Walmart Can Crush Amazon

walmart-amazon-pac-man_rd.3I described Amazon a while ago, as “PacMan,” gobbling up everything in sight, including big chunks out of Walmart. Well, that’s about to change. Walmart can literally crush Amazon. Or at least it can put a lid on Jeff Bezos’ mantra: “get bigger faster.” Bezos will have to begin quantifying just what getting “big, bigger and faster” means. And it will also be the moment we’ve all been waiting for when Amazon will have to start turning a profit. At this juncture, yes, Amazon, the great disruptor, has created a new retail playing field, that they alone have been dominating.

But Walmart is finally rediscovering and reinventing the part of its DNA that disrupted the industry and created a unique new playing field half a century ago, which it alone dominated and grew to its near- $500 billion in annual sales (Amazon is pushing for $90 billion). Walmart is rediscovering its once-revered distribution genius, not just as an incremental update and improvement, but rather to reinvent it altogether. And I predict it will reinvent itself by “leapfrogging” over Amazon’s model (which still has miles to go), and will redefine what getting bigger, faster really means. Talk about a breathtaking spectacle. What does a gargantuan $500 billion, 10,000-store (worldwide – about 4500 in the US) company look like getting bigger, faster? [Read more...]

Three Dirty Little Secrets

Alexander Mcqueen London, Old Bond Street, London, W1, United Kingdom Architect:  Pentagram Alexander Mcqueen, Showroom, Pentagram, London, 2002, Overall View Of ShowroomGlobalShop, the retail design expo, had its three-day extravaganza in Las Vegas the middle of March. Like Euroshop, its continental counterpart, it is a gathering of brick-and-mortar assets: flooring and mannequin companies; fixture and signage manufacturers; point-of-purchase display companies … and more. There are receptions, cocktail parties and lunches, and lots of meetings to imbibe in adult beverages. VMSD and Design:Retail, the two trade magazines covering the industry, put aside their differences and celebrated the occasion enthusiastically. Still, however happy the gathering was, it is hard to avoid the dark clouds looming on the horizon. [Read more...]

Re-Urbanizing America

Suburban Sprawl Gives Way to the Not-So-Mean Streets of the Big City

The Great American Dream isn’t dead, but it’s certainly on life support.

Shopping street Barfüßerstrasse of Marburg, Germany.After decades of unprecedented growth, suburbia has been surpassed by the inner city. It is — if you’ll excuse an old saying from my quasi-hippie days — where the action is! And that action is attracting an incredibly broad demographic — everyone from young professionals and singles to baby boomers who don’t want to end up living in God’s waiting room.

We have already seen the beginning of an inner city building boom by retailers who want a piece of the action and are willing to embrace the idea that bigger is not necessarily better or practical. Those who are late to the party or ignore this new urbanization should have no trouble finding new careers in the healthcare or dogwalking industries.

But to understand where we’re going we have to look at where we’ve been.

“White Flight”

Most historians concede that suburban life really took off in the late 1940s and early 1950s with GIs returning after World War II. This was the beginning of the so-called “white flight” to bucolic suburban settings where the kiddies were safe, stay-at-home moms traded recipes and child rearing advice across white picket fences and all was right with the world — far from the mean streets of New York, Chicago, St. Louis and L.A.

Those left behind, however, witnessed urban decay, a descent into the heart of darkness where once-vibrant neighborhoods became ghost towns after dark, street crime proliferated, empty stores were boarded up canvases for graffiti and the scent of dinner from apartment windows was replaced by the stench of urine, garbage and despair.

I didn’t read all this in some urban history book. I lived it in New York throughout the 1970s when muggers could elude police by ducking around piles of uncollected garbage. But the pendulum, I’m happy to say, has swung in the other direction.

In places like New York, Atlanta, L.A. and points in between, we are seeing the reanimation of city life and a retail renaissance that has drawn the attention of everyone from Costco and Home Depot to Walmart and a new generation of small but competitive neighborhood stores.

The New Normal

A temporary phenomenon? I think not. I believe the financial crisis of 2008 was a major turning point — a time when the dream of home ownership became a nightmare of foreclosures or at least unattainable for younger people. If you want to add another label to your already overburdened lexicon, forget about Millennials, Gen X, or Gen Y, What we’re seeing is “Generation Rent.”

