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

Women AccessoriesAbout 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…]

Canada Goose – Keep Warm, Be Cool

gooseLike most New Yorkers I made it through last winter’s Polar Vortex with many layers and ‘Hot Hands’ in my pockets, but going into this season, I knew I had to replace my very well worn 10-year-old Bogner and 12-year-old Moncler down jackets. I asked a friend, younger and hipper than I, what she recommended. “Canada Goose” she said, “cheaper and cooler than Moncler.” I’d never heard of Canada Goose, but, once aware, the red white and blue Canada Goose expedition patch logos were suddenly everywhere in New York City. The parkas are more function than fashion, many trimmed with coyote fur around the hood. PETA has objected, but celebrities, including Matt Damon, Daniel Craig and Claire Danes have been photographed in theirs. Last season, Canada Goose was featured in the US Magazine “Who Wore it Best” section. Was it Lucy Liu, Cameron Diaz, Maggie Gyllenhaal or Emma Stone? Kate Upton wore a white Canada Goose parka over a white bikini bottom on the cover of the 2013 Sports Illustrated Swimsuit issue. Photographed in Antarctica, the headline reads, “Kate Upton Goes Polar Bare.” [Read more…]

Price Chopper’s Name Game

PriceChopperAlthough it doesn’t happen often, one of the most momentous decisions a company’s board and top executives can make is to change the customer-facing name of the company.

Sometimes, such a change can go well, for example when Macy’s changed the disparate department-store banners it had acquired over time to the Macy’s name itself. Now only Bloomingdale’s remains as a separate banner. There was some initial consumer pushback, especially concerning changing the name of Marshall Field’s in Chicago, but that settled down and now Macy’s enjoys the benefit of being able to stage company-wide, national promotions and advertising campaigns.

In the supermarket space, several companies have changed store banners for various reasons; some went well, some didn’t. Years ago, Food Town changed to Food Lion, which went well. The name change of Lucky supermarkets to Albertson’s went less well.

After 40 years, there’s a name change in the offing for Price Chopper supermarkets in upstate New York and New England that seems to be premised on some especially dubious reasoning. [Read more…]

Dumb and Dumber — A Tale of Cyber Security

hackerIf I were a Sony executive I’d be more concerned about getting punched out by Angelina Jolie for making snide email comments than offending North Korea’s fearless leader, Kim Jong-un. She looks tougher.

Of course, there’s the little matter of some 12,000 CDs filled with internal data from Sony Pictures that the so-called Guardians of Peace threatened to release — a Christmas gift from your friendly neighborhood cyber-terrorists.

But Hollywood, and its ego-fueled denizens, is not cyber-central. By now, every company, large and small, should know that neither data nor email is a whisper but rather a shout that keeps echoing. This latest breach not only reveals a massive gap in cyber security, but a lack of common sense on the part of seasoned business executives who should know better.

Therein lies the tale of data defense dysfunction. [Read more…]

The Bottom Is Near: Thanks to the Millennials

three girls chatting with their smartphones at the parkIt came in with a bang! And it will end with a whimper. I’m talking about the now over-used phrase “the race to the bottom” of price promoting and every method of discounting imaginable and unimaginable. It explosively ramped up around the turn of the century, accelerated through the recession, mainlined on steroids post-recession, and is now limping to its end. This is not a Ron Johnson-like prediction when he bet the bank during his brief and tragic tenure as CEO of JC Penney (and which I naively doubled-down on). I now believe he may have been ahead of his time believing that “fair and square” non-promotional pricing would be desired by consumers. Of course, the JC Penney customers not only didn’t love it, they hated it and walked out the door.

Well that was a different time and a different customer.

The Millennials are going to change it all. They are viewing the industry’s discount madness as an overwhelming, frustrating, and exhausting “paradox of choice” (too many deals and too confusing to even make a choice). They will not only become inured to the onslaught of ubiquitous deals 24/7, they will begin to disbelieve them and cynically expect that another better deal will pop up at any moment – which they will also not trust. How can they believe what the real value of any offering is at this point? [Read more…]

Where Has All the Luxury Gone?

