TJX Companies

Luxury Brands, Fast Fashion, Treasure Hunt, Localization, Super Value

Untouchable

tjx_1The TJX business model is not easily copied. In fact, one could make the case that the specific differentiators and advantages that have been crafted into its DNA cannot be duplicated, period. With the exception of Ross Stores, smaller and not a pure copycat, TJX Companies Inc. (T.J. Maxx, Marmaxx, Marshalls and HomeGoods) all but owns the so-called “off-price” space it dominates.

Hey, you guys in the other sectors, in the middle of the “perfect storm” of an overstored, intensely competitive retail environment, with omnipotent consumers driving you into the insanity of the retail share wars, you can only dream of being in such a position. [Read more…]

Retail’s Darkest Secret: The Knowledge Deficiency Gap

Store format redux from retail’s emerging trends in 2015 has proven that retailers are marching ever forward in this disruptive industry landscape. Big format stores are investing in smaller format editions, department stores are dabbling in specialty and online e-tailers are dipping their toes into the sea of physical stores.

However, despite all of the market research, strategic development, capital investment and operational execution of newly designed stores, retailers must not overlook brick-and-mortar retail’s darkest secret — and perhaps largest problem in general — “the knowledge deficiency gap” of associates. Customers are coming through the door armed with an arsenal of researched information on products and pricing. The hidden truth is often the customers know more about the brand, products and policies than the associates in the stores. [Read more…]

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…]

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…]

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…]

Uniqlo and Forever 21: What Are They Smoking?

UniqloForever2I don’t know if “weed” is legal yet where CEO Tadashi Yanai, (Tokyo-based Fast Retailing Company, including the Uniqlo brand), or CEO Don Chang, (Los Angeles-based Forever 21) run their companies, but maybe they’re getting delusional on some other substance.

One thing their delusions have in common is Larry Meyer. He was CFO at Forever 21 from 2001 to 2012, and then left to become CEO of Uniqlo USA. Both of his bosses gave him his marching orders to “get big fast” (to steal the Jeff Bezos line), and focus mainly on the American market. Doesn’t everybody? And getting big fast apparently means bigger stores and lots more of them. I guess in their minds, this growth logic is supposed to result in bigger revenues as well.

Furthermore, and this is pure speculation on my part, perhaps Uniqlo observed Mr. Meyer’s performance at Forever 21, aggressively pushing for more and bigger stores, and believed they could use his real estate acumen to implement Mr. Tadashi’s mind-numbing growth objectives. However, Mr. Tadashi’s mind must have been a bit addled, not foreseeing that, in my opinion, Forever 21’s get big faster strategy would end up with being stuck with a ubiquitous number of stores that are bigger and less productive, resulting in a cool brand turned cold. Bye, bye young customers. Unfortunately, Mr. Tadashi and Mr. Meyer are now both racing down that same delusional growth-to-death path. [Read more…]

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…]

Millennials in the Workplace

Stocksy_txpd54be8a1J9B000_Medium_228670Maude Standish, Trends Analyst, Millennial, and Co-Founder of Tarot, tracks cultural trends and sociological back-stories of Millennials, particularly how they view and behave in the workplace in an inter-generational workforce. To put their worldview into perspective, here are the Top Five Myths About Millennials, notably held most often by Boomers—their parents!

1. Myth: They Only Want to Be Famous

Reality: Selfies aside, Millennials are building their personal brands by documenting and commenting on their lives as they live them. They actually prioritize family and friends higher than fame. They have been exposed to a world in which fame is a double-edged sword, and fleeting at best.

2. Myth: All Millennials Are Lazy

Reality: Just because it looks like they are online all the time, whatever screen of choice, they are not lazy. Millennials are on their Grind. They work long hours. They check in online vigilantly, both professionally and personally. They are constantly planning for the future. Most Millennials have a day job and are also into some entrepreneurial business they are creating on the side.

3. Myth: They All Leave After Two Years

Reality: They all leave after two years. They leave because they didn’t see a clear career pathway to the future with the company; there was no room for creativity; there was not enough flexibility in the workplace; or they were looking for a mentor and did not find one.

4. Myth: They Are Never Really Working

Reality: They draw no lines between leisure time and work time. Millennials demand balance in their lives. So for example, seamlessly alternating between Facebook and work is a way to squeeze in personal fulfillment to balance the demands of their jobs.

5. Myth: They Have No Loyalty

Reality: Millennials have trust Issues. The recession hit, their parents were losing their pension packages, and their homes were taken. If you give them reasons to trust you—benefits, mentorship, clear examples of career paths in the firm—they will become fiercely loyal.

Some Ah-Ha Insights

  • Millennials never have to leave friends behind because of social media and online connections
  • 6 out of 10 Millennial college graduates are women
  • They are fiscally conservative because they did everything they were told, but then few jobs were available to them when they graduated, and as a result they have trust issues.
  • They are not lazy and entitled, but rather they want to be rewarded for their Grind.
  • There are more Millennials than Baby Boomers.
  • No one, no matter how old, likes to be told “you have to do it this way…”
  • The reason most Millennials think and act the way they do is because they’re YOUNG! They think and act just the way everyone else did at the same age.
  • Headphones now are replacing office doors.

