Archive for March, 2017

L.L. Bean considers a new return policy

From a recent RetailWire discussion, I comment on L.L.Bean’s consideration of a less liberal return policy than it has always been known for:

Having worked for Kohl’s for 24 years, I have a bias toward more forgiving return policies. Kohl’s always viewed its return policies as a competitive advantage and marketing practice (even though there was plenty of gnashing of teeth among the merchant ranks) and I believe this is still the case. Stores can maintain this kind of trust with their customers, even if they look at tweaking the policy through issuance of gift cards for goods returned without receipts or after some time has passed.

I’d be very careful if I were L.L.Bean to walk away from part of what has defined its brand for a long time. As another panelist suggests, look for other reasons why costs are rising faster than sales, starting with merchandise assortments.

In praise of Amazon (again)

As the biggest “disrupter” in retail, Amazon is always a hot topic on RetailWire. Here’s a recent comment:

There may be more innovative retailers who are not as visible as Amazon, but it’s hard to think of a company with such scale that is less willing to rest on its laurels. I know that some panelists view Amazon’s push into new businesses and logistics methods as not much more than a well-oiled PR machine (see yesterday’s discussion of intimate apparel as an example). But it’s hard to deny that the company is anything but complacent when it comes to extending its reach and improving its execution promise.

The real test for Amazon will be its success in rolling out innovative brick-and-mortar retailing models. The bookstore and especially the C-store tests will be telling, because most other stores with “omnichannel” strategies have not succeeded in offering an innovative approach to the business of shopping.

And more thoughts from another post:

Amazon’s competitors have it all wrong if they think it’s all about low prices. (And this is the fundamental error behind Walmart’s “brand promise” over the years.) Amazon has always been focused on breadth of assortment and great execution. As the company has entered more categories (starting all the way back when when they were in the business of shipping books), it has never lost sight of these key competitive advantages. Customers’ expectations have been scrambled as a result, and everybody else (whether pure play e-commerce or omnichannel) is just trying to keep up.

“Voice assistants” riding a wave

Two recent RetailWire posts address the growth of Amazon and competing voice recognition devices — with Amazon’s Echo being the most popular:

Anything that makes the Amazon shopping experience even more seamless is a market share opportunity. As the panel discussed recently, it’s no wonder that several national retailers are aligning with Google’s voice assistant instead.

Retailers probably have their own opportunities to apply voice recognition technology to their own mobile apps. (Maybe this has already happened.) Voice activation seems to be the next “smart” thing, so it’s a win for whoever gets there fastest.

The second post concerns the national retailers who are aligning with Google, not Amazon:

If this works, it’s an opportunity for Google to play catch-up on the head start that Amazon has established with Echo, and to establish a stronger beachhead on the “device” front. But it’s also an opportunity — or attempt — for several retailers to marginalize Amazon’s e-commerce business that has eaten into their own market share.

JCP: Too early to declare victory

JCP’s CEO recently declared that its (slight) 2016 profit repreesented an historic turnaround. Most RetailWire panelists agreed with my contrary view:

It’s admirable that JCP has stopped bleeding cash but its net earnings in 2016 were just over $1 million (not the EBITDA number, which was higher). So it’s premature to declare an historic victory in light of store closings and soft sales. The slippage in gross margin in 2016 is another area of concern, because competition won’t be any easier in 2017.

With those reservations in mind, Mr. Ellison has had his eye on the ball ever since assuming the CEO chair and continues to focus on the right things — data science, expense controls, driving sales opportunities and weeding out unproductive locations.

Will Target’s latest reset work?

Target’s CEO announced last week that investors should expect tough 2017 returns as the company invests in stores and more competitive pricing. Here’s my recent comment from RetailWire:

Walmart was criticized a couple of years ago for investment spending on its stores because it was likely to put a dent into short-term results. But the long-term view for WMT is brighter because of this decision, and Target is aiming for the same kind of outcome.

