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…]

Washington Crossing the Delaware on Black Friday

alpert_washingtonIt all began in Philadelphia, birthplace of innovative and uniquely American ideas and products: Philadelphia Cream Cheese (proof that God exists); Rocky I-V (more proof); and kites flying into lightning storms. Imagine, all this and more emanating from the sparkling urban jewel on the Delaware known affectionately as the City of Brotherly Love, a moniker richly deserved, given the kind and loving sports fans that inhabit this much-maligned metropolis.

Philadelphia was the site of our nation’s first capital and cradle of our revered United States Constitution.  It was here at Independence Hall where George Washington became the first General of the Continental Army, gallantly leading us into freedom from British tyranny. He was elected as our first president, and then moves the nation’s capital south to a city he named after himself. He crossed a roiling and treacherous Potomac River, standing triumphantly in the bow of that overcrowded rowboat, thus rendered in that famous painting he named after himself, Washington Crossing the Delaware on Black Friday. The painting was too big to stow in his little boat; he had a bridge built from New Jersey to New York so he could get the painting to the Met, where it still lives. Guess what he named the bridge?  Unbelievable.

As is obvious in that nautical painting, G-Dubya was taller than everybody else. We know he could not tell a lie: “I just outgrew Philadelphia, it was time to move on.” So G-Dubya moves to the new capitol and takes his football team with him, which he names after a few Native American friends (or potatoes).

But I digress. Back to Philly. Jeopardy fans there will surely know this one:

American Holidays” for, DING DING DING DING — The Daily Double!!! Contestants, you have 30 seconds for this question. What famous or infamous day in America has Philadelphia given to the world? Ben, would you like to go first? What is, Black Friday? YES!!! You win a week in Philadelphia. Betsy, as runner-up you get two weeks in Philadelphia, a wheelbarrow of South Philly cheesesteaks and all the Yuengling lager you can drink.

What’s in a Name?

In the mid-1960s, Philadelphia’s Police Department coined the name “Black Friday.” The name denoted the day after Thanksgiving, a day characterized by an overwhelming volume of traffic due to a confluence of two events: the onset of Christmas shopping madness, plus the torrential influx of West Point cadet and the Naval Academy midshipmen family and friends attending the Army-Navy game on Saturday at Franklin Field. Holy Liberty Bell, Batman! The entire police force was tasked to cover every intersection in Center City, stretching the force to the max, requiring even the Philadelphia Police Band members to pitch in. Philly’s Finest were not happy about this day and so it got its dark nickname.

Retail legend has it that most merchants make their first profit of the year on Black Friday. It was the first day of “being in the black” financially. For years, Black Friday was the spiking pinnacle of a one-day volume of sales. Black Friday pushes balance sheets into rosy American Dreamland, making CEOs, executives and stockholders feel good about themselves. But there’s also that robust lay-of-the-landscape benefit downstream. This is advanced retail capitalism at its absolute max, prompting a flash mob frenzy of shelf emptying and inventory clearing out at fast-forward pace all over this great nation. And now it’s trending abroad.

Trench Warfare

To date, there have been seven fatalities and 90 injuries at various retail stores that have attracted the Black Friday hoards of shopper mobs since 2008. Doors have been torn off their hinges as unruly crowds give way to their basest knuckle-dragging instincts. But who can blame them when flat screen TVs are going for $400? There have been shootings by male customers who have entered stores with fully loaded firearms. Black Friday lore has is that two wives get into a little tiff on the checkout line and one husband reaches for his loaded pistol, resulting in a wild chase through the mega-store, then resulting in a shooting and a death. Thankfully the shooter could buy more ammo at the store; don’t want to go home with an empty clip, now do we?  But hey, he defended the honor of his wife — and then had lots of time to think about his wife’s honor while serving a chunk of the rest of his life in prison, where it’s Black Friday every day.

Collateral damage is a decidedly negative way of expressing the downside of the phenomenon of Black Friday. Let’s just call it the creepier side of human greed and reckless disregard for one another.

Sentimentality Aside

But hey, look at the bright side.  Retailers are now spinning the Black Friday phenomenon forward or backward, depending on how you look at it. What the hell, retailers have finally gotten smart, and EUREKA, they open shop for business on the actual Thanksgiving Day. Yes!!! Huge Win!!!  Who cares about eating turkey anyway? Honestly, which is more American: a family dinnering-down with a large earth-bound bird; or flying through the malls, enjoying a day shopping together? Bonus point: at the store, the family football fans get their holiday football fix watching somebody play somebody, and then the Cowboys playing somebody else on the endless expanse of flat screens. I mean, c’mon!!!

