Retailers and Wholesalers: Yesterday’s Fish Wrap

Direct_to_consumerThe retail and wholesale business models, separately and in conjunction with each other, are collapsing. Along with their demise, the actual terms, retail and wholesale, will literally cease to exist. In fact, as I write this article, major traditional wholesale brands such as The North Face, Timberland and other VF Corporation brands, along with PVH brands, Calvin Klein and Tommy Hilfiger, among many other giant wholesale brands, are achieving faster and more profitable growth in what they are referring to as their DTC (direct to consumer, including e-commerce) business, than through their traditional wholesale to retail to consumer model. Essentially the DTC model that these wholesale brands are adopting is simply the branded apparel specialty retail model that was launched by the Gap, Esprit and other brands in the 1960s. A phrase often used to describe the model is “the brand on the door is the brand in the store.” Likewise, and to some degree in response to their branded wholesale vendors’ accelerating focus on the DTC model, traditional retailers — from Nordstrom and Macy’s to Walmart –- and across all retail sectors, will be forced to transform their business models to better control and accelerate their own brands’ direct engagement with consumers. In fact, Nordstrom and Macy’s, to cite two examples, are proactively beginning to transform their models. [Read more...]

Amazon Finally Gets It: The Next Big Thing For All Pure Digital Players

amazon_openingAmazon’s announcement of its first physical store opening on Manhattan’s 34th Street is not a surprise to me, as I predicted it four years ago in the first edition of my co-authored book, The New Rules of Retail, published in 2010.

The logic was the same then as it is now.  Amazon has a huge database, estimated to be larger than the Pentagon’s — and they know how to use it. The data provide them with laser-sharp knowledge, such as what Jane Doe — who is married with two kids and a dog and is living on the east side of Manhattan (or anywhere in particular) — is eating for breakfast; what brand of jeans she wears; the charities she gives to; the music she likes; and so forth. Therefore, as Amazon rolls out its stores nationally, it can assort each location precisely with those items that are preferred by specific shoppers. The stores will also have screens for downloading information and selecting from Amazon’s massive inventory.

The personalized knowledge that Amazon continues to build on, and that all retailers are pursuing, is collected over time across all accessible consumer browsing and transactional points, and it’s game changing. It tracks consumer-shopping behavior and can be drilled down to individual profiles.  This is the big deal part of the buzz concept, Big Data, because it tells the retailer not only what brands the Jane Does on the East Side prefer, it can also indicate what kind of shopping experience, environment and service they expect. Most traditional retailers have not yet scratched the surface on big data analytics and its laser-like ability to localize, even personalize the shopping experience. It will be interesting to see how Amazon uses its analytical advantage in this area. [Read more...]

Sears: Nothing Left But its Past

Lampert_Sears_logoEddie “fast buck” Lampert is squeezing the proverbial turnip for more cash — as the musicians aboard the sinking “Titanic” are now truly playing “Nearer My God to Thee.” The cash he’s squeezing out is his own, in the form of a $400 million loan from his hedge fund, ESL Holdings. And regardless of his sinking ship, he’s got a life saver in the form of a healthy interest rate and a loan secured by valuable real estate. So “abracadabra Eddie” keeps the ship afloat. For now.

Unfortunately the music is about to end, and as he continues to sell off the “deck chairs” (read: assets), Sears and its bleeding sister, Kmart, will finally sink into the briny. Some experts predict this will happen by 2016. Regardless of the financial predictions, these two retail brands are “dead men walking” as I write. [Read more...]

The Forecast: Share Wars For Rest of 2014

RL_Blog_9-10-14Forget about all of the holiday projections soon to be bandied about by the legions of economists, analysts, pundits, experts and faux experts. This is the one you can take to the bank, and it comes from none other than Macy’s CEO Terry Lundgren. Crisply, clearly and without hesitation, he nailed it at his presentation at the Goldman Sachs Annual Retail Conference.

