All Talked Out “Ain’t Satisfactioning Me”

I am tired of all the talk and am exhausted from doing the talking myself. Retail is tough these days, everyone knows it. There is a shift in the customer’s shopping behaviour and perceptions to be sure. But let’s not keep beating a dead horse.

It may not be business as usual but it still is business. People are shopping – it’s a natural and necessary phenomenon and usually a huge part of a woman’s means of entertainment (this is not a sexist comment rather a sad commentary on the 21st century male who still is averse to shopping for anything other than a big screen TV from Best Buy, a winch from Home Depot or fishing lures from Bass Pro Shops and they would do it all online if they could to avoid browsing the stores themselves).

But we have been talking about the economy for over 8 months now. It is time to act as retailers:

1) I am tired of talking about Gap’s recovery and how much cash they have: Do something bold and creative and re-invent that company! Tinkering with the Old Navy format is nice and may drive some comps (although they have probably lost a total of 50% of their volume from their peak by now so 5-10 comps aren’t bold enough to my mind). With $1.7 billion in cash, they could acquire or create something to revolutionize the retail industry. Continuing to talk about how well they have managed their expenses and cash does not cut it with the consumer. Gap brand has been an issue for over 5 years now. Old Navy seems irrelevant in the market right now with H and M and Uniqlo set to continue to eat their lunch. Banana Republic is the most surprising disappointment to me. It occupied a unique niche in the market and in these times, the brand should be excelling at playing up their position as the fashion alternative to expensive designer offerings and the anti-Neiman Marcus, if you will.

2) I am tired of talking about the woes of the Canadian department store business and what the future holds for these large consolidated national players. The Canadian department store business has shrunk considerably in the past 5-10 years. With new ownership (yet again) at The Bay / Zellers parent company, it is time for bold action. I don’t think going “upscale” to compete with Holt Renfrew at this time is the reinvention The Bay needs. It needs creative thinking about what each floor in their portfolio represents, who each floor targets and how to create excitement, energy and impulse buying. The Bay can become anything it wants as the name is that strong. An upscale fashion resource may not be the right overall message to reinvent the brand.

As for Zellers, it has been an enigma for so many years. Rumour after rumour about Target and others looking and passing on purchasing the company because of the onerous real estate issues regarding size and numbers of non-performing locations have all created a stasis in the business. Who does Zellers appeal to? How can it knock the socks off that customer and compete against Wal Mart at the same time? I would like to see some bold action taken and for Zellers to come out and stand for something other than “The Lowest Price is the Law” and “Everyday Value”. Apparel offerings may be a place to successfully compete with Wal Mart as they cannot seem to get that right. Everyone knows about the Zellers value proposition, thecustomer can get value in many places right now. What other type of “value” are you going to offer your customers aside from price?

3) I am tired of talking about expense cuts and layoffs and “belt tightening” and having Wall Street applaud companies for that. Firstly, in every business cycle, these are natural occurrences. Maybe the company was too fat to begin with. Anyway, my point is that there is never enough credit given to or talk about creativity and unique merchandising in the industry. I realize the current economic conditions but that is when, I believe, fresh merchandise that emanates value to the customer from the standpoint of being style right, colourful and that makes people stop and say “Im Lovin’ It” and entices others to ask them “Where Did You Get That?” People want to feel good about themselves, especially in these tougher times and those retailers that can constantly figure out what merchandise and/or experience helps them achieve that goal, will thrive. Look at Tesco or Buckle or Aeropostale or Family Dollar. They have adjusted to the times or have gained market share by standing out in terms of value, experience and offering.

It’s time to stop talking and start taking action to lure more customers back to your stores. To quote Elvis Presley:

A little less conversation, a little more action please
All this aggravation ain’t satisfactioning me
A little more bite and a little less bark
A little less fight and a little more spark

That’s the recipe for sustained retail excellence and performance no matter what the climate!

TheRetailTherapist

Anticipation

In this day and age, I am constantly reminded of Carly Simon’s iconic song “Anticipation” which actually became famous mostly because of a Heinz ketchup ad in the late 70’s. Carly wrote it while waiting for Yussuf Islam (formerly known as Cat Stevens) to pick her up on a first date.

