A Hopeful Look at the US Department Store in 2014

Macy's Sign Herald Square ManhattanCreative destruction, change management, business transformation —call it what you will, but something’s underfoot in the department store channel. After decades of ceding market share to specialty formats and channel consolidation, has the worm finally turned?

In addition to economic and consumer malaise, mall traffic, and thus store traffic, is the problem. With the Internet’s 24/7 access, price transparency and free shipping, combined with a fruitless in-store search for a size, color or sales clerk, who needs a brick-and mortar-department store? It used to be a destination to see the latest trends in color and silhouette, interpreted by a bevy of national brands, and curated by retail buyers with a clear fashion sense as well as an understanding of their customer base. Nowadays, social media, Instagram and fashion bloggers are more personable than the average sales clerk. And that source of style and fashion curation is more robust. A trip to the mall has become a chore … and just so boring. [Read more...]

How Hearts on Fire Is Poised to Light the Fire of Millennials

“Millennials shop in a very next generation way for things like cars or tablets. But buying a diamond engagement ring is a tradition-bound, emotional purchase, which makes it unique. So Millennials’ shopping process becomes blended – 50 percent is ‘new age’ and 50 percent is tradition.” Rich Pesqueira, Vice President Sales and Business Development, Hearts On Fire

For each succeeding generation, or at least since 1947 when DeBeers’ told consumers that “A Diamond Is Forever,” buying an engagement ring has been a rite of passage in adulthood. Today’s prime target market for diamonds and bridal jewelry are the Millennials, the leading edge of which turns 34 this year. Yet shopping for that diamond in a jewelry store today is not all that different from the way it was for their parents’ Baby Boomer generation in the 70s and 80s, or their grandparents’ post-war generation in the 40s, 50s and 60s. Even in the best-of-the-best jewelry stores – whether it is Tiffany’s or Cartier’s, or the local family-owned jewelers down the block – jewelry stores are more similar than different. They are caught in a time warp.

HeartsOnFireTo make matters worse for the diamond buyers, couples have to do a significant amount of research before they even dare to approach the retail counter to look at rings and stones. Like their grandfather and father before them, today’s Millennial diamond buyer must get indoctrinated into the mysteries of the 4Cs used to grade diamonds – carat, cut, clarity and color. The whole diamond buying experience, while it should be a joy that celebrates the coming wedding, can be such an ordeal for the customers that it can forever turn them off from crossing the threshold of a jewelry store.

The traditional, and largely negative jewelry-shopping experience gave online retailer Blue Nile the perfect “in” to disrupt the diamond engagement ring business. Blue Nile plays to the strengths of computer technology to catalog its massive collection of diamonds’ 4C ratings and let the buyer compare the specifications of each side-by-side, along with the price. The net/net is that Blue Nile, just like the traditional jewelers before them, have made customers think that the only difference between one rock and another is to be found on the specs sheet – how it measures on the 4Cs grading scale. Thus the Blue Nile process of shopping for, and buying a diamond engagement ring, largely becomes an unemotional rational decision, like the one used to buy a television, a lawnmower or a power drill. Nonetheless, Blue Nile is successful as an exclusively online retailer, designed for, and appealing to, how the Millennial generation seemingly prefers to shop.

But let’s face it. A rational, left-brain perspective for buying a diamond engagement ring makes no sense at all. At its heart, buying a diamond engagement ring is a totally emotional decision. So the left-brain-dominated jewelry retailing strategy, especially perpetuated by brands like Blue Nile, is disconnected from customers’ ultimate romantic intentions.

Blue Nile Gets Disrupted!

Seeing the disconnect between the rational focus of diamond shopping and the customers’ emotional intentions, Hearts On Fire (HOF) founders’ Glenn and Susan Rothman recognized the opportunity to transform the entire diamond retailing process around its customers’ emotional needs. At the time, Hearts On Fire was already a well-established diamond jewelry marketer, with its brand positioning “The World’s Most Perfectly Cut Diamond.” Because of the HOF unique cutting process and the company’s careful attention to the quality of the uncut stone, customers don’t need to read the specs for a diamond they are considering; all they have to do is see it and fall in love with it.