Coach StoreWe in the industry have been bandying about the term “luxury” pretty freely of late, but there is growing realization that if a product or brand is easily accessible and relatively inexpensive, it’s not really a “luxury” product. And the minute you add the term “affordable,” it becomes an oxymoron.

As the ever-widening income inequality gap illustrates, the rich are still getting richer. According to Pew Research, the top 1% of households in the US, or those making $400K or more annually, earn 23% of the total income in the country, and control 35% of the net worth. Both figures have been steadily growing for more than a decade.

One ever-present behavior in the spending habits of the superrich of any generation is opting for the special over the mundane. Makers of high-end jewelry and electronics, cars, exotic vacation hotels, and other products and services target this group of discerning consumers for a reason: They value, and are willing to pay a steep premium for, that which is appreciated by and accessible to only an elite few.

Milton Pedraza, CEO of The Luxury Institute, a research firm that tracks and advises the global luxury goods market, says that consumers consistently define luxury as the best of design, quality, craftsmanship, and service. Brands that always deliver against these attributes, including Audemars Piguet, Chanel, and Buccellati, also tend to have a compelling brand heritage story. [Read more…]

Around the World with Paco Underhill

cooking_oilWhat We Can Learn From Emerging Markets

Merchants have a temptation to move up-market. We suspect this is a reflection of their desire to seek higher margins. While we can applaud the successes of luxury categories at the upper tier of the market, it is at the other end of the spectrum where we find insightful examples of merchant innovation. For many of the world’s consumer product goods companies, future earnings and sales growth are anchored in their ability to not only move up, but also to more effectively cover the down-market. But we may be missing some very special lessons in this traditional marketing strategy. We can learn from what’s hidden in plain sight in emerging economies by recognizing the transformation of our ideas and the ingenuity of adapting our concepts to local solutions. There is also a new wave of clever entrepreneurs who are retooling conventional retail and marketing in novel grassroots ways.

Sumba: Rethinking Trust and the Pragmatics of Third-World Recycling

The Indonesian Island of Sumba has the peculiar distinction of being the world’s southeastern-most home of the horse. Its equine culture is unique to the archipelago, and adventurous tourists invade the island for its horse festivals that involve ritual battles on horseback. Its welcoming villages are dominated by tall prehistoric megaliths, not unlike Easter Island. But in Sumba, these giant icons are made all the more startling by the vibrant human life that continues on the island, in contrast to the abandoned statues of Easter Island. Sumba has a few resorts that tend to be patronized by glitterati looking for places where the tabloids can’t find them. It is, in its way, paradise lost and found. [Read more…]

Enough With the “Rooming” Already

stein_blog_roomingI just finished the 54-page 2014 Accenture Holiday Shopping Survey; and while I’m still in a state of ‘stat-overwhelm,’ I’m also left with a nagging thought. With our culture’s unceasing need to simplify things (abbreviation-nation syndrome), we may be losing sight of the obvious. E-commerce and the relative newbie, mobile electronic  retailing, combined have become the greatest destabilizing forces for retailers in a century. Emblematic of this is our culture’s tradition for creating nicknames for any major new phenomenon.

First showrooming arrived, the moniker given to some of the 200 million or so smartphone-toting customers who began deploying their devices in store. Shoppers price-checked the retailer, which more often than not resulted in an abrupt exit to buy online or at a competitor. This new practice also revealed inconsistencies between the retailer’s in-store pricing and that of their own websites which caused a corporate conundrum. Showrooming’s roommate is the more recent webrooming, a tech-term that describes browsing online and then going into a store to make a purchase. [Read more…]

What’s Missing From Online Shopping

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Last year, US e-retail sales hit $263 billion, according to Forrester Research Inc., representing 8% of total retail sales. The company predicts that by 2018, e-retail will reach $414 billion. While it’s a staggering number, it will still only account for about 11% of total retail sales. So why is online shopping still such a small piece of the retail pie? According to research from Cotton Incorporated, there’s room for improvement online.

