Bay Closes the Talent Gap

grace_gap1With the launch of the Spring 2014 lookbook in April, Gap Creative Director Rebekka Bay sets the tone of her six-month-old stewardship as Creative Director of Gap, Inc. For those of you who aren’t yet familiar with Bay, who joined Gap in October 2012, she is known for her conceptualization, development and launch of H&M brand COS (a higher end fast fashion brand).

The Logo Rioters Get Their Way

Bay’s Spring 2014 lookbook does two things: it tells us that Bay is defining who Gap is through her own COS lens (which is great), but also through Gap’s no-frills, 90s aesthete past (even better). Gap’s target influencer demographic is wearing COS abroad and vintage 90s Gap minimalist casualwear right now. Influencers everywhere are pouring into Opening Ceremony for clothing that is essentially Gap in 1999… for $300 a shirt. Think of this demographic as the one that threw a fit over losing the original Gap logo to the Helvetica-ized version, and had their way when Gap reinstated the original logo under pressure. This is because while Gap has been in flux for a decade trying to figure out who it is and who it could be, the Gap consumer has had a very strong understanding of the brand’s identity, and how the brand should continue. And over and over again, in focus groups and style forums around the world, the answer has rung out: bring back the Gap of the 90s, and become the classic brand that you once were. [Read more...]

Innovators Unite!

kennethwalker“I told you so” seems to be the rallying cry of all the retail pundits out there who think they were smarter than Ron Johnson.

Every one is throwing stones and is offering multiple reasons for what went wrong at JCPenney. The reasons for failure are easy to categorize, and I sense a bunker mentality is settling over the retail community.

Beware.

In a business where real change comes very infrequently, the danger of the JCP fiasco may be the end of trying to do anything innovative. Many companies try and fail, but learn their lessons and bounce back by trying again.  The worst thing JCP can do is to go backwards to the status quo.

The vision Ron Johnson brought to the table was revolutionary.  The execution in hindsight was clearly flawed. Unfortunately very few people even got to experience what “the vision” was, as few elements were completed. It could have been a game changer for the retail community.

Current JCP management has a very focused and talented leader. The key investors in the company are smart and have the future in mind.  I hope this team will execute properly and harness the vision and innovation that Johnson began.   It would create a sorely needed new, and unique, customer experience.

Shoppers are always looking for something new. If they try it and like it, they will come back and tell others.   Word of mouth has a very big mouth…it’s called twitter and Facebook, Instagram, Pinterest, and the rest of them.

The poor execution of a vision should not be an excuse to abandon innovation.

Millennials in the Workplace – True or False

grace_ehlersWe Millennials can be a little difficult to decode at work; our incessant attachment to our phones; our buddying up with senior executives; our loose understanding of office hours. Many of our coworkers ultimately begin to believe that we are haphazard workers and that everything you need to know about Millennials at work can be had from any Girls episode.

I am here to tell you otherwise: Millennials are incredibly dedicated workers—many of us placing work before our relationships and lives outside of work. Here are a few myths about Millennials in the workplace, busted or verified, to help you actualize the potential of your Millennials on staff.

1.They do not have a strong work ethic.

FALSE: This is the top Millennial-in-the-workplace myth I have come up against over and over again as a Millennial brand consultant. There are many reasons for this misinterpretation. They may be lackadaisical about office hours, but they will answer your email at any time of the day, any day of the week. They may be wallflowers inside sales meetings but will lead dynamic, impromptu brainstorms. Give them the benefit of the doubt and encourage them by showing them you have confidence in their work—they will show you their work ethic is strong and sustainable.

2. They feel they are entitled.

½ TRUE, ½ FALSE: While Millennials continue to be humbled by a 68% diminished net worth compared to the generation before them, not to mention crippling student loans, Millennials do feel entitled to a piece of the pie. In their eyes, pay scales should be relative to hard work and productivity, not exclusively based on seniority. Which is to say, yes, your associate is eyeballing your salary and willing it to be adjusted to his or her 20-hour workday.