HOF has their story down to a T. “Our diamonds are remarkably brighter and more lively,” explains Rich Pesqueira, Hearts On Fire’s vice president of sales and business development. “Our diamonds are cut to play with the light so it has the perfect balance of intense white reflections and beautiful rainbows. The magical, mystical property of the HOF diamond is especially noticeable in low light environments, like a candlelit restaurant. Customers tell us that they’ve had strangers come up to them and ask about their ring. They have never seen a diamond act so differently. That is the life of our brand.”

Selling the Hearts On Fire diamond, while it can be and is being done online, really requires that the customer have a literal hands-on experience, to touch, feel and see the diamond ring in different lighting conditions and at different distances. While the company has extended its reach though over 500 independent specialty jewelry retailers in more than 30 countries and supported those retailers with extensive sales training, including a bi-annual Hearts On Fire University, the Rothmans decided that the brand needed a totally new way to tell the Hearts On Fire story and to show customers how truly unique and different their diamonds are.

They needed a Hearts On Fire jewelry store experience as unique as the HOF diamonds. So in 2012, the company opened its first Hearts On Fire concept store in Las Vegas at The Forum Shops and expanded to the east coast with a store next to Neiman Marcus and across the way from Tiffany’s at the King of Prussia Mall, outside of Philadelphia. That is where I experienced the HOF experience firsthand.

Everything about the Hearts On Fire store says this is not your ordinary, everyday jewelry store.  It starts with the sheer curtains that hang inside the windows and the studied use of lighting to create a mood inside the store.  There are no overhead florescent lights in the store; area lighting is controlled by the store’s staff to create a sense of romance for the customers.  The store features several full length mirrors that give customers the chance to model the jewelry from head-to-toe. And because Millennials largely shop for bridal jewelry as a couple, there is a separate quiet area with a couch where couples can retreat to discuss this most important of purchases.

Most distinctive, however, there is not one endless glass-fronted jewelry display case to be found. Rather, there are eye-level “Jewel Box” display cases that spotlight a carefully curated selection of designs that guide the customer’s eye to each special piece. The display evokes a museum rather than a typical store with row after row of utilitarian look-alike jewelry cases. Access to the Jewel Boxes is from the front, not the back, as Pesqueira explains, “It’s the biggest principle in our retail concept. It creates a collaborative environment where the sales person and the customer work side-by-side to experience the beauty of perfectly-cut diamonds together, as opposed to the traditional model where you have sales person on one side of the counter and the customer on the other. We wanted to change the entire texture of the way that contact takes place.”

To top off the jewelry shopping experience, each HOF store has an Apple-esque high-tech keyless access to the Jewel Box cases and a ‘Knowledge Wall’ that digitally displays information about the brand and the diamond cutting process that creates the brilliance in the Hearts On Fire diamonds, along with pictures of models and celebrities wearing its distinctive pieces.

Technology Enhances the Customer’s Emotional Experience of HOF Diamonds

The Hearts On Fire in-store experience resonates on many different emotional levels aimed to enhance the customers’ total experience of the diamonds. It shifts the focus from the traditional diamond 4Cs spec sheet to how the diamond comes alive enhanced by technology that actually improves the customers’ emotional experience. Much of that technology is used in subtle ways to control the environment of the store and how the customer sees and experiences the diamonds. Yes, there are computer screens on display, and yes, the customer gets a high-tech vibe upon entering the store, but the essence of how HOF uses technology is to enhance the customer’s interaction with the jewelry. The ‘medium becomes the message’ is an apt description.
By reimaging what jewelry shopping can be and by challenging all the assumptions about the way the jewelry sales process should be done, Hearts On Fire has found a formula for attracting both high-tech and high-touch Millennials in search of the perfect engagement ring.

Ultimately the success of the Hearts On Fire store will hinge on how it delivers to the tech-savvy Millennial diamond buyer by offering a buying-decision process based on the emotional quotient of how the diamond will look on her hand and how it makes her feel. Pesqueira sums it all up, “For the same amount of money they can have a choice of a very ordinary offering, but trying to do it as big as they can within certain parameters that they decided are acceptable, or for that same amount of money, they can have the most beautiful, most lively, colorful diamond in the world without spending one penny more. Our challenge is helping the customer see that is the choice they are making when the whole industry has taught them that they need to nail down the specs, get the largest offering they can for the price and to save money. In the end they are not as fulfilled as they would be if they spent the same amount of money on the most beautiful diamond they can get.”

