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…]

Homeless in America

Young man holding teddy bear and taking a nap on couchThe home furnishings business should be hitting…well, home runs right now. The only thing is that it’s not: a couple of bloop singles at best.

Housing has rebounded and prices are approaching pre-Great Recession levels. Unemployment continues to drop, and more importantly, people with jobs feel less spooked that they’re going to lose them suddenly. Consumer confidence, despite the occasional outlier survey and Election Day polls, is generally positive. Gas prices are down, creating more disposable income for even budget-stretched households. And the costs of consumer goods, thanks largely to low inflation and a never-ending supply of third-world sourcing options, are a downright bargain in historical terms.

Yet sales of home furnishings products continue to struggle, even as sales of other perennial larger discretionary purchases – new cars and vacations – have rebounded from the dregs of their 2008-2009 levels.

Home may be where the heart is, but it ain’t where the spending is. What’s going on? As with most things in the universe, it’s not just one development that is causing a seminal change in the dynamics of home furnishings purchasing patterns. It’s three uneasy pieces.

1. Hello Muddah, Hello Faddah

With all due ethnic respect to Alan Sherman, the fact of the matter is that this generation of young people finishing up college is increasingly moving back in with their parents, rather than setting up their own households. And that’s a huge part of the home furnishings problem today.

The folks who keep track of such things say that there are 2.3 million so-called “missing” households in the country today. That is, new households that would exist if historical patterns of home formation had held true the past few years.

Before the Great Recession, about 27% of 18-to-34-year-olds lived with their parents. Now that number is 31%.

Do that math and that’s almost one in seven more kids heading home rather than getting their first place.

Another study makes the case even more persuasively. In the six years before the Great Recession, an average of 1.35 million households were
created every year. In the six years since, that average has dropped to just over 550,000 a year.

Even with all the hand-me-downs and trash day curbside pickups resourceful kids usually repurpose, there are still a lot of dishes, toaster ovens, sheets, rugs and other household paraphernalia that are still not being purchased.

These kids who are moving back in with their parents, doing extended stays with friends, or otherwise camping out in basements and attics
of unsuspecting relatives are using somebody else’s existing home products. Let’s face it: chipped plates and somewhat frayed towels will do just fine when you’re looking at $80,000 in student loans and no job.

Small kitchen2. Going Rental Mental

Ok, so we know there are simply fewer people starting households. That wouldn’t be so bad if those that were starting up were choosing the great American tradition of buying a house. But they are not.

The number of people deciding to rent rather than own is at a level this country hasn’t seen since the Reagan administration. Between 2007 and 2013, the country added about 6.2 million tenants but only just over 200,000 homeowners. While new single family home construction is finally coming around again, it’s nothing compared to multifamily construction, which last summer hit its highest level since at least 2006 and maybe even further back to 1989.

And first-time home ownership is down 5% to 33%, the lowest level since 1987. These are staggering statistics for a country that has based a wildly disproportionate percentage of its economy around the idea of home ownership. In case anyone forgot, it was the boom in the housing market that fueled the boom of the first half-decade of the new century. And it was the housing collapse that drove the nation into its biggest economic downturn in more than 80 years.

So, maybe you’re thinking what difference does it make whether someone lives in an apartment or a home? They still need those dishes and towels. Yes, that’s true, but not all home furnishings products are created equally. A renter is likely to buy the same sheets as a homeowner. They each will want some cookware and a blender and some comfortable places to sit. But is a renter likely to put in wall-to-wall carpeting as a homeowner would? How about replacing the washing machine or getting a new fridge? Will they spring for the bedroom set of their dreams if they’re not sure it’s going to fit in the next apartment they move to? And they certainly aren’t going to put in new windows, doors or kitchen cabinets if they are just passing through.

3. Home Sweet Home… or Not

The Millennial generation that is increasingly becoming the prime consumer of stuff in America does not have quite the same love affair with their homes as their parents did. Most anecdotal studies will tell you that decorating their homes is not a priority for many Millennials, no doubt because they are still cash strapped with those student loans. And maybe even more to the point, storage capacity in rentals doesn’t accommodate large collections of stuff.

They eat more meals out, be it at Chipotle or the latest all-you-can-eat Quinoa place. Big fancy kitchens don’t have quite the same appeal as they did for their parents. They also don’t seem to have the interest in some of the brands – and their corresponding premium prices – that have characterized the home business for the past few decades. Which is not to say they don’t like Ralph and Calvin and Donna. They just may not love them. Or be as loyal to these labels as previous generations have been…at least right now, anyway.

Furnishings’ Future?

Put all of these things together – fewer households being started, an increasing number of renters with less need for some home products, and demographics pointing to an emerging less-home-conscious consumer – and it starts to make sense why the home furnishings business is not booming the way many thought it would.

That helps explain today. But what about tomorrow? Is this a fundamental change in the way America lives that will define the home furnishings industry for a generation or more? Or is it just a moment in time, and the more traditional patterns will slowly but surely return the natural order?

Tough to say, but somehow I think you shouldn’t throw in the towel and write off the home – literally or figuratively – quite yet.

Uniqlo and Forever 21: What Are They Smoking?

