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…]

Fast Retailing Redux

Forget Weed, Maybe It’s Ecstasy

ecstasyA week ago, I suggested that Tadashi Yanai, President and CEO of Fast Retailing (parent of Uniqlo), must be smoking something, as he declared he would have 1000 stores opened in the U.S. by 2020. Now I read in WWD.com, which covered the company’s annual media event last week, that his aim is to reach $253 billion (yes, USD), in global sales by 2030, up from their August current year-end revenue projection of about $13 billion. His new projection for 2020 was $42 billion,which by the way, is way lower than $61 billion target I had reported that Mr. Tadashi had projected in last week’s article. So, which numbers are we to believe?

And, even with the lowered projection for 2020,does the $250 billion goal for 2030 sound like something a person with all of their marbles would throw out at such a meeting? Mr. Tadashi said, “So we are within sight of 5 trillion yen, ($42 billion) and that’s not just big talk. I think soon we have to start making big ambitions for the year 2030 as well, and if it’s the year 2030, why not 30 trillion yen ($253 billion)?” The audience laughed thinking that this must be Yanai’s type of a Japanese joke. He responded, “It’s not a joke. I believe it’s possible that we can realize this dream.” [Read more…]

Beyond Criticism

criticismWhat’s the role of the fashion journalist today? As a veteran of the industry, that’s something people ask me all the time. They’re always trying to bait me to say the obvious. I might be old school, but I certainly don’t think that school is as relevant as it once was. The role of criticism is changing as we speak, and the sooner the better, as this state of flux does not serve this industry well. We need voices that reflect both the new role of the critics and the new role of the brands themselves.

So what actually has changed? There has been a time shift, of course. Thanks to the flow of social technology, everything is immediate. No one waits to hear a description of a collection. But the other thing that’s shifted, the much more significant shift, is that anyone with a smartphone and a love of shopping is now also a critic. And while everyone thought that this would make for new important voices and fresh faces, really, all it’s done is force everyone to write in the first person. [Read more…]

The Store: Palaces of Consumption or Temples of Doom?

iStock_000023345639For almost 20 years the death knell has been rung for brick-and-mortar retailers with such regularity that, by now, one might expect stores would be a thing of the past. Of course, many of the loudest voices of doom have come from the growing and dynamic world of e-commerce. The difficulties of troubled retailers like Best Buy, Sears, JC Penney, recently high-flying Abercrombie & Fitch, and now, RadioShack, are all cited as evidence of the long predicted “retail death spiral.” So are stores really temples of doom?

Retail Resilience

The impressive growth of many other retailers such as H&M, Zara, Ikea, and, of course, Apple, seems to tell a different story. And there is the trend of formerly pure-play e-commerce retailers like Warby Parker, Bonobos, Indochino, Boohoo.com, and BaubleBar, which are all now experimenting with brick-and-mortar retail. Google, inspired by Apple’s $10 billion, 400 store success, is also said to be close to launching a retail concept. This type of interactive store would, of course, allow customers to engage with Google devices, like Google Glass, smartwatches, phones and tablets. But perhaps more importantly, the store would also allow Goggle to forge the vital link between hardware and software, creating an appealing integrated ecosystem – a key element of Apple’s success – which was realized at retail. And the most striking example of the vitality of the physical retail channel is the elephant in the room: e-commerce behemoth Amazon is bound to open brick-and-mortar stores sooner than we think. [Read more…]

When Activists Attack, Preempt!

activistsIt can happen fast, and without much provocation. It’s happened to companies from eBay to Family Dollar, Ann Taylor to Neiman Marcus, Safeway to PepsiCo. Even Apple.

Activist investors are making waves throughout the retail industry and beyond – and they will only continue to play a bigger role going forward. Understanding your company’s vulnerability to an activist and how to respond accordingly is a key ingredient to success in today’s retail environment.

Activist investors are nothing new, but they have recently broadened their scope from just trying to sell off a target company to influencing the company’s future performance through board representation, reorganization, returning capital to shareholders, changes in strategic direction, capital allocation plans and corporate governance reforms. [Read more…]

Shoppable’s “Distributed Commerce”

young woman texting in a bus stationThe Ultimate In Preemptive Distribution

In my co-authored book, The New Rules of Retail, one of the new rules is preemptive distribution. Simply stated, it is defined as distributing a product to reach consumers first, faster and more often than all of one’s competitors, thus, preempting the fierce and excessive number of competitors. And today, this strategy is further enabled by technology and the Internet, including the unprecedented impact of smartphones. There’s a whole chapter devoted to this new rule and it offers deep perspective on how to implement this strategy.

In this warp speed world where new technologies and millions of new apps appear each day, there’s a preemptive distribution technology that is turning science fiction into reality. It’s called “distributed commerce.”

Think about how many times your brand is mentioned or appears online, in print, social media, advertising, on TV, in conversation, and on merchandise. Now imagine every time consumers engaged with your brand or product, wherever it may be, were automatically connected to a “buy button” that allows them to complete a purchase from any of these locations in under 60 seconds. This may sound like something impossible or out of a futuristic film, but technology companies have been working on this accelerated access for years, and according to better tech minds than mine, it will be everywhere within the next five years. [Read more…]