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.

Bloomingdale’s Next Chapter

Tony_SpringAn Interview With Tony Spring, CEO, Bloomingdale’s

Robin Lewis: Tony, tell our readers a little bit about yourself. Where are you from? What got you interested in the retail business, and how did your career path lead you to your current role as CEO of Bloomingdale’s?

Tony Spring: I grew up in the New York area. My father was a lawyer and my mother worked at CBS as a secretary. There was a mix of passions in our family. The message in the house was always: find something that you love to do and do it well. I was always doing something, some kind of job, whether working in my father’s law office, delivering papers, or working in a fast food restaurant. I went to the Cornell School of Hotel and Restaurant Management. I had a passion for the customer, and what hospitality meant, and how to take care of the customer. I graduated from college in 1987 and had opportunities to work for a couple of hotel chains, including Marriott, but then Bloomingdale’s came to campus to recruit. One thing that really made me want to work at Bloomingdale’s was the people, and to this day they are a key part of my love of the business. They were very competitive, but cared about you as a person. In my belly I felt “wow,” these people want to do something very special.” Campeau bought Federated one year after I joined, then there was an LBO, then cost cutting. A year and a half later I came into Central in the home goods area as a buyer of cookware and cutlery. [Read more…]

Luxury A 2014 Recap and 2015 Outlook

luxrecapIt isn’t only consumer product goods companies targeted at the middle class that fared poorly in 2014. Regardless of what the confidence readings or the employment indicators say, shoppers around the world have exercised restraint for a number of years and have not returned to their free-spending ways of the late 90s and early 2000s.

Blame it on exogenous factors ranging from the Crimean crisis and the sanctions imposed on wealthy Russians; the tightening of anticorruption measures in China, creating a reluctance among the Chinese to be seen as ostentatious spenders; or the street demonstrations in Hong Kong. There are also real macro financial factors as well, including Japan entering a recession in Q4 2014; weakening trends in Europe as the year progressed; and the continued consumer malaise in the US. When the numbers are finally tallied, 2014 will have been a year of very modest (if any) growth in the global personal luxury goods sector. [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…]

2015 A Reality Check

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Click to Enlarge

Now that Santa’s back home, trying to figure out how to get rid of his leftover inventory, with the new year well under way, it’s time for a reality check on what the retail landscape is going to look like for 2015 and beyond. What are some of the major issues and market characteristics that continue to evolve, and those that we are stuck with that are largely out of anyone’s control to change?

For starters, regardless of a few pockets of cheer, once again the retail industry has managed to stumble through another rather mediocre Holiday season. Once all of the insane promoting and discounting is factored in, as well as tallying up the excess inventory that will have to find a hole somewhere to bury itself, mediocre may turn into bleak and unprofitable.

On a more positive note, perhaps this will be the year in which we finally witness the serious elimination of excessive retail space, including malls and shopping centers, and the downsizing of what remains. I said perhaps. Part of the weeding out should consist of retailers who have reached the end of the line financially, due to their inability to steal business from competitors in a slow-to-no growth marketplace, (examples: Deb Shops and Delias). The other part of the shakeout should include retailers who are stuck in the last century (examples: Sears, Kmart and Radio Shack), unable to transform their strategies and business models necessary to engage the 21st century consumer, now the “controller in chief.” [Read more…]

Millennials: Retail Experiences Around the World

zaraBy Victoria Kulesza, Tiffany Lung, Kei Sato and Daniel Swanepoel

At the World Retail Congress in October 2014, a panel of Millennials presented their takes on the Future of Retail. Here is an excerpt of their comments, providing a provocative playbook for retailers to retool the customer experience.

What’s the best in-store experience?

DAN / London: Product design is such an important part to the store. Take the newly popular HAY, a homewares design store on the London retail scene. It has products that are not really essential to have, but they are so cleverly/uniquely individual in design, it transforms any retail space. The thing that makes me return to a store is the turnout of new products/merchandise. Every time I visit a certain store, I should be on an adventure of new discovery. New fashion trends, new designers/fashion houses showcasing their moments of creativity. I want to be inspired by a store. Live for the brand. I want to walk out of that store with a shopping bag. I want to walk all around the city, showing off that I have just been shopping in that retail space.

KEI / Tokyo: I would like my in-store experience to be enjoyable and inspiring. It would be fun shopping if the store can communicate effectively how the products will affect the purchasers’ lives. I want a store that is very personalized. The store would make personal profiles of their customers, including purchase history, taste, cultural background, etc. The store can then give effective advice on what to buy and customers will be able to trust the store since they know who they are and what they like. [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…]

Wallet Wars

iStock_000000409904Consumer behaviorists are mulling a new question: Will they swipe, tap, Tweet or text?

Whichever they choose, consumers, particularly the much sought after Millennials, are looking for new ways to pay. We’re approaching a tipping point where mobile payment systems, or mobile wallets, will move into the mainstream with cash, credit and debit cards becoming as archaic as stone tools.

An article in a recent issue of BCG Perspectives by The Boston Consulting Group put it this way: “Never in the history of the payments industry has there been a time of such disruption and opportunity across regions. Digital technologies will upset the competitive order and the role that payments play both in the operations of businesses and in the daily lives of consumers.” [Read more…]

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…]

Not Your Grandmother’s Neiman’s

RL_Blog_NeimansNeiman Marcus is not wasting any time as it marches into the new frontier, or the “wild west,” as many are calling it. And it’s headed right towards the intersection where technology and the Millennials connect. Neiman’s is recognizing the tsunami of new technologies being introduced on almost a daily basis, as well as the fact that Millennials will soon replace Boomers as the largest consumer segment. This next-gen cohort has not only embedded technology into every moment and movement in their lives, they also bring huge shifts to the marketplace in how they want to engage or be engaged by retailers.

First and foremost, understood by all retailers (except for the few with their heads still in the sand), they must promise a compelling experience to attract consumers to the store. This is especially true for the Millennials, who are more interested in pursuing style of life over the stuff of life. They desire many types of experiences over shopping and hanging out in malls. And since technology is their life, the Neiman’s that attracted their grandmothers will die with their grandmothers, if they don’t integrate technology into every aspect of their business, including an engaging experience in the store. [Read more…]