“The rebound that we were all expecting in this year hasn’t happened. The consumer has not bounced back with the confidence that we were all looking for. And so the performance I think we had in the second quarter, and we expect to have in the second half, is going to be a continuation of what we’ve been able to do over the last several years — and that is to capture market share and get the most out of the consumers that are in our stores.”

In other words, folks, there will be no overall market growth this holiday season; only share wars in which the great retailers will steal share from the not-so-great, resulting in a zero-sum game. So, here you have it, The Robin Report official holiday projection: Zero Percent Growth. [Read more...]

Is Alibaba Really Worth It?

Alibaba Group Holdings Ltd. and Founder Jack Ma As Company Files for U.S. Initial Public Offering of E-Commerce GiantOn the verge of becoming the biggest initial public offering in US history, one has to wonder if it’s really worth the $187 billion some analysts are projecting. As we witness Jack Ma, former schoolteacher and founder of Alibaba, strut across a stage portraying himself as Jeff Bezos and Steve Jobs combined, at least he’s talking the talk. Walking the walk, as we all know, is a horse of a different color.

And to that point, off stage he’s been on a wandering and random acquisition binge, making some 30 investments since the beginning of the year, worth close to $7 billion. Whether or not he was just trying to find stuff to invest all of the cash gushing through the business, the deals he has made seem highly questionable. [Read more...]

Apple Addicts Still Mainline Steve Jobs

X Japan Wax Figure UnveilingExcerpted from the New, New Rules of Retail
By Robin Lewis and Michael Dart

On January 9, 2007, on a big stage at the Macworld convention at the Moscone Center in San Francisco, Steve Jobs unveiled the first iPhone. With the already unprecedented cult following of Apple—and for that matter, of Jobs himself—this would be the first of many launches that would further fuel one of the most powerful brand-consumer connections ever.

This unveiling, of course, was merely the warm-up. Steve Jobs’ grandly staged presentation would trigger an intense anticipation among Apple “addicts” that would be satisfied only by the actual sales release of the iPhone itself.

This would happen at 6:00 PM local time on June 29, 2007, as the doors opened at Apple Stores nationwide to welcome hundreds of cult followers anticipating their fix, so to speak. Some media sources at the time were dubbing the iPhone the “Jesus phone.” In fact, in New York City the line started forming twelve hours before Apple’s flagship store opened and ended up winding around two city blocks, or roughly a quarter mile, with more than a thousand avid cultists in it. Some had even camped out overnight. Obviously the Apple addicts had learned that if they wanted the new phone, they had better be present when that door opened, or be forced to wait for weeks.

Apple’s connection with its consumers has gone way beyond the simply emotional. It has succeeded by actually connecting with their minds. In our updated second edition of The New Rules of Retail, released on August 12, 2014, we called this neurological connectivity. [Read more...]

Whole Foods Market: Conscious Capitalism or Unconscious Greed?

wholefoods_webSo are we adding a luxury food brand to the “designer derby” of racers seeking more growth (for its own sake) by reaching down to consumers who are reaching up? Or is the CEO of Whole Foods, John Mackey, spreading his high-end food among the masses at prices they can afford, simply out of the goodness of his democratic heart? I’m speaking of the Whole Foods launch of pilot stores in more down-tier areas of Detroit, New Orleans and Chicago’s South Side. And about this strategy, Mackey made this rather magnanimous and altruistic statement: “For every penny we cut off the price, we reach more people who can afford to shop with us.”

What a wonderful thing to say. And, what a wonderful thing to do for the less well-heeled people living where the stores are being launched. And I suppose it will be a wonderful thing for new growth, at least for the foreseeable future. [Read more...]

Q/A with William P. Lauder

William_Lauder-1We sat down with William P. Lauder, Chairman of The Estée Lauder Companies, the $10 billion global beauty juggernaut, and talked about the evolving retail landscape, the importance of knowing your consumer and the opportunities and challenges of globalization.

