It’s always a dilemma for retailers deciding what to be when they grow up. The nature of the beast in this business is “change or fail” as Don Fisher, founder of Gap Inc. always said. It is certainly easier said than done, as his company has been experiencing the past few years.
It seems that retailers go white hot and are either consumer darlings or Wall Street darlings (sometimes they are even both 😉 ). Then inevitably they go through a period of what I would call fatigue. They get tired, maybe a tad complacent, a little bloated and satisfied. What’s interesting is that the consumer notices this in some way shape or form. Subconsciously these consumers tend to move away from a retailer if they exhibit any of these tendencies.
Retailers then face the ultimate questions: Do they re-brand themselves and go after a different market segment because their former consumers have grown older and their needs and tastes changed? Or do they tweak and refresh their existing concept and keep true to their current niche and just update and modernize? Tough call. There are dozens of examples of specialty retailers that have done one or the other with mixed success either way.
If you count the number of North American specialty retailers that have thrived consistently for over 30 years straight, you will have a lot of space left on both hands. As previously mentioned, Gap was relevant for a long time mainly because it actually had a broad appeal. Then they tried the re-brand, re-birth, more niche approach and bombed and hasn’t recovered since. One of their acquisitions, Banana Republic, was white hot with the safari look and then became stale very quickly. They decided to re-brand BR with a completely different look and end use. Although one could argue that its target market overlapped with its previous clientele, it was a huge risk that required huge investment but ultimately paid off.
Another legacy specialty retailer The Limited has had a successful past but has also struggled recently. They constantly invested in and then divested of numerous new concepts including the re-branding of Abercrombie and Fitch. But they just sold their once flagship businesses to concentrate on their newer businesses named Victoria’s Secret and Bath and Body Works. It certainly isn’t how they started and could never have imagined ending up here.
So what will become of newer concepts that have cropped up like Lululemon and/or international brands like Zara or H & M that have invaded North America? Will they experience the same fatigue that other stalwarts have? Or will they somehow figure out a way to stay relevant, fresh and paranoid enough not to become stale and suffer the same ailments that has besotted some of the biggest names in specialty retail?