Ghost Malls: Creative Destruction

ghostmallsIn 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…]

An App For Hugging? Never, Ever at Mitchells

mitchellThere should be a Master’s degree in customer engagement (MCE) obtainable from Harvard or any of the other top-tiered universities. It should be as revered and valued as an MBA, including comparable compensation.  And every retail associate or associate wannabe, for both online and off, should be required to obtain that degree. Why? Because it is the most critically important job in retail, even more important than all the hotshot jobs in the C-suite. I use the word engagement, rather than service, because readers’ eyes tend to glaze over upon reading about customer service, a term they have become desensitized to because of its redundant over-use. Plus it has become a “paying-lip-service” term for too many retailers.

In fact, the MCE curriculum could be copied right out of Jack Mitchell’s revised and updated book: “Hug Your Customers,” published by Hachette Books, on sale today. For readers who are not aware of Mitchells Family of Stores, they are a group of five upscale designer and luxury goods stores (Mitchells, Richards, Marshs and two Wilkes Bashford stores) that have total annual revenues north of $125 million and growing. While there are a few other retailers with notably high levels of customer engagement (Nordstrom for sure), Mitchells is legendary for their over-the-top personalized connectivity with each and every customer, starting from day one in 1958 when they were founded. [Read more…]

Soar Wars

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…]

The Secret Sauce to Jumpstart Retail Sales

SECRET_SAUCEThe Census Department has started to release data from its five-year Economic Census that does a deep dive into all aspects of the US economy, including 12 sectors of retail. What’s important about the latest Economic Census is that it gives us the ability to study and learn from the pre- (2007) and post-recession (2012) retail market. While more data will be rolling out between now and 2016, here is the real story in the retail data.

Retail Hasn’t Begun to Recover From the Great Recession

Retail remains stuck in recession mode. In the 10-year period leading up to the Great Recession, retail was posting a compound annual growth rate of 4.76%; since then, retail has limped along with CAGR of 1.54% for the five-year period from 2007-2012.

Retail did a little better from 2012–2013, up some 4.2% based upon comparables from the Monthly Retail Trade Survey, but 2014 has been a complete drag, with September’s YTD report showing the GAFO (General merchandise, Apparel, Furniture & Other) retail sector up a mere 1.4%. For retailers that fill the nation’s malls, shopping centers and main streets, the GAFO number is the one to watch. From 2007-2012, the GAFO stores posted only 5.4% growth, well below retail as a whole, and from 2012-2013, they inched up only 1.5%. [Read more…]

The Case of the Missing $32 Billion

Missin-32billionMultilevel/Pyramid Marketing Schemes Lure Unsuspecting Consumers through FTC Loophole

Don’t look now, but dozens of companies, starting with Amway back in 1979, and more recently Herbalife, the supplements company being challenged as operating a pyramid scheme by activist investor Bill Ackman, have been diverting billions in sales every year away from traditional retailers across the health, beauty and general merchandise industries.

Multilevel marketing, or MLM, is a simple model that enriches those who start it at the expense of those who join later. The premise is simple, and there are few barriers to entry. A multilevel marketer pulls together a line of products, puts a brand name on it, and develops an enticing sales spiel which has, as its primary attraction, the ability, for those who make a bulk investment in these products, to profit from commissions earned when friends, neighbors, and family members become distributors, make a similar bulk investment, and recruit other friends or family members to do the same. They all will get a commission on those and all subsequent purchases that those friends and their recruits make. Everyone back up the line to the original seller gets part of the commission as well. The process creates an exponential geometric growth pattern which, in theory, would eventually encompass all potential prospects and leave later entrants no one to recruit. [Read more…]

Pirch – The “Third Place” For Kitchen and Bath Lovers

pirchWho would have thunk that hanging out in a kitchen and bath appliance store could replicate the Starbucks experience for coffee aficionados and Apple for computer lovers? Well, thunk again. Pirch, as in perching, or sort of feathering your nest in a totally fun and interactive experience, is the reason consumers will flock (pun intended) to Pirch as a “third place” to hang (work, home and Pirch). Just as Starbuck’s and Apple disrupted how coffee and computers were sold and consumed, Pirch is disrupting the appliance world with a fundamentally new and co-created experiential model.

Founded in 2009 on the vision of its CEO, Jeffrey Sears, and Chairman, Jim Stuart, their goal was to make shopping for kitchen and bath appliances “inspirational and joyful.” Originally named Fixtures Living, it was changed to Pirch in 2013, meant to more accurately suggest a perch or nest. “Perching is like feathering your nest, roosting at home. It’s a feel-good name,” said Sears in a PRNewswire article. [Read more…]

Youth Retailers Rebounding in 2015…or Not?

youth_2015_driscollWhat’s happening in the tumultuous youth market? The way youth retailers are faring reflects the typically fickle trend-sensitive nature of this market. Based on recent earnings reports, I think Aeropostale could derail this year. While their international opportunity is real and growing, they could shutter half their stores … and they wouldn’t be missed. Express? I think the outlets will help. American Eagle is the furthest along to success.

My vision for two years from today is that Abercrombie will be half its size in the U.S. and Aeropostale may be potentially shuttered in the U.S. with international franchises still generating profits. American Eagle glides into profitability and Urban improves, and then encounters the typical fashion trends risks that have been a part if its uneven history. [Read more…]

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.