Restoration’s Restoration?

I remember walking into a Restoration Hardware three or four years ago late in December as the holiday crunch was on. The rumours had swirled forever that they were never very productive retailers and they were struggling. Quite frankly I never understood it. The stores were well merchandised, well branded and well kept. The colour stories were always appealing and I always felt like walking in and browsing. But did I ever buy anything? Ahhh, there’s the rub.

Although, that one December evening, the place was packed and they surprised me with a terrific assortment of classic games in beautiful wooden boxes. They were already pre-wrapped and I couldn’t resist. What’s more, they were being promoted. The place was a madhouse and people were lined up buying multiple units of those games such as Clue, Scrabble, Battleship and the like. I bought a Monopoly game that the family still plays to this day (even today as a matter of fact). I often thought that it was a very good business for them to be in when it is gift season, those well made, higher end versions of classic games.

So, what has been the problem? Yes, their particular space is crowded with Pottery Barn, Crate and Barrel and everyone and their brother opening a furniture offshoot of their concept (think Eddie Bauer). But it goes beyond that. The merchandise mix when they first opened was highly eclectic; assortments of accessories, doorknobs, nostalgic radios, some furniture, lamps etc. I was never really sure what they were selling or what they stood for. Lately, they started to really merchandise with colour stories, more furniture and a snazzy website. But I still wonder, what is their bread and butter category? What do they pay the rent with day in and day out? What is the denim or yoga pant of their business with which they can build a steady, repeatable clientele? I don’t see it as yet.

Under new private equity ownership, partnering with the current CEO, maybe they will start to head down the path of basic commodities that will sell each and every day, in every market. Their real estate is of high calibre and their brand name has been built over years of being in the game. However, if they don’t find additional products that resonate on a daily basis, like those games do at certain times of the year, then I fear for this Restoration Period.

TheRetailTherapist

Retail Life is Like a Box of Chocolates (or Gummy Worms)

I was struck by the energy, colour and panache of Dylan’s Candy Bar when I first visited them on 3rd Avenue in Manhattan. I believe it is the way candy should be merchandised and sold - in a vibrant, colourful, fun atmosphere that doesn’t take anything very seriously. Chocolate and candy are part of life’s delights (especially for children, although even I am a self-confessed “Chocoholic”) and they are also part of life’s sweet little sins. How many times have children or adults tried to sneak in an extra treat without their parents or spouses knowing?

This should have been the evolution of “sweets” retailing, but alas, I am afraid it is not.

The sweets retailer I am most disappointed in from this perspective is Laura Secord. This almost century old retailer has not yet entered this century, even though they have new ownership and lots of money to do so. It is disappointing to walk by some of the very best real estate in Canada and be uninspired by their merchandising, their assortment and their presentation. They have it all - an exceptional brand name and virtually 100% brand recognition in Canada; a rich, authentic history; the very best real estate; and a quality product. So, why, I ask, does it have to be so boring? Why can’t we be treated to some buzz, some flare, some panache? Can anyone tell me?

Although Rocky Mountain Chocolate Factory has tried to energize their stores, and they have to a certain extent, it still feels a little dark and serious for me. They rate a mention because they do a better job than Laura Secord, but still have a ways to go in the whimsy department.

Dylan’s Candy Bar is only 6 years old, and granted, it only has 6 stores (not sure why) and it is the brainchild of Ralph and Ricki Lauren’s daughter Dylan. Public relations is not an issue here. But she has the right idea. She has made this concept a destination. Everyone who walks by is compelled to walk in. Isn’t that the essence of merchandising? Isn’t that the goal specialty retail?

I say it isn’t good enough just to have a quality product or a great location. In order to maximize one’s specialty retail business, one has to have a compelling proposition visually and atmospherically. It has to exude energy and vitality. It has to constantly refresh itself (hence the expansion and makeover of the Third Street store recently).

I think Dylan has it right. Where is Laura really going?