This isn’t the end of suburban sprawl. Many people still yearn for the pastoral life and the retail industry is happy to oblige. But remember the old saying that retail follows the rooftops. Increasingly, those rooftops are urban high-rises and the impact on people and business will be tremendous.

But reurbanization, gentrification or whatever you call it has its dark side. It often displaces people who have lived in some neighborhoods for generations. For instance, take the Chinatowns or other ethnic enclaves that have been fixtures in cities like New York, San Francisco and London. Young professionals and Millennials are paying rents that have forced out long time residents. Such is the price of urban renewal or, as the novelist and playwright James Baldwin called it, “Negro removal.”

On another front, legal and illegal immigrant populations — now 40 million strong across the country — are growing rapidly and moving from their traditional central-city locations to the inner suburbs or ”exurbs” in order to find affordable housing. They are creating cities within cities.

Chinese Checkers

Of course, if you want an extreme example of reurbanization gone wild just look at China. For decades, millions of people were practically ordered off the farms and into the cities to bolster the country’s insatiable demand for industrial workers. People happily obliged in order to get lucrative factory jobs that would lift them from abject poverty. Now the government is encouraging people to leave the cities for rural areas to alleviate overcrowding and re-populate the interior. It’s like Chinese checkers but with real Chinese.

Reurbanization is an economic issue here as well. Gas and commutation prices and real estate taxes are so high in some areas that you can literally save thousands of dollars annually by moving to the inner city. Besides people like the “walkability” factor and are tired of the sedentary lifestyle that requires one to own a car or two. .Additionally, the number of married Americans continues to dwindle or people are getting married later and having smaller families.

In fact, due to the above factors and lingering economic uncertainly that some call “the new normal,” the US Census Bureau and the Department of Housing and Urban Development (HUD) forecast that by 2025, only 10% of new households will have children. Put another way, only 2.6 million of the 27 million new households to be formed will have children.

Other sources have gone even further, stating that by 2025, families with children will account for only 25% of all US households. Basically, the days of cheap money, cheap mortgages, cheap gas and long-term economic stability are over. As Yale economist and Nobel Laureate Robert Shiller has noted: “the heyday of the exurbs may well be behind us.”

Foundations for Growth

I’m not sure I agree and the reasons may be of interest to retailers formulating expansion plans over the next few years. It’s the far fringe suburbs that are in jeopardy for the reasons previously stated. The exurbs, in my definition are the inner-ring suburbs — places outside of city centers but accessible by public transportation or even bike paths. I believe these areas will be the foundations that support economic growth in cities across America.

Herein lies the conundrum for retailers who have erected those monuments to consumerism called malls and supercenters. They aren’t obsolete. But how many more of these pleasure palaces can you build before reaching the saturation point or the point of no return on investment?

The entire concept of retailing needs a refresh to compete in space-starved urban environments.

Some say retailing is retailing no matter where you are. For years, the mantra was “bigger is better” But urban living means give and take — giving up space and taking less home. Trust me. In New York closet space is scarcer than a parking space.

From the retail perspective, building in a city like New York means dealing with uncompromising union rules, convoluted fire and electrical codes and erratic deliveries. Getting timely deliveries is like planning the Normandy invasion. Only Allied forces never had to deal with parking violations.

Nonetheless, retailers like Target, Walmart, Costco and others have seen the future and are focusing more closely on smaller urban formats.

Urbanization is not a fad or a simple trend. It is an inevitable, unstoppable force. Retail will follow the rooftops in the cities as they have done in the suburbs, creating new jobs and becoming one of the foundations of urban economic growth. This in turn will hopefully contribute to a stronger infrastructure and, in turn, a better quality of life for everyone.

Kind of makes you wonder. America’s Heartland may not be where you think it is.

In Search of The Future

futureThe Past is Not Prologue

I feel your pain, your anxiety, your confusion. I’m just relieved it’s yours and not mine! You are in the middle of chaos, the “Wild West,” in search of the new frontier, and a future shrouded in fog. However, two things are clear. The past will be no prologue for the transformation your business must go through; and if it fails to transform, it will surely die.

