Archive for May, 2010

Kmart new concept #473

Today’s RetailWire discussion covers a new Kmart test concept in an Iowa location: Replacing a closed auto center with a self-service laundromat. The theory is that customers can shop at Kmart during the hour while their clothes are in the machines. Mark me down as a skeptic:

This story resonates in two ways: It illustrates how much unproductive real estate is sitting in Sears Holdings’ portfolio, and it also shows how Kmart is aiming at more downscale consumers. (The successful layaway program was another example.) Bottom line: Sears Holdings doesn’t appear to have a viable strategy for Kmart centered around merchandise content, marketing or some meaningful reinvention of their store format. And do consumers, no matter how budget-oriented, really want to shop in the same place where people are washing their clothes?

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Blockbuster’s new survival strategy

Blockbuster recently reached agreement with three of the largest Hollywood studios to keep their DVD releases out of RedBox and Netflix for an extended period, in order to protect Blockbuster’s “exclusivity.” This may be a smart short-term tactic for Blockbuster, but I question (via RetailWire) the wisdom on the part of the studios:

My question upon reading this article is why the three studios in question reached this sort of agreement with Blockbuster in the first place. There must have been favorable financial terms, not just the promise of preferred shelf space. After all, better shelf space in a rapidly declining retail concept is of questionable value. Did the movie studios consider the speed with which Blockbuster has closed locations all over the country? Did they consider that the “bricks & mortar” delivery concept is rapidly achieving obsolescence? It makes you wonder what this decision is going to look like five years from now.

Starbucks builds a “flanker” brand

From a recent RetailWire discussion: I agree with Starbucks’ move to build “Seattle’s Best” into a secondary national brand by distributing it through fast-food outlets and elsewhere. Here’s my take:

I like the “good/better/best” strategy behind this move. (Assuming that Seattle’s Best is positioned as “good,” and Starbucks as “better,” there is still room in the brand portfolio for a true premium brand.) It not only gives the opening-price brand more mass appeal, but it provides some brand credibility for the outlets that carry it. A smart move, without a lot of public recognition that Seattle’s Best is actually a Starbucks company.

Who buys $550 khakis, anyway?

You may have read a recent New York Times article about men’s khakis retailing for $550…RetailWire panelists took their turn analyzing this kind of consumer behavior. Here’s my point of view:

$550 pants aren’t “about” being rational, any more than a $2000 handbag or a $90,000 sports car. It’s really about the luxury market returning to the mindset where customers feel they have “permission” for these kinds of indulgences. The same trend is showing up in the luxury hotel trade, which took the biggest hit during the depth of the recession and is now the fastest-growing segment. I’d guess that “status marketing” is the best angle for selling products like these, instead of adapting to the “new normal,” where it would be tougher to justify the “permission” mindset in the first place.

End of the recession: Are we there yet?

From a recent RetailWire discussion about consumer spending and the end of the recession:

I’d say the good results from the first quarter are encouraging but need to be kept in perspective: The comparisons from 2009 were as tough as it gets. Nevertheless, retailers who study their own data closely seem to be reporting with some consistency that shopping baskets are fuller, foot traffic is better and discretionary spending is on the rise. There are certainly other signs in the broader economy that the consumer is leading the economy out of recession.

But I agree with other panelists that the overall environment is still fragile. Today’s jobs report was encouraging in terms of job creation but the overall jobless rate is still very high. Seemingly remote events like European sovereign debt can still rattle U.S. equity markets, and consumer confidence along with them. I’m not suggesting it will take a “perfect storm” of good news to drive retail sales by the end of 2010, but I do feel that second-half gains will be more modest.

Reinventing the regional mall

Lots of commentary at today’s RetailWire about regional malls, and efforts nationwide to breathe some life into them. My contention is that the “reinvention” is long overdue, considering the slow decline of the traditional department store mall anchor:

There are several key trends driving the decline of the regional mall: First, retail consolidation in the traditional department store segment means there are simply fewer tenants to occupy all of the “anchor” space without subdividing it. Second, the department store segment overall continues its long-term share decline…whether you’re talking about “super-regionals” like Dillards or mid-tier merchants like Sears. Third, the growth of value-oriented and aspirational concepts over the past 20 years (power centers, lifestyle centers, etc.) has made it harder to sustain interest in the “one-stop shopping model” of a regional mall. Finally, many regionals were built during the 70’s and 80’s in inner-ring suburbs that are now miles away from most cities’ population growth.

So mall developers simply have no choice but to reinvent themselves with new tenant mixes. The best thing they can do to ensure a viable future is to imitate other successful concepts…through the addition of dining, entertainment and off-price retailers (including discounters and “big boxes”). Simply hoping for the rebound of the traditional mall anchor — because they used to be the biggest traffic draw at the mall — isn’t going to make it happen.

Upscale discounters in the (tenant) mix

From a recent discussion at Retail Wire, here’s a comment on a “town center” in Oregon that was expecting a full-line Saks store and got an Off 5th branch instead. I believe that stores like Off 5th are great tenants for this kind of retail development:

I think the addition of stores like Nordstrom Rack and Off 5th is healthy, not only for the chains but also for lifestyle centers looking for a more diverse and upscale tenant mix. It’s not a practical expectation for most lifestyle centers to support a full-size, two-level anchor department store — with rare exceptions such as Easton in Columbus. And these types of stores still fit the aspirational profile of most “town centers”…after all, we’re not talking about adding a dollar store.


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