In the developed world, retailing remains under siege. As we know, a steady flow of new Internet competitors vie for consumer dollars, frequently undercutting prices of the brick-and-mortar stores. Meanwhile, amidst a sea of sameness with parity products, traditional retailers too frequently compete merely on price. In-store service levels have evaporated in all but the most high-end luxury houses or new entrepreneurial and tech brands, further propelling the “race to the bottom,” an industry trend Robin Lewis coined back in 2012. [Read more…]
More Like A Slow, Sears-Like Descent To The Bottom?
Glenn Murphy exits. Art Peck takes over. It matters not who the players are because there has been a revolving door full of them for the past 15 years, all declaring how they would return Gap to its once dominant position as the cool apparel brand for America’s youth. All of them failed to do so, and there is no reason to believe Art Peck will have any better luck. Actually, even luck would not be enough to reverse the ultimate fate of this storied brand.
I say this because the brand was driven into ubiquity (the anti-cool for young consumers, and therefore, the beginning of its end) in the late ‘90s and first two years of the Millennium under the watch of then CEO, Millard “Mickey” Drexler. With a Gap on every corner, so to speak, cool turned to cold and its descent began. Ironically, Drexler would leave the helm of the brand that he guided through two decades of meteoric growth from $480 million in revenues upon his arrival in 1983 as president, to almost $14 billion in 2000, an amazing 2,400 percent increase when he left. Indeed, his success earned him the moniker of the “prince of all merchant princes.” Unable to right the ship when it started to sink, Drexler retired in 2002. Comp store sales dropped 5 percent in 2000, their first decline since 1989, and then a whopping 13 percent in 2001, with the overall Gap brand down 12 percent. [Read more…]
Brand’s High-Touch, High-Tech Service Business Model Attracts Busy, Fashion-Conscious Women
As the apparel sector gravitates toward cheaper products, relentless promotions, and declining service, a very different microtrend is taking hold. Direct-to-consumer luxury apparel company Worth Collection Ltd. is providing hands-on service with a high-tech twist — and no discounting.
When she answered the door at the Worth New York showroom on New York’s West 57th Street, Dana Kendrick took only a few minutes to size me up — literally and figuratively. “You’re a size 2,” she announced, “and you like classic, updated styles and dark or neutral colors.”
The stylist ushered me into a beautifully paneled room lined with racks of clothing samples from which she began to pull a selection of items. Then the questions started. Was I looking primarily for clothes for work or for social events? Have I thought about wearing color around my face? What are my most urgent wardrobe needs? [Read more…]
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…]
You don’t have to be a criminologist to know that Serial Killers kill people. Retail Serial Killers (or RSKs) on the other hand, are, in my opinion, CEO’s who through their lack of skill, recklessness, disingenuousness, or gross incompetence, destroy the businesses they have been tasked to lead.
I believe that RSKs are the scourges of the retail industry. Businesses which have taken decades, if not generations, to become successful through the talent and hard work of dedicated teams, are murdered in short order by RSK’s. These RSK’s should never have been given the baton in the first place, or who, upon demonstration of lack of skill, should have been promptly removed from power when it became apparent they could not perform credibly. RSK’s are never indicted. In fact, they are often rewarded handsomely for their efforts.
Consider some of the retail industry’s most notable Serial Killers: [Read more…]
Luxury Brands, Fast Fashion, Treasure Hunt, Localization, Super Value
The TJX business model is not easily copied. In fact, one could make the case that the specific differentiators and advantages that have been crafted into its DNA cannot be duplicated, period. With the exception of Ross Stores, smaller and not a pure copycat, TJX Companies Inc. (T.J. Maxx, Marmaxx, Marshalls and HomeGoods) all but owns the so-called “off-price” space it dominates.
Hey, you guys in the other sectors, in the middle of the “perfect storm” of an overstored, intensely competitive retail environment, with omnipotent consumers driving you into the insanity of the retail share wars, you can only dream of being in such a position. [Read more…]
Activist Lightweight Attacking Children’s Place
I like being an activist myself, but a special kind. I like attacking financial activists who assume they understand the businesses they are attacking, yet build stories based on the only thing they do understand: numbers. These stories are all about creating greater shareholder value, but mask the real objective, which is to make tons of money for themselves. Sadly, 90% of them don’t know what the word strategy means and couldn’t operate their way out of a paper bag, much less lead the process. Most of them destroy more value than they create.
Which brings me to Jonathan Duskin, the current poster child activist lightweight, whose track record could only be described as “failing upward” as he became CEO of Macellum Advisors. Somehow he got Barington Capital Group to collaborate with him (I guess he needed their now questionable credibility) in sending an “attack” letter to Norman Matthews, revered industry veteran and Chairman of the Board of Children’s Place (PLCE). The delusional letter, penned by Macellum and Barington, was sent from out of the blue (or black) the night before Children’s Place’s 4th-quarter earnings call (March 12th), attacking the company’s operating and leadership performance under its CEO, Jane Elfers. The “delusional duo” of Macellum and Barington (the delusion revealed below), with a 2 percent share of Children’s Place, had not uttered a peep of discontent during any of the four previous investor calls throughout 2014 — or even two months prior to the attack letter. Perhaps Duskin was trumping up the delusion in a dark room somewhere before luring Barington into the deal? Who knows? [Read more…]
A Connected Life
If you think the tsunami of new technologies, more spectacular one day after another, are now within your grasp of understanding, and soon to be mastered in implementation, do not pat yourself on the back and take a breather. The proverbial light at the end of the tunnel is a far bigger and faster tech train than the many you are just beginning to feel comfortable with. And it’s coming right at you. Yes, your business will soon ratchet up to another level of innovative opportunities and complex challenges.
We are hearing or reading the words IoT or the “Internet of Things” more frequently. It is the next technology mega-trend. And there are some early manifestations of it, from fitness bracelets to watches, connected refrigerators and automobiles, to thermostats and industrial equipment. But it’s still in the nibbling-around-the-edges phase. However, as breakthroughs in reducing the cost of sensors, processing power and increasing bandwidth continue, it will accelerate the ability to connect with more things, faster and cheaper. [Read more…]
The Census Department has started to release data from its five-year Economic Census that does a deep dive into all aspects of the US economy, including 12 sectors of retail. What’s important about the latest Economic Census is that it gives us the ability to study and learn from the pre- (2007) and post-recession (2012) retail market. While more data will be rolling out between now and 2016, here is the real story in the retail data.
Retail Hasn’t Begun to Recover From the Great Recession
Retail remains stuck in recession mode. In the 10-year period leading up to the Great Recession, retail was posting a compound annual growth rate of 4.76%; since then, retail has limped along with CAGR of 1.54% for the five-year period from 2007-2012.
Retail did a little better from 2012–2013, up some 4.2% based upon comparables from the Monthly Retail Trade Survey, but 2014 has been a complete drag, with September’s YTD report showing the GAFO (General merchandise, Apparel, Furniture & Other) retail sector up a mere 1.4%. For retailers that fill the nation’s malls, shopping centers and main streets, the GAFO number is the one to watch. From 2007-2012, the GAFO stores posted only 5.4% growth, well below retail as a whole, and from 2012-2013, they inched up only 1.5%. [Read more…]
For 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?
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…]
On 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…]
Important 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.”