Archive for December, 2010

Borders wants to buy Barnes & Noble: Really?

Here’s my reaction (via RetailWire) to the news that Borders and its “activist” lead investor William Ackman want to take a run at its much bigger and (relatively) healthier competitor, Barnes & Noble:

This reminds me of the 2004 “merger” of Kmart and Sears, in which the much smaller and weaker company had the financial resources to swallow up a retail giant. Without turning this into another exercise in Sears-bashing, the results speak for themselves, because the combination of two weak players does not usually result in a win. (Compare this to the Macys/May merger, in which the two industry leaders formed a stronger company over the long run.)

The parallel to Sears Holding extends to the company management: Eddie Lampert was a celebrated financial wizard who has not shown aptitude for running a retail business over the past six years. Likewise, William Ackman is a noted hedge fund manager who has parlayed his investments in several retail companies into a reputation as an “activist investor,” but without much of a track record of management or results to show for it.

There is one key difference worth pointing out: B&N and Borders are the “last ones standing” in the bricks and mortar bookselling industry. (The real competition is from e-commerce and digital books.) Some consolidation seems inevitable, but is Borders the company that can pull it off? And how does the business model avoid becoming another Blockbuster?

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Black Friday: What really happened

As soon as retailers reported their November comps, it was apparent that Black Friday turned out better than I originally thought. Here’s my more recent comment for RetailWire:

The November results posted yesterday were surprisingly good and (for once) more in line with NRF numbers than ShopperTrak’s more guarded reporting. Without reporting from Walmart, we are not seeing the entire picture but it’s clear that department stores and “upscale” discounters (Target as opposed to the dollar stores) are regaining share. There is evidence that consumers feel “permission” to do more discretionary spending than they have felt for awhile, especially in apparel and the home store. Last weekend was not just about electronics, toys and doorbusters.

Nevertheless, today’s jobless report is a sobering reminder that we are not out of the woods yet. Let’s hope that the uptick in consumer sentiment and spending is not smothered by a wet blanket of tough economic data three weeks before Christmas!

Starbucks expands its CPG footprint

The dust-up between Starbucks and Kraft last week triggered a RetailWire discussion about the coffee giant’s planned expansion into related consumer goods. Here’s my opinion:

Starbucks has done a good job balancing its focus on better-operating stores with expansion opportunities outside its core business, and its shareholders have been rewarded in the past year. (The growth of Seattle’s Best to other fast-food outlets and the strong sales of Via instant coffee are two good examples.) The challenge for Starbucks, as it considers a broader portfolio of CPG brands, is twofold: First, is there synergy between the new brands and the core beverage business? Second, can Starbucks manage new businesses effectively at the same time that it tries to re-engineer its coffee shops to drive more productivity and comp sales? It should be an interesting process to watch over the next few years.

Who’s the “low price leader”: Walmart or Amazon?

From a recent RetailWire panel discussion: It’s one thing to chip away at Walmart’s price leadership item-by-item, it’s another thing entirely to make low prices central to your company’s operating culture. Here’s my opinion:

Amazon has not made price leadership central to its brand position in the same way as Walmart over the years. Its brand is more defined by assortment and convenience, although it is very competitive with Walmart on similar merchandise. Nevertheless, Walmart continues to have the scale to be perceived as the low-price leader…in large part because it has the advantage of vast numbers of commodities and food being sold in brick & mortar locations at very competitive prices, in categories that Amazon barely pursues. Somebody can always beat Walmart on the price of an individual item — and frequently does — but they are still tough to beat in terms of the core premise of the business.

Google meets Groupon

An interesting recent development, with Google’s plan to acquire Groupon indicating the giant company’s plans to expand its footprint as an e-commerce player. My comment from RetailWire:

Groupon has been an astonishly rapid success story, even in the context of e-commerce. From its beginnings in Chicago, only two years ago, the concept has spread rapidly all over the country and internationally too. It’s obviously a revenue-driver for Groupon as well as the merchants who participate — and you can make a case that Groupon is still in its infancy.

The acquisition allows Google to expand the Groupon concept exponentially to e-commerce sites, not just bricks & mortar merchants. It also allows Google to continue expanding its reach from its origins as a search engine and advertising vehicle to much broader e-commerce applications.

Black Friday: What just happened?

I posted the following on RetailWire on the Monday after Thanksgiving, and I probably did not gauge accurately what really happened after Thanksgiving. In hindsight (based on stores’ reported November comps), the NRF probably got it right and clearly there was more activity in apparel than expected. Here, with a side of crow, are my comments:

The metrics for Black Friday are notoriously difficult to gauge, with the NRF report of a 6% sales increase over the weekend especially hard to swallow. (Retailers are optimists by nature, and the NRF is no exception.) The continued growth of e-commerce sales and the earlier openings (including Thursday) make the raw numbers reported in brick & mortar stores on Friday hard to use as a benchmark for the season. And anecdotal evidence (like crowded parking lots and customers with shopping bags) is no substitute for raw data. Add in the fact that Black Friday is traditionally dominated by margin-busting categories like electronics, toys and small electrics.

Retailers need to provide flavor for weekend sales today or (more importantly) they need to report November comp sales before anybody can draw conclusions about the nature of the holiday season. I still expect to see the sort of modest increases for the holiday season that happened during Back to School — there is nothing in the macroeconomic picture that would turn this season into a barn-burner.

Can small stores survive Black Friday?

One of the principles of good Customer Relationship Management is to understand what your “best customer” is looking for. The big boxes are probably not filled with loyalists on Friday, but rather with cherry-pickers. Instead of worrying about how to cater to consumers who probably aren’t all that interested in what smaller specialty stores have to offer, focus on your best customer. Make sure you are communicating special offers or other Friday-only benefits in personalized ways — perhaps with an e-mail blast or direct mail piece to your contact list. Find a way to fight the battle on your own turf, with your own best tools.


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