Are You a Fashion Titan or a Fashion Disrupter?

“Let’s face it, the fashion business does not attract the nation’s best and brightest…”

As told to me by one of the titans of retail, the ex-CEO of a major American brand.

Doubts about my own personal career choice aside, he was right. With a few exceptions, fashion is still somewhat a backward business. What other industry has so little pure product innovation and relies solely on fickle, fleeting consumer desires to drive business? Unfortunately for us, there are no real trends anymore, but gradual evolutions in style due to the way information is constantly leaked and diffused. Sadly, Jorgen Andersson, formerly with H+M and now CMO of Uniqlo, agrees, calling fashion and consumer culture “generic.” [Read more...]

Private Brand Primer: Five Things Not to Do When Launching a Signature Fragrance

Stocksy_txp33ce1e73JS7000_Small_35808Launching a signature fragrance is both exceptionally difficult and wonderfully exciting. It is also daunting and exhilarating. A fragrance launch is many things, but what it is not, is rocket science.

While both involve an attempt to blast off and to reach the stratosphere, the similarities end there. For example, typically no one’s life is at risk because of a fragrance launch. That being said, a promotion or even careers have been in the balance because of such a launch. Also, while there are many complex calculations that are part of a fragrance launch related to the formulations – the financial projections and logistics – none of this math even borders on aeronautical engineering or requires physics. Furthermore, a fragrance launch does not require you to deal with immutable laws of nature ­­– such as the laws of gravity or inertia.

However, having been responsible for putting numerous cologne and perfume products on the launching pad over the last several years, I have observed a few basic patterns and have acquired quite a bit of empirical data, albeit mostly anecdotal, about how to launch a signature fragrance. So here goes… [Read more...]

The Hidden Message in How Americans Spend

Consumer spending increased by 3.7% in June, the highest 12-month smoothed monthly increase in almost two years, according to data released last week by the Bureau of Economic Analysis.

This year, Americans will spend $12 trillion on stuff, slightly more than the $11.7 trillion they spent on stuff last year.

These gross numbers are pretty meaningless and hard to wrap one’s mind around, but if we look behind the big numbers at what we’re spending our money on, and how some of those expenditures are growing, it’s not only pretty interesting, but can also tell us about how optimistic we’re feeling, about our consumer preferences as a society, and where we might be headed.

When the government tracks consumer spending, it creates two major categories: goods, which are separated into durables like cars and washing machines, and nondurables like clothes and food; and services, such as private school tuition, cab fare, eating in restaurants, and going to the doctor.

What I’d like to do here, though, is to categorize them a little differently.

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Abraham Maslow (remember him from Psychology 101?) created the theory of the hierarchy of needs; simply stated that self-actualization is not possible until our basic needs are met. So, using a pyramid as a model, shelter, food and clothing (physiological needs) are the most basic needs at the base.

Fast forward to the top, creativity and artistic pursuits, are defined as self-actualization, or achieving our full potential as human beings. I’m super-simplifying here, but you get the idea. So if we look at trends in consumer spending through a redefined prism of Maslow’s hierarchy, and taking a few liberties with the climb to the top, some interesting patterns emerge. We can start with non-discretionary (need) categories like food, clothing and shelter at the base, and discretionary purchases, (more wants than needs) like restaurant dinners and new cars at the top.

So how have Americans been spending their money? And what’s behind these spending trends?

 

Level 1: Food, Clothing, Shelter (Basic Needs)

For one thing, it looks like the American Dream is alive and well, and home is still where the heart is – at least the heart of non-discretionary spending. As the chart below illustrates, spending on housing, which totaled an annualized $2 trillion as of June 2014 data, has been growing much faster than groceries and apparel, the other two key need categories, whose totals were $900 billion and $367 billion, respectively. Much of this increase has been due to tightened supplies of rental properties and energy costs, which have driven up monthly housing and utility costs, causing people to dedicate a larger share of their wallet to housing costs. Despite rock-bottom interest rates, home purchases have been about as spotty as job market recovery, resulting in an increased demand for homes to rent.

Although food prices have risen for certain categories, like meat and dairy, large supermarket chains are in a tough race for market share, which has kept inflation to a minimum and allowed consumers to take advantage of loss-leader bargains. In both apparel and groceries, showrooming has enabled price transparency across competitive retailers. As the chart shows, although spending on housing rose by 4% last month, slightly ahead of the total spending increase of 3.7%, spending on groceries rose by less than 2% and apparel spending edged up by less than 1%. In other words, Americans are spending more on housing because they have to, and taking advantage of the promotional environment in apparel and food to because they can.