But Target has some specific challenges ahead that a store revamp won’t fix on its own:

1. The longstanding conflict between “cheap” and “chic”: Target needs to be more price competitive but has built its brand promise on more aspirational goods;
2. The continuing lack of traction in the grocery business, especially to drive more frequent visits;
3. The head start on e-commerce (and omnichannel) that its biggest competitors already have;
4. The company’s longstanding inability to keep its shelves and pegs filled.

I can’t overstate the importance of the last point. A trip to Target where a third of the shopping list can’t be filled is a waste of time, no matter how compelling or competitive the merchandise might appear.

Two comments on omnichannel

Here are a couple of RetailWire posts on the subject of whether e-commerce is eating into brick-and-mortar retail. The first comment was published after stores reported year-end sales:

“Omnichannel” retailers like Macy’s, JCP and Target are still heavily dependent on their physical footprint. Each store reported rapid e-commerce growth (from 17% in Penney’s case to 30% at Target), yet each of them also reported total comparable-sales declines in the low single digits. So it’s clear that the combination of brick-and-mortar and omnichannel isn’t driving sales yet.

All of these stores and others have opportunities to improve their assortments, customer service and overall store experience. Omnichannel initiatives like BOPIS and “ship from store” have put even more strain on retailers’ ability to execute these “Retail 101” issues better. But until they do, their overall sales will continue stuck in neutral.

The second comment was published today:

“Cannibalization” may be the wrong term, because retailers with true omnichannel strategies need to think about how to grow the overall pie. Continuing to think about business silos (e-commerce vs. brick-and-mortar) will stand in the way of a consistent overall approach to the business.

But there’s no doubt that brick-and-mortar is losing its relevance, as seen in the growing number of chains closing locations or throwing in the towel altogether. To go back to the question of how to grow the overall pie…why isn’t that happening? Why aren’t strategies like BOPIS (intended to drive traffic to stores) driving incremental sales?

These aren’t easy questions to answer, but I continue to believe that the operating demands of turning a physical store into a mini-distribution center are eroding the service-centric reasons why consumers shop in those stores in the first place.

“Cannibalization” may be the wrong term, because retailers with true omnichannel strategies need to think about how to grow the overall pie. Continuing to think about business silos (e-commerce vs. brick-and-mortar) will stand in the way of a consistent overall approach to the business.

But there’s no doubt that brick-and-mortar is losing its relevance, as seen in the growing number of chains closing locations or throwing in the towel altogether. To go back to the question of how to grow the overall pie…why isn’t that happening? Why aren’t strategies like BOPIS (intended to drive traffic to stores) driving incremental sales?

These aren’t easy questions to answer, but I continue to believe that the operating demands of turning a physical store into a mini-distribution center are eroding the service-centric reasons why consumers shop in those stores in the first place.

 

 

 

 

Department stores’ search for relevance

From a recent RetailWire blog post, I have some comments about the continuing struggles in the department store segment. Some of my concerns are based on the relevance of their merchandise content, and some are based on the “sameness” of the shopping experience:

There are two key “relevance” issues, especially pertaining to traditional department stores: First, are retailers using all of the technological tools at their disposal to enhance their brands? Are they leveraging today’s tools (mobile payment, RFID, and so forth) to improve customer service or simply to cut costs? And how has “omnichannel” (especially BOPIS) actually eroded the shopping experience? There is very little difference between shopping at Macy’s or Dillards today compared to 30 years ago, other than UPC scanning and more sophisticated POS terminals.

Second — and it always comes down to this — is merchandise content. I’ve shopped a lot of traditional department stores over the last few weeks, and I’m struck by how much inventory and square footage continues to be devoted to dressy career apparel for men and women. This may be the retailers’ sweet spot (as they see it), but the lack of adaptation to change is concerning. Do these stores not recognize that Boomers are retiring — and leaving the workforce — in droves? Do they not see that most Millennials are working in more casual environments and are shopping elsewhere for their wardrobe needs? (Add to this the slow reaction to the movement toward activewear-as-sportswear.)

