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

The New Specialty Retail Model

You have heard it before: “Margin is Everything”. In these strange economic times, these words have never rung truer.

Take, for instance, the recent solid performance of Aeropostale. When most of the specialty retail world was crying “Uncle” from the recessionary stranglehold on consumer spending, Aeropostale posted positive comps every month this past fall including a 12 comp in December and an 8 comp in January.

How did they do this? Margins.

Their margins have allowed them to become the promotional specialty retailer in a very crowded teen/tween/preppy category. If you look at the recent results among those who occupy this exact space (we are talking the same look, let alone the same demographic), it was an unmitigated disaster. Abercrombie and Fitch (which refused to mark down – which I applaud by the way) posted comps in the negative 20’s for most of their fall and holiday seasons. American Eagle Outfitters (the cheaper knock-off of A & F) also posted negative comps in the teens for most of their fall and holiday seasons including a -22 comp for January.

In these uncertain economic times, where household income is tightening and spending is scrutinized daily, Aeropostale’s promotional stance with the exact same styling, esprit de corp and target market seems to be gaining market share from the other fuller priced preppy twins. Walking through the malls, I used to shake my head at how hard it was to tell the three brands apart. I often asked myself how could all three survive? If the names and store designs were taken away and you were left with an assortment overview without logos, it would be very hard to tell the three apart. That is, until recently. Aeropostale has become highly promotional 365 days a year. They seemed to have found a recipe for success even prior to the new economic realities.

How are they able to be so promotional all the time? It comes down to sourcing. As an example, if you are able to offer a sweatshirt at $50 dollars and it cost you $10 to manufacture, that is an initial gross margin of 80 points. Even if you sell the sweatshirt on promotion at 50% off, you are netting out at 60% gross margins, which is extremely healthy in any retail environment.

And, when you announce that you are turning your inventory 7 times a year, that is a license to print money. Especially in times of lower productivity, margins become the buffer to ensure you can still operate profitably as it provides a cushion when sales decline (which actually isn’t happening for them yet anyway).

They have successfully redesigned their stores, they have increased their media presence, but at the end of the day, they have embraced a full-on promotional model that seems to be a winner.

TheRetailTherapist:)

“Not-So-Crappy” Tire

Remember the old days in Canada? Our parents would purchase our first set of hockey equipment and first hockey stick at what we would call “Crappy Tire” or Canadian Tire, a general merchandise big box retailer unique to Canada.

Walking through one of their newly renovated and expanded stores dispels the notion of it being “Crappy Tire”. The aisles are wide, the place is bright and relatively clean. For the most part (except for the sporting goods / hockey department), the shelves are fully stocked and easy to browse. It struck me though that the company had to go through many iterations to get to the point they are now – basically without direct competition. Their uniqueness is in their eclectic offering.

Start with a large automotive section (parts, tires, accessories), then move onto garden care, then cruise the sporting goods section on your way to the hardware aisles and finally end up in the home section with everything from small appliances to bath towels and area rugs. This is the charm and the mystery of Canadian Tire.

With over 470 stores across the country their other secret to success is that almost every one of them is dealer owned, which means they are run by an entrepreneur who operates it as if it’s his/her own business. This also helps in maximizing sales volumes, minimizing wasted expenses and avoiding bloated inventories. The network is well supported from home office and the machine has been built since 1923 when A.J. Billes and his brother opened their first store in Toronto.

Just to add to their assortment, they bought Mark’s Work Wearhouse in 2002 and entered into the apparel business. They now have a bunch of stores where they are either side by side or where they put a Mark’s shop within the confines of the larger Canadian Tire box. This has been an extremely successful venture mainly because the customer profiles are so closely matched. Selling work wear to their every day customers was a natural fit and they haven’t looked back.

Their old slogan “More Than Just Tires” started getting people to think of them as a general merchandiser and not just a place for automotive parts and gadgets.

So, who do they compete with? That is difficult to say. They compete with all the automotive parts players (although they own and operate one of the biggest automotive parts retailers in the country named PartSource); they compete with Wal Mart because everyone does in general merchandise; they compete with sporting goods chains such as SportChek; they compete with Zellers and Sears in the home business; and they compete with all gas stations and convenience stores based on their own 266 store gas bar business and their 278 convenience stores.

They also compete with the banks as they have become the second largest Master Card franchise in Canada and have established their own bank in order to sell financial services and products.

So, what is the lesson? In this case, it isn’t “stick to your knitting”. It isn’t “stay laser focused on what you do best”. It seems that knowing your customers  intimately (which is virtually all suburban Canadian adults), having a respected and established name brand, evolving your assortment to mirror the evolving lifestyles of your customers and sticking with and supporting an experienced and talented dealer network are paying off in spades. Maybe “Know Thy Customer” is the golden rule in retail after all.