Not only has the anticipation built for a new blog entry (;)), but in the retail industry today, everyone is anticipating a recovery in consumer spending shortly. Whether or not that happens sooner or later several questions will be answered over the course of the next 12 months regardless:

1) Will Abercrombie and Fitch come down off their high horse and figure out how to lure consumers back into any of their stores? Yes, I was a proponent of their staying the course without markdowns, but I, like most everyone else, never realized the depths that this recession would reach. It is too bad they didn’t think of knocking themselves off (like Gap did with Old Navy in a manner of speaking), because those that did (read Aeropostale and American Eagle Outfitters) have become quite successful and created billions of dollars in market capitalization on their own.

2) When will Gap start increasing same store sales? I am still a fan of their once iconic brands (that includes Gap, Gapkids, babygap, Gap Body, Banana Republic, Old Navy), but I know they are working hard at tweaking assortments and re-designing stores (again). Will it be enough to lure consumers back or have they already been fragmented out?

3) Can Buckle continue its amazing streak? They have yet to fall victim to any recessionary trends and their approach remains the same as it was when they had 5 stores (they now have close to 400). What will they do to continue to comp in the double digits?

4) What will really happen to the high end retailers? Will consumers learn to be happy with less in terms of material things including apparel and accessories?  I know consumers will always shop but will their shopping habits be forever altered and shift to better “value” and more economical merchandise? Will the Neiman Marcuses of the world have to close some stores and pare back their reach because of this new reality? Or, will the consumer treat this as a hiccup and go back to the way they were, purchasing high end merchandise with abandon? I gather it will depend on how long the recession lasts and how quickly the equities and housing markets recover.

5) And, finally, what will the mall landlords do? Will they load up their centres with service oriented merchants to fill the gaping holes in their malls or will they leave some of the spaces empty until they can get the rents they need to command? (just like Taubman Centers has always done – by choice mind you) Or will the mall landlords and retailers truly become partners and share the upside in any recovery and work together to forge a “New Deal”?

So, those are some of the reasons why that song keeps resonating in my head as I think about what the immediate future holds for specialty retail and the industry in general…

“And tomorrow we might not be together
I’m no prophet, I don’t know natures way
So I’ll try to see into your eyes right now
And stay right here, ’cause these are the good old days”

I am fine with the waiting, I just hope when the answers come, the red ketchup doesn’t spill all over the place…

TheRetailTherapist

Friday Night Lights

Some of us spend Friday nights at high school football games; some at the family dinner table; some at bars and clubs; some at friends’ houses; some babysitting at home. I spent Friday night at the mall. This mall is what you would call a “super-regional” at highway crossroads and very close to the big city. What I found was surprising.

Based on what the media tells us and the phrase “Global Financial Crisis” that flashes on the screen of CNN every 5 minutes or so, you would think the parking lots would be empty, stores would be in disarray and people grumpy and irritable. The exact opposite was true.

Now, was it promotional?  Yes. But I seem to remember the holiday season being promotional for several years now. Was it quiet and tense? Not at all. It seemed festive and energetic and there were lots of children running around squealing, lots of people laughing on their cellphones and lots of shopping bags in hands.

Maybe this was an anomaly. Maybe this was a night where people let off some steam of pent up demand that has been building for weeks, but somehow I doubt it. I am sure the numbers are not as good as last year, but I don’t think it is the disaster that the media has made it out to be. The problem with the “Global Media” that is able to change its message or report a snippet of “news” in a nanosecond, it tends to exaggerate any situation. Crises sell. They sell programming on TV and radio and they certainly sell newspapers (and everyone knows they need all the sales they can get these days).

This is not to say that there are not structural problems with the economy. The U.S. housing crisis of confidence is the biggest of them all since this directly affects people’s lives and their notion of personal worth. The other scary issue is layoffs which is a slippery slope. As the economy slows, there is a domino effect on demand and therefore pressure on companies’ overhead and that’s when you get layoffs to cut costs and preserve some form of profitability to stay in business. Everyone gets that.

What I don’t get is the constant harping on retail sales once they happen especially when everyone knew what to expect. Everyone knew October was soft before they announced the actual sales tallies. However, once it was announced (an “astounding and record breaking” drop of 2.8%), the market acted as it it were shocked. That seems ridiculous to me.

