The New Five and Dime

In the old days, thrift general merchandise stores were literally called  “Five-and-Dime” stores. F. W. Woolworth created the concept in the late 1900’s and virtually every main street in America (and Canada) contained one of these variety stores, the precursor to general merchandise retailing as we know it today. With over 1000 stores by the 1960’s, they were the Wal Mart of their time. They lasted through World War I,  the Great Depression and World War II.

Today, the basic business model has certainly been proved out mainly by Wal Mart. Granted, Wal Mart is on a much bigger scale but they certainly modernized the concept. The similarities are staggering: Low prices; endless supply of general merchandise; mediocre / non-descript store layout and design; outstanding real estate; and large footprints. If you think about what the five-and-dime grew up to be, it certainly has to be Wal Mart. Even Lee Scott, the retiring CEO, mentioned this past week that “Sam Walton built this business for economic times like these”. Indeed, Sam understood the five-and-dime concept intimately. Better yet, he knew that to survive long term and not become obsolete like Woolworth’s did, he would have to modernize the concept. That meant to him: bigger boxes; prime suburban real estate; the most revolutionary logistics retail has ever seen; and the lowest prices anywhere. He certainly captured the minds and wallets of a nation or two.

But there are other segments that were created out of the five-and-dime image. For instance,  the dollar store phenomenon has blossomed with more than 27,000 stores expected to be open in the U.S. by 2010.

However, there is a hipper version of the five-and-dime that I really admire. 5 Below was born in the New Jersey / Philadelphia corridor and now boasts 80 stores on their way to 200. They feature general merchandise in approximately 5-7,000 square feet of strip plaza type space that is targeted to kids and teens. Candy, licensed sports merchandise, t-shirts, stuff to decorate your room, a variety of balls and games that inspire the younger set are all on display in a stuffed store, but one with clear, wide aisles. This concept actually seems closest to the original five-and-dime offering from the early years. Everything is $5 or under as the name suggests and they ensure they keep things fresh and carry only the hottest trends that are available at that price point.

In this economy, these new aged five-and-dimes should thrive. However, from now on, we will have to start calling them five-and-tens owing to the fact that prices have increased 100 fold since the good old days when five-and-dimes were born.

TheRetailTherapist

I. K.an’t E.nter A.nymore

I really admire the way IKEA, that little 60’s upstart from Scandinavia, conducts their business. They are a model employer, through training and development and progressive human resources policies that allow flexibility and balance in people’s lives. IKEA knows how to treat their employees and really tries to deliver value and trendy designs for their customers who are looking to spice up their homes or offices.

But I can’t walk into their stores anymore. I just can’t. Every time I do, I get lost and it takes way too long to get something done in that stacked warehouse of theirs. The last time I was there, I wanted one item (silly me). By the time I found it (the signage is confusing and contrary to popular opinion, there are no shortcuts), 30 minutes into the journey, I then had to travel another 5000 feet to get to the check out line, which was a mile long and was taking forever.

This is not the first time I have had that experience but I keep trying to give them the benefit of the doubt because IKEA really is a terrific company. IKEA has been a model organization in developing global talent. It has expanded carefully and prudently, learning about the different countries it enters and adapting beautifully from assortments to dimensions of product, to, yes, store layouts. IKEA marketing is clever and memorable and its meatballs are tasty.

But I have had it. In this day and age, I do not have an hour or two any more to wander through a ton of departments that don’t interest me. I want to get in and get out, even if there are a half dozen items on my list. If Home Depot can do it, IKEA can do it. If Lowe’s can do it, so can IKEA.

People just don’t have the time nor the attention spans any longer, even to save a few bucks. It’s time that IKEA re-thinks their in-store experience. How can someone get in and get out much quicker? IKEA must ensure there are enough cashiers to guarantee the lines move faster – this is a cardinal sin in this day and age. I actually had to leave my purchase on the end cap because it was taking way too long and I had to run. I realy needed the item too! But the 4 lines that were open were jammed and 10 or more were idle. None of the lines moved quickly and it was extremely frustrating.

It seems like these are some easy fixes. IKEA, please let me know when you have overhauled your stores and I will come back then, because I still admire the way you conduct your business and how you treat your employees. It’s time to put some additional energy into your customer store experience.

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

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