Dear Doug – An Open Letter to Doug McMillon, the New President & CEO of Walmart


By now you’ve been in the corner cubicle in beautiful downtown Bentonville for a few weeks, so congratulations on being only the fifth president in the history of Walmart. It’s a big job, running the largest retailer — hell, the largest anything — in the world and you’ve got millions of employees and billions of customers depending on you to do a good job.

No pressure, really.

But you also sit in perhaps the most revered seat in American retailing, the one once occupied by Mr. Sam himself, the man whose name is over the front door, the guy who put most of the stores in the United States out of business, and the hovering spirit who continues to both inspire and haunt everything and everybody at Walmart. But Doug, you and Sam Walton also have one other thing in common: you’re the only merchants ever to run Walmart.

And therein lies the greatest hope for a very troubled company. You see Doug, as you know better than anybody, Walmart is not quite what it seems to be. You know how certain businesses appear to be one thing and are actually another? Like movie theaters fronting as places to show films when in fact they are giant popcorn and snack emporiums? Or furniture stores appearing to be selling couches and credenzas when they are really finance companies charging usury rates that would embarrass organized crime? [Read more...]

Moneyball for Retail

YG_moneyball_FINAL imageThere’s a new way to grow profits and hit it out of the park with consumers, employees and shareholders. It’s “Moneyball for Retail” – finding market inefficiencies to gain a competitive advantage.

In Major League Baseball, team owners want to win games. In retail, executives want to grow sales and profits. Both want to achieve these goals without breaking the bank, and the best-managed franchises in each have one fundamental principle in common: identify, develop, and reward the right players.

Whether baseball teams are winning or not, their ongoing costs continue to escalate. To keep the franchise operating at a high level, management needs to be aware that the most expensive players aren’t always the best fit for the team. The same holds for retail stores: operational costs are escalating regardless of store success, and executives need to schedule the right people in the right places to generate profits with the fewest additional costs.

And just as iconic baseball dynasties have come and gone, so have seemingly invincible retail giants. The survivors are the ones that continue to win. [Read more...]

Amazing Macy’s

Robin-Macys-illo_Rd5Not Just a Miracle – Not Just a Department Store

While JC Penney, Kohl’s and Target struggle to regain their “mojo,” or better put, to save their butts, Macy’s seems to be mojo-fueled and on a trajectory to be the last man standing. Or, are they simply stealing sales away from their befuddled competitors? The answer is a mixture of both.

The Macy’s on 34th Street today, is no miracle, nor are its recent positive (albeit aligned with a weak economy) financial results. It’s just the result of the strategic vision and methodical, complex tactical implementation of CEO Terry Lundgren and his five-star team. The store is a shopper’s delight, an audio-visual stimulating experience, one special event after another, “Black Friday,” and Christmas energy every day. Their many exclusive brands are showcased in a boutique-like shopping environment, and it’s obvious that Macy’s has evolved its brands and experience for the Millennial generation, soon to be the primary consumer segment. Over time, I expect Macy’s will spread the miracle across most of their roughly 800 doors.

Department Stores’ Last Man Standing or a Different Model?

If not “the last man standing” among department stores (an apt reference to Gary Cooper in the classic film, High Noon), Macy’s clearly created a differentiated national brand that they dominate. In a retail industry that I expect will struggle for growth between 2% to 3%, at best, for years to come, in which discounting is the weapon of necessity (Macy’s included), Macy’s is outpacing the pack with its “My Macy’s” localization strategy and ongoing pursuit of a seamlessly integrated omnichannel; plus “Magic Macy’s” elevated consumer service (including new augmented reality technology), as well as its continual focus on the “experience.”

In fact, I wish they would stop calling their business model a department store. I believe that sometime in the not too distant future the terms “wholesale” and “retail” will cease to exist as relics of the past, defining business models that are ceasing to exist. And, the classic “department store” definition will become irrelevant as well.

