Showrooming: A Death Knell or Hidden Opportunity?

showroomingAccording to the Nielsen U.S. Digital Consumer Report, 65% of all American adults own a smartphone, up from 44% in 2011. This trend, the ever-increasing ability of consumers to access the Internet at their fingertips, was hailed as the death knell for retail stores. Showrooming, the practice of trying out products at a store before making a cheaper purchase online, appears to be a fatal flaw for retail shopping.

What we’ve seen instead, running beyond the popular narrative of doom and gloom, is a vibrant new world of opportunities for retail brands.

And it isn’t just tech start-ups that have come to see this revolution as an opportunity. A subterranean phenomenon in the retail and consumer goods industries is the rise of omnichannel retailing. This phrase might not mean much to the average American, but if you’re a retailer like Macy’s, Best Buy or Target, this new consumer-oriented ideology is quickly becoming a way of life. Omnichannel retailing mirrors what we advertising technology companies would call “multiscreen, coordinated campaigns.” In other words, it aims to make all the avenues for a brand to engage with consumers (whether it’s online, on TV, in-store or even through a catalogue) a cohesive experience. [Read more...]

Are You Trapped in the Past?

shutterstock_176490206Think you are a Retail Guru? Student of the Industry? Current or former Master or Mistress of the Universe? Or have you just been around the business for at least 25 years? Well, wherever you were in 1989, were you capable of foreseeing what retail would be like in 2014? Some of you who were part of the industry in 1964 may in fact still be alive and kicking. If you are a member of that rarified group, did you envision then any of the changes that have occurred in our industry over these past 50 years?

Change is a concept that most of us say we understand and readily embrace. Yet, in reality, we have little or no capacity to conceive of, plan in support of, or manage change.

Past as Prelude

In 1964, retail was principally focused on downtown business districts in either overlarge emporium like local department stores and/or mega-catalog houses. Downtown specialty retail was invariably local. Few, if any, shopping malls existed; there were no strip or power centers, and no big box players or discounters of any consequence. Local city-based Woolworth’s and Woolworth-like stores that blanketed downtowns were more the norm throughout the country. Technology then was embodied by mechanical cash registers in the front of the house and manual comptometers and handwritten ledgers in the back room. [Read more...]

Defining the Value of Omnichannel Shopping

Mobile banking wallet on screen of smartphone isolated on whiteBefore investing in an omnichannel strategy, retailers need to understand the true value of this consumer shopping behavior and the opportunity it presents. A new MasterCard study suggests the right approach is to start with the customer. How does their omnichannel spending behavior differ from spending in a single channel?

Conventional wisdom suggests that retailers should invest in bolstering the omnichannel experience they offer consumers on the basis that more channels will result in increased sales. Makes sense, but merchants can either invest in an omnichannel strategy and technology because it seems like the right thing to do, or they can make informed decisions based on data that details the value to be gained from key customer segments. Imagine the following scenario: A working mother of two needs a simple dinner solution for the evening. She logs onto Pinterest for “quick kid-friendly dinner” and decides on the “Cowboy Casserole.” The list of ingredients she needs is automatically saved onto her mobile phone, and dropped into her local grocery store shopping app. She opens this app, and decides to pick up the order on her way home. She stops at the store, where her order is waiting in a cart. She notices a sale on blueberries and adds two pints to her cart. She picks up a single-serve sparkling water for her car ride home and a few magazines to wind down later. The kids love dinner and the mom has illustrated the type of behavior that merchants of all classes are moving to better serve. She is an omnichannel shopper. As such, she is highly sought after but not very well understood. [Read more...]

Widening the Gap

shutterstock_192812690Having followed Gap and Gap Inc. for 25 some years, I’m intrigued with the many growth opportunities the $16+ billion company still provides. As an analyst, I’ve long applied a portfolio approach to Gap Inc.; when one brand is humming another is flubbing— and basically that’s been the case. Gap Inc. is accessible: luxury (albeit boring) at Banana; value at Old Navy; and just-plainclothes- with-a-hint-of-attitude (mostly from good marketing, not so much design) at Gap. Recent acquisitions, along with new global opportunities and a changing industry, begged another look at this behemoth. And I like what I see! [Read more...]

Wellness on the Verge of a Revolution

shutterstock_185901890The past 50 years have seen a transition in healthcare from the Marcus Welby model of a kindly physician taking charge, even ownership, of a patient’s well-being to a phenomenon called participatory medicine, where physicians play the role of senior, expert collaborators with an individual in their plan for health.

In the past, the medico/hospito/pharmaco players were gatekeepers who doled out medical information and care with schedules at places that served their needs. Today’s patients demand greater and more convenient access to health information and medical care. They want care to be provided with the convenience of any other retail service. Simply said, they want it now, wherever they want it… now.