High-tech, high-touch Millennials are going to challenge retailers across all sectors of retail – get ready to disrupt and be disrupted!

What retailers can take away from the Hearts On Fire story is that just as soon as one competitor thinks they’ve nailed down the next-generation Millennial shopper, like Blue Nile did, another competitor will discover that there are still unmet, underserved needs that can ultimately be tapped. As high-tech as this generation is, they also demand real, meaningful emotional experiences. Hearts On Fire discovered how to use technology, not just as a shopping tool that allows a customer to compare and contrast numbers on a 4Cs spec sheet and get the cheapest price, but to deliver an emotional experience to the customers who are anxious about making a huge emotional investment in their future.

The HOF store isn’t selling technology, like Apple, or selling through technology, like Blue Nile, but selling with technology in subtle, behind-the-scenes ways that gives the customer confidence that he or she is in both a high-tech and high-touch world where they feel comfortably in charge and in command. So HOF is poised to disrupt the original jewelry disruptor, Blue Nile, by bringing back the emotion in buying diamond jewelry in a real-world touch-feel-see way. By studying what HOF has done, other retailers can learn new ways to marry the two worlds – technology and emotion – that their customers already comfortably inhabit.

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.

[Read more...]

Go Disrupt Yourself!

Panel logosSo Says a Disruptive Seminar Panel

Please don’t take offense. “Go disrupt yourself” is not a euphemism for that other, often used R-rated suggestion. This is a serious directive for so-called disrupters themselves, as well as for all businesses operating traditional models who incorrectly believe disruption is defined only by fundamentally new models or game-changing concepts. Today’s disrupters are typically spun out of the thin air of “Siliconville,” which often define them as tech-driven and Internet enabled.

This not-so-clear concept of self-disruption was one of the major points that I filtered out of the spirited panel discussion at the recent Robin Report and Fashion Group International forum, “Disrupters vs. Disruptees.” And I believe with some elaboration, the conversation is highly instructive for both upstarts and traditional businesses.

The forum presented a panel of “Disruptive” CEO’s including Warby Parker (Neil Blumenthal), Rent the Runway (Jennifer Hyman), and Shapeways 3D printers (Peter Weijmarhausen). These new kids on the block had a robust discussion with the “Disruptee” CEOs of HSNi (Mindy Grossman) and The Ascena Retail Group (David Jaffe), whose portfolio consists of Lane Bryant, Dress Barn, Catherine’s Justice’s and Maurice’s. Paul Charron, former CEO of Liz Claiborne and Chairman of Campbell Soup was our moderator. Yours truly set the tone with an overview of the principles and perils of disruption.

2014_Retail_Disrupters_012Upon reflection, it occurs to me that since most of the au courant disruptive new business models are really just new marketing concepts made possible by the tools of technology and the Internet — they can be knocked off in a nanosecond. Both Steve Jobs and Jeff Bezos understood this from day one at Apple and Amazon. Their mantras, “the next big thing” and “get big fast,” respectively, were loud and clear marching orders for self-disruption, day in and day out. Whether breakthrough new products from Apple, or entirely new marketplaces from Amazon, implicit to their vision is to preempt copycats by becoming so big, so fast, that knock-off artists would find it nearly impossible to catch up.

Self-disruption and rapid preemptive growth require two ingredients: perpetual innovation into new product or market spaces and huge capital investments to fuel such growth. While these two legendary examples of continuing marketplace disruption are obvious by their success, it was largely due to the tenacity and audacity of their visionary leaders as “first-movers” who leveraged technology and the Internet to catapult their product and marketing ideas into dominant positions.

Many early movers later, we are now witnessing a deluge of innovative ideas (some more disruptive than others), still facilitated by technology and the Internet. In fact, many of them, including Warby Parker and Rent The Runway, were launched on the Internet.

2014_Retail_Disrupters_021The continuing challenge of all disrupters is to be the de facto, sustainable solution with new product innovation and distribution. They will need to continue to dominate market share from competitors. And the hugest threat of all is that the giant traditional companies can easily copy these upstarts and have the financial clout to steal and own the space.

