A friend asked me the other day “Where are we headed in retail?”…Pretty heavy and nuanced question and not one I could answer either right away or in 50 words or less so I said I would get back to him…37 days later, here it is…

I see a polarization happening in the marketplace between what I will call “Highly Branded” and “Highly Promotional” retailers. Highly Branded is relatively full price, unique assortments with or without a highly experiential customer experience. Highly Promotional is just as it sounds – a significant price/value relationship, discounted product to drive traffic and very fast turning assortments be it in fashion or other categories.

A view to the performance over the past few months would tell us that the higher end “luxury” category has returned. I would argue that most of the retailers fit into the Highly Branded side of the ledger. Brands such as Louis Vuitton, Hermes, Tiffany’s all offer unique merchandise and brands that have been carefully cultivated (albeit at the high end) for years if not decades. You also find concepts such as J. Crew, Victoria’s Secret, and the Urban Outfitters family of brands including Anthropologie that carry proprietary product, work very hard at maintaining brand integrity through unique assortments and price integrity. They are thriving at the moment as well. By the way, you also have a Zumiez, who impressed in October especially but do not necessarily carry 100% unique product. However, the way in which they assort, choose the national brands and put the looks and outfits together make for a branded Zumiez look as their overall assortment and merchandising is highly proprietary.

On the flip side, led by Dollarama and its ilk, we have the Highly Promotional, where it is now officially cool to shop. The consumer now brags about the deal she was able to procure at any of the so called discount or value oriented retailers either on-line or in-store. BJ’s Wholesale Club has done some incredible business in this tough economy, as has Forever 21 (may be considered Highly Branded although it is their price/fashion relationship that is leading to line-ups at the cash – the experience is nothing to write home about), H & M (to an extent as they have become more promotional lately in North America out of necessity and the competition Forever 21 is providing) and Aeropostale, which has eaten Abercrombie and Fitch’s and American Eagle Outfitter’s lunches lately selling the same look and lifestyle for 50 and 30% less respectively and is always on promotion.

If you are not squarely in either of these camps, you are going to have a hard time maximizing returns and ensuring long term viability in the market today.

Here are some keys to staying in either camp:

Highly Branded

1. Stay true to your knitting and do not try and become everything to everyone

2. Ensure you stay close to your target demographic and read the winds of change as they are coming faster and faster

3. Ensure your customer experience and not just your assortment is unique and adds value to the purchase

4. Keep the inventory tight but fresh and new. Update basics often and ensure your customer never gets bored. Ensure they are pleasantly surprised and delighted on a regular basis – yes, make them giggle sometimes (or at least smile)

5. Embrace social media and leverage it somehow, someway

Highly Promotional

1. Do not blur the lines. You are what you are and don’t try to “Brand it up”.

2. Keep digging at new sourcing techniques and options. You need your margins to stay healthy but your pricing to stay low

3. Keep stores full and highly productive. My fear for some of the players in this camp is that they are building bigger and bigger stores and that may cause undue financial issues down the road

4. You too have to keep things fresh and new regardless of how value oriented your pricing strategy at the same time, you must also keep inventories tight

5. Embrace social media and leverage it somehow, someway

There is my considered answer. Whatever happens, it will be interesting to witness the spending habits of the largest cohort, that of the over 45 crowd. My guess is they outspend their predecessors in that cohort by a wide margin and turn the entire industry on its head.

Happy Shopping!

TheRetailTherapist 🙂