Overfranchising: When Category-Killers Just Can’t Stop Cannibalizing

overfranchisingMaybe you’re Maybelline.

And maybe, because you’re Maybelline, you produce one of the most beloved mascaras of all time. Yes, Great Lash is one for the ages, a perennial box-office champ for the last 44 years. In this era of here-today, gone-tomorrow product launches, that preppy pink and green tube of makeup magic is in a class by itself.

In the prestige arena, Lancôme has enjoyed a similarly mammoth success story. Though its Définicils High Definition Mascara is 20 years younger than Great Lash, urban legend has it that one is sold – somewhere, globally, from Boston to Beijing — every three minutes.

Clearly, these two brands have carved-out massive slices of the brutally competitive mascara pie, proffering products women the world over genuinely adore. [Read more…]

Stampede to Organics Awakens Sleeping Giants

wholefoodsWhole Foods has succeeded beyond all expectations, but, strangely, that’s not all good for Whole Foods.

Whole Foods was founded 35 years ago in Texas based on the premise that there had to be a safer way to produce food than the mass-manufactured and over-processed approach. (Deep background: Whole Foods was originally named Saferway, a poke at supermarket chain Safeway.)

The Whole Foods concept was to leave conventionally manufactured food behind wherever possible in favor of natural and organic food, and to put a heavy emphasis on fresh. The concept also was that consumers would warm to the idea and pay a premium for such products. Development came slowly to Whole Foods because at the time, there was little consumer buy-in for such an idea. [Read more…]

Pirch – The “Third Place” For Kitchen and Bath Lovers

pirchWho would have thunk that hanging out in a kitchen and bath appliance store could replicate the Starbucks experience for coffee aficionados and Apple for computer lovers? Well, thunk again. Pirch, as in perching, or sort of feathering your nest in a totally fun and interactive experience, is the reason consumers will flock (pun intended) to Pirch as a “third place” to hang (work, home and Pirch). Just as Starbuck’s and Apple disrupted how coffee and computers were sold and consumed, Pirch is disrupting the appliance world with a fundamentally new and co-created experiential model.

Founded in 2009 on the vision of its CEO, Jeffrey Sears, and Chairman, Jim Stuart, their goal was to make shopping for kitchen and bath appliances “inspirational and joyful.” Originally named Fixtures Living, it was changed to Pirch in 2013, meant to more accurately suggest a perch or nest. “Perching is like feathering your nest, roosting at home. It’s a feel-good name,” said Sears in a PRNewswire article. [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…]

Youth Retailers Rebounding in 2015…or Not?

youth_2015_driscollWhat’s happening in the tumultuous youth market? The way youth retailers are faring reflects the typically fickle trend-sensitive nature of this market. Based on recent earnings reports, I think Aeropostale could derail this year. While their international opportunity is real and growing, they could shutter half their stores … and they wouldn’t be missed. Express? I think the outlets will help. American Eagle is the furthest along to success.

My vision for two years from today is that Abercrombie will be half its size in the U.S. and Aeropostale may be potentially shuttered in the U.S. with international franchises still generating profits. American Eagle glides into profitability and Urban improves, and then encounters the typical fashion trends risks that have been a part if its uneven history. [Read more…]

A Tale of Two Malls

Paco6Fifty meters off Nanking Road in Shanghai, behind the Apple Store, you still have remnants of the early 20th century city. The alleys are narrow and you can stare into homes lit with cold fluorescent lights. The dirt, the smells, the noise and the life are visceral. Although it isn’t the dark side of the moon, the impulse is not to linger. It isn’t from a sense of danger, but rather the dawning realization that you are an alien – a stranger in a strange land. It’s an unsettling time warp, where in the space of a few dozen paces, the 21st century fades and the 19th century seems just around the corner.

This juxtaposition makes Shanghai an unlikely battleground for modern luxury shopping. Each year, new malls open in a very crowded marketplace with a fresh proposition. The older the mall, the more it gets pushed down-market. Commercial properties are not aging well in a city of 24 million people where construction fever floats on a bloated financial system desperate for just a modest return on their cash.

