Pirch – The “Third Place” For Kitchen and Bath Lovers

pirchWho would have thunk that hanging out in a kitchen and bath appliance store could replicate the Starbucks experience for coffee aficionados and Apple for computer lovers? Well, thunk again. Pirch, as in perching, or sort of feathering your nest in a totally fun and interactive experience, is the reason consumers will flock (pun intended) to Pirch as a “third place” to hang (work, home and Pirch). Just as Starbuck’s and Apple disrupted how coffee and computers were sold and consumed, Pirch is disrupting the appliance world with a fundamentally new and co-created experiential model.

Founded in 2009 on the vision of its CEO, Jeffrey Sears, and Chairman, Jim Stuart, their goal was to make shopping for kitchen and bath appliances “inspirational and joyful.” Originally named Fixtures Living, it was changed to Pirch in 2013, meant to more accurately suggest a perch or nest. “Perching is like feathering your nest, roosting at home. It’s a feel-good name,” said Sears in a PRNewswire article.

Upscale and luxury kitchen and bath appliances and fixtures are spread throughout some 20,000 to 40,000 square feet (depending on location), in a beautifully designed, modern showroom-like store (sleek and inviting like Apple). After being greeted at the door by Pirch’s “baristas of joy” at the Bliss Cafe (hmmm…sounds a little like Starbuck’s), offering a cup of latte, or customized espresso drink from their $10,000 Italian espresso maker, the customer is connected with a trained expert-associate who guides them through vignettes of working kitchens and bathrooms (live cooktops and grills, ovens, refrigerators and working showers, sinks and baths), in which customers can literally experiment with and “test drive” the products.

“Try before you buy” is encouraged by Pirch. Best of class brands are curated from around the world.  Brands such as Fisher & Paykel, Miele, Franke, La Cornue, Toto and Sub-Zero, are all displayed in warm, inviting settings, compelling customers to try them out. Test an aromatherapy shower (privately of course by reservation in what they call the “Sanctuary”), and test the water pressure from various shower heads or soak in a tub carved from Carrara marble. Attend cooking classes where chefs will demonstrate how to operate a $100,000 Molteni range and cook up sumptuous recipes for your tasting delight. Or, cook your own favorite meal. Or, ladies, check out the ladies room, where you can test drive a Kohler toilet with an adjustable seat temperature.

The entire experience is “an endless journey of inspired living. From design ideas to culinary instruction, the PIRCH experience is best described as magical.” And it compels customers to focus on what they want to do, rather than what they want to buy, which makes the ultimate purchase that much more rewarding. Pirch’s expert staff controls and manages the entire holistic process, including delivery, installation and service, as opposed to third parties.

CEO, Jeffrey Sears, was named “Disruptor of the Year” by the NRF (National Retail Federation) and one of the “100 Most Intriguing Entrepreneurs of 2014” by Goldman Sachs. Pirch was awarded “Retail Store of the Year” (2014), by Chain Store Age, was listed 25th in Forbes’ 2015 list of “America’s 100 Most Promising Companies,” was recipient of the 2014 Grand Prize from A.R.E. (Association for Retail Environments), and was included in House Beautiful magazine’s 2014 “Most Amazing” list.

Sears was quoted in a PRNewswire article: “Our company was born from empathy and frustration. We asked, ‘how is it that the very products adorning our homes and serving as backdrops to priceless memories, are presented in such an uninspiring manner?’ So, we decided to do something about that.” He went on to say, “Pirch is delivering a retail experience that encourages guests to dream about, play with, and ultimately choose products that will improve their lives at home. The products we carry are integral to creating inspired moments, and we believe that the process of selecting them should be just as inspiring.”

Pirch showrooms are located in San Diego, Costa Mesa, Glendale and Rancho Mirage California, Dallas Texas, Chicago Illinois and Atlanta Georgia, and its eighth location just opened in the Westfield Garden State Plaza mall in Paramus New Jersey, (next to Gucci, Neiman Marcus and Tiffany), with a store planned for Manhattan’s SoHo in 2016.

CEO Sears states his manifesto as: “One part Passion, One part Conviction, One part Macaroni and Cheese.”

