Did e-commerce save Christmas 2009?

“Saving Christmas” may be overstating the case…the evidence suggests that consumers were spending in stores, not just online. (Assuming, of course, that they could get out of their driveways!) But there’s no doubt that e-commerce continues to grow at a much faster rate than pure bricks-and-mortar retail. As Paula Rosenblum points out on Retail Wire, the smartest retailers (Walmart, for example) have an integrated strategy to capitalize on the growth of e-commerce sales and to use their websites to drive store traffic. Any retailer interested in fueling its internal growth needs to look long and hard at its online selling strategy: Merchandise content, logistics, marketing, and the rest of the package.

Have consumers ruined “customer service”?

Here’s my comment on Retail Wire, part of a provocative discussion about customer service. The premise of the commentary is that customers have “ruined” old-fashioned notions of good customer service by opting for low-cost operators rather than traditional service providers over the years. I think the key argument is flawed, and here’s why:

I’ve noted before that “customer service” can’t be narrowly defined by the old model of the traditional department store. After all, most traditional retailers have allowed their own service standards decline to the point where consumers have ended up voting for more value-centric models such as Walmart and Costco…and this has been going on for at least 25 years. Retail analysts need to define “customer service” differently in a value-oriented big-box store, by focusing on speed of checkout, ease of store navigation and in-stock execution.

Speaking of execution…it’s no accident that Nordstrom (more than any other retailer following the “traditional” customer service model) has continued to gain share and a national footprint by maintaining better service standards than any of its department store competitors.

Is a liberal return policy worth it?

It’s a good time of year to discuss stores’ return policies, which range from the very strict to the very liberal. My comment on Retail Wire:

A lenient return policy can be the linchpin of an overall “no hassle” marketing strategy, and in fact some of the stores mentioned in the article have taken advantage of it. Yes, there are costs involved in allowing customers to take advantage of liberal return policies but they should be more than outweighed by overall “brand equity” as a result. Stores do need to be careful that “no hassle” applies to the return process, not just the policy.

The last merchant in America?

The Wall Street Journal recently profiled Hans Sternberg, longtime owner of the Maison Blanche department stores in Louisiana, upon the publication of his memoir. Retail Wire panelists had a chance to discuss “the lost art of merchandising”:

I enjoyed reading about Mr. Sternberg, both in the Wall Street Journal review of his book and in Bill Emerson’s profile. Everything that Mr. Sternberg discusses — being customer-centric, creating a satisfying in-store experience, and so on — is just as valid today as 100 years ago. The trick is to maintain these standards in the face of changing competitive threats, new technologies and national operating scale.

With regard to new technology, whether it’s intended to help run the business or help market the company, Mr. Sternberg’s goals ought to be benchmarks for effective systems development. If IT management leads to “analysis paralysis” or a failure of customer satisfaction, it’s time to go back to the drawing board.

Best Buy tests the trade-in game business

A recent Retail Wire comment about Best Buy’s latest test: Allowing customers to trade in used video games in exchange for store credit, with a newly developed kiosk concept:

Best Buy has the reach and credibility to test all sorts of concepts, and this is another good one. There is no reason why they should cede the trade-in business to Gamestop or any other competitor, if they have a chance to recapture dollars in their own store. Best Buy also has the leverage to develop an effective technology to make this happen, and can drive sales throughout the store by putting gift cards into its traders’ hands.

Cures for a tired-looking store

In today’s Retail Wire discussion, Bob Phibbs (a fellow panelist) discusses signs that a store is aging and tired — and ways to fix it. My comment focuses on how to address the bigger issue of corporate “best practices” leading to tired-looking stores:

Many of the points Bob brings up are opportunities for multi-store chains, not just individual stores, to look more updated. It’s not just a matter of the age of the buildings or fixtures…it’s just as much an issue of corporate mindset. If the store is lacking in visual consistency (signage and display), these are probably issues in brand-new locations as well as older ones. Equally, both older and newer stores are likely to look cluttered and hard to navigate if headquarters doesn’t embrace best practices in assortment planning and inventory control. Finally, the oldest store in a chain can look spot-on if there is good management discipline in that location.