UniqloForever2I don’t know if “weed” is legal yet where CEO Tadashi Yanai, (Tokyo-based Fast Retailing Company, including the Uniqlo brand), or CEO Don Chang, (Los Angeles-based Forever 21) run their companies, but maybe they’re getting delusional on some other substance.

One thing their delusions have in common is Larry Meyer. He was CFO at Forever 21 from 2001 to 2012, and then left to become CEO of Uniqlo USA. Both of his bosses gave him his marching orders to “get big fast” (to steal the Jeff Bezos line), and focus mainly on the American market. Doesn’t everybody? And getting big fast apparently means bigger stores and lots more of them. I guess in their minds, this growth logic is supposed to result in bigger revenues as well.

Furthermore, and this is pure speculation on my part, perhaps Uniqlo observed Mr. Meyer’s performance at Forever 21, aggressively pushing for more and bigger stores, and believed they could use his real estate acumen to implement Mr. Tadashi’s mind-numbing growth objectives. However, Mr. Tadashi’s mind must have been a bit addled, not foreseeing that, in my opinion, Forever 21’s get big faster strategy would end up with being stuck with a ubiquitous number of stores that are bigger and less productive, resulting in a cool brand turned cold. Bye, bye young customers. Unfortunately, Mr. Tadashi and Mr. Meyer are now both racing down that same delusional growth-to-death path. [Read more…]

Did Tesco Get Hooked on Drugs?

Under-the-table transactions...That’s a strange question, and the answer is even stranger: “yes,” at least figuratively speaking.

It all has to do with vendor allowances and the revenue bump they give retailers. These allowances are intended to incentivize retailers to better promote or better display a manufacturer’s product, and there’s generally a lot of money left over for retailers after that’s done.

For a long time, supermarket insiders have cloaked vendor allowances in secrecy, privately referring to them as the “drug” supermarkets just can’t kick. The metaphorical drugs caused supermarkets to become almost entirely dependent on them for profitability, despite the fact that they fostered grotesque retailer inefficiencies in the long run.

Now a day of reckoning may be at hand, because Tesco has blurted out the dark truth. Tesco, a huge UK supermarket chain, is being battered by newly disclosed accounting irregularities that were used to puff up financial reports by hundreds of millions of dollars.

Tesco stated: “[Irregularities] are principally due to the accelerated recognition of commercial income and delayed accrual of costs. Work is ongoing to establish whether this was due to error or an aggressive accounting policy.” Commercial income, by another name, means vendor allowances. [Read more…]

The New Luxury Consumer? Think: Multiple Consumers

atk_luxuryThe luxury industry may have lost a bit of its luster lately:  in 2014, Prada’s third-quarter profits sunk 44%; LVMH sales growth has slowed down; and analysts downgraded their recommendations for some listed companies.
There are several reasons for this. First, weak economic performance in parts of Europe and Asia is deflating consumer demand in those areas. Second, societal shifts, including a crackdown on corruption gift giving in China and last year’s protests in Hong Kong, are stealing some of the industry’s cache. At the same time, a lack of truly innovative products has failed to energize consumers.

But there is a big and most important reason:  the luxury consumer base has changed. It’s not your grandmother’s luxury market today, which brings tremendous growth opportunity for the luxury brands that can evolve with the changing face of affluence and market to these new customers based on their individual needs. [Read more…]

Is IKEA the Most Influential Retailer of the Past 25 Years?

shutterstock_202577677Let me cut to the chase. Yes.

Because say what you want about Walmart SuperCenters, H&M, Uniqlo, Restoration Hardware or even Amazon, none of them— not one—would exist in their present form if Ikea hadn’t come along to totally change the rules of retailing.

Ok, you’re saying, Shoulberg, you’ve been downing too many of those Swedish meatballs and have clearly lost your retail smarts. That may be true, but I stand by my Ikea statement.

And I’ve got the proof to back it up. But first, a quick refresher course on this Nordic retail operation that doesn’t easily fall into conventional models. Started in Sweden in 1943 by a 17-year-old named Ingvar Kamprad, named after a typical Scandinavian mash-up of his name and the farm and town where he grew up (take that, Macy’s and Walmart), the company opened its first American store in 1985 in the King of Prussia, Pennsylvania, area. [Read more…]

Vegan Is the New Black

dana_veganWhat’s more mainstream-American-beauty than Christie Brinkley? Christie Brinkley selling her upcoming face and body de-agers on HSN, that’s what. And for an extra dose of apple-pie wholesome, how about a Christie Brinkley beauty counter at Kohl’s?

But here’s what isn’t so by-the-book about Christie Brinkley Authentic Skincare: just like the 60-year-old stunner herself, it’s 100 percent anti-animal cruelty. In fact, it’s vegan. As a decades-long vegetarian and staunch wildlife advocate who spearheads anti-poaching missions in Africa, Brinkley made damn sure her eight-SKU range doesn’t contain a trace of animal anything.

If this were 10 – even five – years ago, Brinkley’s product positioning might have been deemed a gamble. Yes, the line’s core raison d’être is anti-aging; vegan is only one chapter of the story she’s telling. But the fact that Brinkley will be able to riff about why eschewing animal ingredients and testing is important to her — on the massive platform that is HSN – speaks volumes about where the beauty industry is headed these days. [Read more…]