TheRetailTherapist

Three Cheers for Dick’s

I have always loved browsing and shopping in sporting goods stores. As a, well, former “jock” (at least in my own mind), I would meander the aisles looking at the latest equipment and marvelling at the choices. The Mom and Pop shops were the foundation of the industry until the “Category Killers” came onto the scene. At that time, I thought The Sports Authority (TSA) was paradise. Sure, there were the locals like Oshman’s in the Midwest and Paragon in Manhattan, but TSA had them all beat as far as I was concerned because of their sheer size and the breadth of assortment they would carry. It was Disneyland for us athletic types.

But along the way, TSA had their problems (that’s for another entry, but it became too big, too fast and too boring) and in Canada, they were even pushed out of town by the monopoly that is now Sportchek (owned by the Forzani Group). I am not crazy for the store design or the breadth of selection at Sportchek, but, then again, Canada is not the United States and the needs and selection are different (just walk down a supermarket aisle and count the number of different breakfast cereals that are available in a U.S. supermarket compared to what is carried in a Canadian one and you will understand what I am talking about).

But I have definitely found the next generation of sporting goods nirvana: Dick’s Sporting Goods from outside of Pittsburgh, Pennsylvania. I always have to walk around the store anytime I see one. With 350 stores across 38 states, they have started to blanket the country in major markets. With over 50,000 square feet on average on two floors, almost guarantees a breadth of selection. But it is in the store design and the visual merchandising that makes this concept different from traditional sporting goods retailers. In the past, you either felt like you were in a warehouse or something from the 1960’s, with bad lighting, worn out carpeting and old style shelving and racking.

Dick’s is a different story. The store design is meant to ensure as much natural lighting as possible comes through, making it a very different feeling in the store. The second floors are generally mezzanine-like in that they do not cover the entire first floor, thereby retaining that airy feeling. Their assortment is second to none. They have the best brands but within those brands, they tend to choose the freshest merchandise. The buyers have very keen eyes for what will sell and what will appeal to their target markets.

Their sight lines are also well managed so that you are able to see exactly what you are looking for and where you are going (not to mention the creative visuals in each section). The store is split into “worlds” which are very well signed (a pet peeve of mine, and very rare) and easy to navigate. Their wall visuals are very attractive and their floor is also easy to navigate and understand.

All in all it is very easy to see why they have become the number one large format retailer in sporting goods in the United States. I continue to be impressed with their stores, their selection and, on most occasions, their service…Which garners them the “Three Cheers”…

The RetailTherapist

Buckle Up

When I first came upon Buckle (based out of Kearney, Nebraska, of all the unlikely places), it was riding high and I needed to see what they were doing. This was almost 1 year ago and they are still blowing away the competition. Furthermore, since we are supposed to be in highly uncertain economic times, they are no doubt stealing market share from many competitors.

Last month, they ran almost a 35 comp. And almost 28 comp YTD…Compare that to Gap Inc. at -12 comp YTD, American Eagle at -6 comp, Abercrombie and Fitch flat, Lucky Brand at negative single digits. Only Aerpostale, through some very heavy promotions, remains above water on the year in single digits.

So what is their secret? I really have no idea, but i can tell you what I like. Feel free to comment on what you like or don’t like…

They have broken through with some great private label jeans at middle price points and taken some of the pressure off their branded merchandise. They still have a very well assorted selection of brands with good stock levels, but their private label “BKE” is now given more dominance and prime positioning throughout the store and it looks very strong.

Their merchandising is all about denim and what to wear with denim. That is their sole, unwavering focus. It doesn’t have the styling or edge that a Lucky Brand has (which I happen to like very much) but it caters to a more basic oriented customer that wants a bit of fashion but doesn’t want to make a statement with it. Their visuals are very practical in that they instantly inform the customer about what top to wear with a particular denim style or denim brand by showing a number of different options faced out above a selection of denim. It is simple but very effective.

