The Beatles and iTunes: A long-overdue partnership

Count me as a Beatles enthusiast in my comments on today’s RetailWire panel discussion…but I hope I bring some reason to the discussion too:

I think this is a huge win for both Apples involved in the agreement. Let’s face it: iTunes has no serious competition in the market for digital music delivery, and the iPod/iPhone is the standard MP3 player on the market. The Beatles’ catalogue was a huge void in the iTunes assortment that has now been addressed. Beatles fans (count me in) have downloaded tracks from “Beatles One” or the “White Album” onto our iPods a long time ago, but this gives us a huge opportunity to pick and choose individual songs to add to our libraries without investing in entire albums. (And a nice margin opportunity for Apple, too.) So while Amazon can easily undercut Apple on the prices of entire CD’s, there is no quick substitute for the ease and convenience of digital delivery of single tracks. To Apple, I say…yeah, yeah, yeah!

JCPenney looks for new growth engines

From a recent RetailWire discussion about new initiatives at JCP outside of its core department store business. There are two web-only concepts under development, along with a big & tall specialty concept for men. My opinion:

It’s worthwhile for JCPenney to think “outside the box” of its core business for new growth opportunities that it can manage, but it’s also an acknowledgement that its sales have stalled. JCP seems to have a new strategy every six months for revitalizing its comp sales and market share, mostly centered around a new brand initiative — from American Living to Sephora, from Liz Claiborne to MNG by Mango. At the same time, its assortments and private brands are badly in need of editing.

Two of the three new initiatives are web-only, which suggests that JCP doesn’t have confidence in their placement inside existing brick & mortar stores — or as freestanding concepts — but e-commerce may also turn out to be a viable testing ground. The big & tall business feels like a niche opportunity to me (even though I would be a target consumer) that has not been fully exploited in JCP’s physical stores.

Bottom line: Other national retailers (Macy’s, Target, Kohl’s) seem to be in a better position than JCPenney today to generate organic growth.

Barnes & Noble expands its kids’ assortments

From a recent RetailWire discussion about Barnes & Noble, and its plan to expand educational toy assortments into space formerly occupied by CD’s and DVD’s:

I agree with most panelists on this issue…there is a natural synergy between children’s books and educational toys. While the discounters and big box stores like Toys ‘R Us focus on “name brand” and licensed toys and games, the educational market seems fragmented and underserved. It also provides a reason for parents and kids (and gift-givers) to visit B&N on a more frequent basis, even though books for kids aren’t migrating to e-versions as fast as general-interest books. One more benefit: A good redeployment of some of the unproductive space that B&N has devoted to CD’s and DVD’s over the years as this industry moves quickly to digital delivery.

How early is “too early” for holiday merchandising?

There is a market for early gift shopping, and it’s a good way to drive business (especially in apparel) when the weather gods conspire against sales of sweaters, coats and scarves. The question seems to be when and how to promote “holiday” in terms of advertising, e-commerce and in-store decor. Most consumers seem to have an aversion to seeing stores talking “holiday” until after Halloween, but once November 1st rolls around the gloves can come off. (After all, retailers have about six weeks to drive the majority of the year’s profits…and some regions of the country will be affected by very early Hanukkah timing.)The trick is to sell seasonal apparel and gifts early without appearing to push the calendar too much.

What does “customer service” mean to the customer?

From a recent RetailWire discussion about just what defines “customer service”…my contention in many of these postings is that “it depends” on the type of store. Here’s my latest take:

This phenomenon depends largely on the type of retailer being discussed, and the definition of “good customer service” for that segment of the business. A store like Nordstrom has built a successful model on availability of knowledgeable salespeople, and other luxury or near-luxury retailers would be advised to pay attention. But a mass retailer like Target is not dependent on “high touch” customer service; rather, the most important things it can do to satisfy its shoppers are to ensure that goods are on the shelf and the checkout process is efficient.