Healthcare On Demand

An early manifestation of “retail” convenience in healthcare was the standalone, limited service clinic. This movement began in the workplace with employers contracting with companies such as CHS Health Services to operate health clinics. These services have offered free services to employees as a benefit, and for the employer as a means to reduce absenteeism and healthcare costs. CHS, newly merged with Walgreens-owned Take Care, operates more than 500 workplace clinics for major US companies. [Read more...]

Amazon Finally Gets It: The Next Big Thing For All Pure Digital Players

amazon_openingAmazon’s announcement of its first physical store opening on Manhattan’s 34th Street is not a surprise to me, as I predicted it four years ago in the first edition of my co-authored book, The New Rules of Retail, published in 2010.

The logic was the same then as it is now.  Amazon has a huge database, estimated to be larger than the Pentagon’s — and they know how to use it. The data provide them with laser-sharp knowledge, such as what Jane Doe — who is married with two kids and a dog and is living on the east side of Manhattan (or anywhere in particular) — is eating for breakfast; what brand of jeans she wears; the charities she gives to; the music she likes; and so forth. Therefore, as Amazon rolls out its stores nationally, it can assort each location precisely with those items that are preferred by specific shoppers. The stores will also have screens for downloading information and selecting from Amazon’s massive inventory.

The personalized knowledge that Amazon continues to build on, and that all retailers are pursuing, is collected over time across all accessible consumer browsing and transactional points, and it’s game changing. It tracks consumer-shopping behavior and can be drilled down to individual profiles.  This is the big deal part of the buzz concept, Big Data, because it tells the retailer not only what brands the Jane Does on the East Side prefer, it can also indicate what kind of shopping experience, environment and service they expect. Most traditional retailers have not yet scratched the surface on big data analytics and its laser-like ability to localize, even personalize the shopping experience. It will be interesting to see how Amazon uses its analytical advantage in this area. [Read more...]

Luxury Needs a New Story

luxneedsnewHow Alex and Ani, Saint Laurent and STORY are doing just that

Recently, cracks have begun to show in the “same old story” that serves as the traditional luxury marketing platform. For years, for decades, and in some cases for centuries, luxury brands have been doing the “same old song and dance” for their current and prospective customers. The luxury story, which describes how brands are positioned and marketed, goes like this: exclusivity, design excellence, exceptional workmanship, top-quality materials, and aspiration for brands that one aspires to own and to show off. Things are changing.

In July, Hermes reported a slowdown of sales in its fiscal second quarter 2014. In the same month, LVMH reported first-half year sales were below expectations; and Kering, owner of the heritage Gucci brand, reported a 2.4% decline in the brand’s sale in the second quarter 2014. The only bright spot for Kering was their Saint Laurent brand … but more on that later.

While many fingers point to slackening demand in China as the culprit, American affluent consumers have undergone a dramatic mood swing regarding luxury since the recession, reflected in those disappointing results. That change in attitude is illustrated in Unity Marketing’s Luxury Consumption Index, our measure of affluent consumer confidence based upon quarterly surveys.

Every three months we survey 1,250+ affluent (i.e. people with incomes at the top 20%) luxury consumers (i.e. affluents that report buying any luxury or high-end goods or services in the preceding three-month study period) about their financial status and purchase behavior. Five key measures about their finances, spending patterns, and view of the economy overall go into the calculation of the Luxury Consumption Index, which reflects the affluent consumer confidence.

Since early 2010, the LCI has stalled, moving forward one quarter, only to retreat again the next, with no consistent upward trend in affluent consumer confidence. Rather, three times in the past four years, the LCI has slid back to near recession levels. This is what I call a mood of austerity. It’s reflected among the mass affluent HENRYs (high-earners-not-rich-yet consumers with incomes $100k-$249.9k) by trading down to less premium brands and shopping destinations. For HENRYs, austerity means spending less, plain and simple.

The higher income ultra-affluents (income $250k), and the core customers for luxury brands, feel empowered financially, yet their spending has gone undercover, toward inconspicuous consumption or put another way, “conscientious consumption.” Ultra-affluents are expressing austerity as a return to basics and simplicity. For them it isn’t about saving money, they are holding out for something truly different, authentic, and special that reflects their new values.

Affluence, American-Style

American-affluents’ mood of austerity brings challenges to many mainline, traditional luxury brands and retailers. It also opens up opportunities for other brands that tell American customers a new story giving meaning to the brand. Aligning luxury brand positioning to the American consumer mindset is critical since by any measure the US is the world’s largest luxury market. The US has the most millionaires of any country in the world, 7.1 million according to Boston Consulting Group, which is nearly three-times more than China. And the Bain/Altagamma study reports the US leads the world in luxury goods sales, estimated to reach €62.5 billion in 2013, which is more than 3.5 times the size of the next largest country, Japan.