Their real estate strategy seems to be aimed just “off centre”, to coin a phrase. Meaning, while they have stores in Mall of America and Woodfield, the AAA malls are not their core business. They are situated in smaller cities and towns where they become the most important denim resource for that mall customer.

Ok, so some of the stores could use the updated, slicker new look. Their staff and in-store service are only average (no worse nor better than any other mall based retailer in this space). But maybe some of that is part of their charm. Maybe they are supposed to be a little rough around the edges and not too slick as that is the customer who is drawn to them.

From what I can tell, there are more and more of those customers coming through the doors over the past year and being converted into Buckle shoppers.

TheRetailTherapist

Kudos to Costco

I am fairly confident that the founder of “Warehouse Style Shopping” never envisaged cool ipods or flat screen LCD TV’s or even 1 carat diamonds being sold as you walk in the front door of a vast warehouse store. It is an interesting experience to be handed a coupon booklet for diapers and Tylenol Cold Tablets as you walk in the door, walk by a few of the week’s specials piled up to 10 feet on your left and on your right see and hear the sounds of the latest, hippest electronics - not to mention being blinded by the” bling bling” also on display at the front. Oh, and you need a membership through a corporation to join and it costs $40-50 to join every year!

But it is Costco that has perfected the art and science of warehouse madness. The old style merchants would marvel at how the old traditional strategy of “pile it high and watch it fly” with large price point signs on each rack really does work in these environments. Did we mention the average household income as being around twice the national average? This, for sure, the founders never dreamed of or originally targeted: A very affluent core demographic.

I know there are large families out there who need three tons of dishwasher detergent at a time. I know in our household we go through 3-4 cases of the flavoured water in barely a month. I also know that to feed a family of five, the portions at Costco allow everyone to feel satisfied without breaking the bank or offending anyone’s taste buds.

So, when we mentioned that the Apple store was the “Perfect Retail Concept”, maybe we should think of Costco in the same breath. There is no floor service - it is fully self serve. There are no shopping bags or boxes - one gets to re-use the strangely shaped boxes in which the merchandise was delivered to Costco. The checkout is easy, quick and very efficient. There is no home delivery or help to load and unload the car (hence my back spasms on two occasions, two days after a Costco run). The stock is replenished and shipped overnight. There is no visual merchandising expense per se as the manufacturers’ own packaging and boxes are used to place on the floor always palletized. There are tastings set up around the store to help satisfy the munchies (which surely entices shoppers to purchase) especially after wandering around 100,000 square feet of concrete flooring. The cost and complexity to build are both extremely low and all the layouts are pretty standard and consistent. There is a built-in loyalty program and mailing list to which to advertise and promote and a built-in cash flow from the annual dues each member pays.

There is no internet expense or national advertising campaign. The employees are very well paid and committed. There seems to be less of a loss prevention issue as items are larger than average and hard to conceal and everything is checked as one walks out the door, by hand and in person. And they only take American Express. Imagine that.

I guess what I am saying is that I like Costco. I admire what they have done and the culture they have created. They do everything well at minimum cost so that they can pass along the best pricing possible to their “members” - that would be you and I. I have found golf bags, life jackets, hockey sticks, Sea Doo tubes to pull behind boats, athletic socks, children’s cotton pajamas, bestsellers in books and audio, patio and dock furniture not to mention the every day staples of bottled water, garbage bags, batteries, pine nuts and Chipits. Now, apparel is taking a larger and larger percent of their floor space and has succeeded based on price and need.

It is a one of kind treasure hunt experience that even guys like to visit. Oh, and they are needed because it usually takes more than one person to lift everything onto the cart and then into the car!

TheRetailTherapist

The Kids Are Alright

I love the kids’ business. Not only can it be imaginative and colourful but it is such a positive and cheery aspect of any retail category, but especially apparel. As a parent, I know I enjoy dressing the kids up (while we still can) to make them look handsome or pretty or cute or wholesome or whatever. The price tags don’t necessarily matter until they are old enough to want things for themselves. Then, mysteriously, all of a sudden a light switch goes on and price and usage become the be all and end all. This takes us into the “tween” and “teen” phenomena, which are less than thrilling from my perspective.