3. They expect to be promoted without the years of experience necessary to warrant the promotion. They seem to think they can fast track it to the future.

TRUE: This is the #1 point of tension between Millennials and generations past. In our eyes, if we have the skills and can handle the responsibility of our superiors, and have demonstrated that we can, why shouldn’t we be allowed to advance? Why measure experience by time instead of skill level and capability? In your eyes, experience is developed over time. Agree to disagree.

4. They are not loyal and will bolt to another job if they feel like it.

½ TRUE, ½ FALSE: Millennials are very loyal employees, but if they feel stifled, or if the only way up is out, they have less than no problem showing you they know how to use the door.

5. They want to be part of the decision-making process, no matter what level they are.

TRUE: A truism of truisms for Millennials is that they want to be involved in the decision-making process; politically, professionally. What they love about work is seeing how their work ties into the bigger picture. Bringing them into the formation of that bigger picture will not only make their contributions richer, it make them emotionally invested in the company—and you will hold on to them longer because of it.

Hey JCP: We Millennials Will Demand Fair and Square

grace_ehlersRon Johnson’s highly publicized tenure at JC Penney has ended, and perhaps with it, the potential of JC Penney to compete for the middle class Millennial. Sure, they may regain the customers they lost by reinstating the deals-centric retailing of Myron Ullman, but the customer base that JC Penney took losses to acquire, short of their $1 billion loss in 2012, is the lost customer base of JC Penney — the middle class Millennial, from the young family segment all the way to the senior in high school.

Older Millennials will tell you they remember the uncool Target of their childhoods; the deals, the cheap quality, the ducking-out-if-you-saw-anyone-you-knew Target. The pre- (ready your best French accent) “Tar-JSHAY” Target. It was really uncool, and what’s more, it was really uncool to shop there or have anyone shop there for you. Fast-forward a decade, and the Target website is crashing in response to the millions vying for anything from their Missoni X Target collection launch. JC Penney became what Target was, and if significant directional changes are made to Johnson’s visionary long-term plan, JC Penney will stay that uncool store.

Assuming JCP does not stay the course, they will not finally secure their hard-earned, first-time customer. The return of pre-Johnson deals will drive Millennials further from the brand (“fair and square” pricing could not have a better fit for this demographic). Removal of all the brands that Johnson acquired, such as Joe Fresh, will leave Millennials without any reason to try the brand out in the first place. Taking away the innovative tech options, which we’ve come to expect, to enhance the experience won’t go over so well either.

It is impossible to say if Johnson’s plan would have ultimately worked– each quarter seemed to prove otherwise. But there was something happening in Johnson’s tenure that wasn’t yet quantifiable with ROI– the middle class Millennial was reconsidering their disgust for JCP. We were intrigued– we may have not yet visited a store, but we could see ourselves actually doing that. Joe Fresh is in JCP? Really? We might have checked that out. The necessarily slow process of attracting the Millennial consumer was just beginning, the only thing missing was the mandatory push of recommendations from friends – the viral marketing connection. Johnson’s last step, and his most crucial — from a brand standpoint and an investment standpoint — was getting that consumer inside the store, if only to replace the droves leaving the retailer after “fair and square,” which proved to be the undoing of his entire legacy. But what Mike Ullman and the rest of us should understand, is that we were standing there right outside the door, just about ready to walk in.

Peapod’s New PUP: Doggone Poor Thinking

peapod_commuter_storePeapod has a new PUP. Unfortunately, it may be a biter.

Peapod is the big grocery delivery service with major operations in the Northeast and the Midwest. It has never been hugely successful, so it sometimes casts around in different directions to invigorate the business. The latest idea is to launch pick-up points, referred to in the industry as PUPs. Peapod now has three dedicated pick-up points in the suburban Chicago area in addition to one attached to a Stop & Shop supermarket outside Boston. (Peapod and Stop & Shop are commonly owned by Ahold.)

