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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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…]

Tory Burch. Doing Almost Everything Right

tory_burch_2About a dozen years ago, sitting in her blue and white David Hicks and Billy Baldwin design-inspired kitchen in her 6000-square-foot Pierre Hotel co-op overlooking Central Park, Tory Burch set about to create an affordable clothing line that she and her friends would like to wear. By this time, Tory Burch was already something of a socialite and had appeared in the pages of Vogue and on the cover of Town & Country. Not entirely to the manor born, but close enough, Tory, a graduate of the University of Pennsylvania, had worked in the fashion industry, not in design, but in advertising and public relations. Perhaps this is where she learned about marketing and branding, or perhaps she just has very good instincts.

The first Tory Burch boutique opened in 2004 on Elizabeth Street in Manhattan’s Nolita, now a fashionable retail stretch, but a somewhat more pioneering location at the time. With a $2 million dollar investment from then-husband Chris Burch and additional funds from friends and family, the store launched with multiple categories of clothing and accessories. In 2005, Oprah Winfrey discovered a Tory Burch tunic and pronounced it the next big thing. With Oprah’s endorsement, a unique fashion point of view that struck a chord with a certain crowd in Manhattan in its early days and some good exposure on Gossip Girl, fashion history was made. [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…]