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…]

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…]

Suit Supply to the Rescue!

suit_supplyI hate clothes shopping. In eighth grade my father wanted to buy me a suit. We went to a men’s shop on University Place in Greenwich Village.  We picked out a wool three-piece herringbone that was a dark ochre with traces of so many embedded colors. I liked it. The salesman handed me off to Mr. Miller, a short, bald and pudgy man with a heavy Eastern European accent and a yellow tape measure dangling around his neck.  Stepping up onto the platform surrounded by three mirrors, Mr. Miller gathered the cuff material around my ankles and put in his pins. Couple of weeks later we were back. I put the suit on in the changing room, stepped up onto the platform and from three angles I saw how the baggy-fitting pants were overflowing onto my shoe tops like the Ganges in monsoon season; the huge water-catching cuffs deep enough to have guppies swimming in there.  I was a deer in the headlights about this pant/shoe debacle. But I didn’t know what to say, being only 14, getting fitted for a suit for the first time.  I looked at my father for some help; none was forthcoming.  Then I looked at Mr. Miller in the mirrors — all three Mr. Millers — and noticed that Mr. Miller’s pants were exactly like mine; baggy, billowing, ridiculous.  Mr. Miller and I both looked like circus immigrants getting off the train on a dank night in Prague. My introduction to suits, fittings, and this “a man’s world” club was less than stellar. [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…]

The Past as Prologue

coswalzonI recently spent some time looking 25 years into the future of retailing. Coincidentally, I played this game almost 25 years ago, exactly. I think it was July of 1989 when I was an executive at the May Department Stores Company. We were operating 19 department store names, two discounters (Caldor and Venture), 26 shopping centers, and a couple of specialty stores, including Payless ShoeSource, 25 years ago.  As we looked at the future then, we certainly missed the rise of online sales and mobile devices. We correctly guessed that there would only be one national name in the department store space, and we even guessed that the name of that store would be Macy’s. We missed that we would not own it.

We correctly guessed that Walmart would own discounting and we divested both Caldor and Venture because of that. (Both subsequently went broke.) We also thought that the discount store was going to own the $10-a-pair shoe business even though we owned that business with Payless ShoeSource in 1989. We divested Payless in 1996. We guessed that Ralph Lauren, Jones New York and Liz Claiborne would be the biggest vendors in the department store world in 2014. But in the reverse order! Only Ralph is still a winner.

We saw the rise of the specialty store, but it was well under way by 1989 and not that hard to see. We missed the success of the off-price sector and the outlets. We thought both were a side show that would have limited success. [Read more…]

A Holiday Fable

‘Twas the day after Christmas, when all through the mall,
Every shopping creature was stirring in a big free-for-all.

The sale banners were hung in the windows with twine,
In hopes that black ink would show up on the bottom line.
The merchants were hunkered down like well-tailored elves,
West Coast dock slowdowns having bared all their shelves.

Warren_saleCheap gasoline gave the season a boost,
Proving to be many a retailer’s surprise golden goose.
Walmart trotted out Kelly & Michael clones in their TV attack,
Having decided the entire season could now be called Black.

Target did its usual mix of cheap and chic kerfuffle,
Trying to forget the ghosts of breaches and Steinhafel.
Macy’s ran a record number of one-day sales with flair,
Doing enough business to never muss up Terry’s hair.

Sears and Kmart were largely invisible,
Eddie’s vision rapidly becoming a sinking dirigible.
Mike Jeffries & Dov Charney were two December casualties,
Undone by H&M, Zara & all the other fast-fashion casual Ts.

Radio Shack watched as the clock wound down tic by tic,
It couldn’t be saved by a bizarrely retro Weird Al Yankovic.
Kohl’s tried kash and koupons in every denomination,
Making sense of them caused customer consternation.

And Amazon finally opened an in-town warehouse sorter,
Promising deliveries even before a shopper places the order.
Best Buy had all its consumer electronics at the ready,
Hoping not to go the way of Circuit City and Crazy Eddie.

Luxury brands kept their stores all orderly and neat,
Waiting for those big bonuses to come in from Wall Street.
JCPenney was still suffering from its Ron Johnson hangover,
Though the trouble was still too much merchandise holdover.

But no matter the channel, the site or the store,
The customer would only respond to more and more.
Now 10 percent off, 20 or even 30,
It took 40 or 50 for shoppers to get down and dirty.

In fact, only one store was sale-less and unflappable,
It bore the image of a fruit, of course, it was Apple.
So the endless sales and promos from very far to quite near,
Promised to stretch through well into the New Year.

It’s just how business is done in retailing these days,
Sadly, executives and customers are no longer fazed.
And longing for the good old days is just a wasted gesture,
Trying to do it any other way is meaningless conjecture.

So as the season ends and the stores turn out the light,
We wish you Happy New Year, it was one hell of a fight.

The Magic of Christmas Should Just Be the Beginning

happy woman in a Christmas cap opens the magic box giftIf the only effort you make with those you love were once a year, you’d likely be left alone at Christmas. So why do brands and retailers show the love disproportionately at Christmas and then revert to the same-old, same-old throughout the rest of the year?

The simple response is because you follow the money and the holidays are when shoppers are spending. So you make hay. But this strategy, one that’s all too common, points at a serious problem.