What is also ridiculous is the manipulation that is going on near the end of trading days. I know I am straying from my mission on this particular entry but I have had it. The very best retail companies are being painted with the same broad brush as those copy cats and lesser lights I spoke about last time. Trust me when I tell you, people are buying and the good retailers are operating better than ever. Their results may be below last year, but who really cares for one year out of 10-12?

By the way, the busiest store in the mall by far was Bath and Body Works. It is pretty new to this market and their store is nice and compact and the merchandise is also very unique and affordable. I predict they have an outstanding holiday season.

Life is too short…You should too.

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

Mall Experience Also in Need of a Bailout

Like the markets, a walk through the mall these days is totally uninspiring. I am not sure what came first (the old chicken and the egg theory), but it has taken me an extra week to try and write something about this industry at this time. It seems that the mall is reflecting the markets or the markets are reflecting the mall.

Sure, Abercrombie and Fitch’s music keeps pounding in one’s ears as one walks by; Gap is featuring “Colour” in their windows which is more like them but it has taken them too long to get back to what their core strengths are; most stores still have sale signs in their windows and I am not sure they ever came down since June; American Eagle is featuring their standard BOGO event (which my 14 year old and 12 year old sons took advantage of this weekend); the Nike store looked flat probably suffering from a post-Olympics hangover; Pottery Barn looked empty; and MAC cosmetics looked bright but almost dated at this point.

The only scintilla of activity is in the multitude of cell phone stores featuring the blessed iphone by Apple or the Blackberry Bold. That may be the only energy source in an otherwise lifeless mall experience. It seems that shop owners and their staff are going through the motions awaiting for the clouds to blow over. It feels like everyone in the mall is holding their collective breath until the storm passes. It certainly looks like investors are feeling the same way.

So it is true that the mall reflects Wall Street, or Bay Street or whichever financial hub you care to name. And Wall Street reflects the mall.

Someone needs to break from the malaise and offer something new, cool, fun and affordable. Someone needs to be the contrarian and shock the mall customer into feeling some kind of passion The mall is in need of a bailout – badly.

I now do not believe a bailout will come from any of the larger retail corporations, they need to play it safe and cozy until the uncertainty passes. It will come from some virtual unknown, some small buckeroo who will, all on their own, nail exactly what the customer needs and shake the doldrums from our malls.

I hope it comes soon. For the financial markets’ sake.

TheRetailTherapist

Invasion of the Blanket Snatchers (Part II)

Is it Deja Vu all over again or just a continuation of the saga of the Hudson’s Bay Company (HBC)?

No one’s really sure. Although it certainly makes me think of the movie “Groundhog Day”: Wealthy American purchases Canadian iconic retailer and names a senior American retail executive to run the show. Repeat. Again.

It hasn’t worked before so why does anyone think it will work again?

They really should change the script.

I happen to understand that things were at least more profitable these days under the late American Jerry Zucker’s reign. But no one really knows for sure as it is a private entity. One thing is for certain, the dilemma of what to do with an out-of-date department store concept and a second fiddle of a discount chain (whose stores come in so many different shapes and sizes) is still not resolved. Everyone wants to talk about real estate values, but they only actually own one location in downtown Toronto. There may be some favourable terms negotiated on some of their leases but the landlords won’t just let them sub-lease at the drop of a hat.

The Bay department stores haven’t really changed that much. Their exclusive apparel licensing arrangement with U.S. department store giant Federated (or Macy’s I forget which) may be terminated seeing as Lord and Taylor is now stepping into HBC’s deerskin slippers. The aisles are still crowded, the merchandising is a bit boring and every other retailer, specialty and big box alike, has taken market share from them. There is no compelling reason to shop at The Bay.

Zellers is another story. Wal Mart has absolutely decimated all retailers that deemed to play even remotely in their arena. Now they are coming after another Canadian icon, in groceries this time. G-d help Loblaws.

Zellers, with about 380 doors, caters to that same audience and has been unable to gain any traction like Target has been able to glean south of the border. Their stores are still uninspiring, their mix is eclectic at best and a lot of their stores are way too large for their markets.