The click-and-collect model goes like this: Customers go online and order groceries on Peapod’s website. But instead of waiting for delivery, customers agree to go to a pickup place at a certain time to retrieve their order. This scheme may offer some consumers a vague advantage in that it eliminates waiting at home for delivery and it can reduce or eliminate fees charged for delivery.

Peapod isn’t alone with its PUPs. A number of conventional supermarket retailers have tried PUPs too, not all with success.

The difference is that for conventional retailers, PUPs make a modest amount of sense. It gives established retailers a way to cater to customers who really want to transact business online, but don’t want home delivery. It is also a low-risk proposition for an established retailer. The store itself can be the pickup point and existing personnel can probably be used to pick and package customers’ online orders. So retailers’ PUPs do little harm and if they fail, little is lost. Supermarket giant Publix in the Southeast is among the retailers that tried PUPs, and discontinued them for lack of consumer interest.

That exposes the real problem with PUPS: Many customers just don’t find there to be much convenience associated with ordering online, then picking up. Why not just shop a store and be done with it?

That a company like Peapod is trying PUPs is an especially odd development. Peapod’s core business is the offer of home delivery. If the delivery model is so flawed that it feels obliged to offer customers an alternative, doesn’t that mean that a major part of the business is a failing at some level?

Beyond that, Peapod is operating dedicated pick-up points in the Chicago market, so the cost of failure– if that happens — will be far from negligible. Failure may move closer if Peapod goes through with its plan to charge for pick-ups. The plan is to charge $2.95 for picking up against $6.95 for home delivery. Really? Another reason to use the pick-up service all but vanishes.

It’s time for Peapod to put the PUP on a very short leash.

The Coty/Avon Dance: A Train Wreck About To Happen

Avon’s sudden hiring of Sherilyn S. McCoy as CEO – almost certainly intended to thwart any takeover attempt by Coty – indicates that the smaller suitor will have a fight on its hands to acquire the giant direct sales company.

Coty would be better off letting this one get away. Its $10 billion offer for Avon is the biggest and most recent effort in its aggressive quest to become one of the world’s major beauty companies – in other words, to play with the big boys. The company has spent over $2 billion on acquisitions in the past two years, including $400 million for TJ Holdings, a Chinese skin care company, and a reported $1 billion for the skin care company Philosophy.  They also picked up nail color maker OPI and Russian brand Dr. Scheller Cosmetics.  Some industry leaders think they have seriously overpaid.  Are they about to do it again?

Avon is a disaster, but Coty (not to mention many on Wall Street) is focused on its worldwide network of 6.5 million sales reps and its big presence in Brazil.  Add some internationally known products to Avon’s product mix and the reps will sell them like crazy. The thought process taking place around that? Synergy, synergy, synergy.  The old school synergistic proponents are drooling.  But drool rarely translates into sales. It can, however, translate into paying too much for an acquisition.

There are questions about the distribution network Coty is so hot to get.  Some believe Avon has drifted off into the Amway multi-level marketing or pyramid model, which counts as revenues the products and promotional materials newly hired sales reps are induced to buy. So, why not hire more reps? A growing share of the company’s revenue, this might in fact be a strategy to offset declining consumer demand.  Avon is losing nearly half of their reps every year. This forces them to troll for and spend most of its advertising dollars for new reps instead of doing heavy consumer marketing to keep the Avon brand brightly lit. In the meantime, traditional Avon sales are slumping.

Coty obviously has access to a mother lode of money, so funding the deal will not be a problem. The banks reportedly still think Avon is a viable company and, if well-managed, can be fixed. The timing is right for Coty and a godsend for Avon.

It’s documented that Coty and Avon have been talking for a while. First it was going to be Avon owning Coty in a stock deal. Now’s it’s Coty owning Avon in a cash deal.

It looks like Coty announced its $23.25 a share offer for Avon to tease out any interest from a giant like Proctor and Gamble, or some large Brazilian company.