The disruptive, game-changing dynamics of the Internet, all of the new retail and supply chain enabling technologies, globalization, and over-saturated markets continue to drive unlimited and instantaneous access for whatever product or service consumers desire; whenever, wherever, however and how often they so desire. The unprecedented convergence of these dynamics of commerce and a 24/7-consumer is arguably driving the greatest transformation in retailing’s history, which will require innovation and creativity; plus fundamental new strategies and systemic change in our business models to succeed into the future.

To paraphrase Charles Dickens’ opening line in his epic Tale of Two Cities, for this revolution, we are now in the most exciting of times and the most challenging of times. [Read more...]

Delhaize’s New Way Forward – A Blueprint for Retailers?

logo_delhaize_67_cmykChanging markets and disruptive technologies have shaken many retailers to the core. Many are flailing about in all directions in hopes of chancing on a solution.

Barnes & Noble wanted to convert to a technology company, but couldn’t. JCPenney wanted to become a boutique mall, but couldn’t. Best Buy doesn’t know which way to turn.

So it goes for many retailers, including some in the food-retailing sector. Let’s take a look at one company in that industry – Delhaize. More than just about any retail company, it has tried out every conceivable model to reinvent and reinvigorate itself, but eventually decided to return to its core business. That move gave it two clear options for the future. Delhaize is an interesting case study in lessons that other retailers can learn from. [Read more...]

Opening the Door on Target’s new Threshold

Robin_Report_Sep2013_stock4Perhaps the Dayton family should have come up with another name for its discount department store start-up back in 1962 if it wasn’t prepared for the inevitable – and as-it-turns-out endless – questions raised by retail observers, competitors, suppliers and, oh yes, customers, about whether the store was on Target, had missed the Target, or otherwise was involved in some Target-related activity.

Be that as it may, those are valid questions to ask, more so than ever when it comes to the country’s second-biggest general merchandise retailer’s home furnishings offerings and its new marquee program called Threshold. Officially rolled-out this past spring after some soft teases over the prior months, Threshold is the single-largest private label program Target has ever introduced, and is no doubt being counted on to carry much of the merchandising load for the retailer in the months and years ahead. [Read more...]

Store Employees’ Roles Need to Change…and Change Begins with Leadership

Robin_Report_Sep2013_stock12Why do customers visit brick-and-mortar stores when it is often easier and cheaper to buy online?

It’s obvious…because consumers want to see and touch the product, experience the brand, interact with people with the hope of solving a problem, or simply to feel better. For brick-and-mortar retailers, this in-store customer experience IS the competitive advantage. So why don’t front-line employees seem to know this? Why don’t they have the urgency and skills to make shopping experiences consistently good? Creating a consistent ‘performance improvement culture’ IS within the reach of most retailers…IF they take the right steps!

From my perspective, answering these questions starts at the top. Progressive retail executives realize it is no longer enough for store employees to simply complete tasks and operate stores. They know they need to get more from their large annual labor investments. They know it is no longer enough if employees only ‘fluff and puff’…they must also interact with customers to positively impact the in-store experience and drive sales. But how? [Read more...]

LIDL Defies Odds, Thinks America

Robin_Report_Sep2013_stock7Are they Nuts?

Could it be that that Lidl executives have taken leave of their senses? Maybe so. They’ve announced plans to plant a large number of stores in the US, notwithstanding its overseas industry peers’ wretched record of failure in the States.

Lidl is the mammoth discount food retailer based in Germany. There can be no doubt it’s a formidable force in European food retailing. With annual revenues of roughly $80 billion and about 10,000 stores in more than 20 countries in both Eastern and Western Europe, it’s probably the largest pan-European food retailer of all.

Yet, the failure of other European food retailers in the US surely must give Lidi executives pause. The most recent downfall came when UK-based Tesco threw in the towel and decided to cut short its five-year-old bid to establish its Fresh & Easy format in the western US. Tesco lost in excess of $3 billion in startup and operating losses. Tesco isn’t alone. Other European operators have tried to enter the US without any success. They include Carrefour, Auchan, Leclerc and 3 Guys. All are long gone. [Read more...]