And, guess what?  This business model is not some high-tech, app-driven, sexy Silicon Valley startup, running on fumes and fund-raising.  And it’s not brain surgery. Pirch has simply created a wonderfully designed setting within which it has placed wonderfully designed products, which can be played with and learned about from experts, before deciding to buy.
Indeed, add Pirch to Apple and Starbucks as pioneers in their respective spaces.

Macy’s – The Distribution of Things

macys_distributionAgain, in Front of the Trend

I recently wrote about Macy’s distribution brilliance. And even though the ink is hardly dry, here I am again. Actually, I am not going to focus on lauding what most people might view as a great Macy’s marketing program with Plenti (a cross-brand and industry point-generating redemption deal), which I’ll explain in a minute. This new collaboration is really a tactic, albeit very innovative, to support what I view as Macy’s larger distribution strategy and vision.

My recent article was about Macy’s understanding of the broader and more accurate definition of omnichannel. Too many retailers interpret omnichannel to mean simply two channels: online and brick-and-mortar stores.  So let’s get it straight once and for all.  The old term multi-channel meant more than one channel of distribution.  The new concept omnichannel means “all” distribution channels. Under the multi-channel definition, company strategists would align operations, distribution, marketing and all other functions with the needs of each channel as if they were “silos.” For example, the store, catalogs, marketing strategies, etc., would all be tailored to the needs of the specific channel, assuming different customer behaviors for each.  Omnichannel, as Macy’s and other enlightened retailers are employing the model, is the seamless integration of consumers’ experiences in a matrix of all distribution channels, wherever and whenever the consumer wants it: stores, the Internet and mobile devices, TV, direct mail, catalogs, and now, even operating on other brands’ or retailers’ distribution platforms.

“Plenti” of New Distribution Platforms

Rite Aid, AT&T, ExxonMobil, Nationwide, Hulu, and Direct Energy

So, the Plenti deal basically adds many other distribution platforms to Macy’s omnichannel strategy.
It’s pretty simple.  All the aforementioned companies, including Macy’s, are interconnected with each other through Plenti’s program.  Each time a consumer spends a buck at any one of those companies, they receive a point (equivalent to a penny), which then can be applied to discounts at any one of the companies.

As so aptly described in WWD: “Consider pulling into a gas station, filling up your tank and earning a point per dollar, then applying those points to get discounts on shoes at a department store, or cough drops at a drugstore.  Or imagine getting points for discounts at Macy’s or Exxon just by paying for your auto or homeowner’s insurance.”

And while one could argue that these are not, by definition, used for distributing goods, it is, in fact, an indirect strategy of distributing the brand on non-related, but compatible industry and product categories. It all ultimately leads to expanded distribution, acquiring new customers as well as maintaining current customers who will be delighted to build up a bunch of points for new deals.

In fact, Macy’s strategy might more appropriately be called the “distribution of things.”  Borrowing from the term, the “Internet of things,” which describes the interconnectedness of everything, Macy’s is interconnecting and integrating all possible distribution platforms that engage their consumers wherever they may be.

Think about this, Macy’s.  In the future, when you perfect the use of your “big data” and are able to profile each and every loyal customer and what they personally dream for in their lives, you will be permitted into their homes, to be downloaded into their “global communications center” from which they get important and timely information from you and other permitted brands. You will give them information about new styles that you know, from your database, they will love.  A fashion show invitation or Stella cocktail party can be hyped for their attendance.  And you might even be able to deliver products to them that they can keep or be placed in a Macy’s return box to be  picked up by Instacart or some such service that will inevitably spring up over the next couple of years.

The big shift is that the home will be the final distribution platform. The “distribution of things,” indeed.

Journey of the Chosen Ones – JNCO Jeans Are Coming Back

JNCOOr if you don’t like that original acronym, JNCO (Jean Company), it also now stands for “Judge None, Choose One.” I’m not sure I get either one of those lines, but, then again, I’m way beyond the age of which the owners of JNCO care whether I understand them or not. Furthermore, as I’ve said before, I’m not even an amateur fashionista, so all I can do is ask questions.