In the second edition, of our updated book, The New Rules of Retail, (due to be released in August), we redefine retailing into three sectors: “Omni-Brand to Consumer,” Commoditization,” and “Liquidation.” The Omni-Brand to Consumer sector is best positioned strategically for maximum competitive advantage and profitable growth.

The business models in this sector are destination brands, not nameplates. These brands are highly differentiated, including unique, mentally indelible experiences. Ultimately the brand is the creator of the largest percentage of all products and services sold (if not, they exercise dominant control). These brands will then control the distribution of its goods, including the experience, on all relevant distribution platforms, seamlessly integrated, from creation to consumption.

As Macy’s continues to evolve, in my opinion, they will begin to look like the poster child of this newly defined Omni-Brand to Consumer sector.

The Future is Now

I refer back to some quotes from an article I wrote for The Robin Report in 2011 to give context to Macy’s evolution. At the time, Lundgren commented that the massive $400 million expansion and restoration that Macy’s was undergoing, would create “a modern, customer-centric shopping experience” to reflect “how a new generation of customers prefers to shop.” His next statement was the one that really caught my attention. He said, “In many cases, product will be organized by lifestyle to help customers create looks and build wardrobes across categories.”

The significance of that last statement might have gone unnoticed by many. But Lundgren’s commitment to this lifestyle aspect of the shopping experience could well have been the first “shot across the bow” of the branded apparel specialty chains, most of which have used this same strategy to steal apparel share from department stores.

I have long speculated that if the big stores could begin to organize their products and services around lifestyle it could actually provide them a huge competitive advantage, because they already trump the branded specialists with the breadth of their selection. This merchandising reorganization speaks to an easier, more convenient shopping experience without having to traverse the maze of departments and floors.

Finally, I could not sign off in that article without offering up what could be the severest blow to the branded specialists, which would be department stores rolling out their private or exclusive brands as branded specialty chains. While Macy’s did so with their Aeropostale brand several years ago without great success, I believe it was simply ahead of its time.

How About Macy’s Mini-Mall?

So what might brand-Macy’s look like fully evolved? As I said back in 2011, Macy’s would resemble more of an enclosed mini-mall, full of go-to events, cafes, restaurants, and a collection of small, branded lifestyle shops that would be leased and run by the brand, which by the way, Mr. Lundgren was recently quoted in WWD declaring he’s “all in” and “I’m a believer” in the leased shop concept. Macy’s, the brand, would be the destination, with a mini-mall full of experiences so compelling that consumers would leave the Internet or any other store that just sells stuff.

One thing I am sure of is that even though many of Macy’s initiatives will result in echoes of its origins as a kind of a grand palace, the future is now for the department store sector. Macy’s is certainly providing a roadmap for transforming the department store into a more relevant 21st century model, defined by us as the Omni-Brand to Consumer model.

And, at the end of the day, they can call the model whatever they want, as long as consumers connect with it the moment they hear it.

How about, well … Macy’s?

Who Are the HENRYs and Why Are They Important to You?

Pam charts Rd2After a lot of retailer nail biting this past December, the Department of Commerce has reported the numbers and, all in all, the sales year didn’t turn out as badly as expected. So while we sigh with relief, nobody reading the news or talking with consumers is delusional enough to think that retail is out of the woods yet. Consumers remain extremely cautious about spending; the average US household’s income is currently $71,274, down more than $4,500 from its high in 2006 of $75,810. The reality of this extended post-recession period is that the American middle class has lost much of its spending power, leaving retailers that have traditionally targeted this customer holding the bag and needing to find new consumer segments for growth.

If the middle-income customer is scarce, the logical place for retailers to look for new customers is one step up the income ladder: the affluent, which are defined as the top 20% of US households based on income which starts at around $100,000. With nearly 125 million American households in total, the affluent segment numbers just under 25 million households. In most any spending category, the affluent top 20% account for about 40% of total consumer spending, according to the Bureau of Labor Statistics Consumer Expenditure Survey. That means the absolute spending power of the affluent household is twice as big as the average middle class spend.

