Archive for August, 2012

Stuck in the middle with you?

Here’s a comment from RetailWire about what JCP and SuperValu may both be struggling with right now…the problem of being the “guy in the middle” without a more clearly carved-out identity:

Both stores (JCP and SuperValu) have become victims of the “barbell effect,” in which they are outgunned by lower-priced competitors with better cost structures on the one hand, and stores with more pricing power due to higher-end assortments. In SuperValu’s case, think Walmart below and Whole Food above. It’s not always about price and promotional activity…a lot of these stores’ issues are driven by content and the store experience.

JCP’s situation is more complex: In hindsight, they may have erred not by pursuing a new pricing policy, but by focusing on it before addressing content and store changes that will take years to unfold. As a result, they have chased some of their most loyal (and bargain-driven) customers to competitors. And they have not done a good job reinforcing the value message in-store: Would it kill JCP to sign its new Levi shops more aggressively with its new everyday prices for jeans?

Lululemon for kids

From a recent RetailWire post about ivivva, the kids’ concept from Lululemon. The discussion centered on the growth potential of activewear in general and for kids in particular. I’m a believer:

I commented on ivivva a few years ago when BrainTrust panelists first discussed the test. It was a viable concept then, and it’s still a viable concept…the only surprise to me is the duration of the rollout.

However, it would be worthwhile to experiment with different formats, as long as Lululemon is still in test phase. In addition to small-footprint stores with narrow assortments, it would also be worth testing a larger “experiential” concept (think Build-a-Bear) that allows for more space for yoga or other kid-friendly physical activity.

JCP: Evidence of a pulse?

I posted these comments on RetailWire in response to the news that the JCP “free haircuts in August” promotion has at least succeeded in drawing foot traffic to the store. The question is whether ideas like this will offset the absence of any other promotional strategy:

The free haircut offer is an indicator that the “Town Square” strategy of drawing traffic through event marketing has a chance to be successful. It’s one of the few “calls to action” that JCP has unveiled since its new strategy was announced earlier this year. This may be just in time, because the second-quarter results to be announced this Friday are not likely to be pretty. (Note: they weren’t.)

As the article points out, the biggest question is whether the added foot traffic converts to added business. I shopped a JCP store last Friday (in Rockford, IL) and I don’t want to draw too many conclusions from one store visit, but there was more traffic than I had seen for months. However, customers were shopping clearance (it was “Best Price Friday” and the store was loaded), not the goods in the new shops. There were lines at the register that was open — take that as a positive sign if you want, or as a disappointing lack of customer service.

Best Buy: New sheriff in town?

To continue the thoughts from my last post about Best Buy, here are my RetailWire comments about the hiring of a new CEO:

In theory, an outside hire is just what Best Buy needs right now. The takeover attempt being orchestrated by Richard Schulze and his team (including one of his ex-CEO proteges) was not likely to be as transformative as the company’s issues demand. However, it’s too early to declare that “months of uncertainty” are over, as long as Schulze still has an opportunity to stir things up.

Joly brings an interesting background to Best Buy, with experience in the tech industry and (perhaps more relevant) the hospitality industry. Best Buy’s forgotten legacy is great customer service, and if the company is to survive it needs to compete on a level playing field with The Apple Store. Joly should bring a fresh pair of eyes to the challenge.

Best Buy: Looking for answers from inside or outside?

I published the following comment on RetailWire a couple of weeks ago when it appeared that Richard Schulze (the founder) was going to make a run at Best Buy. This week the company announced the hiring of an outside CEO, but the issues raised in the last paragraph ┬áremain the same. (I’ll comment separately about the new CEO’s skill set.) Here’s my take:

Whether Best Buy stays public or goes private is not the real issue. The biggest question is whether the founding CEO (who served on the board for many years after his retirement) and his handpicked successor as leader of the company can be the “agents of change” that BBY requires.

Yes, the company has developed a new “Connected” prototype in the shadow of its home office, and has successfully developed the “Mobile” concept. But a recent visit to a full-sized store showed the same issues that have dogged the company for years: A center core overspaced with CD’s, DVD’s and computer software…lackluster presentations of computers and TV’s…a dark, unappealing shopping environment. Schulze and his proteges have been very slow to react to the innovation of the Apple Store; how do they intend to fix Best Buy now?

JCP’s push toward RFID technology

Here’s a recent RetailWire post about JCP’s conversion to RFID tagging from traditional barcodes. I’m a believer in RFID but I’m skeptical about the plan to convert entirely to self- and mobile-checkout at JCP. My thoughts:

Macy’s has been working on RFID conversion for at least a year, and JCP’s promised update should push this technology into the spotlight once and for all. JCP is positioning it as a way to streamline the store checkout process (by eliminating traditional checkout counters) but the real benefit to retailers will be more accurate real-time inventory management and replenishment. In fact, JCP ought to make sure that its existing and targeted consumer actually likes the sort of checkout experience being proposed — testing first would be a wise idea.

Amazon: What’s the worst that could happen?

From today’s RetailWire blog: All of the doomsday scenarios spelled out by Brian Walker of Forreester are valid exercises in worst-case planning. But I see a few shorter-term threats that Amazon needs to contend with:

1. How and when does the company start to deliver consistent operating profit? Its gross margins are lean yet manageable, but the bottom line results are consistently depleted by its high SGA and investments in infrastructure.

2. Amazon’s key advantage (no sales tax charged to most customers) is threatened, not only by legislators looking for more revenue but also by its own growing network of distribution centers.

3. The Kindle Fire tablet faces more credible opening-price competition soon, depending on the price points chosen by Apple (for its mini-iPad) and Microsoft.

4. The “showrooming” trend has played into Amazon’s hand, but you should expect stores like Best Buy to develop successful strategies to combat this issue.

In short, Amazon is not as invulnerable “here and now” as its growth and dominance make it seem.