What I do know is that JNCO brand ultra-baggy jeans, reaching up to 50-inch leg openings at the height of its popularity in the 1990s, is making a comeback this fall. Along with new styles and designs for cargo pants, T-shirts, plaids and “joggers,” which are a cross between jeans and jogging pants, JNCO (still headquartered in LA) will re-launch its “heritage” brand of baggy jeans. So the first question I must ask is what does that mean for skinny jeans? While they are not creating 50 inch leg openings, its re-launched signature jeans will feature openings of 20-23 inches. [Read more…]

Fast Retailing Redux

Forget Weed, Maybe It’s Ecstasy

ecstasyA week ago, I suggested that Tadashi Yanai, President and CEO of Fast Retailing (parent of Uniqlo), must be smoking something, as he declared he would have 1000 stores opened in the U.S. by 2020. Now I read in WWD.com, which covered the company’s annual media event last week, that his aim is to reach $253 billion (yes, USD), in global sales by 2030, up from their August current year-end revenue projection of about $13 billion. His new projection for 2020 was $42 billion,which by the way, is way lower than $61 billion target I had reported that Mr. Tadashi had projected in last week’s article. So, which numbers are we to believe?

And, even with the lowered projection for 2020,does the $250 billion goal for 2030 sound like something a person with all of their marbles would throw out at such a meeting? Mr. Tadashi said, “So we are within sight of 5 trillion yen, ($42 billion) and that’s not just big talk. I think soon we have to start making big ambitions for the year 2030 as well, and if it’s the year 2030, why not 30 trillion yen ($253 billion)?” The audience laughed thinking that this must be Yanai’s type of a Japanese joke. He responded, “It’s not a joke. I believe it’s possible that we can realize this dream.” [Read more…]

It’s the Distribution Century, and Macy’s Gets it

macys-mercIt’s coming guys. It’s looming large. And Macy’s $210 million acquisition of the Bluemercury spa and beauty chain indicates that they see it, and are moving on it. And the “it” is the future. While this acquisition was a brilliant tactical move for all of the reported reasons, not the least of which is a new source of revenue and growth with 60 stores in 18 states, it sends a much larger strategic message regarding the future, not only for Macy’s, but the entire industry.

It’s a future that will see the collapse of the traditional wholesale/retail business model and the literal terms “wholesale and retail.” And, I’m sorry, but the current definition of “department store” will no longer define what Mr. Lundgren and team are ultimately doing with Macy’s, and for which I highly applaud them. From what I observe of Macy’s evolution (and a few others as well), it’s greatly expanding beyond the commonly held definition of omnichannel, which is limited to integrating the physical stores and the online business. Macy’s understands the term “omni” as broadly defined in the dictionary, meaning everywhere. Thus, it’s seeking other relevant physical and online distribution platforms beyond its nameplate stores. [Read more…]

Shoppable’s “Distributed Commerce”

young woman texting in a bus stationThe Ultimate In Preemptive Distribution

In my co-authored book, The New Rules of Retail, one of the new rules is preemptive distribution. Simply stated, it is defined as distributing a product to reach consumers first, faster and more often than all of one’s competitors, thus, preempting the fierce and excessive number of competitors. And today, this strategy is further enabled by technology and the Internet, including the unprecedented impact of smartphones. There’s a whole chapter devoted to this new rule and it offers deep perspective on how to implement this strategy.

In this warp speed world where new technologies and millions of new apps appear each day, there’s a preemptive distribution technology that is turning science fiction into reality. It’s called “distributed commerce.”

Think about how many times your brand is mentioned or appears online, in print, social media, advertising, on TV, in conversation, and on merchandise. Now imagine every time consumers engaged with your brand or product, wherever it may be, were automatically connected to a “buy button” that allows them to complete a purchase from any of these locations in under 60 seconds. This may sound like something impossible or out of a futuristic film, but technology companies have been working on this accelerated access for years, and according to better tech minds than mine, it will be everywhere within the next five years. [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…]

Not Your Grandmother’s Neiman’s

RL_Blog_NeimansNeiman Marcus is not wasting any time as it marches into the new frontier, or the “wild west,” as many are calling it. And it’s headed right towards the intersection where technology and the Millennials connect. Neiman’s is recognizing the tsunami of new technologies being introduced on almost a daily basis, as well as the fact that Millennials will soon replace Boomers as the largest consumer segment. This next-gen cohort has not only embedded technology into every moment and movement in their lives, they also bring huge shifts to the marketplace in how they want to engage or be engaged by retailers.