Of course, all affluent households aren’t created equally in spending power either, with the top 2%, or the ultra-affluents, roughly 2.5 million households (incomes starting at about $250,000) with much more discretionary income. But between the ultras and the middle-income consumer segments, there is an often overlooked group that, quoting Rodney Dangerfield, ‘gets no respect’ – the lower-income affluents or HENRYs (High Earners Not Rich Yet). These are the new mass-market affluents with incomes $100,000 to $249,999 and they number about 22.5 million households.

Tale of the Tape –The receipt tape, that is.

Every three months my company,Unity Marketing, surveys 1,200+ affluent consumers who recently purchased any high-end or luxury goods or services in 21 different categories, including home goods such as furniture and major appliances; experiential services such as travel and dining; and personal items such as fashion, jewelry, and beauty. In that survey, data is collected about those recent purchases including how much people spent. [Read more...]

The Power of One

shutterstock_93965347Consumer Insights from MasterCard Advisors

The digital age has brought a shift in power from retailers to consumers unlike anything known before. Each consumer is now a market segment of one. Within the next five years every retailer will learn to win consumer business and sustain loyalty by understanding behavior as it’s reflected in what consumers buy, the experiences they covet, the networks they leverage and their attitudes regarding data usage, price and convenience.

The year is 2020. Isabel, a 35-year-old professional, opens her tablet. First stop is her home screen, from which she controls her universe. She has her favorite brands, her product wish list with the prices she’s prepared to pay (information she has shared with those same favorite brands) and an easy-to-manage dashboard defining what the outside world sees about her. Certain brands she trusts enough to share quite a lot about herself. These favorites, of course, know the most about Isabel, so that she can get exactly what she wants from them. [Read more...]

CVS: Blowing Smoke? Or Truly Concerned for our Health?

Judy-CVS_FINAL-imageI resent the fact that I can’t walk down a street in New York City without breathing in a potentially lethal amount of second-hand smoke. So imagine my satisfaction when, on February 5, CVS announced it was going to cease selling tobacco products at its 7,600 stores by October 1.

CVS Loses a Loyal Customer

I became a CVS customer about 30 years ago. I found the stores conveniently located, bright, clean, and easy to shop. The product assortment was excellent and well-priced, and the ExtraCare loyalty program, of which I was a charter member, was terrific. I started shopping there for my prescription and over-the-counter medications, health and beauty aids, and vitamins, eventually expanding to cereal, juice, sundries, holiday candy, and school supplies. As the years went on, I did a greater portion of our family shopping there, and each quarter I would receive a generous coupon of “extra bucks” — free money to spend in the store. [Read more...]

Innovation and Prosperity: A Primer on Private Brand Fragrance Development

shutterstock_115177768Why aren’t more retailers getting into the private brand fragrance game?

In the fashion retail marketplace, developing your own private fragrance brand, especially for specialty apparel chains, is a powerful way to take share from larger multi-brand stores. The single brand strategy resonates so well with consumers today, from Millennials to Baby Boomers, at all levels of the marketplace — from mainstream to luxury. Multi-brand retailers can use private or exclusive brand fragrance to enhance their businesses. These proprietary brands reinforce uniqueness; can be used as promotional tools, gifts-with-purchase, or other innovative marketing techniques.

For retailers who have the will and the vision, the development of private brand fragrance products represent an opportunity for significant financial gains combined with the strategic leverage of merchandising exclusive, compelling products. This is a wonderful opportunity to showcase the creativity, imagination and innovation of your company – - just what is necessary today to differentiate yourself and be successful in the retail space. While nothing is ever guaranteed (and especially not in retail), the development of private brand fragrances can potentially lead to tens of millions of retail profits. [Read more...]