With the ease of entry into this technological and Internet-based space, another challenge facing these “later movers,” so to speak, is that their fundamental value propositions are easy to copy. For Warby Parker, the model is making and selling trendy eyewear online (and now in stores) for low prices. Their charitable program donating glasses to kids in need hits spot-on with Millennials’ sense of social justice. The fundamental proposition for Rent The Runway is renting apparel, and they have found themselves in the dry cleaning business along the way to ensure that their quick turnaround rentals are guaranteed clean. In Warby Parker’s brilliantly conceived, innovative eyewear space, there are now several copycats: Classic Specs; Eyebobs; Lookmatic; Mezzmer; and Made Eyewear — offering frames, sunglasses and readers. Likewise, the world that Rent The Runway launched has some wannabes, including Lending Luxury, Girl Meets Dress (in the UKL, and Wish Want Wear.

2014_Retail_Disrupters_050It’s important to note that while these may be copies of the core value proposition of Warby Parker and Rent The Runway, they are not necessarily marketing the model and delivering it in precisely the same way. How these models are executed of course, will determine their success or failure. Nevertheless, the copycats did enter the same space pioneered by these two initial disrupters. Such is the compliment and challenge of innovators.

Shapeways, while not the creator of 3D printing technology (earliest versions launched in the 1980s), they also face a different challenge. Shapeways 3D printing is on an industrial scale (unlike MakerBot home 3D printing) and is still in pursuit of a scaled-up market to serve. They are ahead of their time in the sense that the potential of 3D printing to disintermediate the accessories business, for example, is still nascent.

A major point to be made is that the three Disrupter panelists are faced with the almost daily challenge of stealing market share in their categories and sustaining growth. They must also understand the concept of self-disruption as envisioned by two of the most powerful disrupters of our time: Jobs and Bezos. They must be relentless in churning out the “next big thing” and to “get big fast” (now more difficult among a sea of knock-offs). Each of these young CEOs seem determined to do so.

2014_Retail_Disrupters_059Have We Over-Glamorized Marketing 101?

Now step back for a second and reflect on these business concepts. Are today’s winning principles any different than they have ever been? You innovate and come up with a new product or service or retail concept that targets a segment of consumers who need or want your offering and the way in which you provide it. You then brand the business and invest heavily in marketing it for growth. And you keep innovating new ideas into your model to continually add value to keep your existing customer loyal and to entice new customers.

Today the only difference and change from the past are the full-on advancements of technology, the Internet, and the all-enabling smartphone. However, they are simply tools to achieve a greater understanding of, and connection with, consumers and provide more efficient and effective marketing and distribution. These tools are only as useful as the human minds that envision their optimal capabilities for their specific business models: Jobs, Bezos and hopefully our three Disrupter panelists leading the perpetual stream of new upstarts.

So are the Traditional Giant Brands and Retailers “Chopped Liver?”

In closing, I’m sorry to have to break it to many of these young upstarts that while they may be disruptive in the way they are using the new tools, those same tools are available to the 800- pound gorilla brands and retailers that are already big, some in fact, enormous. And as traditional retailers wake up one morning to understand how to use those same tools, they won’t be disrupters, they will be serial destructors.

And of course our other two panelists were anything but “chopped liver,” comfortably reinventing self-disruption, perfecting and maximizing the use of the technology and Internet tools, and reframing their business models. HSNi and the Ascena Retail Group are both multi-billion dollar businesses that got huge over time and are now envisioning how to get bigger faster by seamlessly integrating their enormously complex business models with the Internet and all of the advanced operating and information technologies available. And guess what? They don’t have to lurch from one round of funding to another.

Talk about self-disruption. Mindy Grossman commented: “In the past eight years we have disrupted our business model at least four times. We created a culture where risk-taking is encouraged and failing fast is encouraged too.” HSNi has an advanced innovation group tasked with finding the next big thing., They disrupt the status quo and innovate reflecting changes in consumer behavior, tasked with primarily raising whatever bar necessary to provide a boundary-less shopping experience, wherever, whenever and however the consumer wants it.