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Level 2: Health and Wellbeing (Safety)

Next, let’s look at how we are spending on keeping ourselves healthy, the next level up on our redefined hierarchy of needs spending pyramid. Consumption of pharmaceuticals has skyrocketed in recent months as millions of formerly uninsured people got coverage under the Affordable Care Act and began to take medications for chronic illness and other conditions, causing windfalls for Big Pharma companies and the major drug store chains. However, spending on medical services and other forms of healthcare has grown by just over 3% as hospitals, clinics and physicians find their ability to bill patients is extremely limited under the new health care legislation. More people are going to doctors, according to CMS, the service that administers Medicare, but total spending is being offset by the declining average cost of a doctor treatment or visit. Maybe the Affordable Care Act is actually keeping health care affordable? Time will tell.

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Level 3: Quality of Life Connections (Belonging)

Next, let’s take a look at some spending categories up a little higher on the hierarchy of values: feel-good “big ticket” items. The auto industry has benefitted greatly in the past year by the unleashing of pent-up demand. During the recession, car sales declined because people decided they would just make do with their old clunkers. Once the economy started to grow again and employment and income started to recover, millions went out en masse and purchased new cars. However, that growth started to slow considerably early last year, as shown by the chart below, and then picked up again starting in February of this year. Although new car sales are strong, at an annualized $98 billion in June, they’re not growing as much as they were in early 2013, though part of that is due to tougher comparisons— that is, they’re being compared to stronger months than they were in early 2013.

Another interesting category in this realm is communication ($276 billion), which includes mobile device (smart phone) contracts, where growth is an annualized 4%, but off from the higher levels seen last year, primarily because the tablet craze has quieted considerably.

And growth in furniture and appliance spending, representing a total of $287 billion, remains sluggish despite the improved stability in the housing market. The lack of consumer interest in the category has been a source of tremendous frustration for retailers in this space. Perhaps a good bit of the softness in spending is due to the extremely competitive and promotional marketplace – prices have been declining for these products, and consumers are taking advantage of the available deals to spend less.

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Level 4: Having Fun (Esteem)

We’re approaching the top of the spending pyramid, where some of the most discretionary of the major consumer purchase categories reside, specifically entertainment. Key categories include recreational activities spending, at $450 billion, products like toys and sporting goods, at $367 billion, and spending on food outside the home, at $746 billion. Of the three, eating out is the only one with accelerating growth. In the hierarchy of needs, it reflects confidence and achievement that consumers have choice to reward themselves with a slightly more expensive option than cooking at home. And the fact that we’re spending moderately on recreation says that we’re having some fun.

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Level 5: Self-Improvement (Self Actualization)

At the pinnacle of all these spending categories are the self-actualized pursuits of spending on education and financial planning. Amazingly, it looks like these areas are growing at above-average rates; we’re actually spending more to improve our ability to succeed in the future. Education spending, at $282 billion, is one of the fastest growing categories in consumer spending (after pharmaceuticals). And not all that surprisingly, given the volatility of the financial markets, spending on financial services is growing quickly as well, at an annualized $890 million according to June 2014 figures. This data would suggest that we are optimistic about the future, interested in self-improvement and searching for, and funding, solutions.

Despite what is happening in the economy or in Washington, people are living their lives and hanging on to their dreams.

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A Hopeful Look at the US Department Store in 2014

Macy's Sign Herald Square ManhattanCreative destruction, change management, business transformation —call it what you will, but something’s underfoot in the department store channel. After decades of ceding market share to specialty formats and channel consolidation, has the worm finally turned?

In addition to economic and consumer malaise, mall traffic, and thus store traffic, is the problem. With the Internet’s 24/7 access, price transparency and free shipping, combined with a fruitless in-store search for a size, color or sales clerk, who needs a brick-and mortar-department store? It used to be a destination to see the latest trends in color and silhouette, interpreted by a bevy of national brands, and curated by retail buyers with a clear fashion sense as well as an understanding of their customer base. Nowadays, social media, Instagram and fashion bloggers are more personable than the average sales clerk. And that source of style and fashion curation is more robust. A trip to the mall has become a chore … and just so boring. [Read more...]

Is Joe Fresh Still Fresh Enough?