Luxury is very much a culturally conditioned concept. One-size-fits-all luxury won’t work in the global market; it has to be adapted to the unique character of each market. American affluents in their mood of austerity are focusing their purchasing choices on value; nobody wants to pay more when they can get good stuff for less. The brand story also plays an influential role. There is so much good product out there that the story becomes the hook that justifies the purchase. The narrative or history of a product — where it comes from, why it exists, and what it means — is increasingly becoming a key driver for purchase.

Luxury expressed American style means a trend toward the practical, simple and minimalistic, as opposed to the gaudy, showy or ostentatious. Austerity doesn’t necessarily mean cheap or low cost, but it demands that brands justify their premium prices with real value.

Here are three brands that have reinterpreted luxury well.

Selling Energy from Alex and Ani

Rhode Island-based Alex and Ani has put a new spin on jewelry marketing – emphasizing the personal experience of buying and wearing its designs, rather than placing value simply on the jewelry itself. It’s luxurious not because of what it is made from, the artisanal design, or the price, but rather by how it makes the customer feel. It’s jewelry with a meaning and purpose, designed so that customers can combine it in unique ways to create a personal statement. It is jewelry enhanced with an energy boost, as the company’s logo reflects.

A pendant tied to a specific interest (sports team, zodiac sign, charity, college, sorority) or emotion (enthusiasm, confident, enlightenment, vibrant, spirit) is the basis for each piece. Pendants are attached to wired bracelets designed to stack on the arm, or to necklaces for layering. While each individual piece is very affordable (most under $50), the concept is to create a whole collection so one can ultimately wear multiples worth several hundred dollars just on one arm. Every time she puts on her collection, she tells a personal story of where she’s been, what she values, or who she is. Or he is, since the brand is unisex by design.

Alex and Ani is a made-in-America brand, but more importantly, it is very much a brand made for American consumers today.

Saint Laurent Reinvents YSL for the Next Luxury Generation

In Unity Marketing’s affluent consumer tracking study we consistently find the young affluents, those aged 24-44 years with incomes of $100,000 and above, outspend the mature affluents 45 years and older. Young affluents are in an acquisitive life stage, while the matures may already be downscaling their lifestyles.

That leaves the younger consumers, under 45 years, as the prime targets for luxury brands. Increasingly, that means catering to Millennial shoppers, born from about 1980-2000; the leading edge of the cohort (34 years) is approaching early middle age and their peak income years.

Moneyed Millennials are looking to brands and shopping experiences that capture their unique mood and spirit. That is what makes the efforts of the newly reimagined Saint Laurent brand, under the direction of GenXer Hedi Slimane, worth studying. By dropping the Yves from the brand name, but keeping Saint Laurent Paris, it connects to the brand’s past, but looks forward to the future.

Further, the Saint Laurent reinvention has an American twist. Slimane moved his design studio from Paris to LA and opened a new flagship store on Rodeo Drive. While some of the Saint Laurent fashions feature glitz and glam, there is a minimalist, back-to-basics aesthetic, especially among the menswear designs, that connects with the current mood. Slimane is honoring the YSL-edge, but telling a new story reinterpreted for today’s hipsters. Saint Laurent was rewarded for its bold moves by a 29% growth in sales growth in the second quarter 2014, while Kering sister brand Gucci declined.

The Story Behind STORY

Made in USA, as with Alex and Ani, is a very popular story today among affluents. Luxury with an American-twist is reflected by Saint Laurent, and then there is the STORY store itself. Located in on 10th Avenue in New York City, STORY is a store that, as described on the company’s website “takes the point of view of a magazine, changes like a gallery and sells things like a store.” It is fun, innovative and quirky.

Every four to six weeks, the store is completely made over with new fixtures, displays and merchandise, all that that tell a special story. A recent STORY exhibition is called Style Tech, which features brands like CuteCircuit — fashion that fuses LED lights into fabric technology or Ringly — interfacing jewelry with a smartphone to alert the wearer to an incoming call or text message. At STORY, merchandising becomes multidimensional – good quality and outstanding value combined with a compelling story that justifies the product’s existence.

Luxury brands Have to Tell a New Story

The idea of consumer aspiration for luxury brands– that people buy out of hope or ambition – is dead. The truly affluent don’t need status symbols; quite the contrary, today they are going stealth. They need to be inspired to pay a premium for luxury. And inspiration comes from a strong value proposition with an equally strong story hook. The smart marketers also recognize that each succeeding generation craves brands and shopping experiences that reflect their own special tastes and interests.

The question is whether you are ready to transform your brand through the hard work it takes to articulate authentically your story for today’s and tomorrow’s American luxury consumers. Believe me, they sure don’t want the “same old story” and the “same old song and dance.”