Unintended Consequences: The Price Race to the Bottom

mysupermarketConventional supermarket retailers can’t catch a break — even sometimes.

Conventional operators — Kroger, Safeway and the like — face a vast array of competition developing on all sides. That includes food purveyors such as deep discounters, mass merchants, membership clubs and restaurants, just to cite a few. Competition is always evolving with new strategies and new players, but one constant is that shoppers demand good value for low prices, and are quick to change stores if they think that’s not happening.

Regrettably for supermarkets, the battle for the low-price prize isn’t in their favor, and not just because of increased competition. The looming threat is really information: thanks to increasingly sophisticated online price-comparison websites and mobile apps, it’s getting easier for shoppers to take a look at several retailers’ price lineups before leaving home, or while in the supermarket.

Up to now, most online services compared prices among competing supermarkets in a defined geographical area so shoppers could make a convenient shopping choice or decide to patronize more than one local store in their quest for low prices. [Read more...]

Elastic Pricing: Beyond Dynamic

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Hardly a day goes by without an article or discussion about “dynamic pricing.” By now, we all know that dynamic pricing refers to the ability to present prices to specific consumers at certain times based on their behavior, or in response to pricing actions undertaken by competitors. Today, it is primarily a tool for driving higher conversion rates for e-commerce sites.

The ability to present specific offers and messages to individuals was foreshadowed in the 2002 Tom Cruise sci-fi thriller Minority Report. In the movie, technology enables the government to predict when an individual is about to commit a crime based on externally observed tendencies. Digital signs with facial recognition identify individuals and present them with targeted messages. The premise is that the application of a predictive model to observable behavior can accurately forecast future events.

Now some of this has become a reality. If you leave an item in your shopping cart, some online retailers will present you with a discount after a certain period of time. Technology can let retailers scan the web for competitor prices and reduce prices in nanoseconds in order to remain competitive. [Read more...]

Caracas Lost Dreams

The Robin ReportI noted more than a few binoculars focused this morning on the military airfield outside my Caracas hotel. It’s likely they were searching the ground for evidence of the military coup I heard whispers about last night in the hotel bar; but who knows in Caracas. Even the journalist interviewing me this morning made reference to the challenges of living in a Communist country; Venezuela is in midst of crisis. The recently botched election recalls the passionate controversy of George Bush’s results in Florida in 2004, except it’s unimaginably worse.

In 2013, I can’t think of a well-grounded leftist intellectual that can defend actualization of the Karl Marx syndrome we witnessed in the 20th Century. Russia, the former Soviet Republics, and Eastern Europe have all moved on. By most gauges, shedding this ideology has brought improvement and positive change. Poland grew faster last year than any other nation in Europe, which in the midst of our recession may not be saying much, but still says a lot. Of the three Asian remnants of Communist ideology, China and Vietnam have cherry-picked through Das Kapital and added doses of Confucian and Keynesian economics to craft some semblance of prosperity. North Korea has abandoned all logical thought; the only question is how much of the rest of the world they intend to take with them when they go.

Yet dear reader, this is a newsletter about retail, so here is our thread. In my trip to the supermarket in Caracas this afternoon, there was no coffee of any variety on the shelf, and the reek of rotting meat was stomach turning. People wait in long disorganized lines for basic food supplies. We are witness to the tragedy of governmental pricing control for food; Venezuela has gone from an exporter of food to an importer over the course of its Chavezian transformation. Today, much of its basic food needs are imported from the United States.

My economist colleagues predict that global food prices will increase country by country by 10% to 20% over the next year. While the precise number is anyone’s guess, it’s a fact that food costs are increasing by at least twice the rate that global wages increase. How are we going to continue to feed ourselves?

The answer, in part, rests in the world of retail where for almost 30 years we have watched a concerted effort to engineer both value and fair profits from the supply chain. From growing, to trucking, to minimizing waste and mechanizing the modern warehouse, the degree to which the increased costs of basic food commodities have been passed on to the consumer have been limited for us living in First World nations. Thank Walmart, Tesco and Auchan; but also thank the farmers markets, the slow food movement, and the advent of local community-supported agriculture (CSA) organizations.