But mostly, a kids-only apparel store is a happy place to shop, work and create. Take, for example, the ultimate kids emporium babyGap and to a certain extent Gapkids. BabyGap especially has stayed true to its brand by designing and merchandising unique, cute, wearable, slightly higher end baby clothes. They are by no means the most expensive but one could argue it is the most premium of any of Gap Inc.’s brands. Gapkids has come upon some major competition in recent years and has had ups and downs but is still a fun place to shop. Gymboree, Children’s Place, babystyle, Jacadi, abercrombie, Crewcuts by J. Crew, AE77 (American Eagle) and every other national retailer also loves the kids business. H & M and even Zara have launched kids businesses as well.

I have to say I am partial to higher end kids retail as well those that target the 0-8 year old. During this time, price seems to be no object (especially with all the grandparents out there) and usually, the child has yet to really have a say in how they look (or at least can be easily persuaded one way or another!)

I recently came across a neat little shop called “Peek…aren’t you curious”. They have barely 5 stores in California and Arizona and have a distinct point of view - let’s call it “high end beach”. But what is distinctive about it is the fact that the national brands that are represented are fairly obscure, and pretty expensive. But the stuff is outrageously cute merchandised in a very friendly, open environment.

What caught my eye are their walls. They are adorned with the cutest quotations regarding children, and their personalities. My favourite poem of all time “When You Thought I Wasn’t Looking” by Connie Back (it will make your eyes well up every time - I promise) was stenciled, in its entirety, on the wall along with other quotations from the likes of Emily Dickinson, Pablo Picasso and A.A. Milne. I asked about the poem and the manager produced a photocopy of all the quotations for me to take home. Nice touch.

If you believe that the kids are our future, then wouldn’t it also portend that kids retailing also has a robust future?

TheRetailTherapist

Staying True

“Sticking to one’s knitting” has always been an axiom in our retail world. We can count on one hand how many retailers have been able to completely re-invent themselves and become more successful. Once dormant brands have been ‘re-suscitated’ such as Banana Republic and Abercrombie and Fitch. Mostly though, brands and concepts have been ‘refined’ along the lines of Target, J.C. Penney and even Victoria’s Secret to match the customer’s demands for change but all the while remaining essentially what and who they were before.

One example of a ‘re-invention’ gone sour was when Gap decided to rid themselves of all their basic commodities and become a young, hip source for fashion, earlier in this century. The chain dropped 25% overnight and hasn’t fully recovered since. Any other success or horror stories of re-inventions out there? I would love to hear them.

In a recent outing at the mall I was struck by two retailers who have been hot lately and are taking slightly different approaches in this tougher environment. Anthropologie has honed in on the 20-30+ year old women who love the thrill of the treasure hunt, when looking for either something to wear or something with which to adorn their residences. They are unique not only in their approach to the theatre of retail (with their elaborate visual changes every quarter in every store) but their ability to create branded labels out of their own private labels. They have been consistent in this approach with their merchandising, staying true to their customer and not wavering from their core formula.

J. Crew has been another fabulous success. What Mickey Drexler and his team have done with that brand and those stores is nothing short of remarkable. They have extended the brand to wedding gowns, suitings, kids clothing and additional accessories, while, for the most part, staying true to the original premise of well made, preppy/fashionable weekend clothing for the young at heart. However, I hope the latest store set up is not indicative of a change in direction.

At the front of the store, were mannequins lined up with quite dressy looks in metallic fabrics in quite hideous mustard and gray colour combinations. It was not pleasing to this eye when walking in the door. It did not seem to fit what the general premise or direction has been for the past number of years. Maybe it was an aberration and it will change in the next few weeks (if it hasn’t already) but the point is, especially in these uncertain economic conditions, the customer must feel their favourite stores are familiar and trustworthy and must not stray from them in their time of need.

