Archive for July, 2015

Dick’s takes on a small-format concept

Dick’s Sporting Goods announced a test concept (Chelsea Collective) dedicated to yoga and fitness wear in a small-format concept. While the length of the product life cycle for “athleisure” is uncertain in length, it’s worth a shot, as I discuss on today’s RetailWire forum:

It’s a worthwhile experiment for Dick’s to try a small-format store dedicated to the growing “athleisure” business. There are plenty of customers for yoga and fitness apparel (whether for use at the gym or on the street) who would rather not shop for it in a big-box store among the golf clubs, elliptical machines and so forth. It’s also a chance for Dick’s to take a high-margin concept to the mall or lifestyle center…although it will find plenty of competition between Lululemon, Athleta and others in the same space.


Another activist investor takes on Macy’s this time

Starboard Value Investors garnered a lot of PR recently, with its micro-critical look at the operations of Darden Restaurants before taking over the chain. Now its sights are set on Macy’s, in hopes to “unlock the asset value” of Macy’s real estate. Here’s my comment from a recent RetailWire discussion:

It’s arguable that Starboard drove the share price of Darden Restaurants higher by micromanaging issues like the breadsticks at Olive Garden. But it’s hard to make the same case that they can bring much value to the operation of Macy’s, widely viewed as an industry leader. Macy’s ought to be free to make its own decisions about the value of its real estate assets, instead of reacting to the whims of an “activist” investor.

The history of activists and retailers is not pretty, if William Ackman and Eddie Lampert can be used as examples. (Don’t forget Ackman’s push to “unlock” the real estate value of Target, before his misadventure at JCPenney.) Successful retailers are about much more than “unlocking assets,” and they really depend for their success upon good merchandising, branding, store operations and omnichannel strategies.

J. Crew Mercantile: Potential reward worth the brand risk?

J. Crew recently announced the test of a “value priced” division called J. Crew Mercantile, opening soon in a Dallas regional mall. The concept is meant to be different from J. Crew outlet stores and from the flanking Madewell brand. My question (on RetailWire) concerns potential erosion of the parent J. Crew brand in the first place:

The key difference from Mr. Drexler’s experience at Gap Stores is that Old Navy represented an entirely different brand. Most customers didn’t recognize it as a division of the same company (at least initially) so there was less risk of cannibalization. The company’s “good/better/best” approach to its three divisions worked for a long time until oversaturation and merchandise missteps caused it to stumble.

The use of the J. Crew name on a “value brand” is risky. It sends a signal that the core brand’s prices are too high (or its value perception is lacking) when most of its recent problems stem from bad product development. One concept store is unlikely to move the needle in one direction or the other, so the priority needs to be fixing J. Crew in the first place.

Charging the customer for BOPIS?

John Lewis, a large UK-based retailer, has begun charging some customers to cover the processing costs of “buy online – pick up in store” (BOPIS) orders. Most RetailWire panelists agree with me that this is not a good idea:

It’s hard for the consumer to tell the difference between a BOPIS order that was picked from a distribution center and one that was picked from a store’s inventory…which seems to be the growing trend. So it would be hard to explain why she was asked to pay more for a product that (as far as she knows) is already in the store’s inventory. From the customer’s standpoint, why stop there, and why not charge her for the right to shop in the store in the first place? Unless you’re Costco, good luck with that.

Bottom line: I don’t see BOPIS charges happening anytime soon in the U.S. retail environment. Stores that are racing to figure out how to make BOPIS work for their market share aren’t about to pass along costs to the consumer, and the idea of “free shipping” as a settled practice would make BOPIS hard to swallow.

How does “the Internet of Things” translate into retail sales?

The “Internet of Things” is a buzzword that I don’t fully understand myself. I believe it relates to devices that can be interconnected via wifi network and controlled remotely via mobile device. (Everything from thermostats to security systems to slow cookers…you’ve seen the ads.) On a recent RetailWire forum, panelists weighed in on Sears’ move into this business. Here’s my comment on their “Connected Solutions” strategy, especially in contrast to Target’s decision to open pop-up stores:

I shopped a Sears store recently in the Milwaukee area, and they were in the process of setting up an extensive “Connected Solutions” shop adjacent to the electronics department. (The merchandise hadn’t been set up yet, but the sales associate explained the idea to me.) I think Sears’ approach — integrating it into their existing stores — actually makes more sense than the idea of a pop-up store. Target certainly has enough real estate in its stores to roll out the idea faster, especially with their decision to take a more “curated” approach to the grocery business.

What makes a strong mission statement?

This is a question that every organization faces, and it was a topic of discussion at RetailWire relative to the new mission statement at Microsoft: “To empower every person and every organization on the planet to achieve more.” Here’s my opinion:

Regardless of the type of company or organization, I believe that a mission statement ought to be relatable to its “business” in a tangible way. This doesn’t mean that it needs to be as metrics-driven as the original Microsoft mission statement, but it’s nice to know what business you’re in.

I volunteer for a local independent school which rewrote its mission statement recently in sync with a new strategic plan. It’s arguable that the mission statement could be more concise, but it’s beyond debate that it’s all about the core values of a school.

The Microsoft mission statement, as written, is so generic that you could assign it to any other tech company — or a host of companies and organizations in other industries. (Why not Boeing, for example?) And since part of the purpose of an effective mission statement is to “rally the troops,” you have to question whether it accomplishes that goal.

JCPenney experiments with a new mobile app

The app in question allows JCP customers to take photos of apparel items in other stores, and (hopefully) find similar items in JCP stores or on their website. My brief comment (from RetailWire) follows:

I put this into the “it can’t hurt” category, like the JCPenney test with the Apple Phone. It’s likely that at least some of those millions of JCP customers carrying iPhones will find this to be a useful tool, and that it will drive some sales. There is a downside risk to Penney, however: How closely will the products in its own assortment mirror the designer goods being checked? Will there be a false promise of equivalent fit, finish and quality raised by the tool?