Archive for December, 2014

Can Starbucks drive other “dayparts” with food?

Starbucks is fighting to drive more productivity into its lunch and evening business, in part by selling more food. Several RetailWire panelists commented on this development, and I caution against the same kind of overassortment that has become such a big headache for McDonald’s. Here’s my take:

Starbucks has rebounded from an unsuccessful push into breakfast sandwiches a few years back. (At the time, Howard Shultz complained that the place smelled like eggs instead of coffee, and he was right.) It’s worth exploring how to get more productivity out of lunch and even dinner hours, but the company has to be cautious. Trying to emulate the Panera model without the space to deal with menu complexity could backfire on Starbucks’ core beverage business, and this week’s Wall Street Journal article about “menu complexity” at McDonald’s ought to be a cautionary tale.

Advertisements

The junior problem: It’s not just about Abercrombie

There were plenty of comments at RetailWire upon the sudden resignation of Mike Jeffries, CEO at Abercrombie & Fitch. Although his company has made more than its share of mistakes over the past five years, I argue that some of the problems are endemic to the industry:

There are many issues at play here. First, it comes down to merchandise content: The mall-based junior retailers have been too slow to move to the “fast fashion” model of competitors like Forever 21, so their long-leadtime product development can put too much of the wrong product into their stores. The junior customer figured this out a long time ago.

Second, mall-based apparel traffic has suffered for years. The misses’ chains (Talbots, for example) have hardly done any better than their junior counterparts. There are too many fast-fashion and off-price options where the “treasure hunt” for variety is a compelling part of the shopping experience now.

Finally, the economics of the consumer have changed: First, the Great Recession put a damper on overall discretionary spending for apparel that has yet to recover fully. And the discretionary dollars have shifted dramatically, away from apparel and toward personal technology. One more element in this “perfect storm” for the junior industry.

Thanksgiving 2014: A post-mortem

I posted the following at RetailWire on the Monday after Thanksgiving. The “punch line” is that Cyber Monday sales were soft, too. Despite a lot of positive tailwinds, this holiday may be another squeaker:

It can’t come as a surprise that sales on Friday itself fell in brick-and-mortar stores, although the size of the decrease was bigger than I expected. Every year that sales are pulled forward by earlier openings — first from 6am to 4am to midnight on Friday and now to 6pm or earlier on Thursday — takes the sense of urgency out of Friday morning. The entire four-day weekend has to be considered disappointing.

This year’s decline was more pronounced than usual because of the rapid shift to e-commerce and mobile commerce (not reported in the overall weekend numbers) and the probability that some sales shifted to the early part of November this year. As the consumer becomes more empowered each year by the information at her fingertips, she is also less likely to believe that Black Friday pricing is really the lowest of the holiday season.

Add it all up, and it probably made for a more pleasant, and less crowded, shopping experience on Friday. But the sheer size of the numbers will leave retailers sweating it out — as usual — for the next couple of weeks.

Radio Shack: Tailwinds may not bring a comeback

There is some traction in the consumer electronics business, but RetailWire panelists seem to agree that it may be too late to help Radio Shack. Here’s my recent comment:

Best Buy’s announcement of an upswing in its sales suggests that the consumer electronics business is not dead after all, and the big box store might also be showing a pulse. It becomes more difficult for a company like Radio Shack — saddled with an image that it tries to embrace one day and mock the next — to compete against the brick-and-mortar or e-commerce giants in its segment.

It’s probably too late in Radio Shack’s history to consider a complete rebranding — including a new name — but it’s worth remembering that Best Buy originated many years ago as a Twin Cities-based audiophile store called “Sound of Music” and decided to walk away from its original brand identity.

Ship-from-store: Who gets credit for the sale?

The “silo culture” holding back omnichannel is something that I address on an earlier post. This comment (from RetailWire) pertains especially to the accounting for sales when a product is ordered online but shipped from a physical location. As this becomes a more common practice, it’s a question deserving an answer:

The sense among brick-and-mortar managers that their company’s e-commerce channel is their own worst enemy — is part of the reason that stores continue to move slowly at development of a true omnichannel model. It would be worth knowing how Macy’s handles these kinds of issues, since it is already steps ahead of other aspiring omnichannel retailers.

To oversimplify, if an individual store location is taking on the expense of order processing, and shipping goods from its own inventory — rather than from an e-commerce distribution center — shouldn’t it be credited with the sale? In the early days of my career, when I bought cosmetics, the charge customers’ “remittance envelope” orders (remember those?) were filled by (and credited to) the branch store filling the order. (Usually the downtown headquarters store…remember those?) I don’t see this concept being totally different.

Can retailers avoid the 2013 shipping fiasco?

RetailWire panelists — and other observers of retail — will be closely watching whether retailers and shipping partners can execute better than last year. I raise a caution in the following comment:

No retailer wants to be in an uncompetitive position on Christmas delivery, just as most retailers want to start Black Friday when “the other guy” does. The issue is whether retailers have partnered more effectively with the major carriers — especially UPS, who was less prepared than FedEx last year. (And the Postal Service seems to be playing a more active role this year.) It’s also debatable whether the rise of BOPIS and ship-from-store will help retailers execute better, since brick-and-mortar locations will be plenty busy anyway.

The biggest question is whether consumers — having been burned in 2013 — will even take the risk of waiting until the last possible minute, if they are righfully skeptical about the stores’ ability to execute.

And still more on “new Black Friday”

Again — in hindsight — the effort to spread out Thanksgiving shopping from a one-day event to weeklong has not paid off in incremental sales. Here’s a RetailWire comment that I posted about a week before Thanksgiving:

“New Black Friday” is simply a marketing handle meant to acknowledge the new reality of shopping patterns from Thanksgiving morning through Cyber Monday. It’s hard to say whether the idea is likely to drive additional sales, but it should help address the operational challenges of early-morning doorbusters even at the cost of some sense of urgency. Most importantly, it is an omnichannel-friendly approach to a key shopping weekend that has evolved dramatically over the past decade.


Advertisements