Staying true is difficult especially the more success one garners and especially in the “fashion apparel” business. But the customer must be able to recognize who you are and what you are offering as that is how they, in part, tend to define who they are and what they should look like to the rest of the world. A very important facet to keep in mind in any retailer’s strategic planning session.

TheRetailTherapist

Lulu for Lululemon

You never know when something is going to click. An out-of-the-way location on Queen Street (very) West of most of the action, turned into all the rage in a city, like Toronto, that was obviously craving one. My Wife, my Mother, you name it, had to take an extra hour or so to shlep out to this undersized, over-assorted hole-in-the-wall store that sold yoga inspired activewear. The fabric was nice, the fit was oustanding (especially on fit women), the colours appropriate and the prices high. A perfect storm erupted. This Vancouver based chain had barely 5 stores at the time, a very haphazard expansion strategy (territorial rights, internet rights and U.S. continental rights given out like gift with purchase schemes) and yet had hit on exactly what women were looking for.

This is barely 5 years ago. Today as a public company, it has a market capitalization of $2.2 billion. What the heck gives any more?

Most retailers are scraping and clawing, discounting and promoting to retain market share (let alone gain it!). Yoga inspired clothing has been around quite a while already with Danskin being the first and most popular (although coming out of the dance industry). Several others have been around just as long albeit more from a wholesaling standpoint with the exception of Portland based Lucy, which started on the web and then morphed into a bricks and mortar retail concept. What makes people go crazy for Lululemon as opposed to any other concept out there (maybe with the exception of Aritzia - from Vancouver also - and Buckle - from Nebraska of all places ?

It is hard to say and I have been at this a long time. The stores are not well merchandised and lack strong visual presentation. The product designs are quite nice and the colours and fabrics are rich but not overwhelmingly so. The staff seem nice and pleasant but not much different from the typical mall fare. The branding is not slick and is only promoted on a grass roots basis through yoga instructors, personal trainers and community initiatives. The pricing is premium so it doesn’t seem as accessible as it could be. So, what is it?

If you have any answers I would love to hear them but they have certainly created a large devoted following. They appeal to a range of ages and are even sprucing up their men’s assortment (which sorely needed it). They have opened as many as 60 stores now in Canada and the U.S. and are no means ubiquitous, which no doubt helps their productivities.

But if I were to think about it for a while, I believe there may be two main success factors: The logo identification is strong (a stylized horseshoe of sorts) and is strategically placed on each garment for maximum exposure without feeling you are a walking billboard (like you feel while wearing a Roots garment for example); and secondly, its approach within each community has resonated with its clientele. It has been subtle and supportive and they work hard at keeping their authenticity in tact, even as their market cap heads for the stratosphere. They have yet to advertise in any meaningful way and keep building their brand one fitness/yoga instructor at a time in each community in which they open a store.

It has been a wild ride since the private equity players invested in the concept almost three years ago. But their clientele could care less about those things. Their customer base only cares about whether they have the latest merchandise in their size and how good it looks on them. Word of mouth is any brand’s most effective means of marketing and communication.

These fitness buffs must also be expert socializers for the concept to be as popular as it is today. The gift of the gab has made Lululemon one of today’s most popular retail brands.

TheRetailTherapist

The Apple of Everyone’s Eye

Being in the retail business for about 25 years or so, I often dream of what the perfect retail scenario would be like…Money would be no object to spend on the customer experience including unlimited sales/service help on the floor; very high margins with little or no markdowns; very heavy and constant traffic due to high brand recognition and enthusiasm; smart and clean store decor; just in time inventory deliveries; and enough time and capital to train staff and be able to spend hours with any customer that desires it…

Welcome to Apple Retail!

It hardly seems fair but they have been so logical in their execution that it is a lesson in simplicity and common sense. I have long believed that your best vehicle for marketing your product and your concept, especially for a mall based retailer, is by ensuring you have adequate staff “coverage” on the sales floor at all times so that every single customer regardless the time of day, can receive the ultimate experience. This is one’s primary marketing expense. I would actually extract millions of dollars from the marketing budgets in any circumstance to invest on the floor in hours and in training.