But wait, there’s a wizard behind the curtain: Big Data! Retail data from Adobe Systems (proof of God, again) tell us that the biggest sales are no longer on Black Friday, but the Sunday before Thanksgiving. The really good news is that Black Friday is not even Black Friday anymore. Nope. It’s Black November!  Even old G-Dubya never thought of that! Just as Hurricane Sandy changed the coastline of New Jersey, the 2008 Recession changed Black Friday and spread it over the whole month of November. Let’s use the WHOLE MONTH not just that one Friday. But hold on, what about Cyber Monday? Over $2.29 billion spent on that day. That’s billion with a, ‘b,’ friend. This is what is so good about America. We really know how to make a buck!

So after the final whistle of the last football game on Thanksgiving Day, thanks to the City of Philadelphia, the Philadelphia Police Department, and the founding father himself, I will be zooming down the NJ Turnpike to Philadelphia, Black Friday – Ground Zero – Holy Grail.  I will be armed and dangerous, credit cards polished and sharpened, ready for serial swiping.

Happy Thanksgiving and be careful out there!

Memo from the Grinch: The Gas Price “Bonus” is an Empty Tank

RL_11-18-14_1Economists, experts, analysts, consultants, a lot of CEOs, casual observers and even my friend and CNBC regular Jan Kniffen believe lower gas prices are going to goose holiday retail sales. In what some call the “gas bonus,” this means that some $40 billion saved on fuel will end up being spent over the holidays in the nation’s retail stores. This is certainly a happy thought. On a CNBC panel the other day, Kniffen was almost giddy about it. And then when you add in a falling unemployment rate, followed by an increase in consumer confidence — at its highest level since 2007 — stock traders are already chilling the bubbly.

Once again, I find myself the naysayer. Let’s start with the gas theory. The Robin Report Chief Strategy Officer Judith Russell looked at the monthly change in gas prices and retail sales for the past eight years. And as indicated in the chart below, there is neither a significant bump up, nor down, in retail sales accompanying rising or falling gas prices. She even looked at regressions with different segments in retail, and found that there simply does not seem to be a correlation, period. In other words, the gas theory is an empty tank.

Having said that, Walmart had a slight increase in third quarter sales of .5%, for the first time since 2012, which they believe was partially due to lower gas prices. So, one may conclude that the entire discount sector will gain from the gas bonus, putting more cash in its lower-income consumers’ pockets. On the other hand, one might conclude, as I did, that Walmart is clawing back its customers whom they lost to the thousands of smaller neighborhood dollar stores during the recession when gas prices were high and low-income shoppers had a shorter ride to those local stores, thus saving fuel costs. In fact, Walmart said in its 3Q conference call that the Walmart Express strategy (smaller footprint convenient neighborhood stores) is beginning to facilitate their clawback of market share from the dollar stores.

Therefore, this hypothesis would suggest that rather than the gas bonus lifting total spending among low-income consumers across the entire discount sector, it’s simply shifting shares around within the sector.

Click to Enlarge

Click to Enlarge

If consumers do take their fuel savings and decide to spend them, while the discount retail sector may minimally benefit, it’s more likely they will spend more on health care and entertainment, as well as home improvement. And since income growth is flat, they could just as well decide to save the gas “bonus.” In fact, the savings rate has been ticking up.

And there was certainly no additional gas bonus spending among the mid-to-higher income consumer segments. In fact, Macy’s CFO, Karen Hoguet told analysts a week ago, “shoppers are spending more of their disposable dollars on categories we don’t sell, like cars, health care, electronics and home improvement.”

Lastly, the low overall inflation rate, even disinflation in some major merchandise categories, is allowing consumers to get more value for their money, which doesn’t result in an increase in sales, because they’re not buying more stuff per se. Consumers and particularly the growing Millennial cohort are shifting toward a “less is more” mentality, eschewing buying more stuff to seeking more experiential satisfaction out of life, which is why restaurant sales and entertainment spending are strong. And now with a strong dollar, we might see people opt to travel more often. So these dynamics, much of which has to do with a demographic and cultural shift, will also divert any part of the gas bonus that might have made its way into mainstream retailing.

The final word: dream all you want about getting your hands on a piece of the $40 billion gas bonus, but when you wake up on January 1st with a hangover, it won’t be due to the bubbly that the stock traders are currently chilling. It will be due to the fact that the dream was really a nightmare about the passing gas bonus, pun intended).