Archive for March, 2016

Sports Authority: What do its problems mean for retail?

Sports Authority recently announced a chapter 11 filing as well as its plans to close or sell many of its locations. RetailWire panelists had a chance recently to dicuss what these developments mean for the broader world of retailing:

There are two issues at play here: Yes, there is an overall recognition by brick-and-mortar retailers that they have too much square footage as their own “omnichannel” business cannibalizes their physical stores. It’s an issue for all kinds of retailers, from Walmart to Kohl’s to Macy’s.

But Sports Authority’s struggles are symptomatic of the problems plaguing “niche” big box stores for several years. There has been a survivor (Best Buy, Bed Bath & Beyond, Barnes & Noble) and a failure (Circuit City, Linens & Things, Borders) in just about every niche you can think of — and even the “winners” are struggling with too much square footage.

Underlying the consolidation in the sports apparel and equipment industry? First, the impact of Amazon and other online competitors on just about every retail segment. Second, the push into activewear by every department store and apparel specialist you can name.

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Millennials buying homes in the suburbs: Breaking news?

I answer the question in my headline below, in this brief comment from RetailWire. The bigger question is the long-term impact on consumer preferences as this trend unfolds:

Is it surprising the Millennials make up the largest segment of suburban home buyers? Not really, considering that they are outgrowing Baby Boomers in terms of sheer numbers at the same time that they are house-hunting for the first time. So I’m not sure how many conclusions you can draw from this bit of data.

As long as most American cities offer better school systems in their suburbs — along with more affordable housing and more space — it’s not unexpected that Millennials would be drawn to suburban living. (And it’s no coincidence that Boomers continue to downsize.) This will continue to drive the long-term strength of home-related businesses (furniture, DIY, home decor) beyond the short-term cyclical ups and downs of the housing market.

Amazon’s Echo: Where’s Apple in this product category?

You’re probably seen or heard about Echo, the voice-activated “smart assistant” from Amazon. RetailWire panelists recently discussed why Apple has been slow to gain traction here, and I added my thoughts:

This seems like the type of category where Apple would move faster than the competition, but perhaps they are aiming to be a “fast second” while learning from somebody else’s wins and losses. But Apple-watchers have made the same argument for years about Apple TV, which has yet to make a significant dent in the streaming TV battle.

So — for now — advantage definitely goes to Amazon. It’s not just a matter of developing an innovative technology (as with the Kindle) but their ability to link Echo to its entire e-commerce ecosystem. This is something that Apple simply can’t compete with, regardless of the products it develops in Echo’s wake.

Target’s new supply chain chief: What’s the message?

Target recently hired its new logistics head from Amazon, and RetailWire panelists weighed in on the meaning of the move. While I’m sure Target is trying to send a message about its “omnichannel” growth, the new supply chain team needs to fix in-stock levels in the stores first:

Omnichannel initiatives (like BOPIS) and the growth of e-commerce have made effective supply chain management more challenging. And nobody has mastered this aspect of the business like Amazon — with the caveat that they are not experts in brick-and-mortar logistics. Target has had supply chain issues for many years in its physical stores, based on its seeming inability to keep its shelves and pegs full. If I were Mr. Valdez, this is the first issue I would tackle as a sales and reputational problem for Target.

JCPenney sells “goods for a penny”

RetailWire panelists recently had a chance to discuss a new promotion at JCPenney (buy one item, second for a penny) and what it says about JCP’s growth prospects. I wouldn’t read too much into it:

For those with a long memory (meaning that we remember JCP before the Ron Johnson era), this is something of an echo of Penney’s Anniversary Sales. JCP occasionally ran “second item for a penny” during these events and as Black Friday doorbusters. It’s the equivalent of “buy one, get one free” and is a good tool for selling key items bought in depth at a cost where you can still make money at 50% off.

The campaign will drive sales, traffic and sampling of private label goods — all important tactics for JCP in the short term. But pay more attention to the strategic steps that Mr. Ellison has taken in the past six months — especially in areas like IT, omnichannel and logistics. These won’t be as visible as new marketing and promotional tactics but will pay dividends in the future if Penney can keep its sales momentum moving.

BOPIS: Be careful what you wish for

From a recent RetailWire discussion, I comment on the move toward omnichannel initiatives like “Buy online, pick up in store” (BOPIS). I think there are two broader challenges brought on by BOPIS specifically and stores’ rush to create an “omnichannel” experience in general:

First, brick and mortar stores are devoting more of their associates’ hours to off-the-floor activity (such as pulling and readying BOPIS orders) instead of face-to-face customer interaction still expected in most physical stores. And, since store payrolls are unlikely to grow in a flat sales environment, this trend is eroding one of the key reasons why shoppers visit brick-and-mortar locations in the first place.

Second, stores are trying to emulate in their physical locations the breadth of assortment found on their websites. This is meant to make the BOPIS fulfillment process easier, or at least to offer the customer more choices. But sometimes the customer wants more editing, not more assortment, and the resultant clutter and lack of focus does nothing to make the shipping trip more appealing.

Home meal delivery: Still an upside?

Restaurant delivery is an exploding business, but how much room for how many players? This is a question tackled recently by the RetailWire “braintrust” panel, including me:

Whether you’re talking about groceries, restaurant meals or anything else, there is only so much space in any given market for competitors before the weakest or most underfunded performers get squeezed out. Even bigger players like GrubHub (full disclosure: my son works there) face competition as Amazon and Uber move into these businesses. And there is always the threat from grocery or nonfood retailers who verticalize their own delivery instead of outsourcing it.

So — short answer — yes, there is likely to be fallout among the startups who fail to develop a compelling reason to be, other than wanting to jump on the bandwagon of a fast-growing category.


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