Browse Before Buying

Though the majority of purchases still occur in-store, online is quickly becoming the first stop for consumers looking to shop for apparel. According to the Cotton Incorporated Lifestyle Monitor™ Survey, 84% of consumers say they browse for clothing online using a computer or laptop, while 45% say they use a smart phone, 39% use a tablet, and 18% use a smart television.

“We’ve seen strong growth in the percentage of consumers who browse for clothing online using smartphones, tablets, and smart televisions, and we anticipate those numbers will continue to grow as they reflect the behavior of younger consumers who were raised with the technology and are increasingly comfortable with it,” says Kim Kitchings, Vice President, Corporate Strategy & Program Metrics, Cotton Incorporated.

Indeed, according to Forrester Research Inc., 69% of US adults who regularly purchase items online end up buying about 16% of their products through e-channels, and both numbers are expected to grow as so-called “digital natives,” or those consumers born in the early 2000s after the advent of digital technologies, continue to increase their spending power. [Read more…]

Memo from the Grinch: The Gas Price “Bonus” is an Empty Tank

RL_11-18-14_1Economists, experts, analysts, consultants, a lot of CEOs, casual observers and even my friend and CNBC regular Jan Kniffen believe lower gas prices are going to goose holiday retail sales. In what some call the “gas bonus,” this means that some $40 billion saved on fuel will end up being spent over the holidays in the nation’s retail stores. This is certainly a happy thought. On a CNBC panel the other day, Kniffen was almost giddy about it. And then when you add in a falling unemployment rate, followed by an increase in consumer confidence — at its highest level since 2007 — stock traders are already chilling the bubbly.

Once again, I find myself the naysayer. Let’s start with the gas theory. The Robin Report Chief Strategy Officer Judith Russell looked at the monthly change in gas prices and retail sales for the past eight years. And as indicated in the chart below, there is neither a significant bump up, nor down, in retail sales accompanying rising or falling gas prices. She even looked at regressions with different segments in retail, and found that there simply does not seem to be a correlation, period. In other words, the gas theory is an empty tank.

Having said that, Walmart had a slight increase in third quarter sales of .5%, for the first time since 2012, which they believe was partially due to lower gas prices. So, one may conclude that the entire discount sector will gain from the gas bonus, putting more cash in its lower-income consumers’ pockets. On the other hand, one might conclude, as I did, that Walmart is clawing back its customers whom they lost to the thousands of smaller neighborhood dollar stores during the recession when gas prices were high and low-income shoppers had a shorter ride to those local stores, thus saving fuel costs. In fact, Walmart said in its 3Q conference call that the Walmart Express strategy (smaller footprint convenient neighborhood stores) is beginning to facilitate their clawback of market share from the dollar stores.

Therefore, this hypothesis would suggest that rather than the gas bonus lifting total spending among low-income consumers across the entire discount sector, it’s simply shifting shares around within the sector.

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If consumers do take their fuel savings and decide to spend them, while the discount retail sector may minimally benefit, it’s more likely they will spend more on health care and entertainment, as well as home improvement. And since income growth is flat, they could just as well decide to save the gas “bonus.” In fact, the savings rate has been ticking up.

And there was certainly no additional gas bonus spending among the mid-to-higher income consumer segments. In fact, Macy’s CFO, Karen Hoguet told analysts a week ago, “shoppers are spending more of their disposable dollars on categories we don’t sell, like cars, health care, electronics and home improvement.”

Lastly, the low overall inflation rate, even disinflation in some major merchandise categories, is allowing consumers to get more value for their money, which doesn’t result in an increase in sales, because they’re not buying more stuff per se. Consumers and particularly the growing Millennial cohort are shifting toward a “less is more” mentality, eschewing buying more stuff to seeking more experiential satisfaction out of life, which is why restaurant sales and entertainment spending are strong. And now with a strong dollar, we might see people opt to travel more often. So these dynamics, much of which has to do with a demographic and cultural shift, will also divert any part of the gas bonus that might have made its way into mainstream retailing.

The final word: dream all you want about getting your hands on a piece of the $40 billion gas bonus, but when you wake up on January 1st with a hangover, it won’t be due to the bubbly that the stock traders are currently chilling. It will be due to the fact that the dream was really a nightmare about the passing gas bonus, pun intended).