For jaded shoppers bored with last year’s hot spot, the attraction is no longer about scale, but about the proposition. While it is not quite as simple as the 2013 holiday decorative stars, the 2014 goats continued to try to reinvent the retail thematic proposition. But in a mall where five years ago you had to stand in line to ride the escalators, today it is startlingly vacant. [Read more…]

Beauty’s Buying Blitz: It’s the Early Aughts All Over Again

NYX Cosmetics at Yigal Azrouel Spring 2015 - BackstageIf it weren’t for the massive stack of 2015 promo calendars clogging our mailbox (thank you, Triple-A Termite Control and Super Shiny Carwash!), we’d bet our bottom dollar it was 2000 all over again.

At least this seems to be the case for the beauty business, which is currently on an acquisition spree, the likes of which we’ve not seen since the go-go early Aughts.

But before we dive into any serious tea-leaf reading, let’s recap the M&A landscape of the past year.

Acquisitions on Steroids

In 2014, L’Oréal Group snapped up a whopping six brands: three that are primarily skincare (Magic Holdings International, Decléor, Carita); two in hair (Niely Cosméticos, Carol’s Daughter); and one in makeup (NYX Cosmetics).

The Estée Lauder Companies, while less acquisitive, nonetheless swooped in with three third-quarter purchases, adding two fragrance brands to its portfolio (Le Labo and Editions de Parfums Frédéric Malle) and one in skincare, Rodin Olio Lusso. [Read more…]

Macy’s – The Distribution of Things

macys_distributionAgain, in Front of the Trend

I recently wrote about Macy’s distribution brilliance. And even though the ink is hardly dry, here I am again. Actually, I am not going to focus on lauding what most people might view as a great Macy’s marketing program with Plenti (a cross-brand and industry point-generating redemption deal), which I’ll explain in a minute. This new collaboration is really a tactic, albeit very innovative, to support what I view as Macy’s larger distribution strategy and vision.

My recent article was about Macy’s understanding of the broader and more accurate definition of omnichannel. Too many retailers interpret omnichannel to mean simply two channels: online and brick-and-mortar stores.  So let’s get it straight once and for all.  The old term multi-channel meant more than one channel of distribution.  The new concept omnichannel means “all” distribution channels. Under the multi-channel definition, company strategists would align operations, distribution, marketing and all other functions with the needs of each channel as if they were “silos.” For example, the store, catalogs, marketing strategies, etc., would all be tailored to the needs of the specific channel, assuming different customer behaviors for each.  Omnichannel, as Macy’s and other enlightened retailers are employing the model, is the seamless integration of consumers’ experiences in a matrix of all distribution channels, wherever and whenever the consumer wants it: stores, the Internet and mobile devices, TV, direct mail, catalogs, and now, even operating on other brands’ or retailers’ distribution platforms.

“Plenti” of New Distribution Platforms

Rite Aid, AT&T, ExxonMobil, Nationwide, Hulu, and Direct Energy

So, the Plenti deal basically adds many other distribution platforms to Macy’s omnichannel strategy.
It’s pretty simple.  All the aforementioned companies, including Macy’s, are interconnected with each other through Plenti’s program.  Each time a consumer spends a buck at any one of those companies, they receive a point (equivalent to a penny), which then can be applied to discounts at any one of the companies.

As so aptly described in WWD: “Consider pulling into a gas station, filling up your tank and earning a point per dollar, then applying those points to get discounts on shoes at a department store, or cough drops at a drugstore.  Or imagine getting points for discounts at Macy’s or Exxon just by paying for your auto or homeowner’s insurance.”

And while one could argue that these are not, by definition, used for distributing goods, it is, in fact, an indirect strategy of distributing the brand on non-related, but compatible industry and product categories. It all ultimately leads to expanded distribution, acquiring new customers as well as maintaining current customers who will be delighted to build up a bunch of points for new deals.

