A Tale of Two Malls

Paco6Fifty meters off Nanking Road in Shanghai, behind the Apple Store, you still have remnants of the early 20th century city. The alleys are narrow and you can stare into homes lit with cold fluorescent lights. The dirt, the smells, the noise and the life are visceral. Although it isn’t the dark side of the moon, the impulse is not to linger. It isn’t from a sense of danger, but rather the dawning realization that you are an alien – a stranger in a strange land. It’s an unsettling time warp, where in the space of a few dozen paces, the 21st century fades and the 19th century seems just around the corner.

This juxtaposition makes Shanghai an unlikely battleground for modern luxury shopping. Each year, new malls open in a very crowded marketplace with a fresh proposition. The older the mall, the more it gets pushed down-market. Commercial properties are not aging well in a city of 24 million people where construction fever floats on a bloated financial system desperate for just a modest return on their cash.

For jaded shoppers bored with last year’s hot spot, the attraction is no longer about scale, but about the proposition. While it is not quite as simple as the 2013 holiday decorative stars, the 2014 goats continued to try to reinvent the retail thematic proposition. But in a mall where five years ago you had to stand in line to ride the escalators, today it is startlingly vacant. [Read more…]

My View

charronThis is the first in a series of firsthand views from industry leaders on the retail landscape, careers, personal insights, and the future of retail.

How did you get into the business?

Executives at VF Corporation, CEO Larry Pugh and COO Rob Gregory, decided to take a chance on an individual (me) with extensive experience in Consumer Packaged Goods (CPG) but only limited experience in soft goods. During the years at Liz Claiborne, many observers took note of my CPG experience. Very few, however, credited the success we were able to enjoy to these foundational experiences at VF.

Who has been your greatest influence/mentor?

[Read more…]

Urban Legend

Stocksy_txp50011d0dXEG000_Medium_456973_2For more than four decades, Urban Outfitters Inc.’s namesake brand has been a favorite among hip young adults in search of edgy products and a cool place to hang out. Though its brand ethos is the envy of many in the apparel world, sales have until recently been on the decline, and the company has had to face the fact that having customers spend more time chilling in its stores doesn’t necessarily increase sales. So what’s an iconic brand to do?

Urban Decay

At the new Urban Outfitters store in Herald Square, steps from the Macy’s flagship at the southernmost edge of New York’s historic garment district, two 20-something women with multiple tattoos and pink ponytails fondled a fur-trimmed suede coat priced at $248. “I love it,” said one, holding the coat up in front of a full-length mirror. “I just don’t know if I love it enough.” [Read more…]

Journey of the Chosen Ones – JNCO Jeans Are Coming Back

JNCOOr if you don’t like that original acronym, JNCO (Jean Company), it also now stands for “Judge None, Choose One.” I’m not sure I get either one of those lines, but, then again, I’m way beyond the age of which the owners of JNCO care whether I understand them or not. Furthermore, as I’ve said before, I’m not even an amateur fashionista, so all I can do is ask questions.

What I do know is that JNCO brand ultra-baggy jeans, reaching up to 50-inch leg openings at the height of its popularity in the 1990s, is making a comeback this fall. Along with new styles and designs for cargo pants, T-shirts, plaids and “joggers,” which are a cross between jeans and jogging pants, JNCO (still headquartered in LA) will re-launch its “heritage” brand of baggy jeans. So the first question I must ask is what does that mean for skinny jeans? While they are not creating 50 inch leg openings, its re-launched signature jeans will feature openings of 20-23 inches. [Read more…]

What is “Disruptive Innovation” Supposed to Mean?

hockingThe IGD’s recent London conference focused on “disruptive innovation.” The organizers brought together industry heavyweights from both retail and brands; several spoke, and all claimed the new reality of business was a universe of shoppers who expected low prices. Let’s call their view “the problem.”

These speakers were then followed by others, mainly suppliers, who presented various forms of technology ranging from Google Glass to 3D food printers, with much of the application of this so-called disruption really centred on being “new” rather than being beneficial to shoppers. Let’s call their tech toys “the solution.”

The whole thing felt to me like an endorsement of that classic phrase, “Just because you can doesn’t mean you should.” Here was a case where the problem was underestimated and the solution overestimated.

Shoppers seek low-price in the absence of additional drivers of value in what they are purchasing. The UK grocery industry isn’t suffering because of a lack of technology; it’s suffering due to a lack of disruptive innovation in the area of “stuff that matters to shoppers that’s different than from what our competitors offer.”

The tradition of much of retail, grocery in particular, is to create stores that are more like warehouses, with very little to inspire shoppers who consistently state their desire to find inspiration when they visit a grocery store. And these are people whose average repertoire includes just four recipes, yet they need to put 21 meals a week on the table. They find even less inspiration online. Grocery retail’s common solution is to streamline operations, strip out value, and claim to pass the savings onto shoppers.

But there’s a greater need that’s being overlooked.

There’s an old saying, “Low prices only rent you customers, not build loyalty.” If I were the CEO of a UK grocery retailer, I’d be asking my team to figure out what it will take beyond price (with its accompanying lousy margins) to earn the hearts and minds of their customers what some refer to as “loyalty beyond reason.”

