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

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

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

Gas Pains

It occurred to me that with the price of gas through the roof and due to stay at elevated levels for the foreseeable future, shopping patterns will almost certainly change. Not to mention the fact that hybrid technology is not quite cost effective as yet (unless you want to drive something that looks akin to the Hunchback of Notre Dame), people’s habits will instinctively change as they monitor their fuel expenses.

That does not mean that shopping is out. As a matter of fact, I believe this situation is actually better news for shopping centres than anyone else. If the local or regional mall has done a superb job at re-merchandising their tenant mix and updating their mall experience, then it will make good sense for those who have a list of things to do to drive to one location and be able to take care of everything on that list. This is what the malls should be thinking about over the next 5 years or so.

It isn’t necessarily about cramming as many small footprint retailers who can afford to pay exorbitant rents and strain to produce the ungodly high sales per square foot sales productivity just to pay the bills. I am talking about simple research into a typical shopper’s day and the places he/she has to go. If this is a doctor’s appointment, shoe repair, dry cleaners, hardware store, grocery store, tailor, high quality restaurant, coffee houses, fitness centre, yoga studio, massage therapist, day care, hair dresser, or whatever it is that people do on a daily, weekly or even monthly basis, it behooves the malls to become even more of a one stop shopping experience. Build a second floor if you must so that your economics work, but create an all encompassing experience. It seems to me you will get more of your share of traffic than some of your competition that don’t have the luxury of the space and breadth you can offer.

This has been part of Wal Mart’s strategy in their own microcosm (although that word seems like an oxymoron for such a behemoth of a retailer). They have branched out into groceries in a big way and are trying to become more of a one stop shop for everyone. They seem to be one of the only retailers making some consistent gains in this economic downturn we are experiencing.

Power Centres were everyone’s darling over the past 10-15 years (now they are morphing into “Lifestyle Centres”) but they just can’t offer what a major mall can. Firstly, you are outside and whether you are in Canada or anywhere north of the Carolinas in the United States, it is not that pleasant to shop outdoors from November until April. Not only that, in order to get any kind of breadth of choice, you cannot walk from store to store anyway, as it’s too far. You have to get in your vehicle, start it up and drive from spot to spot. That can get expensive these days.

I have always loved the mall. I give them credit for dealing creatively with the glut of space that has come their way from the department store consolidation across this continent. There is going to be a bit of turnover over the course of this year again. Let’s see what the mall landlords do to ensure they draw traffic and make it easier for all of us to save on gas and at the same time, they will even be doing their share for a healthier environment.

TheRetailTherapist