In fact, Macy’s strategy might more appropriately be called the “distribution of things.”  Borrowing from the term, the “Internet of things,” which describes the interconnectedness of everything, Macy’s is interconnecting and integrating all possible distribution platforms that engage their consumers wherever they may be.

Think about this, Macy’s.  In the future, when you perfect the use of your “big data” and are able to profile each and every loyal customer and what they personally dream for in their lives, you will be permitted into their homes, to be downloaded into their “global communications center” from which they get important and timely information from you and other permitted brands. You will give them information about new styles that you know, from your database, they will love.  A fashion show invitation or Stella cocktail party can be hyped for their attendance.  And you might even be able to deliver products to them that they can keep or be placed in a Macy’s return box to be  picked up by Instacart or some such service that will inevitably spring up over the next couple of years.

The big shift is that the home will be the final distribution platform. The “distribution of things,” indeed.

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…]

Journey of the Chosen Ones – JNCO Jeans Are Coming Back

JNCOOr if you don’t like that original acronym, JNCO (Jean Company), it also now stands for “Judge None, Choose One.” I’m not sure I get either one of those lines, but, then again, I’m way beyond the age of which the owners of JNCO care whether I understand them or not. Furthermore, as I’ve said before, I’m not even an amateur fashionista, so all I can do is ask questions.

What I do know is that JNCO brand ultra-baggy jeans, reaching up to 50-inch leg openings at the height of its popularity in the 1990s, is making a comeback this fall. Along with new styles and designs for cargo pants, T-shirts, plaids and “joggers,” which are a cross between jeans and jogging pants, JNCO (still headquartered in LA) will re-launch its “heritage” brand of baggy jeans. So the first question I must ask is what does that mean for skinny jeans? While they are not creating 50 inch leg openings, its re-launched signature jeans will feature openings of 20-23 inches. [Read more…]

What is “Disruptive Innovation” Supposed to Mean?

hockingThe IGD’s recent London conference focused on “disruptive innovation.” The organizers brought together industry heavyweights from both retail and brands; several spoke, and all claimed the new reality of business was a universe of shoppers who expected low prices. Let’s call their view “the problem.”

These speakers were then followed by others, mainly suppliers, who presented various forms of technology ranging from Google Glass to 3D food printers, with much of the application of this so-called disruption really centred on being “new” rather than being beneficial to shoppers. Let’s call their tech toys “the solution.”

The whole thing felt to me like an endorsement of that classic phrase, “Just because you can doesn’t mean you should.” Here was a case where the problem was underestimated and the solution overestimated.

Shoppers seek low-price in the absence of additional drivers of value in what they are purchasing. The UK grocery industry isn’t suffering because of a lack of technology; it’s suffering due to a lack of disruptive innovation in the area of “stuff that matters to shoppers that’s different than from what our competitors offer.”

The tradition of much of retail, grocery in particular, is to create stores that are more like warehouses, with very little to inspire shoppers who consistently state their desire to find inspiration when they visit a grocery store. And these are people whose average repertoire includes just four recipes, yet they need to put 21 meals a week on the table. They find even less inspiration online. Grocery retail’s common solution is to streamline operations, strip out value, and claim to pass the savings onto shoppers.

But there’s a greater need that’s being overlooked.

There’s an old saying, “Low prices only rent you customers, not build loyalty.” If I were the CEO of a UK grocery retailer, I’d be asking my team to figure out what it will take beyond price (with its accompanying lousy margins) to earn the hearts and minds of their customers what some refer to as “loyalty beyond reason.”

My plea is to put away the big data, the technology, and the built-in biases that say “But that’s the way we do it” and get back to the basics by asking ourselves if what we offer matters enough to the people we count on to pay our salaries. Knowing what matters to people – truly, deeply matters – isn’t something you find on a spreadsheet and it can’t be spied through a Google Glass. It’s found by thinking like people about real human needs.

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

[Read more…]