We’re Talking Tech

Lectra-3DWe think Nick Graham, co-founder of Joe Boxer, is a rock star. “The brand is the amusement park, the product is the souvenir,” he says. Well, we are in line to buy both tickets and souvenirs!

You can’t forget about the product! But how do you create a better product? It takes a good team and a good process, and technology has to be the backbone.

Technology is taking the fashion and retail world by storm, transforming the way we work in the design room, during production and at the point of sale.

Technology for design and pattern development is a good place to start but technology can’t compensate for a bad process. In fact, it only makes it worse! But a good process, one that marries retail, design and production from the beginning, for example, can take you from just an “okay” product to a fantastic one that both your customers and you love. One that fits and looks great, but also meets cost and time objectives. [Read more...]

Three Strikes and He’s Out!

FINAL-target-imageStrike One

Spotty performance going into the recession and poor performance coming out.

Target Stores and its web business have been poorly positioned from a merchandise trend and strategic standpoint, and stores have been inexplicably and chronically poorly stocked. Empty shelves in a 200,000+ square foot discount store are as unappealing as dining in an empty restaurant. Frankly, it’s been a very long time since Target exhibited the “mojo” that successfully differentiated it from their competition.

Once upon a time Target was a hotbed of trend and value. Every endcap at the head or foot of every aisle used to tell an interesting story of fashion or value. And the stories were woven into a tapestry that worked as an expression of Target, the brand. No more. Today it looks, mostly, like just a lot of disconnected stuff. Just like Walmart. [Read more...]

Sales Force Transparency: You May Have an Olympian and Not Even Know It!

salesforceBy the time you’re reading this article, the 2014 Sochi Winter Olympics committee will have awarded its last trio of medals. The athletes will have boarded planes back to their respective home countries, and only the elite few will have cemented their places in Olympic history.

On a worldwide competitive stage like this one, the difference between immortality and obscurity is often a matter of microseconds. Events are won or lost by hundredths of a percentage point. And the single factor that separates the winners from the losers is precise and consistent measurement. Without it, the whole system falls apart at the seams.

So what does this have to do with retail? [Read more...]

Millennials: Double Trouble for Retail

Robin Millenials_FINAL imageFor those of you out there who think the Millennials are the “next big thing” for your business, think again. They may not be as big as you had hoped. And for the likes of the three “As,” (A&F, American Eagle Outfitters and Aeropostale), and others who primarily target this cohort, you better start strategically repositioning your brands and your messaging to adapt to the “double trouble” of dying malls (which used to be huge teen hangout destinations) and Millennial shopping behavior, which is shop-until-you-drop…but don’t buy.

As I pointed out in my recent article The Great Retail Demassification, there are several reasons mall traffic is suffering, directly impacting store traffic, particularly in the B and C malls:

  • Every store in the world is literally in Millennials’ pockets; they can hang out with their friends, sip lattes and shop online – all at the same time. So why spend all the time and effort traveling to, and traipsing through, big, old, largely boring malls with a limited number of cool stores that don’t offer any great experience in the first place? [Read more...]

Made Up in the USA

Made In The USAWhen Walmart announced last year it was going to launch a major push on domestically-made products—helping to fund some of the suppliers, in fact – it set off a jingoistic feeding frenzy.

All of a sudden everybody and his shopping brother was envisioning a plethora of product produced right here in the good old U.S. of A. Politicians jumped on the bandwagon, of course, visions of full employment and happy voters in their heads.

It was a wonderful story. And it would have been even more wonderful if it were actually true.

Because any discussion of wide-scale manufacturing returning to the United States needs to be put into context…and reality First off, this isn’t Walmart’s first manufacturing renaissance rodeo. Way back in the days of Mr. Sam, Made in the USA banners hung proudly in virtually every store the company owned. Many went so far as to single out exactly where the products were made, highlighting those in the immediate proximity of individual stores. [Read more...]