IMG_2103I heard good things about Joe Fresh from a friend a couple of years ago, so I visited the Madison Avenue store, which initially opened in October, 2011 as a pop-up. It was a bright, fun place in a convenient neighborhood location. I bought a cotton V-neck cardigan in orange, Joe Fresh’s signature color, for about $19. I returned several times to buy Christmas gifts that season. Joe Fresh seemed a good resource for low priced, colorful, clean looking, basics. A poorer woman’s JCrew, perhaps a bit younger, certainly much, much cheaper — decent enough quality for the price, with a teeny bit of a contemporary edge. Joe Fresh has a much narrower, more classic and basic-focused assortment than H&M, with equally low prices, and is a refreshing, lower priced alternative to the now muddy Gap.

In 2004, Loblaw’s, Canada’s largest retailer with 1000 corporate and franchised stores, serving 14 million customers weekly, reached out to Joe Mimram, the co-founder, of Club Monaco, to create a clothing line to be sold in Loblaw’s supermarkets. Loblaw’s had extensive and successful experience with private brands, including President’s Choice, the maker of the Decadent Chocolate Chip Cookie, the number-one selling cookie in Canada. But those cookies were not enough to meet the threat of Walmart’s ever expanding Canadian Supercenters. And so, a well priced, well designed clothing line for Loblaw’s made sense. Joe Fresh was launched with women’s apparel in 40 Loblaw stores in 2006 and exceeded sales expectations. Today, Joe Fresh is sold in 340 Loblaw’s stores and includes women, children and men’s clothing, shoes, accessories, cosmetics, bath and body. In 2010, Loblaw’s launched the first Joe Fresh stand-alone store in Vancouver, and there are now 16 in Canada. [Read more...]

Seeking Transparency

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Click to See Chart Full-Sized

How Sustainability Can Enhance Your Supply Chain

Has sustainability truly become part of our lexicon, or is it still just a buzzword? Today, most consumers expect products and their manufacturing processes to be sustainable; indeed, it’s part of the legacy of the original Earth Day, held more than 40 years ago. And while Millennials demand it, they’re not always willing to pay more for it. So how can the retail industry adapt?

“Research reveals price and style still top consumers’ lists of purchase drivers when shopping for apparel, though environmental-friendliness remains a draw,” says Kim Kitchings, Vice President, Corporate Strategy and Program Metrics, Cotton Incorporated. “When she buys something that looks great on her and is the right price for her budget, the item’s environmental-friendliness becomes a kind of added bonus.”

Indeed, data from the 2014 Cotton Incorporated Environment Survey support this; 98% of women say fit is the most important factor when making a clothing purchase, followed by comfort (97%), quality (95%), and price (95%). Nearly half (46%) of female consumers cited environmental-friendliness. [Read more...]

Fashion or Fitness – What’s a Portfolio Manager To Do?

Marie-Blog-image_Rd.1Apparel is considered a discretionary purchase. Really? Most would agree we have little choice as to whether or not we purchase and wear clothing, and it’s considered ‘de rigueur’ in most social settings. The array of apparel choices is truly mind-numbing and drives a $1.7 trillion global market. Options span the most basic Gildan Activewear cotton t-shirt sold by the gross to vendors for silk-screening early in the supply chain, to non-branded apparel at Walmart, to national and specialty retail brands, all the way to the rarified luxury world of a Chanel tweed jacket priced at $10,000. There is something for everyone.

Branded apparel companies (both wholesalers and specialty retailers) such as Ralph Lauren, PVH (Calvin Klein, Tommy Hilfiger, Lacoste et al.), JCrew, and Gap differentiate themselves in the market by appealing to targeted consumer segments based on age, lifestyle, and income, as well as their interpretations of prevailing fashion trends for their demographic segment. Therein lies the rub! Fashion is fleeting and supply chains are inconsistent. Balancing the tightrope of enough fashion to be relevant, while not too trendy to incur speedy obsolescence, is the fashion merchant’s Gordian knot. Imagine doing this for two to four seasons a year! [Read more...]

How Chicago Grew Its Own Fragrance

Tru Fragrance_flowersThe Second City has racked up something novel. For the first time, the city has come together to fulfill a mission of sustainability, urban beautification, and economic development through creating flower gardens specifically for use in a fine fragrance.

Tru Blooms is a fragrance initiative designed to transform Chicagoland’s green spaces into growing spaces, and cultivating flowers that are harvested and bottled into a limited edition perfume.