Robin: William, we’re living in what we believe is the biggest transformation of the industry in the history of retailing, and therefore in wholesaling and branding as well. Some CEOs are saying it feels like the Wild West. Others feel like they are living in the chaos of technology that is far ahead of our capabilities to totally understand and use it.

And here is The Estée Lauder Companies, the undisputed leader in their space, right in the middle of it all. You served as CEO from 2004-2009, when you transitioned to your current role as Executive Chairman. During these ten years, the business has nearly doubled. So, I know you’re really smart, but is there also a bit of luck working here as well?

William: When I first joined this company in 1986, I perceived that my mission was to gain the experience to do what we needed to help the company be at the forefront of prestige aspirational beauty around the world. In 1996, more than half of our business was in North America. Now more than half our business is outside of North America. Emerging markets like China and Russia were very important, and we had a low share of market in those countries as well as in Europe, the UK and elsewhere. So, we saw a greater global opportunity where the pie was expanding, as opposed to our huge share of the US pie, which was static. [Read more...]

Amazon: Trouble in River City?

Or Wall Street’s Magical Leprechaun

Amazon Unveils Its First SmartphoneJeff Bezos does have that “Leprechaunish” look about him. Wall Street certainly bought into the fable that Mr. Bezos (symbolically toiling over his “shoe making”) would deliver a pot of gold at the end of some yet to be defined rainbow. For 17 years, the Street has believed in his magic ever since he wrote in his SEC filing in 1997: “The Company believes that it will incur substantial operating losses for the foreseeable future, and that the rate at which such losses will be incurred will increase significant from current levels.” He also stated that he wouldn’t run the company to make profits, rather he would pour investment into growing the business to “get big fast.” Wall Street took a deep breath and bought into his strategy, hook, line and sinker. The Street believed that at some unknown distant point in time, and at the end of some rainbow, the Leprechaun would magically deliver his pot of gold.

Well, talk about “substantial operating losses” (which Amazon has lived up to for these past 17 years), this recent second quarter earnings report, revealing a net loss of $126 million, takes the cake. Worse, Amazon rather flippantly, with no explanation as to why, says it will lose between $410 and $810 million in the current quarter. Pot of gold? It’s more like a pot of coal. [Read more...]

Dov Charney is a Joke: A Dirty Joke and a Business Joke

Dov Charney, Portfolio, November 1, 2008The media at large has publicly exposed enough of the “dirty” part of this “jokester” that I don’t need to pile on more. Although it might be a more titillating read to add more dirt to the pile, I’ll just sign off on his disgusting behavior during his tenure as CEO of American Apparel by saying it’s equally disgusting to me that the board didn’t kick his butt out of there a long time ago. It never ceases to amaze me that too many boards are still weak on proper governance in protecting the shareholders from the egregious, deleterious behavior of miscreant CEO’s. And American Apparel’s board seems to be one of those.

But for the moment, let’s forget about Charney’s sexual proclivities, including allegations of abuse. Many top executives have been caught with their pants down, so to speak, albeit not all as flagrantly as Charney. Many were fired, yet many others have just had their dalliances swept under the rug.

Charney’s real dirty joke is that he is a business joke of the tallest order. [Read more...]

The Coming Crash of Michael Kors…Take it To The Bank

MK_Blog_graphic-01Michael Kors, the brand, is becoming ubiquitous, and that’s the kiss of death for trendy fashion brands, particularly those positioned in the up-market younger consumer sectors. Its distribution is racing towards ubiquity, wholesale and retail (online, its own stores, outlet stores and internationally). Even worse, a rocket-propelled accelerant to ubiquity is its expansion into multiple product categories and sub-brands, so they can compete at all price points. Some would argue all of those segments will simply end up competing with each other, thus cannibalizing the top end of the spectrum. [Read more...]

Go Disrupt Yourself!

