Brand Stories

With the opening of the 40,000 square foot Hollister “Flagship” store by the Abercrombie and Fitch group in the last week or so, it gave me pause to think of the relevance of investing in this type of brand experience.

Of course, Ralph Lauren pioneered this type of branding effort by deciding to create its own environment in order to increase brand presence, showcase exactly the way the Ralph Lauren brand should be merchandised to the public and increase awareness for their labels which were (and still are) carried by almost every department store in the country. I remember the hew and cry emanating from their wholesale accounts that these stores would cannibalize sales and that it would ruin the relationship. The end result was that business everywhere increased substantially as people became more familiar and comfortable with the Ralph Lauren name and brand and this led to every other designer opening their own stores to show off their true brand essence.

Nike was also at the forefront in opening their own homage to the swoosh and the sporting icons they had under contract and called it “NikeTown”. They opened usually in the highest profile areas in major metropolitan centres and created a buzz when athletes showed up for autographing sessions or product launches.

But what is the real purpose of these “Brand Stores” (usually built several stories high and at huge expense to the company)? What should the real purpose be?

As retailers know, most of the time, these stores cost almost twice as much to build per square foot (not to mention the footprint usually being at least five times larger than the average store – in Hollister’s case around 8 times), the rent is usually exorbitant as it is usually located smack in the middle of the highest profile metropolitan shopping hub and the operations of a store like this one is not only different than the company is used to, but takes that much more effort, staffing, security and inventory than any other store in the chain by a wide margin.

So, why bother? What, exactly, is the point?

Most wholesale brands do not have the retail capacity or mentality to operate stores profitably or properly, nor do they want or need to. To them, it is a sidelight purely for increasing their brand profile. Ralph Lauren is the exception, since he has been able to hire and develop a retail division and create a business model that works. But he has been an exception to the norm in many ways (his outlet, off-price channel is actually his most profitable channel in the entire company, but that’s a different story for a different day). I don’t believe NikeTowns have made money since day one. But I am not sure that really matters.

To my mind, opening a flagship, brand-illuminating store should be all about marketing and public relations. The store should be run independently of either a standard retail chain or a wholesale division with the goal of breaking even. Even if it does lose some money on an annual basis, it should be part of the marketing department’s budget as opposed to hanging the retail operations team with that burden. This way, everyone wins.

There is no better vehicle for showcasing exactly what your brand is about (be it retail or wholesale) than an actual store where your marketing department, your visual merchandising department, your buying teams and even your human resources department can create the ultimate brand expression. The downside is time and energy for sure, but if both those are compartmentalized and the emphasis on maximizing profits on these locations is not the driving force, these flagship stores like the 40,000 square foot Hollister “Soho Grande” can be successful at helping build brand loyalty and customer share of mind.

TheRetailTherapist:)

Postscript: I forgot to mention Apple stores for their brilliance and their ability to increase their market share almost instantaneously and creating awareness and the ultimate brand image for themselves. They are extremely profitable which flies against my theories above. They are a unique case though but worth mentioning. TRT:)

Forever 21 – The Death of Retail?

There is no question, especially in these harsh economic times, stores such as Forever 21 are pretty popular. The formula is simple: Knock off the hottest and latest fashion trends, move the merchandise into the stores within weeks, jam the stores full of every category a woman could want, create an “environment” that is fairly innocuous, schedule minimum staff to at least clear the fitting rooms, play the music loud and watch the cash roll in.

Sound familiar?

There are many examples of this kind of retail formula all across North America, which is basically a take on the European model of Zara and H & M, but from the looks of it, severely “dumbed down”.

I, for one, can’t stand it. I do, however, envy their margins. While these types of concepts draw the crowds (usually young, ethnically diverse and fashion conscious) what is it really saying about the state of retail merchandising as we have come to know it?

Instead of high concept, we get red and yellow signage shouting at us about the 50-70% off promotions. Instead of friendly and knowledgeable sales help, we get no sales help, clothes strewn all over the floor and toxic attitudes. Instead of unique store design and some branding elements, we get plain vanilla stores juiced up by a chandelier or two, loud music and chrome 4-ways.

