Archive for March, 2014

Albertsons acquires Safeway: A deal between two slow-growth giants

While food retailing is not my area of expertise, the merger of Albertsons and Safeway is too big to ignore. The trend toward consolidation, among slower-growing segments of the retail business, continues with this deal. Here’s my recent comment from RetailWire:

As conventional grocers continue to lose share to more innovative stores (everybody from Aldi to Whole Foods to Walmart to Amazon), this sort of industry consolidation makes sense. While neither chain operates in my backyard, it’s apparent to me that both companies failed to maintain past standards at their Chicago-based brands (Dominick’s and Jewel). Merging may bring the combined company more market power, but not necessarily a better experience for shoppers.

This move will probably push Kroger toward its own buying binge. It would not be surprising to see regional and super-regional companies like Publix, Roundy’s and others disappear over the long haul.

Men’s Wearhouse and Joseph A. Bank: Finally, a deal

Again, a brief comment (from a RetailWire discussion) now that the back-and-forth between Men’s Wearhouse and Joseph A. Bank has concluded. (With Eddie Bauer looking in from the outside…) The big question in my mind is whether the combined company can maintain each brand’s quite distinct image, targeting and promotional strategy:

There are economies of scale to be found, from sourcing to IT to media buying, that will make sense for the combined company. But it will also pay to maintain each brand’s separate focus in terms of customer profile and merchandise direction. This may require leaving two buying organizations in place, even with the expected back-office efficiencies.

Amazon Prime: How risky is its price increase?

A bried comment (from RetailWire) follows, on the topic of Amazon Prime and its decision to raise its annual fee from $79 to $99:

The apt parallel is Costco’s raising of its membership fee, which hasn’t hampered its growth over the long haul. As long as Amazon has tested the response to the price increase, and provided they keep marketing Prime as a suite of benefits, I expect the complaints to die down quickly.

Your store is on Candid Camera…

“A picture is worth a thousand words,” or so many investors believe based on the growing number of analysts whose specialty is visiting stores and taking cellphone photos of empty or unkempt fixtures. Stores like Target, Walmart, Sears and Penney are particularly interesting subjects for this kind of coverage.

A recent RetailWire discussion centers on how (and whether) retailers should respond to this kind of reporting. Are they smart to argue that these are “isolated incidents,” instead of dealing with endemic out-of-stocks and housekeeping issues? Here’s my point of view:

There are at least two issues at play: First, the customer service problems caused by out-of-stocks or poor housekeeping. Second, the PR and “investor relations” ripple effects, whether a company considers this kind of reporting fair or not.

First things first: Fix the underlying causes of the problems, whether through store management or supply chain management. (And if these are chronic issues, admit it and tackle them.) The “gotcha” reporting should then take care of itself.

Is H&M missing the omnichannel bandwagon?

H&M has been famously late to the table developing its own e-commerce site from which it can sell merchandise. There continues to be a lot of debate (including on RetailWire) about whether the company is missing the boat, or smart to focus on physical store expansion. Here’s a recent comment:

H&M is competing globally against the likes of Zara and Uniqlo. It’s understandable that the company’s focus is on brick and mortar expansion, and especially getting the content right in each country where it operates.

Still, given the overall maturing of brick and mortar retail (at least in the U.S.), it looks like a good time for H&M to redouble its move toward a true omnichannel strategy.

Should Penney stop reporting monthly sales?

Two related questions under discussion at RetailWire today: First, is Penney’s announcement that it will stop reporting monthly comp sales the smart thing to do? Second, is JCP moving fast enough on store closures? Here are my thoughts on both issues:

Given the volatility of this stock, and the wild swings up or down at the hint of any news, now is not the right time to discontinue comp-store sales reports each month. More transparency is called for, not less. The vagueness of the December sales comments (compared to the November report) ought to be a lesson to JCP.

To the question about being overstored, the answer is, “Absolutely.” Closing about thirty low-volume locations (judging by several small-town stores being closed here in Wisconsin) barely scratches the surface. If JCPenney wants to convince investors that it’s on the right track, it will take a greater commitment to expense reductions for this downsized company, not just a push toward higher gross margins.

Abercrombie’s new approach…about time, or too late?

Abercrombie and Fitch is apparently taking a page from its “fast fashion” competitors (Forever 21, Zara, and so forth), in order to move its product development in a faster and cheaper direction. The hope is that A&F can deliver more timely trend merchandise to its stores, at a better value. There is no question that its share has suffered over the past few years, while its senior management has steadfastly refused to make these sorts of moves. Recently, RetailWire panelists discussed whether these tactics will affect A&F’s brand image. Here’s my response:

Brand image? What brand image? A&F is caught in the middle (never a good place to be), between more nimble competitors like Forever 21 on the one hand and more upmarket stores like J. Crew. Abercrombie’s image was built on edgy marketing tactics that lost their luster years ago…the catalog photos and the shirtless male employees. Now a lot of these moves look gimmicky.

The most important thing A&F can do now is to change its sourcing and product development model. Making big bets months in advance on a trend like plaids — and then turning out to be wrong — leaves Abercrombie in a losing position vs. its “fast fashion” competitors. We’ll see whether the company culture can adapt to the new business model.