David Jaffe, with about 4000 stores under five nameplates, is also using the new tools to seamlessly integrate the omnichannel concept and to provide shopping interchangeability both online and off. He closed by saying: “We believe the convenience and sociability of shopping gives us a head start over the Internet startups.”

Indeed, there is great truth in that statement as Warby Parker, Rent The Runway and many other e-commerce startups are now opening physical stores. Apple, of course, understood the synergy long ago.

So, the great news for all of commerce is the tsunami of young entrepreneurs who understand how to use the new technologies and the Internet to create disruptive and innovative ways to engage and delight consumers and to integrate operational systems to more efficiently and effectively market and distribute their value.

The challenge and tough news for these entrepreneurs is three-fold: first, self-disrupt with a continual innovation process; second, build a management and operational infrastructure for sustainable growth; and, finally, invest heavily to “get big fast.”

A final ironic twist may very well be that while the young upstarts, as well as Amazon, Apple and others disrupt the market with innovative ways to use the new tools, the world of billion dollar legacy brands and big retailers may end up being the real copycats. And if I were Warby Parker, I would not want Luxottica as a copycat. If I were Amazon, I would not want Walmart knocking me off.

It could all end badly, more like a knock-out.

Fabric Substitution Needles Home Textile Shoppers

Preference for Cotton Remains Paramount

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Click to See Chart Full-Sized

Housing starts and existing home sales are not only good economic indicators, but they are also strong predicators of future growth in other areas like home textiles. As the turnaround in the housing market gains steam, the home textiles market benefits – but consumers are increasingly paying higher prices for lower quality and less cotton-rich items, and they are not satisfied.

Textile World recently reported that housing starts could increase by as much as 15 to 20% over the course of 2014, despite the harsh winter, leading to potentially brisk business for the home textiles sector. While January building permits were 5.4% below the December rate, they were still 2.4% above the January 2013 estimate, according to the Department of Commerce, hinting at an upswing in the industry that could carry over to home textiles.

Cotton remains the favored fiber for home textiles like bedding and sheets; more than eight in 10 (81%) consumers prefer their sheeting to be made from cotton and cotton blends, and 75% of consumers prefer their bedding to be made from cotton and cotton blends, according to the Cotton Incorporated Lifestyle Monitor™ Survey. But that’s not always evident at retail. [Read more...]

Your Local Fruit Stand is a Bellwether

IMG_0139On the corner of 7th Avenue and 12th Street in Manhattan is a fruit and vegetable cart. Others just like it are scattered across New York City. They tend to be run by hardworking immigrants willing to stand up all day and put up with whatever weather comes their way. I’ve passed this stand thousands of times as I walk to and from work. Last fall, I stopped for the first time noticing that the same blueberries and blackberries that have now become my breakfast staples were cheaper than in the grocery store down the street; the same box and brand, but 25% less.

In retrospect, it makes perfect sense since my grocery store pays more in rent than the street vendor does. It wasn’t just that the berries were cheaper; when I actually compared the other fruit and vegetable prices, everything else was too. I started buying avocados, eggplant, onions and melons. Not only was it cheaper, but it was more convenient. Yes the selection was narrow, but it met my needs. The vendor was friendly, and his name was Ali. [Read more...]

Seeking Transparency

Cotton Charts 05-2014-01

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How Sustainability Can Enhance Your Supply Chain

Has sustainability truly become part of our lexicon, or is it still just a buzzword? Today, most consumers expect products and their manufacturing processes to be sustainable; indeed, it’s part of the legacy of the original Earth Day, held more than 40 years ago. And while Millennials demand it, they’re not always willing to pay more for it. So how can the retail industry adapt?

“Research reveals price and style still top consumers’ lists of purchase drivers when shopping for apparel, though environmental-friendliness remains a draw,” says Kim Kitchings, Vice President, Corporate Strategy and Program Metrics, Cotton Incorporated. “When she buys something that looks great on her and is the right price for her budget, the item’s environmental-friendliness becomes a kind of added bonus.”

Indeed, data from the 2014 Cotton Incorporated Environment Survey support this; 98% of women say fit is the most important factor when making a clothing purchase, followed by comfort (97%), quality (95%), and price (95%). Nearly half (46%) of female consumers cited environmental-friendliness. [Read more...]