Peter Glen would not be impressed. Neither am I. But the customer is king, and they seem to be voting with their pocketbooks as Forever 21 and others like it keep opening stores at an alarmingly fast rate. Some of these players keep gobbling up more and more chains, who, in their previous incarnation, were unique and branded on their own. Now, each banner carries similar (if not the same) merchandise and carries out the same strategy. The stores all start to look the same – the only real difference is the name above the door.

This is depressing and infuriating. Being a merchant, I have always aspired to creativity, concept and branding to ensure the customer doesn’t stray even in tough times. Obviously, the keepers of brands such as Abercrombie & Fitch, Gap, Old Navy and even Eddie Bauer have done a poor job of keeping their customers happy and streaming back.

I think the difference may be that brands and their stores need to reflect exactly what their customers are going through and empathize with all the stages of their customers’ lives and they have not done a good enough job in this regard. If that means that Abercrombie, for instance, has to pare back a bit on their bells and whistles they engineer into their cargo shorts and come up with plainer ones so that their prices can be adjusted to fit their customers’ state of minds, then they should do that. A brand has to understand its customer and their moods more intricately than ever probably forever now. The brand must become a reflection of their customer. Once it does, the brand will never lose their customer like so many have.

Retail branding is an exercise in life cycles like everything else. Having a “concept” does not absolve you from sticking your head in the sand when real life hits. The customer is too smart and too fussy these days. She will realize when you are being too stubborn and when you are being accommodating and understanding of her needs as they change with the cycles of her life.

Forever 21 and their ilk are not the answer. At least I hope not.

TheRetailTherapist:)

Where’s the Beef?

I used to love that commercial. Wendy’s (!) made fun of McDonald’s and the entire world started using that phrase to single out thin arguments, lack of facts or just plain superficiality.

But, we use it here to describe what has ailed Loblaw’s (or is it Loblaw? – more on that in a minute). In a failed attempt to counter the Wal Mart effect in Canada, Loblaw’s (the largest grocer in the country with multiple banners) started a massive effort to sell everything but the kitchen sink (but lots of accessories to use in the sink itself). The company tried to restructure its entire supply chain itself to handle the gidgets, gadgets and apparel that they never used to handle. Alas, even before this economic downturn, they went into a tailspin and it cost their bright CEO his job.

But what about the beef? In the interim, the worst thing that happened is that they forgot they were a food retailer, and they used to be an exceptional one at that. Their trail blazing private label brand “President’s Choice” had ME reading their Insider’s Report for goodness sake to see what creative food items they had come up with on a monthly basis. This franchise was gaining traction internationally where they sold the brand into major supermarkets in the U.S. and abroad. But they took their eye off the ball and let the 500-pound gorilla in the room dictate their strategic thinking. Not to say it isn’t difficult, but when you have a huge advantage in a staple like food and you have the largest market share of any competitor, my advice is to get better at what you do and in that way you will keep that gorilla at bay.

It didn’t work out that way. It became an obsession. Not only did it distract the entire company but as a result, their core business suffered. Time and again the shelves weren’t fully stocked, our family’s favourite cheese was constantly out of stock and lean ground beef was nowhere to be found. It has been better lately although they have a new merchandising strategy for some locations as they call them “Loblaw” and they do not carry such common items as a mop or a duster like all supermarkets carry. The Loblaw without the apostrophe ’s’ denotes food only. Who thinks of these ludicrous things?

Anyway, they are trying now to pump up their private label brands once again. In addition to “President’s Choice”, they are pushing their “Blue Menu” healthier brand, their “PC Green” environmentally friendly brand and their “No Name” value brand. They have also struck some gold with their “Joe Fresh” apparel brand thanks to Joe Mimram. That is something at least Wal Mart cannot get right (and should have) -inexpensive fashionable apparel. It is just not in Wal Mart’s bones.

I am hopeful that Loblaw’s (or whatever they want to call themselves) will ultimately prevail. I have to say that Metro is looking better and better and giving them a run for their food dollar. Hopefully Loblaw’s has learned their lesson not to look in their rearview mirror so much and keep their eyes firmly fixed on their own road ahead which was already smoothly paved for them long ago.

TheRetailTherapist

Lavish and Squalor

I passed an interesting store the other day. I had to chuckle to myself as I walked by as the name seems to sum up what the economy is struggling with at the moment. These are interesting times for sure, and the fact that we have been so “Lavish” and that has led to a bit of “Squalor” has humbled a lot of people and re-set quite a few expectations.