Sleepless Nights

mattress isolated on the whiteI am not sure about where you live, but around here in southeastern Pennsylvania, it seems like wherever I drive, I am never far away from a mattress store, and a discount one at that.

It makes me wonder how these stores can keep their lights on. Can there really be that many people in this community of half a million that, give or take, need a new bed? I don’t have the answer for the mushrooming growth of retail banks, but do I understand Americans have been buying mattresses in record numbers making the mattress category the fastest growing segment in the $164.4 billion home furnishings business in 2012, according to HFN’s State of the Industry report. In 2013, the mattress segment posted slower but still good growth to reach $9.4 billion.

Mattress Madness

Obviously Americans are sleeping better—or at least investing in record numbers in better beds. And with recent double-digit growth in the category, mattress retailers are trying to squeeze every bit of spring out of the mattress business. Sleepy’s tops out at over 900 stores, and 1800Mattress.com gives ‘showrooming’ mattress shoppers access to deep discounts for most of the leading brands. The leading television channels and even Walmart are getting in on retailing beds. [Read more…]

Competing in the New Normal

Competing_in_the_new_normalThe struggle between retail titans and industry disruptors is in the news more and more often. We are all well-versed in how companies such as Etsy and Rent the Runway, both of which were named to CNBC’s Disruptor 50 list, have successfully exploited a niche within the marketplace.

There are disruptors changing the rules of the game and titans who are reinventing themselves on a daily basis. Disruption is daring, while reinvention is daring but also extremely difficult and exhausting. Some days, pushing water uphill feels easier.

So, what is the new normal? The United States is arguably the most hyper-competitive retail market in the world. With exponential growth being seen in emerging regions like India, Brazil and especially China, the US market will continue to face oversaturation from domestic as well as international competition. Going outside US borders to seek growth is tempting.

As Mickey Drexler, CEO of J. Crew, once said, “There are too many retailers. There are too many brands. There are too many designers. There are too many discount stores, and the predator online companies are selling discount like crazy.”

What is frightening is that this oversaturation is becoming ubiquitous worldwide. As a result, a sort of depressing sameness has settled across major and medium-sized cities around the world, even in the world of fashion, which should have the highest levels of distinction in the fastest moving consumer goods category of all.

The sea change shift is that rather than simply expanding geographically—which has been the classic approach to growth—new business models are quickly evolving … because there is no other alternative.

Competing to win in the fashion market requires that companies do not go back to traditional retail basics to find solutions. Customer service, great prices, fast delivery, brand awareness, an authentic brand—these are no longer enough.  In fact, they are the tickets to entry in this fast-paced marketplace. With all the omnichannel, e-com, customer-experience hype, we seem to be forgetting one key thing—the product. Let’s be honest: what do people actually get when they buy something? Garbage, even when sold as part of an amazing customer engagement process, is still garbage.

A new paradigm is required to be innovative and sustainable. For fashion, modern companies are returning to the future, focusing on these three foundational elements:

1. Newness and Unique Design

Fast-fashion is no longer a new concept; it is a business model that has changed the fashion industry forever. Fast-fashion has pushed companies to increase the number of drops through continuous replenishment. But in a seasonless market where everyone has access to the same trend forecasts, couture and ‘street’ photos and paparazzi snapshots, designers can no longer stay within the safety zone of following ‘predicted’ trends. As a consumer, if I see variations of the same trend over and over, and retailers are running with the herd and not giving me other choices, only price becomes a strong influencer. This is really a shame because uniqueness, creativity and design can be core strategic retail benefits to customers. And even more of a shame is that the US has both easy access to technology that can elevate creativity, as well as easy access to sheer creative talent. But are we levering this access? US fashion schools offer some of the best, most balanced programs in the world, yet many foreign students come to the US to learn, and then go back home to their native countries to apply their learnings (as competitors!).

2.Fit

It’s not going away. In fact, it’s more important than ever before. With more and more companies operating on a global scale, combined with the fact that morphologies vary greatly, coming up with an optimal size range to match fit remains elusive. This is one area where technology is really helping. Virtual fitting rooms and fabric libraries simulate the look of different materials; style and fit can also be simulated, adjusted and approved before a prototype is even made. Moreover, a virtual avatar can be simulated across size ranges and morphologies to accurately capture the nuances of today’s consumer. (Plus, avatars don’t get tired, need bathroom breaks, or change size and they always show up on time!)  According to fitsme.com, online garment sales alone have an average return rate of 13%, 77% of which is due to bad fit. This represents a massive potential impact on immediate sales as well as long-term brand loyalty.

3. Supply Chain

The supply chain is becoming the product engine. Brands, retailers and manufacturers are all rethinking their strategies to determine if greater vertical integration and proximity sourcing make sense for them. This can be seen especially in China and Mexico where traditional manufacturers are now developing their own brands. A lean approach to fashion development and manufacturing is an excellent opportunity to reduce cost, reduce time to market and boost innovation. Companies can gain greater control over the product itself, how it is developed, when it is available, and its price.

Three fundamental strategies: design, fit and the supply chain. Focusing on these key elements is critical for both disruptors and titans. Such is the opportunity and the new normal – and it’s there for the taking.

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…]