Fashion or Fitness – What’s a Portfolio Manager To Do?

Marie-Blog-image_Rd.1Apparel is considered a discretionary purchase. Really? Most would agree we have little choice as to whether or not we purchase and wear clothing, and it’s considered ‘de rigueur’ in most social settings. The array of apparel choices is truly mind-numbing and drives a $1.7 trillion global market. Options span the most basic Gildan Activewear cotton t-shirt sold by the gross to vendors for silk-screening early in the supply chain, to non-branded apparel at Walmart, to national and specialty retail brands, all the way to the rarified luxury world of a Chanel tweed jacket priced at $10,000. There is something for everyone.

Branded apparel companies (both wholesalers and specialty retailers) such as Ralph Lauren, PVH (Calvin Klein, Tommy Hilfiger, Lacoste et al.), JCrew, and Gap differentiate themselves in the market by appealing to targeted consumer segments based on age, lifestyle, and income, as well as their interpretations of prevailing fashion trends for their demographic segment. Therein lies the rub! Fashion is fleeting and supply chains are inconsistent. Balancing the tightrope of enough fashion to be relevant, while not too trendy to incur speedy obsolescence, is the fashion merchant’s Gordian knot. Imagine doing this for two to four seasons a year! [Read more...]

How Chicago Grew Its Own Fragrance

Tru Fragrance_flowersThe Second City has racked up something novel. For the first time, the city has come together to fulfill a mission of sustainability, urban beautification, and economic development through creating flower gardens specifically for use in a fine fragrance.

Tru Blooms is a fragrance initiative designed to transform Chicagoland’s green spaces into growing spaces, and cultivating flowers that are harvested and bottled into a limited edition perfume.

Capitalizing on the trends of urban farming, locally-grown produce, and the overall “farm-to-table” vibe, Tru Fragrance, based in Willowbrook (just west of Chicago), and with offices in New York and Denver, saw an opportunity to do something completely different in the perfume space.

The brand DNA was not only based on the flowers grown locally in the Windy City, but it was also infused with an artisanal touch, and defined by community and purpose. Over 60 people have been trained and employed to plant and maintain more than three acres of flowers located across the city, ranging from the high profile and highly trafficked Grant Park, to many of the small neighborhoods that Chicago is known for.

Tru Blooms is a brand based on community gardening with a perfume evoking an olfactive image of a fountain cascading with overgrown with roses. Our goal is to produce a scent that is as authentic as the spirit of the community of gardeners. [Read more...]

The Breakfast Champion Goes Down for the Count

BreakfastWhat Happens When an Entire Consumer Segment Suddenly Loses Interest in a Brand or Product Category?

Ugly results happen, that’s what. Just take a look at Abercrombie & Fitch, the retailer of upscale apparel to teens. Over the space of a year or so, teens have been abandoning A&F in droves as the retailer lost its design edge and cash-strapped teens found cheaper and more fashion-forward alternatives at other retailers. Maybe also, teens now self define status more by the mobiles they carry than the jeans they wear.

That’s powered sharp declines in A&F’s same-store sales, its net sales volume, and the fortunes of Michael Jeffries, its autocratic and gaff-prone chairman and chief executive — or to be more precise, its former chairman who is now chief executive only.

What that retailer experienced in a comparatively short period of time has been happening in slow motion in the food industry for a long time. For a decade or more, a huge consumer segment shifted away from a core supermarket category: breakfast. And the component of the breakfast category that’s taking the biggest hit is its former champion, cold cereal.

Let’s take a look at what’s going on. [Read more...]

Amazing Macy’s

Robin-Macys-illo_Rd5Not Just a Miracle – Not Just a Department Store

While JC Penney, Kohl’s and Target struggle to regain their “mojo,” or better put, to save their butts, Macy’s seems to be mojo-fueled and on a trajectory to be the last man standing. Or, are they simply stealing sales away from their befuddled competitors? The answer is a mixture of both.