The way I see it, we have spent a ton of money on some very overpriced merchandise. We have constantly traded up and traded across as there have been so many copycat merchants that have risen with the high tide of the stock market, huge bonuses, easily available credit and rising housing values that the expression about “a rising tide floats all boats” is appropriate to explain what has happened at retail.

Now, the fallout will begin and the copycats will have the toughest time. If you do not have a unique proposition or occupy an important piece of real etate in the consumer’s mind at the moment, you will struggle when the spending stops and the constant sales flow turns into chinese water torture.

Independents that have romanced their customer and have built personal relationships with them should be able to survive this downturn. Those powerful brands that have built an authentic reputation and have been consistent about delivering on that reputation should also do alright. Gap could have been one of these but they have been inconsistent. I would say Urban Outfitters and their other brand Anthropologie have mastered their domain and should be able to perform well over the course of the next 12-15 months of a predicted tough retail climate.

Of course we all know the obvious that the bargain brands will gain market share at this time in the economic cycle as Wal-Mart, Target and TJX should all thrive. But the corollary to that is what will happen to the Neiman Marcus’ of the world? My hope is that they have not become too overwrought with overhead or inventory and they can weather some significant negative comp sales. The sales will come back to a certain extent – maybe not to the level it once was, but business will be solid as long as they stay true to their unique proposition and the high end retailers do not become tempted to change their stripes.

So what about “Lavish and Squalor” the store? It is a neat blend of a full range of casual unisex apparel, accessories, candy, Vitamin Water, and gifts. It is aimed at the 17-27 year old who is a bit funky, urban and casual. It looked like there is a grunge influence but it is tasteful and more mature than the average store of that type. The music, the environment are spot on for their target market (er…not me) and the staff seemed cheerful and interested. The visuals were exciting and unique.

And I love the name!!!

TheRetailTherapist

The New Age Apothecary

It’s really fascinating to witness the evolution of a chain of stores let alone the transformation of an entire retail category. Shopper’s Drug Mart just opened their latest large format concept store down the block in my neighbourhood. My son and I wandered in there and we were both truly amazed.

The only resemblance to its roots or the apothecary of old is that it is predominantly white – shelving, walls, floors and bright lighting make it seem clean and almost sterile. It certainly gleams from the street and I have never been in one of these as large as this one. It has to be close to 15,000 square feet.

Let’s examine what Shopper’s has become: Yes, they have a stylized pharmacy counter and they are certainly profiting in this space with the aging population and the preponderance of new drugs being designed for just about any affliction be it mental or physical; they have a huge presence in cosmetics and fragrances as they smartly took advantage of the merchandising and financial woes of the department stores here in Canada; but what is most surprising is the amount of food and consumables they are carrying today. It is as if they are taking on all comers across categories to become the 21st century version of the “General Store”. The only thing that is missing is apparel like our friends at Loblaws has proffered.

I know that Tesco has opened up Fresh & Easy stores in the U.S. and once mighty 7/11 has almost disappeared from consciousness. Canadian Tire has tried its hand at convenience stores but I believe that Shopper’s is trying to take it to a brand new level. This is an excellent example of extending your brand and the product selection that your core customer buys anyway. It’s all about convenience for their loyal customer base and increasing the basket size to drive higher returns to justify the huge increases in store size across the country.

So what does this mean? It is another way to look at consolidation except instead of the traditional mergers or acquisitions route, Shopper’s has decided to roll up categories organically and out-assort department stores, convenience stores and general stores. The strategy certainly seems to be working.

What is worthwhile to note is that the mastermind behind this strategy was a guy named Glenn Murphy who is now CEO of Gap, Inc. What is ironic is that Gap’s strategy actually needs to be the opposite of Shopper’s successful strategy that he implemented. The assortments and stores need paring down in both Old Navy and Gap brands, not expanding.

Is this really his strong suit? Only time will tell.

TheRetailTherapist

Sarah Palin’s Favourite Store

I am absolutely positive about something: If Bass Pro Shops had an outlet in Alaska, Sarah Palin would have spent a considerable amount of time and money in what would undoubtedly be her favourite store.