First and foremost, understood by all retailers (except for the few with their heads still in the sand), they must promise a compelling experience to attract consumers to the store. This is especially true for the Millennials, who are more interested in pursuing style of life over the stuff of life. They desire many types of experiences over shopping and hanging out in malls. And since technology is their life, the Neiman’s that attracted their grandmothers will die with their grandmothers, if they don’t integrate technology into every aspect of their business, including an engaging experience in the store. [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…]

Michael Jeffries – A&F Genius Rides Into The Sunset

Earth in space with a flying asteroid, abstract backgroundMichael Jeffries is no Gary Cooper by any stretch of the imagination. When Cooper rode into the sunset, he was leaving behind whatever victory he won for the “good guys,” albeit Hollywood style. As Michael Jeffries heads into the sunset, he will be leaving behind a once victorious A&F brand that he brilliantly developed over the past quarter century that is now in tatters, In the movie High Noon, in which Cooper starred, he knew the three killers were coming after him seeking revenge. Alert and ready, he single-handedly (actually helped somewhat by his wife) blew them away in a gun fight.

Michael Jeffries in the real world, was blinded by meteoric success, in my opinion, and did not see his adversaries gunning for his consumers as his brand drifted off course.

Positioning Drift

That was Jeffries’ Achilles heel. He drifted older along with his original young customers. He kept his focus on his aging customers without looking over his shoulder at their younger siblings, most of whom wouldn’t be caught dead wearing their older brothers’ and sisters’ brand. This positioning drift blindsided Jeffries. In my opinion, even if he had foreseen the need to pivot to the next generation, Jeffries would not have been able to successfully reposition the brand.

Essentially, Michael Jeffries was A&F and A&F was Michael Jeffries. Both were one. Therefore, for him to reposition the brand, it would be as impossible as changing his own personality or DNA. And so far, he has not been able to do so.

A Shared DNA

Michael Jeffries was largely vilified for his exclusionary attitude regarding the hiring of overweight people or anyone not befitting the brand’s image of sexy, young and cool, as he defined it. He also often used derisive language when questioned about his position. Yet he created and sustained a premier position in the youth market for about 25 years. He captured the zeitgeist of youth in that period and all but owned the entire space. He did so by excelling in a superior implementation of what we all learned about branding in Marketing 101. He created the DNA of A&F precisely to fit the sexy, young and cool image of the products, store layout and design; the nightclub experience; the catalogue; and even by hiring sexy, young and cool associates. He created a holistic, super powerful brand all the way through the entire marketing process. He relentlessly focused on all of it with no divergence, almost maniacally so, to the point of making abusive public comments about the consumers he specifically did not want in his stores – namely anybody who was not sexy, young and cool. So regardless of his rather questionable style and unnecessary derision of anybody not fitting that image, he was a strict disciplinarian when it came to protecting the image of his brand. Therefore, he could arguably be called a brilliant marketer, and I have often given him credit for that.

During the meteoric rise of this iconic brand, its loyal consumers also became an extension of the brand’s persona, proudly exhibiting the highly visible A&F logo, plastered on all of their products. This indelible, neurological connection with its consumers allowed the brand to be sold at full price, never promoted nor discounted.

The hue and cry, as well as the pushback from consumers over his behavior, is not why A&F is in trouble today. The brand got caught up in positioning drift. As their young core consumers grew older, A&F drifted along with them. A&F failed to see and understand that the younger brothers and sisters (now the emerging Millennial cohort) had no interest in copying what their older siblings were doing and wearing. A&F did not react quickly enough to pivot the brand. Therefore, A&F’s original core of sexy, young and cool customers grew out of A&F into Brooks Brothers and other brands. Their young siblings bypassed A&F altogether, heading into the world of fast fashion.