The Macy’s on 34th Street today, is no miracle, nor are its recent positive (albeit aligned with a weak economy) financial results. It’s just the result of the strategic vision and methodical, complex tactical implementation of CEO Terry Lundgren and his five-star team. The store is a shopper’s delight, an audio-visual stimulating experience, one special event after another, “Black Friday,” and Christmas energy every day. Their many exclusive brands are showcased in a boutique-like shopping environment, and it’s obvious that Macy’s has evolved its brands and experience for the Millennial generation, soon to be the primary consumer segment. Over time, I expect Macy’s will spread the miracle across most of their roughly 800 doors.

Department Stores’ Last Man Standing or a Different Model?

If not “the last man standing” among department stores (an apt reference to Gary Cooper in the classic film, High Noon), Macy’s clearly created a differentiated national brand that they dominate. In a retail industry that I expect will struggle for growth between 2% to 3%, at best, for years to come, in which discounting is the weapon of necessity (Macy’s included), Macy’s is outpacing the pack with its “My Macy’s” localization strategy and ongoing pursuit of a seamlessly integrated omnichannel; plus “Magic Macy’s” elevated consumer service (including new augmented reality technology), as well as its continual focus on the “experience.”

In fact, I wish they would stop calling their business model a department store. I believe that sometime in the not too distant future the terms “wholesale” and “retail” will cease to exist as relics of the past, defining business models that are ceasing to exist. And, the classic “department store” definition will become irrelevant as well.

In the second edition, of our updated book, The New Rules of Retail, (due to be released in August), we redefine retailing into three sectors: “Omni-Brand to Consumer,” Commoditization,” and “Liquidation.” The Omni-Brand to Consumer sector is best positioned strategically for maximum competitive advantage and profitable growth.

The business models in this sector are destination brands, not nameplates. These brands are highly differentiated, including unique, mentally indelible experiences. Ultimately the brand is the creator of the largest percentage of all products and services sold (if not, they exercise dominant control). These brands will then control the distribution of its goods, including the experience, on all relevant distribution platforms, seamlessly integrated, from creation to consumption.

As Macy’s continues to evolve, in my opinion, they will begin to look like the poster child of this newly defined Omni-Brand to Consumer sector.

The Future is Now

I refer back to some quotes from an article I wrote for The Robin Report in 2011 to give context to Macy’s evolution. At the time, Lundgren commented that the massive $400 million expansion and restoration that Macy’s was undergoing, would create “a modern, customer-centric shopping experience” to reflect “how a new generation of customers prefers to shop.” His next statement was the one that really caught my attention. He said, “In many cases, product will be organized by lifestyle to help customers create looks and build wardrobes across categories.”

The significance of that last statement might have gone unnoticed by many. But Lundgren’s commitment to this lifestyle aspect of the shopping experience could well have been the first “shot across the bow” of the branded apparel specialty chains, most of which have used this same strategy to steal apparel share from department stores.

I have long speculated that if the big stores could begin to organize their products and services around lifestyle it could actually provide them a huge competitive advantage, because they already trump the branded specialists with the breadth of their selection. This merchandising reorganization speaks to an easier, more convenient shopping experience without having to traverse the maze of departments and floors.

Finally, I could not sign off in that article without offering up what could be the severest blow to the branded specialists, which would be department stores rolling out their private or exclusive brands as branded specialty chains. While Macy’s did so with their Aeropostale brand several years ago without great success, I believe it was simply ahead of its time.

How About Macy’s Mini-Mall?

So what might brand-Macy’s look like fully evolved? As I said back in 2011, Macy’s would resemble more of an enclosed mini-mall, full of go-to events, cafes, restaurants, and a collection of small, branded lifestyle shops that would be leased and run by the brand, which by the way, Mr. Lundgren was recently quoted in WWD declaring he’s “all in” and “I’m a believer” in the leased shop concept. Macy’s, the brand, would be the destination, with a mini-mall full of experiences so compelling that consumers would leave the Internet or any other store that just sells stuff.

One thing I am sure of is that even though many of Macy’s initiatives will result in echoes of its origins as a kind of a grand palace, the future is now for the department store sector. Macy’s is certainly providing a roadmap for transforming the department store into a more relevant 21st century model, defined by us as the Omni-Brand to Consumer model.

And, at the end of the day, they can call the model whatever they want, as long as consumers connect with it the moment they hear it.

How about, well … Macy’s?