Now, if we could only do something about being able to get some sales floor help, it would make their store experience that much less “Crappy”…

TheRetailTherapist:)

2009 Retail Resolutions

We are all guilty of making resolutions every new year and then watch as they fade away by the end of the first quarter. It is the measure of a strong, stubborn and a-type personality that actually sees a resolution through to completion and makes it last throughout the entire year (let alone make it life changing).

I would like to think us retailers are resolute enough to see through some sorely needed resolutions in what is promising to be a challenging year for our industry. It does not necessarily have to breed disaster if we all stick together and ensure the following come to life for the full year:

1) No retailer should panic and take excessive markdowns unless your business is truly on the brink. Markdowns are the scourge of all retail (especially independent retail) as full price needs to take on some true meaning once again. I realize this is easier said than done but I doff my cap to Abercrombie and Fitch, who realize that this recession too is short lived and they need to be relevant for decades to come. They have managed their business (read:Inventory) intelligently and are maintaining their pricing structure for better days. If a company has the wherewithal to do this, it will be rewarded in time.

2) Every retailer should invest in their people, especially at the expense of marketing budgets (among other line items). It is hard enough to find great people let alone, great people who actually want to work in retail. Do not let them leave either your company nor the industry. This, again, will pay back in spades when the economy turns around. Invest in training, payroll on the sales floor, product development talent and store experience talent. Do not start massive cuts of labour especially at the store level, which will inevitably create a viscious cycle.

3) Pour money, resources and talent into improving the customer experience. This could be a website or a physical environment but this is where your customer interfacing needs to be pretty special, when dollars are scarcer. Store design, staff/customer interaction, special events, visual merchandising are all examples of elements that will maximize your returns over the long term. If you start treating every sale as a gift (and this year it may turn out that way) and your staff can emulate that attitude, then you will have instilled something unique and special that will be “Built to Last”.

4) Focus your strategic plan on fewer elements in order to nail them. In times such as these, execution is critical. The organization has to be even more aligned than at any other time. Make it easier on everyone to rally behind fewer initiatives. This will actually increase creativity and goal achievement. It will also serve to lower stress levels and improve employee morale overall in a challenging environment.

5) Start to leverage your organization to make a difference in the communities in which you operate and improve your commitment to charitable and socially responsible causes. At a time when funds are drying up for charitable causes and community needs, your retail organization can do so much to alleviate the stress on these institutions by donating more product, more time and more energy and creativity to helping your staff and your company help others who need it most. That could be the most meaningful contribution any organization can make in times such as this.

So let’s get cracking on these 5 simple resolutions. Let’s also make sure they do not peter out at any time over the course of the next 360 days or so. We will be watching

TheRetailTherapist

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

Black (and Blue) Friday

Yes, all retailers are feeling a bit bruised right now. Amongst the stock market meltdown, the Big 3 automakers in need of a bailout and the trickle down effect of the negative psychological condition of the consumer (job losses, deflation concerns, housing value issues), the mall seemed surreal on what is purportedly the busiest shopping day of the year in the United States.

It’s not that it wasn’t busy – it was. It’s not that people weren’t walking around with shopping bags – they were. It’s not that Santa didn’t show up – he did. And it’s not that the markdowns didn’t work – they seemed to. It was that it seemed strangely like nothing had happened outside the perimeter of the mall parking lots to disturb the activity inside the mall corridors and shops. It did seem less festive a mood, but not by much.

The real problem is it’s a bit of a snowball effect on the negative atmosphere. Once one retailer announces that they are paring back inventory and slashing prices, the dominoes start to fall. That is the nature of this business unfortunately. So, while the Thanksgiving Friday’s sales may be pretty healthy considering the doom and gloom that has been purported, the margins may have suffered big time. That is the primary concern – how much bruising did everyone’s bottom lines take? How much more can they take in case this pall lasts a little longer?

Sales were aggressive this year, but the smart retailers make them pretty aggressive every year to capture the hype and the predisposition to buying that this weekend evokes. The Thanksgiving weekend phenomenon has been receiving an increasing amount of hype over the past few years. Stores have started opening earlier and earlier (with some opening on Thanksgiving Day itself) and more and more people have been seduced into lining up throughout the night to ensure they get the best deals available.

I am all for promotions and excitement, but the caution would be how much is too much? I understand that this year may be an exception, but this issue has been a trend for years. At some point it spoils the consumer – I gather that point has been reached by now.

For now, the holiday windows are bright and cheerful (and occasionally obstructed by sale signs) and the Gap has more colour in the assortment this season, so all is right with the world.

At least they won’t be calling it “Red” Friday this year.

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

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