Capitalizing on the trends of urban farming, locally-grown produce, and the overall “farm-to-table” vibe, Tru Fragrance, based in Willowbrook (just west of Chicago), and with offices in New York and Denver, saw an opportunity to do something completely different in the perfume space.

The brand DNA was not only based on the flowers grown locally in the Windy City, but it was also infused with an artisanal touch, and defined by community and purpose. Over 60 people have been trained and employed to plant and maintain more than three acres of flowers located across the city, ranging from the high profile and highly trafficked Grant Park, to many of the small neighborhoods that Chicago is known for.

Tru Blooms is a brand based on community gardening with a perfume evoking an olfactive image of a fountain cascading with overgrown with roses. Our goal is to produce a scent that is as authentic as the spirit of the community of gardeners. [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...]

Social Networks – Flipping Traditional Marketing on its Head

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Attention all: You are no longer in control of your marketing messages.

How many times, and in how many ways, have we declared that today’s consumer has total power over all of commerce? Hundreds? Thousands? I don’t know, but certainly enough that if there are any of our readers who still don’t get it, they need a brain transplant.

Just as retail, wholesale and service business models are being driven by consumers’ shifting desires, these same dynamics are driving an equally fundamental transformation in the communications, advertising and media industries.

Permission-Based Marketing

Reflecting consumer behavioral shifts, technological advances continue to expand an infinite number of distribution platforms for communications, products and services that can literally follow, and access, individual consumers 24/7. Unfortunately for marketers, technological innovations have allowed consumers to block what they don’t want entering their “personal spaces;” and also enable people to invite or grant permission to precisely what they do welcome. [Read more...]

Globalization and Democratization Impact Fashion, Too

Chanel: Runway - Paris Fashion Week Womenswear Fall/Winter 2014-2015Just as globalization and information combined to create what Thomas Friedman aptly coined the ‘flat world,’ these transformational forces are driving the democratization of luxury. Exclusivity has been replaced with near mass availability, anywhere and anytime.  Technology and social media are potent forces in spreading the word and creating awareness that can turn into desire and demand — and ultimately sales and profits. But these new tools also undermine a core tenet of luxury: uniqueness or rareness.  When luxury becomes ubiquitous, it migrates out of an exclusive arena into the everyday, everywhere streets of fashion.  So, while opportunistic luxury brands can reap the benefits of democratization, without nimble brand management, they risk the underbelly of crass commercialism, which is guaranteed to destroy luxury’s allure.

Chanel’s Super Market

In Chanel’s fall 2014 fashion show at the Grand Palais (March 4, 2014) in Paris, Karl Lagerfeld playfully took the idea of luxury’s democratization to the extreme. Instead of transporting the viewer (those in attendance as well as the world of voyeurs watching from afar, thanks to YouTube and chanel.com) to the rarified world of haute couture, a lifestyle few women are able to participate in, Karl brought us to a world we know all too well, the big-box grocery section. He outfitted the interior of the Grand Palais into a tongue-in-cheek Chanel Super Market, replete with Chanel-branded corn flakes and dishwashing detergent. Models adorned with Chanel’s iconic pearls and tweeds wore that most democratic of footwear, sneakers. Everything in the Chanel Super Market was marked up a totally undemocratic price; in fact the signage conveyed +20%, +30%, +50%. Was Karl snickering at our mass consumption of luxury icons and the fact that Chanel has nearly doubled handbag prices in the past five years? Ha Ha — not! [Read more...]

Technology Doesn’t Change People, People Do

speed kills_FinalPardon me for using the “guns don’t kill people” metaphor. But people are now using the incredible power of technology and the Internet in ways that are disruptively changing our entire culture: some of it awesomely positive, but some of it ominously negative. The myriad of positive effects is accelerating on a daily basis, immediately recognizable as providing “better, easier, quicker, more convenient, more sustainable, more experiential” and on and on. Yet, in my opinion, there is a darker side that threatens to alter our culture in a very negative way.

Today, humans are born with a mouse in one hand and a smartphone in the other. “Digital” is the ‘D’ in our DNA. That is to say that as we evolve generationally, the importance and utility in our lives of newspapers, books, libraries, movie theaters, concert halls, designers and on and on, become irrelevant. Exaggerating a little bit, but you are getting my drift; and we are, indeed, participating in this cultural evolution whether we want to or not. [Read more...]