Sometimes achieving “relevance” costs money — whether through new tech tools, more payroll or a fresh coat of paint. But mostly it’s about the products, brands and trends that stores choose to put forward.

Macy’s store closures don’t fix the problem

I commented on RetailWire in early January about Macy’s announcement of 2017 store closures:

I saw with a particular shudder that one of the Macy’s stores on the list is the “flagship” location in downtown Minneapolis — the old Dayton’s headquarters, where my wife and I both worked and eventually met. It’s hard to imagine that a store with an appropriately sized footprint can’t thrive in downtown Minneapolis — full of office workers and residents — unless there is something fundamentally wrong with how Macy’s is running its business. I’ve shopped their stores from California to Florida to Nevada to Illinois over the past couple of years, and continue to be disappointed by the merchandise content, the physical condition of the stores and the service experience. Until Macy’s addresses these “Retail 101” issues, it doesn’t matter how many stores they close.

Additional thoughts from RetailWire:

Some of our observations about Macy’s are based on 20/20 hindsight, not based on what seemed like a smart move at the time. Even though there was plenty of debate about the disappearance of powerful local nameplates like Marshall Field’s, the reality is that several of those retailers were in their own slow decline. So Macy’s effort to create a national brand (and economies of scale) paid off for awhile.

Where Macy’s has lost its way is in the failure of the “My Macy’s” initiative to cater more effectively to local tastes. The best data science in the world may not be a substitute for experienced managers who really understand their customers’ taste (and when things sell in a given climate). But the bigger issue is the overassortment of women’s brands, erosion of customer service and lack of capital spending; no amount of localization can overcome those hurdles.

And to add a final thought after visiting Macy’s Manhattan flagship in early March: This is a spectacular store that has gotten a big boost in capital investment over the last few years. But Macy’s is so focused on this location (visible to its investors, suppliers and competitors) that it has neglected hundreds of other locations around the country.

Can The Gap make its own luck?

After the CEO of Gap mentioned the lack of a fashion trend as part of his company’s sales problems, I posted the following (late in 2016) to RetailWire:

To blame soft sales on “lack of a trend” fails to recognize the retailer’s responsibility to help create those trends. Back in the Drexler-led heyday of The Gap, the company helped create the khaki phenomenon by getting behind the item in a huge way and by marketing it on TV as a must-have wardrobe item. The same principle applied to many other items in the store — from my days merchandising handbags, I remember a canvas tote in a bunch of colors that the industry dubbed “the Gap Bag.”

It sounds like Gap is suffering from the suffocating influence of both its creative direction and its data science, making it hard for entrepreneurial spirit to thrive among its merchants. (And it also looks like Gap has been slower to embrace the short-cycle, high-turnover model of its fast fashion competitors.) Gut feeling can still work wonders to drive sales, if a retailer has the courage to react quickly to big ideas.

And (upon further review) some more thoughts as Gap released its 2016 earnings in February:

One quarter doesn’t make a trend, but the 2% gain compares favorably to most of Gap’s competitors. In terms of merchandise content, there seems to be a renewed focus on what I would call “core basics,” which is what brought such success to Gap during the 90’s. Without ignoring the lessons of fast fashion retailers (especially in terms of speed to market and supply chain management), Gap will probably continue to gain traction if it takes a more classic approach to the business.

 

 

 

Amazon Go: Reinventing the C-store?

A delayed posting from late 2016 about Amazon’s convenience store concept being tested in Seattle. What’s unique about this store is that customers can pick what they want and walk out the door without “paying” — it’s all handled through mobile payment technology. My RetailWire comment speculates on the impact on other types of retail:

Amazon has redefined convenience in every category they have entered (starting with their original business of shipping books). The company has raised customers’ expectations for speedy execution, and has raised the bar for all of its competitors at the same time. Whether Amazon Go works or not is almost beside the point, because the company can afford to fail — but Amazon appears committed to bringing its vaunted tech-driven efficiency to brick-and-mortar retail models that haven’t advanced much beyond the UPC code. (But if Amazon Go works…watch out!)