My plea is to put away the big data, the technology, and the built-in biases that say “But that’s the way we do it” and get back to the basics by asking ourselves if what we offer matters enough to the people we count on to pay our salaries. Knowing what matters to people – truly, deeply matters – isn’t something you find on a spreadsheet and it can’t be spied through a Google Glass. It’s found by thinking like people about real human needs.

The Power Of John Fairchild

fairchildJohn Burr Fairchild, who turned a family owned bread and butter garment center trade publication, Women’s Wear Daily, into a fashion powerhouse, passed away last week at 87 years of age.

John completely understood the business of publishing. His father, Lewis Fairchild, drummed circulation, advertising and administration into him. His father had no need to school John in journalism; he had spawned an editorial genius.

Rarely has a man’s talents and interests been so perfectly synchronized with John’s innate journalistic abilities, his love for fashion and those who practiced it, as well as his incredible fashion instincts, all married to pitch perfect taste. He was, without question, simply the best fashion editor there ever was in the time, of his time, and maybe for all time. No one even came close during his reign at Women’s Wear Daily and W. And no one has come close since. Legendary Vogue Editor, Diana Vreeland, walked in the same rarified atmosphere, but lacked all of those other skills that John possessed combined with the right vehicle to exploit them.

[Read more…]

12 Symptoms of a Dying Retailer

12symptomsWe 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.

[Read more…]

Bloomingdale’s Next Chapter

Tony_SpringAn Interview With Tony Spring, CEO, Bloomingdale’s

Robin Lewis: Tony, tell our readers a little bit about yourself. Where are you from? What got you interested in the retail business, and how did your career path lead you to your current role as CEO of Bloomingdale’s?

Tony Spring: I grew up in the New York area. My father was a lawyer and my mother worked at CBS as a secretary. There was a mix of passions in our family. The message in the house was always: find something that you love to do and do it well. I was always doing something, some kind of job, whether working in my father’s law office, delivering papers, or working in a fast food restaurant. I went to the Cornell School of Hotel and Restaurant Management. I had a passion for the customer, and what hospitality meant, and how to take care of the customer. I graduated from college in 1987 and had opportunities to work for a couple of hotel chains, including Marriott, but then Bloomingdale’s came to campus to recruit. One thing that really made me want to work at Bloomingdale’s was the people, and to this day they are a key part of my love of the business. They were very competitive, but cared about you as a person. In my belly I felt “wow,” these people want to do something very special.” Campeau bought Federated one year after I joined, then there was an LBO, then cost cutting. A year and a half later I came into Central in the home goods area as a buyer of cookware and cutlery. [Read more…]

What Can Luxury Brands like Louis Vuitton Learn from Lego?

legoImportant Lessons, It Turns Out

Fast Company just published an interesting story about Lego and its Future Lab, titled “How Lego Became the Apple of Toys.” Before the recession, Lego was in serious trouble. Fast Company sets the stage:

“About a decade ago, it looked like Lego might not have much of a future at all. In 2003, the company — based in a tiny Danish village called Billund and owned by the same family that founded it before World War II — was on the verge of bankruptcy, with problems lurking within like tree rot. Faced with growing competition from video games and the Internet, and plagued by an internal fear that Lego was perceived as old-fashioned, the company had been making a series of errors.”

What Lego Did Wrong & How Lego Made It Right

[Read more…]

Fast Retailing Redux

Forget Weed, Maybe It’s Ecstasy

ecstasyA week ago, I suggested that Tadashi Yanai, President and CEO of Fast Retailing (parent of Uniqlo), must be smoking something, as he declared he would have 1000 stores opened in the U.S. by 2020. Now I read in WWD.com, which covered the company’s annual media event last week, that his aim is to reach $253 billion (yes, USD), in global sales by 2030, up from their August current year-end revenue projection of about $13 billion. His new projection for 2020 was $42 billion,which by the way, is way lower than $61 billion target I had reported that Mr. Tadashi had projected in last week’s article. So, which numbers are we to believe?

And, even with the lowered projection for 2020,does the $250 billion goal for 2030 sound like something a person with all of their marbles would throw out at such a meeting? Mr. Tadashi said, “So we are within sight of 5 trillion yen, ($42 billion) and that’s not just big talk. I think soon we have to start making big ambitions for the year 2030 as well, and if it’s the year 2030, why not 30 trillion yen ($253 billion)?” The audience laughed thinking that this must be Yanai’s type of a Japanese joke. He responded, “It’s not a joke. I believe it’s possible that we can realize this dream.” [Read more…]

When Activists Attack, Preempt!

activistsIt can happen fast, and without much provocation. It’s happened to companies from eBay to Family Dollar, Ann Taylor to Neiman Marcus, Safeway to PepsiCo. Even Apple.

Activist investors are making waves throughout the retail industry and beyond – and they will only continue to play a bigger role going forward. Understanding your company’s vulnerability to an activist and how to respond accordingly is a key ingredient to success in today’s retail environment.

Activist investors are nothing new, but they have recently broadened their scope from just trying to sell off a target company to influencing the company’s future performance through board representation, reorganization, returning capital to shareholders, changes in strategic direction, capital allocation plans and corporate governance reforms. [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…]