Right now in the UK, retailers are in the middle of their annual advertising war. This tradition involves trying to top one another through 60+ second TV ads designed to make you to cry. But strangely, I’d even say stupidly, if you’re so moved by these ads to actually leave your sofa and go to the store, all you’ll find is crowds, a bit of tinsel, steep discounts, and the same old store you likely opted out of the rest of the year. What moved you to tears, exactly? Perhaps this is why the growth of online shopping climbs on its relentless ascent.

I recently hosted a panel discussion with a group of retail executives from Disney, Selfridges, Google, and Intel, among others. A key point they made was the crucial need for clarity of meaningful shopper purpose if retailers are to succeed in today’s market. This purpose recognizes that the limited wallet we all chase for our success has a myriad of choices for what to buy, where, and at what price. Providing only one shopping solution won’t produce success.

While there is greater pressure to spend at this time of year, the fact is people love discovery and the seduction of new things at any time. There’s no seasonality to desire. And this offers retail’s great opportunity: the ability to tap into an always-on emotional state to entice people to come into the store and then keep coming back.

A perfect example of a retailer that does this exceptionally well, a personal favourite of mine, is Selfridges. They make it their business to constantly innovate, to make their store a destination not just a shop all year long. Their view is that the store is a theater of dreams, requiring constant care and attention to capture peoples’ imaginations. For Selfridges, Christmas is just an excuse to add another level of experience to customers. This strategy has made shopping at Selfridges an incredibly special experience. In return, they are rewarded with an abundance of new shoppers added to their loyal customers who have a deep emotional engagement to the Selfridges unique brand of retail. The in-store experience is so powerful that shopping online at Selfridges.com defeats their true purpose and value.

Which brings me back to Christmas. The mythical magic of this holiday showcases stores at their best. It is our retail stores that create the stage set for creative, sentimental, joyous, dreamy holiday memories. Who can forget the childhood memory of sitting on Santa’s lap? And it isn’t just about the stuff. It is the power of creating a meaningful experience.

My challenge is: Why isn’t it Christmas year-round? Shoppers expect it. And in the competitive environment in which we now operate, we are being asked to create something special all year long. If we can do it once a year, we can sustain it for 12 months.

Richard Baker Is Smarter than Eddie…or Is He?

lampert_bakerNow 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…]

State of the Union

Union graphic-01

Generals huddle in their bunkers hammering out strategies for the next battle, while fighting by well-equipped opposition forces continues door to door, punctuated by brief and tentative ceasefires.

No, this isn’t the latest dispatch from the war-torn Middle East or the Ukraine, and the bunker here is a well-appointed lawyer’s office or a suite at the local Hilton.

But warfare is an apt metaphor for the endless battle surrounding labor relations and the war of words between retailers and unions—a war that is likely to escalate.

Retailing is seen as an increasingly viable route to economic development and job creation in many areas of the country, making the industry and its workers a more attractive target for union organizers. And in an industry that can have a 200% or 300% annual employee turnover rate, union organizers don’t have it easy. But sometimes things go their way. A case in point: The United Food and Commercial Workers (UFCW), which handles retail employees, got a boost from the National Labor Relations Board’s recent decision that a group of 41 cosmetics and fragrance workers at a Macy’s in Saugus, Massachusetts, could unionize. This precedent- setting decision may be a sign of things to come in retail, if unions are allowed to go after specific groups rather than having to organize an entire store.

In Southern California, the UFCW has reached a tentative accord with major supermarket chains covering 70,000 employees from the Mexican border to Monterey County, temporarily averting a debilitating walkout like the one that took place 10 years ago.

But these Californian chains will have to battle the Teamsters when negotiations begin on a new contract for drivers and warehouse workers this time next year. [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…]

Sears’ Last Gasp: In the Asset Leasing and Loan Business

RR_Blog_AssetI thought I wrote the final word and all that was worth saying two weeks ago about the inevitable collapse of Sears in my article Sears: Nothing Left But its Past.  As I said then, there’s nothing left but its past. Well, “Abracadabra, fast buck, Eddie-the-magician Lampert” has once again given me reason to write another missive on his uncanny ability to squeeze even more cash out of the sinking “twin Titanics,” (for those out of the “know” – twin losers Kmart and Sears).

The cash-squeezing model Eddie is now employing is what I would call the “robbing from Peter to pay Paul (aka Eddie)” model. Essentially he is now in the asset leasing and loan business. First of all, as pointed out in my previous article, ESL Holdings loaned the retail business $400 million. However, with a premium interest rate that gets paid to you know who, the loan is secured by Sears’ most valuable real estate, which eliminates the risk for, you know who.

In 2006, Lampert devised another risk-free concept to squeeze more cash out of the business. He transferred ownership of Sears’ Kenmore, DieHard and Craftsman brands to an entity named KCD (acronym for the brands), which in turn charges Sears a royalty fee to license the brands, which are now being sold in other stores. And I would bet that somewhere in this clever deal, Eddie and his ESL Holdings are reaping some financial benefit. The model sounds like it resembles a real estate investment trust, (REIT), whereby stores’ real estate are sold to the REIT which then turns around and leases them back to the retail business (which Eddie is now considering). Hey, maybe fast buck Eddie pioneered a new instrument: brand investment trusts or BIT. [Read more…]