Bass Pro is certainly Disneyland for true outdoor enthusiasts who like to catch (fish), shoot (hunt), cook or even live outdoors. It is 100,000 square feet of camouflage nirvana – everything from camo Crocs to camo Under Armour to Redhead hunting socks with a lifetime guarantee is featured at Bass Pro. The amount of inventory and depth of assortment is staggering. I am not sure how customers aren’t overwhelmed when they walk in. I imagine the average time spent in this “warehouse” is off the charts way above average. But it must be a goldmine as they have done most everything right.

Their selection is beyond compare. They have different shops for hunting, fishing, boating, outdoor living and apparel. They even have a section for outdoor cooking and a separate section for food and gift giving – not to mention a home decor corner. They sell ATV’s and boats, they carry extreme tree climber chairs, layout blinds and Ranger Ladder Stand “Luxury Boxes” for hunting. Their selection of guns is second to none and you can pick up something called Broadhead targets while you are at it. You can also practice at a shooting arcade for a little interactive experience.

They carry their own private label branded clothing along with the staples of Carhartt, Columbia Sprotswear and The North Face brands. They also carry the largest assortment of neon orange apparel on earth. The assortment of lures is enough to make fish salivate (if they could) and I observed many fishermen do the same as they stood gawking at the selection.

I visited the store at what must be one of their peak seasons. Never mind “back to school” for these guys, it’s “back to bush” as hunting season opens this month and next throughout North America. There were people carrying baskets and wheeling around carts just browsing the aisles for the latest smokehouse or cross-bow with colourful arrows or rugged outboard fishing rig.

I couldn’t help but think about the experience at other sporting goods stores and attempt to compare the experience with this one. For the outdoor enthusiast, this place is pretty special. I wrote about PGA Superstore in an earlier entry and that might come close, but as large as the Bass Pro assortment is, it is very focused and there is a certain intensity that radiates from every corner of the store. There was a buzz at PGA Superstore, but maybe because golf attracts a more heterogeneous crowd, it lacks that same density of intensity.

Other sports could probably benefit from the kind of focused energy this massive store produces. I still do not understand the math with that much inventory to manage and turn, but baseball, football, basketball, soccer and hockey merchants could all take a page from Bass Pro and aim to match the store experience of this outdoor emporium, if not in size, then at least in emotion, energy and edge.

Wait…Didn’t Governor Palin mention something about being a Hockey Mom as well?

TheRetailTherapist

Being Schooled

Let’s see…if we clear away the debris from a very poor August for most retailers, we see some interesting trends. Gap continues to post negative comps (but are very profitable due to cost and inventory controls – which will catch up to them very soon if they do not solve their top line problems). That’s a continuation of a trend.

The high end retailers of which I include Abercrombie and Fitch, Saks Fifth Avenue, Nordstrom and Neiman Marcus all had tough months. What would be really interesting to know is whether transactions were down or did they have to reduce prices and become more promotional, which meant their retails were lower than last year yet transactions held. It looks like of all the higher end retailers, Neiman’s either held their prices the best or suffered the least amount of traffic declines.

Then there are the hot retailers, which will always buck any ebbing economic trend. Buckle, American Apparel and my guess would be Urban Outfitters (although they report quarterly) performed brilliantly in August. During these times, kids are told they have just so much money to spend and they learn to spend it wisely on the stuff they REALLY REALLY want and these stores are who they choose. Pretty impressive stuff. That is the power of each of their brands that is shining through in this type of environment. I am sure they are the envy of most retailers out there.

As one would expect, the trend towards the “value” retailers is signified by the positive results at Wal-Mart, Costco, TJX (although surprisingly only recorded flat comps), Family Dollar, BJ’s Wholesale Club and Ross Stores posted positive comps in an anything-but-positive environment. These results do not surprise. What does surprise is how poorly Kohl’s and J.C. Penney performed. I guess they are continuing their poor trend this year but with all the uniqueness of offerings and exclusive brand related marketing and price points, I would have expected better results to sway the teens and college kids (or more specifically their Moms). They are obviously not executing where they should be and need to be careful to ensure they stay relevant in this hyper-competitive market.

The biggest surprise to me is Target. They have been bouncing around flat to slightly negative and slightly positive most of the year but with the current state of the economy and state of mind of the consumer, I would have expected them to post better than a negative 2 for August. Even though they were coming off a very good August last year, I expected them to continue to keep pace with Wal-Mart. Does that mean that Wal-Mart is making in-roads in apparel? I am not so sure after walking through a Wal-Mart Supercenter recently.