If anyone has a shot, I guess a real estate expert and his already burgeoning retail empire might be all that’s left to try and salvage this beast. They were quoted as saying that this is not a real estate play (although everyone who has looked at this seems to claim that’s where all the value is) and that they can probably open 12-15 Lord and Taylor stores in Canada. Where, pray tell, other than maybe 2 in Toronto, 1 in Vancouver, 1 in Calgary and 1 in Montreal (if it’s even worth it to translate everything for one store).

I certainly wish them luck but I have thought for a long time that Zellers needs extra cool factor and wow merchandising and The Bay should look at the Japanese department store model which actually rents out space in their stories high stores to the best, hippest and most productive specialty retailers and makes a very tidy profit doing so. If you aren’t productive (and we are talking close to $2000/sq.ft. minimum) they terminate your lease and replace you with someone who is more so.

Maybe that is what we should do with the new owners…they should have 12-24 months to become productive or their time in Canada should be terminated…

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

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

Flattery Will Get You Nowhere

It is with mixed feelings I watch the “Hedge Fund Guru” decide to play retailer. After banking a zillion dollars being a very successful, yet ruthless, hedge fund genius, Ed Lampert decided that retailing seemed like a great way to spend some of that zillion dollars. The fact that the latest Wall Street wizard chose retailing, amongst all other industries, was, I guess, flattering in some ways to our ancient profession. Since most people do not stick up their hands and declare they want to be a retailer when they grow up (or even want to interview out of college), maybe this was a turning point in the industry. Maybe, just maybe, under the white hot lights of one of Wall Street’s most successful people of the 1990’s, retailing as an industry and as a career would finally get its due.

But alas, it has been a bit of a joke, in my opinion. I would welcome yours.

Since purchasing Sears to be integrated with his already purchased Kmart, Mr. Lampert has installed himself as the “chief merchant” which, in my mind, is the ultimate insult to our profession. No disrespect intended to Mr. Lampert who has the knack and the intellect to create and nurture value (as he did in this case at the outset with Kmart specifically). However, he should not be thinking that he can run a retail organization and oversee the merchandising aspects of national retail brands.

Case in point…As I mentioned in an earlier submission, the purchase of the esteemed and established “Land’s End” brand was an interesting one, particularly because at that point, it had no bricks and mortar presence and the trend was (and still is) to ensure a retailer had both online and in-store experiences to maximize share of the customer’s wallet. On the surface, not a bad idea to add the catalogue component either, as Sears knows something about catalogue retailing. But, their execution, to this point, at least at retail, has been abysmal and has severely damaged a very solid and trusted brand. The in-store shops at Sears are poorly merchandised, sloppily maintained and dreadfully insipid. Peter Glen would have had a heart attack walking through these “shop-in-shops”.

Of course at the end of the day, it will be about the returns Mr. Lampert can generate over a set period of time. But I am disillusioned at the approach and the arrogance. It demeans merchants and retailers everywhere, who have grown up on the shop floors, have studied customer trends for decades, have walked hundreds of malls and conducted thousands of store visits at all levels. One doesn’t all of a sudden become a retailer or more specifically, a “chief merchant”.

I guess what I am trying to say is that retailers everywhere deserve more credit than what is evident in the Sears experience. I feel strongly that retailing is not a profession one can just “pick up” along the way. The great ones (even the good ones), have worked most of their professional lives in and around customers, stores and merchandising. They have worked on the floor with the customer. A former partner of mine once described it as “getting in your blood like an addiction”. This seems truer every day, but it takes time. Although there are now schools and courses and classes and degrees in the profession, it takes hands on experience on multiple levels and across multiple functions to truly appreciate it, understand it and most importantly to FEEL it.

Highly successful merchandising, at the end of the day, is about FEEL and instinct. I know that this causes rashes amongst investors, analysts and bankers, but these instincts are developed over time and experience in the business.

Ed Lampert cannot possibly possess the instinct for merchandising like he does for investing and generating above average returns for his partners. The Lampert-Sears-Kmart combination may turn out to be strange bedfellows after all and does not paint a flattering picture for retailers across the industry.

TheRetailTherapist