based on their behavior, or in response to pricing actions undertaken by competitors. Today, it is primarily a tool for driving higher conversion rates for e-commerce sites.

The ability to present specific offers and messages to individuals was foreshadowed in the 2002 Tom Cruise sci-fi thriller Minority Report. In the movie, technology enables the government to predict when an individual is about to commit a crime based on externally observed tendencies. Digital signs with facial recognition identify individuals and present them with targeted messages. The premise is that the application of a predictive model to observable behavior can accurately forecast future events.

Now some of this has become a reality. If you leave an item in your shopping cart, some online retailers will present you with a discount after a certain period of time. Technology can let retailers scan the web for competitor prices and reduce prices in nanoseconds in order to remain competitive. [Read more...]

Mike Gould, Unplugged

Michael_Gould_RRAn Interview with Robin Lewis

Robin Lewis What do you think about the economy, how do you think it will be for the rest of the year?

Mike Gould I’m cautiously optimistic, but I’m always cautiously optimistic. You know, we’re in a business that if you’re a retailer and you’re not optimistic, you’re not a retailer. It doesn’t work. One of my beliefs, and one that I always tell the Bloomingdale’s team, is that my role is balancing hope and reality.

Where are our opportunities that are driving the business, and what is the reality of the moment? So to me, I think there are some really bright things in the economy right now. But I also think it goes back to the great comment by Charles Swindoll who said, Life is 10% what’s given you; 90% how you want to deal with it.”

For example, let’s take last March. It turns out to be the coldest March we’ve had in, I don’t know how many years, up against the warmest March in 100 years, a year ago. All right, that’s the 10% given us. So do we want to talk about that? Do we want to complain about it? It won’t do us any good. But that’s the 10%. So how you want to deal with it, that’s the 90%. So what do I think? I think there are so many good things out there right now. The Stock Market is obviously, touch wood, in terrific straits. The S&P is at an all-time high. The housing market has had an incredible comeback. Our car sales are at a high point over quite some period of time; so, you have to say there are a lot of good things going on. [Read more...]

The Red, White & Blue – and Green

CottonplanetThe Cotton Incorporated 2013 Environmental Survey reveals that more than 50% of U.S. consumers identify themselves to be “green”. And, although participation in basic household environmentalism has shown only incremental growth, higher income consumers constitute a markedly greater level of engagement. Survey data indicate that personal income and larger economic concerns are changing the ways in which consumers perceive and participate in environmental activities. Several factors, including a significant increase in consumers’ pursuing apparel made in the U.S.A, and apparel made from natural fibers, suggests that these are emerging as new forms of environmental engagement.

“It is clear that consumers are aware and concerned about the environment,” says Kim Kitchings, VP of Corporate Strategies and Program Metrics at Cotton Incorporated, adding that the majority (60%) of survey respondents say that they often think how their actions affect the environment. “What is less clear to them is the cost of making a difference.”

Kitchings points to five years of data showing that participation in relatively low- or no-cost household environmentalism, including recycling, conserving water, and investing in energy-efficient appliances, is consistently greater among consumers with higher incomes. The divide is also seen in the 34% of consumers who say they put effort into finding environmentally-friendly apparel; that figure jumps to 40% among consumers making $75,000 or more per year. [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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 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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Click to enlarge chart

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.

Click to enlarge chart

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.