At both ends of the First World retail spectrum, we are watching innovation and reinvention driven by competition and local entrepreneurship. At best, we ask government to get out of the way. We’d rather have the local farmers market manager certify a farmer’s products than the FDA, although we need to embrace both in the flawed, but preferable, world of Capitalism.

Journalists keep asking me –- whether it’s here or in Shanghai —how are we going to feed ourselves in the next five years, both from the standpoint of cost and safety? My answer is always the same: Price controls are not the answer, but organized retail can, and will, do its part. The process takes time, but it does work. The places that will feel the most pain over the five years are those where global organized retail is not playing a transformational role in a local economy. India is a prime example. Open markets provide incentive and examples for local merchant organizations to do it often better and faster. They provide farmers with stable prices, drastically cut down on spoilage, and most importantly, help get their offerings on dinner tables everywhere while making a profit.

When I arrived at Simón Bolívar International, I was expecting a sturdy intelligence officer with a serious face to meet me at passport control. I did not expect the smiling young woman with braces that giggled when I presented my thick, well-worn passport. She greeted me warmly after a long flight, stamped my passport and let me pass, welcoming me to her country. She deserves better.

Thinking Beyond the Box

250px-Incredible_UniverseThe Incredible Universe was…well, pretty incredible. There was no store like it ever before – and there’s not likely to be one like it ever again.

For those of you who have gone through retail remembrance reprogramming, a quick history lesson: During the 1990s, which in hindsight represented the full-tilt zenith of big box retailing, superstore chains were exploding. Be it home improvement, home furnishings, computers or consumer electronics, big boxes were multiplying at geometric proportions.

And the biggest box of them all was Incredible Universe, which was a dramatic new retail platform from the folks who ran some of the smallest boxes out there, Radio Shack. Current management at the time – who can remember back that far – decided to out-box everyone else out there and go for broke. The first Incredible Universe opened just off Old Country Road in Westbury on New York’s Long Island, which with the exception of Paramus, New Jersey and Schaumburg, Illinois, is about the most concentrated retail location in the country.

The store was well over 150,000-square feet, if memory serves me well, and featured just about every conceivable product with a plug that existed at the time. And considering this was well before iWhatevers, that was a whole lot of TVs, stereos and toasters. Every shopper got a personal identity card that promised all sorts of digital delights. There were salespeople in snappy uniforms as far as the eye could see. It truly was incredible.

It was also way, way too much. Shoppers were overwhelmed and they ended up underbuying. The Universe as we knew it soon failed to exist.

Fast forward a couple of retail generations to today’s reigning – by process of elimination, it has to be noted – big box player in consumer electronics retailing: Best Buy. We’re not here to go through all of Best Buy’s problems. Frankly, the Robin Report website doesn’t have that much bandwidth. But among the leading issues the retailer faces is that its physical stores are just too big. Talk to anybody who follows retailing and they’ll tell you that the problems of too many stores in the country is only matched by the problem of too-big stores.

And Best Buy has got it the worst. Unlike a Home Depot or a Lowes, which need those tens of thousands of square feet of space for tools and aluminum siding, Best Buy has more space than it knows what to do with. Let’s face it, nobody has bought a CD or DVD in a store since the Bush administration. So, as Best Buy was on the leading edge of the big box movement it may also be in the forefront of the next trend in superstore retailing: Not-So-Big Boxes.
Yes, the DIY twins need that floor space, but does Bed Bath & Beyond or Staples or Office Max require stores that large? What about giant furniture stores like Rooms To Go or Raymour & Flanigan? And does it end there? What about off-pricers like the MarMaxx group? What about supermarket? And ultimately, what about the biggest big boxes of them all, Walmart and Target?

If, as some people predict, anywhere from 30% to 50% of general merchandise sales will eventually be done online, does that mean we are in the final stages of Big Box retailing? Does it mean that, in the end, the big box will be outdone by the small carton?

Warren Shoulberg is editorial director for several Sandow Media home furnishings business publications and is glad he was there for the big box era.