Archive for January, 2018

Online grocery sales gaining share quickly

It should come as no surprise (except, perhaps, to traditional grocery chains) that online sales are the fastest growing segment of the industry. Today’s RetailWire panel reflects on whether the major players are ready for this trend. Here’s my opinion:

The wave of online sales that has swamped general merchandising is now catching up to the grocery industry. This shouldn’t come as a surprise to food retailers after watching other industry segments caught flat-footed. It’s only now that general merchandisers have developed omnichannel strategies that are helping them turn a corner.

The key for grocery retailers is to reach the customer where he or she wants to shop. This may mean home delivery or it may mean BOPIS — and it may also mean a simpler shopping experience in-store with less overassortment to choose from. Rest assured that Amazon is going to deliver a more convenient experience (with higher in-stock levels) while traditional food retailers are still trying to figure out if there is a threat.

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Can Macy’s claim a turnaround?

Today’s RetailWire panel focused on Macy’s 2017 holiday results, where they reported a 1% gain for the season. Despite the optimism of their executive chairman Terry Lundgren, most panelists agree with me that the celebration is premature:

As the article points out, Macy’s comp sales of 1 percent paled in comparison to J.C. Penney and Kohl’s, in a season where brick-and-mortar retailers did better than expected. So they actually lost market share during a robust shopping season, and probably ran behind in their physical stores if you assume that most of their growth came from e-commerce.

It’s hard to point out much good news in these numbers, other than being “less bad” than year-to-date. The large number of store closures doesn’t appear to have driven sales to remaining locations, and the jury is still out on the wisdom of the Backstage store-within-a-store strategy. In this panelist’s opinion, it does little to enhance the brand image of the rest of the store.

Amazon Go…it’s a go!

After a long period of testing, Amazon Go is finally opening its doors to the public. Its first C-store location in Seattle has already received a lot of attention for its technological leap, where the shopper can walk out the door and pay for purchases without stopping at a register. Here’s my comment on RetailWire:

I assume the long gestation period was needed to test not only the technology but also the merchandise content. From the descriptions of Amazon Go, it is more focused on fresh and ready-to-eat food than a typical C-store and devotes less space to categories like candy, chips and so forth. It will be interesting to read some on-the-ground reporting about what the store actually looks and feels like.

I expect Amazon to be patient with the concept, because some customers simply won’t be comfortable right away with a cashier-less environment. At least for now, human interaction in any kind of store (including a C-store) is part of the equation unless you’re an early adapter of the Amazon Go tech experience.

Retailers’ comfort level with change

Hiring people comfortable with the fast pace of change, and able to adapt to uncertainty, has always been a critical part of the retail equation. On RetailWire, I add this point about how technology is speeding the pace of change:

Technology and the growth of e-commerce have accelerated the pace, but retailing has always needed attract talent who are comfortable with change. An attitude of “We’ve always done it this way” or “This worked last year” is the kiss of death when most retailers’ fate is in the hands of their customers. While retailers don’t want to be purely reactive and tactical, they do need to attract associates with the sense of urgency needed to move quickly.

Retailers can and must plan for the weather

An interesting discussion at RetailWire about whether retailers can plan for weather variations from year to year or from region to region. Despite several myths on the topic, there was strong consensus that it can and should be part of the planning process. My take:

You can and should plan for the weather, despite what “myth 1” says. It may not be possible to project exactly where or when above- or below-average temperatures will hit (even using long-range forecasting tools), However, it’s certainly possible to project total seasonal buys of categories like gloves, coats, etc. based on three-year or five-year averages. It’s a common mistake to base this year’s buy only on last year’s sales data — which may overstate or understate demand based on exceptionally strong or poor sales results.

It’s also critical for retailers operating nationally to be as flexible as possible about reordering and/or canceling goods, and using the tools at their disposal to make the smartest possible allocation decisions as close to need as possible.

Will a “mobile overhaul” fix J. Crew?

I haven’t seen holiday results for J. Crew, so the following RetailWire comment (published in early December) may misread the final outcome. It was apparent from shopping their stores during the holiday season that they continue to have a traffic problem. Here are some thoughts about the underlying issue:

J. Crew is pursuing the path of many other mall-based retailers, both department stores and specialty apparel chains. They are shedding excess square footage in weak locations, and they are developing an “omnichannel” strategy by expanding their digital footprint. These are all necessary steps for almost any retailer you can think of, not just J. Crew.

What’s missing from the discussion of a “mobile overhaul”? Any acknowledgement that the merchandising continues to be the underlying problem at J. Crew. The company is more dependent than most apparel retailers on a product direction that is relevant to its customers and true to its brand. Until J. Crew gets this right, the other pieces of the strategy feel like window-dressing.

Is the off-price space already overcrowded?

Any student of retailing has seen segment after segment get overcrowded with imitators and then go through a period of consolidation — from department stores to discounters. Here’s a recent RetailWire comment that elaborates on this issue:

Every time a retail segment gets overcrowded with “me too” brands, a shakeout is inevitable. Between the key players like TJX and Ross, the luxury retailers’ outlet brands, and the new entries like Backstage and Off/Aisle, the market is ripe for consolidation. It’s no different from the waves of brand closures that swept the department and discount store industries, but I do expect TJX and Nordstrom Rack to be among the survivors.

Meanwhile, off-pricers keep expanding their brick-and-mortar footprints (often in other retailers’ closed sites) at the same time that most other big chains are working on omnichannel initiatives. You can argue that the “treasure hunt” appeal of off-pricers doesn’t lend itself easily to e-commerce, but this segment of retail needs to figure it out in a hurry.


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