As more consumers migrate to “mission shopping” (walking into a store looking for a specific item), the self-service model becomes more important. Consumers are also becoming accustomed to more control through online and mobile shopping. But there is still a place for good CRM, even in the most hands-off models of “customer service.”

Walgreens: Getting serious about health and wellness?

From a recent RetailWire comment: Walgreens has wavered over the past several years between broad varieties of goods unrelated to their core mission, and a more focused approach. Lately, they are swinging toward “less is more” again:

I’ve long argued that Walgreens needs to be more focused in its mission to be a provider of health and wellness products and services, not just a pharmacy. Central to this mission will be some long-overdue “SKU rationalization” and store redesign. Walgreens needs to be willing to walk away from its other role as a “neighborhood convenience store” cluttered with a bunch of stuff in order to maximize its true role as a category killer with huge growth opportunity. I look forward to the day when I can actually find the HBA product I’m looking for in my neighborhood Walgreens store, without having to wander through aisles of t-shirts and “as seen on TV” junk.

Abercrombie’s two-tier pricing strategy

A&F apparently prices its goods one way for the domestic market, another way in its overseas stores. From a recent RetailWire post:

I think the overseas pricing strategy is appropriate as long as A&F can get away with it. After all, several other American brands (Levis, for example) have a completely different cachet in foreign markets than in the U.S., and can price their goods accordingly. Obviously A&F’s offshore sales did not suffer to the same degree post-recession as they did in the U.S. — but I am also assuming these stores represent a relatively small percentage of their sales, although the WSJ article didn’t make it clear.
On the other hand, A&F’s initial refusal to budge on its price position in the U.S. (while almost all of their competitors recognized the “new normal” after 2008) is practically a case study in how to sacrifice responsibility to one’s shareholders at the altar of brand equity.

Managing 50% off sales as part of a promotional mix

From a recent RetailWire panel discussion about those ubiquitous half-off sales all over the retail landscape:

50% off sales have evolved from “once in a blue moon” events to a routine part of most retailers’ promotional arsenal. So the challenge is to use these promotions effectively. Here are some metrics to consider:

1. Do they “traffic” the store?

2. Do they represent a credible value?

3. Can the store successfully “margin out” on 50% off items by sourcing them aggressively with the intention of half-off sales?

The last point is critical: Retailers need to be much more disciplined than in the past about planning and buying 50% off items not as loss-leaders or margin-busters, but as marginally profitable parts of the assortment. It’s a big reason why so many stores have migrated from national brands to private label, in order to drive the “half-off” machine more profitably.

 

The Microsoft Store moves forward

The Microsoft Store has become an interesting “group project” for the retailing class that I teach at UW-Milwaukee. Especially with very few stores open so far (and none close to Milwaukee until this month), the students have a “blank slate” as far as concept development is concerned. Most of the class would agree — and so would I — that taking direct aim at Apple is the right location strategy, especially for a tech-heavy store that is not meant to be on the same scale as Best Buy.

But beyond the location strategy lies a much bigger challenge: What does the Microsoft Store actually sell? The brand and company are built around “solutions” rather than a focused assortment of items like Apple, and Microsoft has not made a dent in the MP3 or smartphone markets so far. The other big question: Who is the target customer? Not enough to say “everyone”…Microsoft will need to pick its targets carefully, between the gamer, home PC user, small-business customer for software, and so on. Clearly Microsoft is gaining enough confidence from its early tests to start a rollout strategy.

Multichannel retailing vs. web-only strategies

RetailWire panelists recently discussed whether specialty stores are better off pursuing a web-only strategy. My opinion:

For most large chains (especially those with an existing bricks & mortar footprint), multichannel retail seems to make the most sense. The website provides an important avenue for brand marketing, a platform for social networking, and (most important) a method to drive sales with broader assortments than the physical stores can carry.

For smaller specialty stores, however, I think it’s a harder choice: Is it easier to cultivate the same kind of “brand loyalty” with a website only, without the parallel advantage of a store location and human interaction? I’m not so sure, especially in the cluttered world of specialty apparel retailing.