Archive for May, 2014

“Small format” momentum continues to build

Today’s RetailWire discussion focuses on traditional grocers (Publix, Kroger and so forth) who are developing small-format concepts for college towns, resort communities and other locations where a full-sized supermarket can’t pay for itself. As I discuss here, it’s part of a rapidly growing trend throughout the retail industry:

Small format stores make a world of sense for both food and general merchandise retailers. They provide edited assortments aligned with the brand equity of the parent company. They also offer the retailer much more flexibility in terms of location strategies and site selection.Most national chains have too much square footage devoted to large-scale prototypes. Full-line discounters like Walmart and Target have already figured this out, so it’s not surprising that food retailers are looking at similar growth opportunities.

After all, why should TJ’s and Aldi have this idea all to themselves?

Can TJX keep playing the hot hand?

RetailWire panelists reflected recently on the huge growth of TJX, which has surpassed many of the best-known names in American retailing. My point of view is that the off-pricer’s success is part of a larger narrative:

The growth of TJX is part of a 50-year cycle (with no end in sight) in which the retailer offering better value and other sustainable advantages takes share away from the mid-tier retailer. First it was Sears in the 60’s and 70’s, then the national growth of discounters like Target and Walmart, then the big box specialists, and now the off-pricers. No reason to believe this trend won’t continue, with the added twist of web-only powerhouses like Amazon. TJX is dealing with a hot hand right now, but history suggests that a new format will emerge within another ten years or so.

Can (and should) Target change its culture?

Since Target appointed an interim CEO (who handled the recent earnings call), there has been plenty of conversation about whether a company can change its stripes after becoming too insular and risk-averse. Some of this conversation has come from Target itself, including its marketing chief’s response to a disgruntled employee posting on Gawker. Here’s my recent comment on RetailWire:

Every company is entitled to build its own culture, and it’s easy for an anonymous blogger to air grievances that may or may not be personally motivated. What company (retail or otherwise) doesn’t have its share of disgruntled employees, whether or not they have the megaphone of Gawker?

With that being said, Target does seem to be an unusually inbred company. Many of us have commented on this since the departure of the CIO and then the CEO. (And a bit of full disclosure: I worked for Target’s predecessor company, Dayton Hudson Corporation, from 1978 to 1982…a lifetime ago.) The challenge for an incoming CEO will be to overturn the attitude of “we’ve always done things this way” common in any homegrown organization, without disrespecting the very real underlying assets and talent at Target.

No “right answer” on e-commerce penetration

I’ve combined a couple of recent RetailWire comments below. The first touches on whether retailers know when they have hit the “right number” of e-commerce penetration to total sales. The second comments deal with the evolution of e-commerce from traditional (PC and laptop) to mobile devices. Hope it all makes sense:

Here’s an answer to the first question (e-commerce penetration to total retail sales)…”It depends.” Aside from pure-play companies like Amazon, most omnichannel retailers would like a higher percentage than they have right now, especially laggards like Target and JCPenney. But those same companies need to consider how to drive more productivity out of their brick-and-mortar locations using e-commerce as a tool. Just closing stores is not enough.

Briefly, on the second question, there is no question that mobile devices are rapidly overtaking the PC or laptop as the “computer of choice.” This has huge implications for companies’ e-commerce strategies, along with every other way in which consumers buy goods and services. If you extrapolate from current trends, it’s easy to see where this is going.

For the short term, a lot of consumers still have a comfort level with the security and familiarity of a desktop or laptop. As other panelists have pointed out, a lot of e-commerce sites still have work to do to make their m-commerce sites equally easy to use. But there is no doubt that the growth trajectory favors tablets and smartphones over the long run.

Nordstrom: Growth ideas offset a maturing platform

RetailWire panelists discussed Nordstrom’s performance as an emerging “multi-platform” retailer, with growth coming from its Rack stores and its e-commerce sites. I have plenty of praise for the company’s balanced approach:

Nordstrom is aggressively riding the growth potential of Rack stores and its e-commerce business. (E-commerce grew at a 30% rate last year and accounts for over 10% of company sales in 2013.) And the company has been a leader in leveraging its brick-and-mortar inventory to fulfill web orders. It helps to have the service levels and “process” in place to make this happen.

It’s just as noteworthy that JWN continues to grow its full-line department stores at a very deliberate pace, especially given slow comp sales. It would be tempting to step up the rate of store openings, given the lack of saturation in many areas of the U.S., but this kind of caution will keep Nordstrom from asking five years from now, “Why do we have all this excess square footage?”

Sears’ latest vision, or latest retreat?

Eddie Lampert announced that Sears will continue to close brick-and-mortar stores at an accelerated rate. While this is the right thing to do, he put it into the context of a company “reinvention” that any Sears-watcher should be skeptical about. Here’s my point of view, as expressed in a recent RetailWire panel discussion:

Mr. Lampert has had ten years to prove the validity of his vision. And that vision has changed every time the “last strategy” failed to achieve gains in profitability and market share. Meanwhile, a collapsing sales base in outmoded stores makes it very seriously to accept the latest messaging — whatever it is.

The undermining of the Sears and Kmart brands through mismanagement is so thorough that it’s naive to think an “online marketplace” can leverage those same damaged brands effectively. An online version of Sears runs a risk of irrelevance compared to stronger, better-managed competitors like Amazon and It’s the same pathway that led to Sears’s “also-ran” status today.

The axe falls at Target (part 2)

The end of Gregg Steinhafel’s 35 year career at Target was widely reported this week, along with speculation about the type of CEO that the company could use. I posted my thoughts on RetailWire, and here they are:

While hiring and promoting from within has always been part of the Target tradition, the company may need an outsider who is not a part of its insular culture. (“Guest,” anyone?) As several other panelists point out, the company’s performance has stagnated for several years — long before the data breach — and the focus on merchandising needs to be strengthened. Target’s “brand” is as much about the product as any retailer in the business, and it would be fun to see what a “merchant prince” like Mickey Drexler could do with the company.