If not, then Avon will have to very seriously consider Coty’s offer.  Time is not on Avon’s side. As new CEO Sherilyn McCoy takes over from lame duck CEO Andrea Jung, she walks into a nightmare of bribery accusations in China and other developing markets, slumping sales, a weak senior executive lineup and massive legal fees that are bleeding company profits.

Given all of Avon’s current problems, a thorough due diligence of the company could be very interesting indeed. Imagine what could be lurking in the many closets of such a big, loosely-managed company with so many divisions!

Stay tuned.  As one industry observer said, “They are dancing on the porch now. However, Avon has had other suitors dancing on its porch before, and thus far hasn’t let anyone inside the house. ” Coty’s drive to become an industry giant could become a giant handicap if it results in the purchase of a very expensive, unfixable company.

Time to blow the train whistle long and loud. Hope it’s heard in the Coty executive suite.

Why Same Store Sales Don’t Matter

With all due respect to the analysts, journalists and consultants who make a living keeping track of all the companies that comprise the retail industry, it has been my opinion for some time now that the popular measures reported on the first Thursday of every month known as comparable store sales, which so many of us spend at least a day per month thinking and talking about, are like George Clooney’s S.A.T. scores. They just don’t matter.

Only about 20 retail companies – a small minority of the publicly-held merchants who sell discretionary consumer products – report their total and same-store sales on a monthly basis today. This is a sharp decline from 5 years ago, when virtually all publicly-held retailers reported.

Many of them stopped reporting because it was “causing too much volatility in stock prices.” (I guess we should thank them all for reducing the volatility in the stock market.) Others claimed it was “causing management to focus too much on the short term and not enough on longer term initiatives.” Whew. Thank goodness they nipped that problem in the bud, too.

To really grasp how insignificant same-store sales figures have become, let’s consider for a moment the companies who no longer report. Walmart, the largest retailer in the country, representing half of all retail sales, stopped reporting in early 2009, after the news got so bad month after month that someone in Bentonville finally figured out they were important enough to not have to share it anymore. Quickly following Walmart’s lead were Sears, most of the regional discounters, and the dollar stores.

Stealth giant Amazon never did report same-store sales. I guess it’s because they don’t have stores. But they certainly do a lot of sales – sales that used to be done by stores.

Only one warehouse club, Costco, still reports on a monthly basis. Big box retailers Best Buy and Bed Bath and Beyond do not. In the women’s specialty apparel sector, we know how Gap, Limited Brands, and Wet Seal are doing, and that’s about it. About the other major players, like Ann Taylor, Talbots, Chicos, Express, Urban Outfitters, Dress Barn, Charlotte Russe, Charming Shoppes, Christopher & Banks, New York & Co. – we learn nothing.

And it’s not just the women’s merchants who are remaining mum. There’s no news from Men’s Wearhouse, Joseph A. Banks, or Casual Male, either. Throw in Children’s Place, Abercrombie, American Eagle, American Apparel and Aeropostale to that list while you’re at it. The only teen store still reporting is Kearney, Nebraska-based Buckle, whose monthly performance has been so good for so many years they can hardly contain themselves when the first of the month rolls around.

So what are we left with? The department stores, off-pricers, one discounter (Target) and one luxury store (Saks). Big stores, to be sure, but representing less than a third of retail sales, making it impossible to glean from the data whether the market’s growing or shrinking, or which retailer or channel is gaining share from another.

Complicating the situation even further is the fact that some of the big stores, like Macy’s, Penney and Nordstrom, have started to include their e-commerce sales in same-store sales. (Huh?) With online sales growing by double digits, all this does is introduce even more confusion and insignificance to the measure.

I have therefore concluded that those companies who report monthly same-store sales should just stop. Macy’s, Gap, Target, TJX and friends should just post their comps every quarter like the rest of the market does. At least we’ll have something meaningful to look at, especially considering the profitability figures that come along for the ride. It would also give us all an extra day per month – if not more – to do other things, like focus on longer term initiatives.

Or spend more time watching George Clooney movies.