The Beginning of the End

A&F’s space began to close down as three dynamics converged:

  • Competition kept advancing, including the other two ‘A’s’ (American Eagle and Aeropostale).
  • The onset of the Great Recession.
  • The early beginnings of the fashion trend shift among younger customers to the faster, newer and cheaper fashion churning brands like Zara, Forever 21, H&M, etc.

I don’t believe Jeffries connected these dots. He may have been aware of the growing competition in his original space, and he might have concluded that the combination of his direct competitors applying promotional pressure, along with the recession, was stealing customers who couldn’t afford A&F’s full prices. But I don’t think Jeffries recognized the fact that his original brand loyalists were growing out of the brand, and that A&F wasn’t attracting the younger brothers and sisters who were pouring into the fast fashion brands. Of course, further motivation for this trend shift among young consumers was the impact of the recession and the lure of cheaper fashion.

By the way, the same combination of positioning drift and the recession befell American Eagle and Aeropostale. This raises an interesting question. Will the hot fast fashion brands, beloved by the Millennials, get caught in positioning drift, and grow older with their core consumers, thus missing the desires of their younger siblings?

Regardless, Michael Jeffries is left holding the proverbial bag, apparently not totally understanding what hit him. And even if he did, it would be too late to the party. While his DNA is still intact, it is no longer synonymous with A&F, the now-struggling brand he brilliantly launched and once dominated its space.

As he rides into the sunset, will A&F’s brand DNA be able to reposition itself for a new post-Millennial consumer? Or is it too late?

The Bottom Is Near: Thanks to the Millennials

three girls chatting with their smartphones at the parkIt came in with a bang! And it will end with a whimper. I’m talking about the now over-used phrase “the race to the bottom” of price promoting and every method of discounting imaginable and unimaginable. It explosively ramped up around the turn of the century, accelerated through the recession, mainlined on steroids post-recession, and is now limping to its end. This is not a Ron Johnson-like prediction when he bet the bank during his brief and tragic tenure as CEO of JC Penney (and which I naively doubled-down on). I now believe he may have been ahead of his time believing that “fair and square” non-promotional pricing would be desired by consumers. Of course, the JC Penney customers not only didn’t love it, they hated it and walked out the door.

Well that was a different time and a different customer.

The Millennials are going to change it all. They are viewing the industry’s discount madness as an overwhelming, frustrating, and exhausting “paradox of choice” (too many deals and too confusing to even make a choice). They will not only become inured to the onslaught of ubiquitous deals 24/7, they will begin to disbelieve them and cynically expect that another better deal will pop up at any moment – which they will also not trust. How can they believe what the real value of any offering is at this point? [Read more…]

Sears’ Last Gasp: In the Asset Leasing and Loan Business

RR_Blog_AssetI thought I wrote the final word and all that was worth saying two weeks ago about the inevitable collapse of Sears in my article Sears: Nothing Left But its Past.  As I said then, there’s nothing left but its past. Well, “Abracadabra, fast buck, Eddie-the-magician Lampert” has once again given me reason to write another missive on his uncanny ability to squeeze even more cash out of the sinking “twin Titanics,” (for those out of the “know” – twin losers Kmart and Sears).

The cash-squeezing model Eddie is now employing is what I would call the “robbing from Peter to pay Paul (aka Eddie)” model. Essentially he is now in the asset leasing and loan business. First of all, as pointed out in my previous article, ESL Holdings loaned the retail business $400 million. However, with a premium interest rate that gets paid to you know who, the loan is secured by Sears’ most valuable real estate, which eliminates the risk for, you know who.

In 2006, Lampert devised another risk-free concept to squeeze more cash out of the business. He transferred ownership of Sears’ Kenmore, DieHard and Craftsman brands to an entity named KCD (acronym for the brands), which in turn charges Sears a royalty fee to license the brands, which are now being sold in other stores. And I would bet that somewhere in this clever deal, Eddie and his ESL Holdings are reaping some financial benefit. The model sounds like it resembles a real estate investment trust, (REIT), whereby stores’ real estate are sold to the REIT which then turns around and leases them back to the retail business (which Eddie is now considering). Hey, maybe fast buck Eddie pioneered a new instrument: brand investment trusts or BIT. [Read more…]