Panel logosSo Says a Disruptive Seminar Panel

Please don’t take offense. “Go disrupt yourself” is not a euphemism for that other, often used R-rated suggestion. This is a serious directive for so-called disrupters themselves, as well as for all businesses operating traditional models who incorrectly believe disruption is defined only by fundamentally new models or game-changing concepts. Today’s disrupters are typically spun out of the thin air of “Siliconville,” which often define them as tech-driven and Internet enabled.

This not-so-clear concept of self-disruption was one of the major points that I filtered out of the spirited panel discussion at the recent Robin Report and Fashion Group International forum, “Disrupters vs. Disruptees.” And I believe with some elaboration, the conversation is highly instructive for both upstarts and traditional businesses.

The forum presented a panel of “Disruptive” CEO’s including Warby Parker (Neil Blumenthal), Rent the Runway (Jennifer Hyman), and Shapeways 3D printers (Peter Weijmarhausen). These new kids on the block had a robust discussion with the “Disruptee” CEOs of HSNi (Mindy Grossman) and The Ascena Retail Group (David Jaffe), whose portfolio consists of Lane Bryant, Dress Barn, Catherine’s Justice’s and Maurice’s. Paul Charron, former CEO of Liz Claiborne and Chairman of Campbell Soup was our moderator. Yours truly set the tone with an overview of the principles and perils of disruption.

2014_Retail_Disrupters_012Upon reflection, it occurs to me that since most of the au courant disruptive new business models are really just new marketing concepts made possible by the tools of technology and the Internet — they can be knocked off in a nanosecond. Both Steve Jobs and Jeff Bezos understood this from day one at Apple and Amazon. Their mantras, “the next big thing” and “get big fast,” respectively, were loud and clear marching orders for self-disruption, day in and day out. Whether breakthrough new products from Apple, or entirely new marketplaces from Amazon, implicit to their vision is to preempt copycats by becoming so big, so fast, that knock-off artists would find it nearly impossible to catch up.

Self-disruption and rapid preemptive growth require two ingredients: perpetual innovation into new product or market spaces and huge capital investments to fuel such growth. While these two legendary examples of continuing marketplace disruption are obvious by their success, it was largely due to the tenacity and audacity of their visionary leaders as “first-movers” who leveraged technology and the Internet to catapult their product and marketing ideas into dominant positions.

Many early movers later, we are now witnessing a deluge of innovative ideas (some more disruptive than others), still facilitated by technology and the Internet. In fact, many of them, including Warby Parker and Rent The Runway, were launched on the Internet.

2014_Retail_Disrupters_021The continuing challenge of all disrupters is to be the de facto, sustainable solution with new product innovation and distribution. They will need to continue to dominate market share from competitors. And the hugest threat of all is that the giant traditional companies can easily copy these upstarts and have the financial clout to steal and own the space.

With the ease of entry into this technological and Internet-based space, another challenge facing these “later movers,” so to speak, is that their fundamental value propositions are easy to copy. For Warby Parker, the model is making and selling trendy eyewear online (and now in stores) for low prices. Their charitable program donating glasses to kids in need hits spot-on with Millennials’ sense of social justice. The fundamental proposition for Rent The Runway is renting apparel, and they have found themselves in the dry cleaning business along the way to ensure that their quick turnaround rentals are guaranteed clean. In Warby Parker’s brilliantly conceived, innovative eyewear space, there are now several copycats: Classic Specs; Eyebobs; Lookmatic; Mezzmer; and Made Eyewear — offering frames, sunglasses and readers. Likewise, the world that Rent The Runway launched has some wannabes, including Lending Luxury, Girl Meets Dress (in the UKL, and Wish Want Wear.

2014_Retail_Disrupters_050It’s important to note that while these may be copies of the core value proposition of Warby Parker and Rent The Runway, they are not necessarily marketing the model and delivering it in precisely the same way. How these models are executed of course, will determine their success or failure. Nevertheless, the copycats did enter the same space pioneered by these two initial disrupters. Such is the compliment and challenge of innovators.