Tips for a prospective new vendor

Interesting discussion on Retail Wire about how vendors can and should approach new customers. The discussion was triggered by an article in a food industry trade publication, but the conversation applies equally well to general merchandise stores.  There are a few cardinal rules that vendors should follow, especially if they are making their first sales pitches to prospective accounts:

1. Shop the store ahead of time: Gain an understanding of how your product fills a needed void in the assortment (in terms of category, price, whatever) rather than duplicating existing content.

2. Understand the strategic positioning of the store: Don’t present merchandise to a buyer that is completely out of sync with her company’s direction or target market.

3. Edit your assortments: The buyer is dealing with limited shelf space, opened to buy and has the ability to test new products. Make your presentation as concise and focused as possible, instead of trying to show “everything under the sun.”

While these are good guidelines for an initial presentation, the established vendor should pay attention to the same rules.

Where are today’s merchants?

Retail Wire panelists had a chance to weigh in on the apparent decline of “merchant skills,” exemplified by the “me-too” merchandise content visible at many mall-based department and specialty stores. Here’s my point of view:

The same retailers who drove modest comp-store increases a couple of years ago are now suffering through two of the toughest years in memory. It’s easy to blame lack of merchandising skills for the downturn, but the fact is that every good merchant didn’t get stupid overnight. That being said, there are some core principles of good merchandising worth remembering as most national retailers work to fight their way out of the recession:

1. Focus on key items: A “hot item” or focused category will do well in any economic climate, and the success stories of the iPhone and Kindle are perfect examples. It may take more creativity to apply this lesson to apparel businesses, but it’s no less important.

2. Take your own markdowns: Retailers have been guilty for awhile of “musical chairs” buying assignments. It may take a couple of years before a new buyer gains the experience needed to figure out what works and doesn’t work. Keep people in their chairs long enough to be responsible for their own wins and losses.

3. Be less risk-averse: The pressure to avoid mistakes has grown along with the trend toward retail consolidation and the emphasis on quarterly results. It’s time to balance financial caution with the recognition that retailing–at its best–is a high risk/high reward business.

Consumers cutting back on credit card purchases

Retail Wire panelists commented on the rapid shift from credit to cash purchases. Several of my colleagues focused on bank card companies jacking up interest rates ahead of pending legislation…I focus on the effects of the recession and excesssive household debt:

This study is consistent with all the other evidence that consumers (like businesses) are digging their way out of excessive debt. And the vast majority of shoppers can no longer use their home equity as virtual “ATM machines” if they behaved that way in the first place. This is a trend that is not likely to reverse itself anytime soon, and it’s healthy over the long haul.

However, retailers need to respond in a couple of different ways:

1. Find ways to encourage shopping in your store (instead of the competitor’s) through old-fashioned focus on merchandise content, compelling value and effective branding.
2. At least use your proprietary credit card program (if you have one) to drive sales and loyalty programs, if consumers are reluctant to use their bank cards.
3. Make sure you are catering to “shoppers on a budget,” whether you offer opening-price goods or more aspirational merchandise.

The stores that have adapted fastest to the “new reality” of less credit and tighter household budgets appear to be the market-share winners today and in the near future.

National brands: Enough spending on “equity”?

Are national brand marketers spending too much on sales promotion with their retail partners, at the expense of long-term brand equity? Here’s my point of view:

It’s hard to separate this topic from the recent discussion about partnership (or lack thereof) between national brands and their biggest retail partners. (The last post centered on the conflict between Costco and Coca Cola.) While it’s easy to say that national brands have sacrificed long-term equity by cutting their marketing budgets, it’s also hard to argue that retail consolidation has forced serious rethinking of overall strategic spending.

Certainly the retail landscape was much more diffuse 25 years ago; power has become much more concentrated in the hands of companies like Walmart that were barely noticed in the early 80’s. (And at the same time there is far less concentration among a few media outlets, with many more choices for ad spending among cable networks, digital media, and so on.) So the national brands who intend to spend against “equity” need to deal with the reality that they must allocate more dollars than ever before to keep their key retail accounts happy.