The other major issue for retailers today is inventory control on the sales floor from presentation and loss prevention standpoints. Apple has figured this out - no inventory on the floor (with the exception of accessories and some software near the back of the store near the cashwraps), only demonstration models of every single piece of hardware Apple makes. All other merchandise is stored in the back room and deliveries are daily based on what sold the previous day.

Not only is the staff plentiful at any given point during the day, but they are rabid Apple fans. The staff does not need to be “sold” on the company or the product, they are already enthusiastic users and experts. Not only do they demonstrate the product and help guide customers to the right machines, but they sit for hours at the “Genius Bar” where they help you re-configure your Mac computers or ipods or fix any problems you may have - for free!!! That is the ultimate technology customer experience.

By the way, there are no markdowns or sales. There are no promotional signs. There are clever and witty and compelling campaigns that draw customers in the doors. The store design lends itself to easy circulation and navigation of that high traffic and allows customers to see the entire store easily.

The sales volumes are huge due to the high average retail price of the product they carry and the brand name recognition that drives the huge amount of traffic. Therefore, their costs of operating in the malls as a percent of sales will be lower than anyone else due to sheer volume (with the exception or maybe allowing for the wage costs).

There is certainly a buzz to the Apple brand and has been for some time. The stores capture that buzz brilliantly and enhance the experience through staff deployment and minimalist merchandising. Does this store rock your world too as a retailer and/or a customer? I would love to know.

If I had to close my eyes and dream of the perfect retail scenario, Apple is the closest thing to perfection today.

TheRetailTherapist

Oh Canada

It seems for those of us who are serious retailers, the Canadian marketplace sure seems to be getting smaller every day. Not that it was ever large to begin with. In the days of Dylex, Comark, Woolco, Bretton’s, Eaton’s, Cotton Ginny, Beaver Canoe, Coconut Joe, Aikenhead’s, Freedom, Kettle Creek etc., it seemed that there was a diverse, healthy and creative retail industry thriving in “our home and native land”.

Today, all of the abovementioned retailers are gone except for Comark which is now a shadow of its former self. Most retail chains today are either owned and operated by foreigners or of the “cheap and cheerful” variety like Stitches, International Clothiers or Urban Behavior. Roots has lost its iconic status, Hudson’s Bay Company just lost its latest U.S. born owner, Sears is owned by a U.S. Hedge Fund manager, Club Monaco is owned by Ralph Lauren, and Gap, Abercrombie, American Eagle, Zara and H and M now seem to dominate the landscape.

It makes things difficult for those who want a career in retail in this country to find a path. With most home offices south of a border or across an ocean, it doesn’t promote the kind of well rounded development an aspiring retailer should possess in order to create new concepts or drive exisiting ones to new heights. It is one thing to gain operational and “on the floor” experience in the field (which is crucial especially when one is just starting out), but then to be able to be exposed to what happens functionally behind the scenes in merchandising, design, marketing, human resources, visual, distribution, planning and allocation is almost impossible given the state of the industry in Canada and one is forced to re-locate to the U.S. to gain that type of experience, which causes a talent or “brain drain”.

I would love to hear what your thoughts are on this topic as it is critical for Canada’s retail industry and the industry’s creativity as a whole, that we continue to nurture and develop and encourage young people to choose a career in retail as opposed to luck into one, like I did.

What can really be done about the state of the retail industry? For every Lululemon, there are 10 Best Buy/Future Shop, Wal Mart/Woolco, Home Depot/Aikenhead’s or Michael’s stories in Canada. American Apparel, which is opening stores in this country is actually an American company owned and operated by a transplanted Montrealer, out of L.A.

Does that really how it has to evolve in Canada? It needs a concerted effort to nurture and foster creativity and career orientation amongst all Canadian retailers to change this trend. It’s time to wake up and get busy.

TheRetailTherapist