Interesting times for sure. The kids are not the only ones learning new lessons this time of year.

TheRetailTherapist

Olympic Gory

I am digressing from my usual missives on strictly retail subjects a bit for two reasons:

1) It seems that everyone else around the world is digressing from other things to watch the glorious Olympic Games from Beijing, so why can’t I?

2) I feel compelled to comment on what I saw at the opening ceremonies on Friday night.

The opening ceremonies were absolutely breathtaking and brilliantly creative. Dramatic, acrobatic, synchronized and sensational are words that come to mind. They were truly one of a kind scenes from a one of a kind Olympic site as China makes history once again.

These ceremonies were 5000 years in the making and surpassed all expectations by miles. It is in this setting that I felt great embarrassment and disappointment when the Parade of Nations began.

I am no “fashionista”, but when Canada walked into the stadium after having witnessed the opening drummers, movable type staging and beautiful symbolism and elegance, I felt sick to my stomach. I was embarrassed to be Canadian. The Roots outfits were one thing over the past decade or so, but now that it had moved to The Bay, I guess I thought we would take it more seriously. It was a joke. Other countries paraded around either in suits or traditional wardrobes indigenous to their regions and people. Ralph Lauren did an admirable job with the Americans (although I expected a bit more as well). But short sleeved printed zip up performance tops for an Olympic Games Opening Ceremony in Beijing, China? Are you kidding me?

The Turks wore suits. The Chinese were resplendent in their national flag colours differentiated between men and women. The Canadians looked like asexual gym rats ready to hop on their bikes and pedal down the street. The printing was a weird font which wasn’t eminently legible. There was absolutely no style or creativity prevalent at all.

Not only that, the collections in the stores are severely lacking. Now I know why. There is no sense of fashion, occasion or pride in what the Canadian team wore in that Parade of Nations nor in the collection in the stores that Canadians are supposed to be enticed into buying.

Would it have been too much to ask for the Canadians to be wearing some type of co-ordinated outfit (either a suit with a cool red and white shirt – possibly red background with white maple leafs printed all over it – or a red blazer with great looking khaki pants or skirts and a cool striped polo shirt)? I was crushed.

These games may turn out to be a turning point in China’s history, even in world history. Michael Phelps will probably make Olympic history as well. With Canada being the next host of the Olympic games in 2010, I can only pray that we wake up and make amends so as not to embarrass ourselves in front of our own home crowd in Vancouver.

TheRetailTherapist

Get in the Game!

There is little doubt that the era of big time sports has been upon us for quite a while. Nothing stirs passions amongst North Americans like a great inter-state rivalry or an intra-divisional clash of teams from different (or even similar) geographic regions and/or cities. I acknowledge that there may be more passionate fans globally when it comes to the “beautiful game” of football (or soccer as it is called in North America), but I want to focus on the retailing efforts of a couple of the big name, major sports leagues that North American fans tend to revere. I also acknowledge North America’s efforts surrounding Major League Soccer (MLS) and the merchandising and marketing muscle of professional wrestling and NASCAR.

Because of the passion and the amount of money now involved in today’s big league sports (Major League Baseball (MLB), National Football League (NFL), National Basketball Association (NBA) and National Hockey League (NHL)), marketing these leagues is very big business and there is no expense spared in order to position or “brand” their league and logo to the general population. Admittedly, hockey ranks behind the “Big 3″ but this means they are required to create even more buzz and energy surrounding their product because of their standing.

That is why I find the stores that two of these leagues have built and operate within blocks of each other, fascinating (I have yet to see an NFL or MLB store).

The NBA store, which is on very tony and very expensive 5th Avenue has been around for a while and is certainly a full expression of the game it serves. It is noisy, packed with merchandise and offers a variety of activities which provides just enough entertainment. Anything related to the selling of NBA logo merchandise is pretty well available somewhere in this store. It takes a while to meander the entire place on two floors and there are interesting little rooms to explore. I have never been disappointed with respect to being in stock in any type of player or team jersey I have asked for or even in an obscure NBA logo item like a Timberwolves lunch box. They had it.

