Over the years, whenever I purchased a “party dress” — meaning an expensive dress for a specific occasion, mostly black tie — I always thought, why can’t I just rent the dress, wear it, and be done with it, instead of spending so much money on something that, while gorgeous, might be out of style or not look so great when the time comes to wear it again? Two Harvard Business School classmates, Jennifer Hyman and Jennifer Fleiss, had the same thought, but went so far as to turn it into an actual business. The first Jennifer, Hymen, was struck with the idea after her younger sister showed off a $1,600 Marchesa dress she couldn’t afford but bought anyway to wear to a wedding. What’s a girl to do when every event is photographed and appears on Facebook? Wear the same outfit twice? Not anymore is the answer the two Jennifers provided when they launched Rent the Runway in 2009 with $1.5 million of venture funding from Bain Capital Ventures. [Read more…]
Luxury Brands, Fast Fashion, Treasure Hunt, Localization, Super Value
The TJX business model is not easily copied. In fact, one could make the case that the specific differentiators and advantages that have been crafted into its DNA cannot be duplicated, period. With the exception of Ross Stores, smaller and not a pure copycat, TJX Companies Inc. (T.J. Maxx, Marmaxx, Marshalls and HomeGoods) all but owns the so-called “off-price” space it dominates.
Hey, you guys in the other sectors, in the middle of the “perfect storm” of an overstored, intensely competitive retail environment, with omnipotent consumers driving you into the insanity of the retail share wars, you can only dream of being in such a position. [Read more…]
In the horror story of the declining fortunes of the American shopping center, the central character is the “Ghost Mall” – abandoned, forlorn, and lifeless — but looming, casting a post-apocalyptic pall over the American Dream. The website, DeadMalls.com, provides ample evidence that ghost malls are real and that they appear to be a growing insidious blight across America. The eerie photos show boarded-up entrances, broken glass, empty storefronts and hulking monolithic edifices surrounded by desolate unkempt parking lots. Hollywood even used a ghost mall to symbolize menace and hopelessness in last year’s psychological thriller “Gone Girl.”
Frightened yet? Well don’t be. In a country with an astounding 23 square feet of shopping mall space for every man, woman and child – representing almost 70% of the world’s supply — it should come as no surprise that some obsolescence and creative destruction is inevitable…even desirable. [Read more…]
Look up in the sky! It’s a bird…it’s a plane. No, it’s those Louboutins you ordered.
That might not be too far from reality given the frenzy over drones and their potential in retail.
We have the fertile mind and tongue-in-cheek attitude of Amazon’s Jeff Bezos to thank for that. Since he unveiled Amazon’s flying fantasies on CBS 60 Minutes last year, there are stories almost daily about their commercial use. Bezos is not alone. DLH is already doing drone deliveries in Germany, and FedEx and Google are working on it here in the U.S.
In Japan, which is always serious about technology, the Yamaha Motor Company is developing drone technology and the government has formed a panel to encourage private companies to come up with ideas on how and where they can be used in “drone zones.” [Read more…]
Again, 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.
We all know when a retailer is in trouble financially. If public, their quarterly results invite critical comments by analysts. Their financial disclosures begin to make reference to problems with loan covenants. Their underlying liquidity and solvency comes under fire from suppliers and factors alike. Often these symptoms are noted too late for any effective remediation to take place. The deathwatch is on.
But are there warning signs that can be spotted before it’s too late?
I would suggest that, in fact, there are 12 symptoms of a dying retailer:
- Reductions in selling space. Stores that close off selling space abruptly are often signaling a crisis in lost productivity. Beware the department store that suddenly shutters its upper or lower floors.
- Reductions in inventory. Stores that begin to exhibit chronic stock outages, either empty shelves or lack of continuity in colors and sizes of ongoing merchandise, are often signaling a liquidity problem. A mass merchant, big box specialist or grocery chain that can’t adequately stock its shelves is sliding down a slippery slope that can be hard to escape.
- Unexplained elimination of classifications. This sometimes foretells a retailer that is beginning to lose its way. A healthy retailer finds ways to make difficult merchandise categories viable rather than eliminate them. The decision most department stores made in the 1990s to trim consumer electronics and housewares in favor of apparel and accessories — because those categories didn’t have enough margin or exhibit enough turnover — was a bad decision that is now coming home to roost.
- Reduction/elimination of amenities and services. A retailer that stops offering free or inexpensive gift wrap, and adequate boxes and bags for customer purchases, is also exhibiting worrisome behavior. Reductions in selling hours that don’t conform to competitors’ policies is another red flag.