Target’s Big Leap of Faith

targetNot long ago, Brian Cornell was appointed Target’s CEO, becoming the retailer’s first CEO hired from the outside instead of being appointed from within the company’s hierarchy.

At any company, when a long-standing practice concerning the appointment of the top-level executive is changed, it usually means there is a lot of repair work to be done at the company. Target is no exception to that.

Let’s take a quick look at four key issues at Target and then see how — or if — Cornell’s experience addresses them. [Read more...]

Lessons in Luxury From the Middle Eastern Souks

Gold_SoukWhy is buying fine jewelry in the Western World such an intimidating and utilitarian experience? A beautiful piece of jewelry is sensual, romantic, seductive. Why do we feel like we’re purchasing expensive light bulbs instead of a circlet of dazzling diamonds? We can learn a lot from the bazaars and the souks in the Mideast.

Two of the most magical places in luxury retail are the Gold Souk in Dubai and the jewelry section of the Grand Bazaar in Istanbul. The window displays are opulent. There is nothing restrained about the presentation, unlike the minimalist Tiffany windows or vitrines at Bulgari. These Middle Eastern bazaars are the meeting grounds of testosterone and estrogen, resulting in a unique mercantile representation of desire. There is a sheer physical smell of the power to buy here, and there is a visceral joy in being the retail host for luxury and craftsmanship. Contrary to Western stealth wealth, the souks exhibit a certain sensuality; part dress-up, part princess-complex; and an explosion of both insatiability and satisfaction. The whole experience is wrapped up in life’s emotional punctuation marks. Acquisitions from the bazaars celebrate milestones, even those as simple as adding another gold bangle to the collection for no reason at all other than the ability to do so. [Read more...]

Goldman Sachs 21st Annual Global Retail Conference Key Takeaways

The traditional September back-to-work event for investors, marking the end of the summer lull (after a hectic wrap up to Q2 earnings in August and prognosticating about the back-to-school selling season) is the Goldman Sachs annual conference. This two-day affair is chock full of investor presentations and Q&As with 50+ public companies, private equity investors and the GS team. There was no real breakthrough news at the event, and our stalwart retail leaders seem to be soldiering on working hard to create compelling customer experiences as a point of differentiation. But it’s tough out there on the retail battleground front, and omnichannel is settling in as the strategy of choice for survival.

I believe the overriding takeaway of the conference was put forth in Robin Lewis’s recent blog, The Forecast: Share Wars For Rest of 2014, that ran a week ago, which quoted Macy’s CEO, Terry Lundgren, who kicked off the conference on the first day. The blog forecasted zero growth based on Mr. Lundgren’s quote: “The rebound that we were all expecting in this year hasn’t happened. The consumer has not bounced back with the confidence that we were all looking for. And so the performance I think we had in the second quarter, and we expect to have in the second half, is going to be a continuation of what we’ve been able to do over the last several years — and that is to capture market share and get the most out of the consumers that are in our stores.” [Read more...]

Rise of the Machines

DV1035356What if you could find a new retail outlet—yet another piece of the omnichannel puzzle to enhance the in-store experience? Well, how about a vending machine?

Admittedly, it’s not the first avenue of growth that comes to mind in our high-tech, high-touch world, and not exactly the kind of impersonal customer service image that most retailers want to project. But it’s the wave of the future.

Condoms and Holy Water

The first documented vending machine showed up around 215 BC at a temple in Alexandria, Egypt. You inserted a coin in a slot at the top of the machine. Levers opened a valve and out spritzed holy water. It was designed to prevent people from taking more then they paid for and, for all you historians, an early solution to portion control and shrink. It’s been pretty much downhill from there with vending machines mostly denigrated as low-rent purveyors of cigarettes, stale chewing gum on subway platforms, and restroom condoms.

On a more personal note, I admit to having fond memories of the Coca-Cola machine at the local candy store dispensing ice-cold bottles for ten cents that cooled the body and the soul on those sweltering summer days. Or, my father tossing me a quarter during his weekly poker game in back of the hardware store to get him a pack of Luckies from “the machine.” [Read more...]

Serves Up, One Caffeine Wave at a Time

keurig2.0For big box retailers in the home business, there is no single merchandising classification they love to hate more than small electrics.

A cornerstone of the housewares business, it is – along with cookware — the workhorse of the promotional calendar, driving traffic and generally getting bodies to come into the store to the home department. It is also a train wreck when it comes to profitability. I remember talking with a new divisional merchandise manager for housewares who was downright flabbergasted by the tiny margins in the store’s small electrics business. If it weren’t for bad margins, small electrics wouldn’t have any margins at all. That said, you’re unlikely to see any of the major players in housewares retailing getting out of the category anytime soon. Like the old Woody Allen joke about the guy who thought he was a chicken, retailers need the eggs. [Read more...]