The contrast is evident when you then head a block west to Avenue of the Americas (6th Avenue) into the shiny new NHL store “Powered by Reebok”. I am not sure what the arrangement was between these two titans but the store is not a good reflection on either brand, especially when you compare it to the NBA store. You would think these guys would have gone to school on that basketball emporium.

The NHL store is a stark, white room with an exceedingly high ceiling, with very little merchandise available. There are the requisite large screen televisions blasting the NHL Network feed to anyone who cared (mainly the staff). The mezzanine in the back of the store (almost like a balcony) houses the studio for NHL Commissioner Gary Bettman’s XM Satellite Radio show.

The merchandise assortment was pathetic, but then again, hockey is not the most popular sport in the U.S., so why carry much merchandise if you aren’t going to sell it. Correct me if I am wrong, but the goal of these types of stores is not necessarily to become cash cows, but to be brand beacons. Am I mistaken? This is an incredible opportunity to show Americans from all over the U.S. and tourists from all over the world (as Manhattan surely is a magnet for all of those) what the NHL is, where it has been and where it is going through their merchandising. Yes, all leagues have internet presences (and a dictatorial attitude surrounding the look and feel for some of the leagues – hence the importance of branding online at least), but the one place with the league name on the door, where customers can physically interact with the brand and the product is their very own store. The NHL flat out blew it.

My cousins visited both stores in Manhattan recently. Their sons are huge hockey fans from “Hockeytown”, U.S.A. (Detroit, reigning Stanley Cup Champions). All one of the sons wanted was a particular player’s sweater from an “Original Six” team. No stock was available and they couldn’t even make one up for him. What is the purpose of the NHL store, if they cannot satisfy the fans desire for basic merchandise? Not to mention, there was no breadth or depth to the assortment and the visuals were lousy. This should be a hockey fan’s nirvana. All my cousin’s son wanted to do in Manhattan was visit the NHL store. They walked out empty handed. But they walked over to the NBA store and loaded up with stuff. Does that tell you anything?

The NHL have clearly missed another opportunity to brand themselves as belonging in the big leagues when it comes to marketing and reaching out to their fans. Maybe instead of Reebok’s money, they should spend some of their own so that hockey fans can get a similar retail experience to basketball fans.

TheRetailTherapist

Ubiquity is Everywhere

It didn’t come as a total shock to anyone (even its customers) that Starbucks announced they were closing over 600 stores in the United States (of 11,000). This may seem like a lot of stores to write off and a lot of people to lay off, but in the scheme of things, less than 6 percent of their portfolio is not that significant. However, symbolically, it is huge.

What this really means is that the strategy of putting a Starbucks on every street corner has not worked over the long term and that like anything else, too much of a good thing is, well, too much.

Starbucks is not the only culprit who headed down this strategic path. Gap Inc.’s Gap Brand also committed way too many stores and in sizes too large to be able to sustain a healthy dose of productivity. Whether it was in Manhattan where you see their blue box signs on virtually every other street corner or in every mall in addition to street locations nearby. Not to mention the fact that it seemed that every location Gap had opened a store, the very same parent company would open an Old Navy store, which sold product very similar to that of Gap’s at 30 percent less. This has created about half the problems the company is still enduring. Their new CEO Glenn Murphy has already stated that they will close stores and downsize their portfolio.

It is a delicate balance between replicating your offerings in as many places as possible to leverage your infrastructure and maximize a brand’s potential and profits, and reaching some sort of diminishing returns over the long run as one location cannibalizes another and productivities start to wane and the leverage starts to roll backwards.

My preferred approach is that taken by Urban Outfitters. Their deliberate, measured approach to expansion, more fueled by the development of different concepts than by an over saturation of any one concept including their namesake brand and ever-popular Anthropologie. Although Wall Street may not have been their biggest fan because of their somewhat cautious approach, it ensures that their productivities remain high, their concepts remain destination oriented and their offerings remain special.

My sense is that with the slowdown in retail spending that is currently taking place, those that remain selective in their expansion plans will emerge more successful and better able to ride out the storm as they will have fewer weaker store performers.

It is also about time that specialty retailers take cues from their more sophisticated larger box cousins, who have spent an inordinate amount of time and resources to analyze and develop a sensible and practical long term real estate strategy. It is not only about replication, it is also about avoiding the traps of over-expansion and misplaced ego.

The more special you are, the more shock-proof you become in any kind of environment.

TheRetailTherapist