- Wholesale changes in return policies. Returns are a never-ending challenge for all retailers. Appropriate changes that reign in aberrant customer behavior, without undue effect on customers at large, are a sign of a healthy retailer. But when changes take place that are completely inconsistent with past company policies and competitive practices, it is often a sign of inner turmoil.
- Deterioration in merchandise quality. Taking quality features and benefits out of merchandise and services is always an all-too-available stratagem for retailers looking to improve their gross margins. But it is almost always a fool’s errand. Customers notice when apparel doesn’t fit or wear well; when features and benefits have been withdrawn or made available at higher prices than in the past; and when packaging begins to look cheap and cheesy. Merchants under pressure, without adequate leadership, will often see this as path of least resistance. Once set in motion, however, this course usually becomes irreversible. Customers rarely give retailers who exhibit this behavior a second chance.
- Reduction in marketing spending. Stores that are having trouble paying their bills often begin to reduce their marketing spend disproportionately. Cheaper paper and fewer pages in newspaper inserts, less attention to quality of artwork, smaller media distribution, and failure to repeat historically successful fashion and promotional events are all harbingers of trouble. Hand in hand with this is the imposition of unreasonable and unwarranted demands on vendor partners for increases in advertising allowances.
- Loss of price competitiveness. All retailers are sensitive to competitive price issues. When a retailer suddenly begins to be less focused on this they are definitely heading for trouble. Failure to set prices properly, and then adjust prices, as necessary, is a symptom of a loss of integrity in customers’ eyes.
- Reductions in customer service. Unwarranted reductions in selling expenses by understaffing departments; cutting back sales support; providing fewer cash wraps, check out stations, and pick-up desks; and cutting back on customer service are all early warnings that something is going awry. If you are a customer and can’t get a sales representative to talk to you in a store or on the phone, you need to take your business elsewhere. If you are a vendor and you can’t reasonably correspond with your retail client, then you, too, need to think about taking your business elsewhere.
- Reductions in lighting. Does a store start to look dark and dim? Has the store actually begun to turn its lighting down by removing bulbs, or is it merely failing to replace the bulbs that have burned out? Hand in hand with this is inappropriate heating and air conditioning.
- Deterioration in housekeeping. Stores require constant attention to housekeeping. This includes everything from neat, properly presented merchandise to clean selling floors, wrap stands, and rest rooms. Dirty, disheveled stores are accidents waiting to happen.
- Deterioration in physical plant. Stores whose buildings and property are in disrepair are signaling larger troubles. Leaking roofs, unlit external signs, poorly maintained parking lots, entrances and docks are all signs of an organization that is coming off its rails.
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…]
When Woolworth went out of business and bought its one-way ticket to the great strip mall in the sky, I remember the great outcry from people who reminisced about the good old days of grilled cheese sandwiches and nickel Cherry Cokes at the lunch counter and shopping for notions.
Except when you asked these same people when was the last time they had eaten a grilled cheese sandwich or shopped for notions at Woolworths, they stared blankly and searched their memories to no avail.
We are now in the same mourning period for Radio Shack following its bankruptcy filing last Thursday. Certainly it was the retail demise with the longest build-up and least amount of surprise since the General Store closed in Dodge City.
Equal parts sad, appropriate, unforgiveable and tragic, Radio Shack’s bankruptcy has been forecast for years, despite new management, a handful of new concept stores and a Super Bowl ad that was every bit as dumb and ill-advised as Pete Carroll’s play calling. [Read more…]
The 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…]
Now that Eddie “sell the assets” Lampert is turning his dying retail business into a real estate play, he should retain Richard Baker as a consultant. If Lampert can afford him. Of course Richard doesn’t need the money, so he might do it out of the goodness of his heart. After all, ‘tis the season. While nobody ever questioned Eddie’s financial engineering skills, he is now at the 11th hour before bankruptcy or outright liquidation of the Kmart and Sears’ businesses. The only asset he has left to squeeze more cash out of is the real estate. With that in mind, Baker’s brilliance in real estate would come in handy. Here’s his story. In Canada, Baker sells the Zeller’s chain for a huge premium of $1.8B to Target. This is akin to Target getting whacked in the head with a sandbag. More recently Baker gets an appraisal on Saks 5th Avenue for a whopping $3.7B, making it the most valuable retail building in the world. Just to give some context, it was reported to be worth between $1B and $2B when he bought it a couple years ago. [Read more…]