Shapeways, while not the creator of 3D printing technology (earliest versions launched in the 1980s), they also face a different challenge. Shapeways 3D printing is on an industrial scale (unlike MakerBot home 3D printing) and is still in pursuit of a scaled-up market to serve. They are ahead of their time in the sense that the potential of 3D printing to disintermediate the accessories business, for example, is still nascent.

A major point to be made is that the three Disrupter panelists are faced with the almost daily challenge of stealing market share in their categories and sustaining growth. They must also understand the concept of self-disruption as envisioned by two of the most powerful disrupters of our time: Jobs and Bezos. They must be relentless in churning out the “next big thing” and to “get big fast” (now more difficult among a sea of knock-offs). Each of these young CEOs seem determined to do so.

2014_Retail_Disrupters_059Have We Over-Glamorized Marketing 101?

Now step back for a second and reflect on these business concepts. Are today’s winning principles any different than they have ever been? You innovate and come up with a new product or service or retail concept that targets a segment of consumers who need or want your offering and the way in which you provide it. You then brand the business and invest heavily in marketing it for growth. And you keep innovating new ideas into your model to continually add value to keep your existing customer loyal and to entice new customers.

Today the only difference and change from the past are the full-on advancements of technology, the Internet, and the all-enabling smartphone. However, they are simply tools to achieve a greater understanding of, and connection with, consumers and provide more efficient and effective marketing and distribution. These tools are only as useful as the human minds that envision their optimal capabilities for their specific business models: Jobs, Bezos and hopefully our three Disrupter panelists leading the perpetual stream of new upstarts.

So are the Traditional Giant Brands and Retailers “Chopped Liver?”

In closing, I’m sorry to have to break it to many of these young upstarts that while they may be disruptive in the way they are using the new tools, those same tools are available to the 800- pound gorilla brands and retailers that are already big, some in fact, enormous. And as traditional retailers wake up one morning to understand how to use those same tools, they won’t be disrupters, they will be serial destructors.

And of course our other two panelists were anything but “chopped liver,” comfortably reinventing self-disruption, perfecting and maximizing the use of the technology and Internet tools, and reframing their business models. HSNi and the Ascena Retail Group are both multi-billion dollar businesses that got huge over time and are now envisioning how to get bigger faster by seamlessly integrating their enormously complex business models with the Internet and all of the advanced operating and information technologies available. And guess what? They don’t have to lurch from one round of funding to another.

Talk about self-disruption. Mindy Grossman commented: “In the past eight years we have disrupted our business model at least four times. We created a culture where risk-taking is encouraged and failing fast is encouraged too.” HSNi has an advanced innovation group tasked with finding the next big thing., They disrupt the status quo and innovate reflecting changes in consumer behavior, tasked with primarily raising whatever bar necessary to provide a boundary-less shopping experience, wherever, whenever and however the consumer wants it.

David Jaffe, with about 4000 stores under five nameplates, is also using the new tools to seamlessly integrate the omnichannel concept and to provide shopping interchangeability both online and off. He closed by saying: “We believe the convenience and sociability of shopping gives us a head start over the Internet startups.”

Indeed, there is great truth in that statement as Warby Parker, Rent The Runway and many other e-commerce startups are now opening physical stores. Apple, of course, understood the synergy long ago.

So, the great news for all of commerce is the tsunami of young entrepreneurs who understand how to use the new technologies and the Internet to create disruptive and innovative ways to engage and delight consumers and to integrate operational systems to more efficiently and effectively market and distribute their value.

The challenge and tough news for these entrepreneurs is three-fold: first, self-disrupt with a continual innovation process; second, build a management and operational infrastructure for sustainable growth; and, finally, invest heavily to “get big fast.”

A final ironic twist may very well be that while the young upstarts, as well as Amazon, Apple and others disrupt the market with innovative ways to use the new tools, the world of billion dollar legacy brands and big retailers may end up being the real copycats. And if I were Warby Parker, I would not want Luxottica as a copycat. If I were Amazon, I would not want Walmart knocking me off.

It could all end badly, more like a knock-out.