Archive for February, 2018

Is Target’s turnaround on the right track?

A brief comment (below) from RetailWire, regarding Target CEO Brian Cornell’s evaluation of their improved comp sales and operating results. It’s all about the merchandising:

Given his CPG background, I give Mr. Cornell credit for recognizing at the outset that Target’s real niche is “cheap chic” apparel and home goods. This is what the brand was built on, not groceries and commodities. While these categories will continue to be important in-store and online, Target’s destiny doesn’t depend on them. The new brands’ product development didn’t happen overnight, but the strategy is beginning to pay off.


Did Walmart deserve the punishment?

By “punishment,” I mean the 10% drop in Walmart’s stock price yesterday (February 20) when the company reported slower-than-expected sales and profits in its e-commerce business. My comment at RetailWire expresses a contrary opinion about the market reaction:

Walmart’s stock took a similar hit a few years ago when management decided to investment-spend in the store experience — more payroll in areas like fresh food, remodeling and refixturing as needed, and so on. These were smart strategic choices that weren’t meant to please investors only interested in the latest quarter. Walmart’s decisions at the time have been rewarded with better results ever since.

I look at the 10 percent drop in stock price as a similar overreaction. Walmart is now starting to come up against its own numbers after the acquisition, and (more importantly) it’s doing major spending on logistics and marketing to gain omnichannel market share. I’m no stock picker, but maybe this is a buy opportunity …

Can Circuit City make a comeback?

Whoever bought the Circuit City brand after the store’s demise a few years ago plans to revive it — both as an e-commerce site and as a re-engineered brick-and-mortar store. The question in front of RetailWire panelists: Does the world need a revived Circuit City? (Or, as their headline put it, “Can Circuit City come back from the dead?”) Here’s my skeptical point of view:

This reminds me of the Linens-N-Things saga, in which the brand survives as an e-commerce site but its physical stores are long gone. There simply wasn’t the need for two similar big box concepts, so Bed Bath & Beyond turned out to be the survivor. (But BBBY stock price has fallen sharply in the past five years, like many retailers, as it faces increased competition from Amazon and others.)

It’s hard to see what value Circuit City brings to the table at this point — except as a web-only play. Does a small-footprint “experiential” store offer something different from Best Buy or Apple? (Especially now that Best Buy is removing CD’s from its physical stores, it’s easy to see that they will roll out more engaging and productive uses of that space.) The Circuit City brand was already “damaged goods” because of bad decisions they made to reduce customer service and in-store expertise.

Did L.L. Bean need to change its return policy?

L.L. Bean got plenty of publicity when it announced a change to its longstanding policy of “no questions asked” returns. Apparently the cost of abusive returns (products bought at yard sales, twenty-year-old clothing with normal wear and tear) was an unsustainable cost of doing business — to the tune of a reported $50 million annually. The RetailWire panel discussed whether this was a good strategic move, and here’s my point of view:

L.L. Bean is among the last retailers to abandon “no questions asked” return policies. The company is right that abuses of the policy make it unsustainable. A cost of $50 million per year has been reported, although it’s not clear whether this is the cost of “abusive” returns or all returns. I’ve noticed other companies with generous policies (Kohl’s, for example) tightening their processes, in part to avoid being swamped by e-commerce returns to physical stores.

Loyal shoppers will not be put off by the change, but L.L.Bean took a PR hit because of widespread media coverage. There was a missed opportunity to manage the message more effectively, even if the decision was justified, given that the policy was a central branding message.

Reflecting on the impact of IKEA

Most of the obituaries of IKEA’s recently deceased founder focused on his background, but RetailWire panelists reflected instead on what the store’s operating model has meant to the world of retail. Here are my thoughts on IKEA’s impact and the store experience:

IKEA revolutionized furniture and home furnishings retailing in several ways. It developed a low-cost operating and sourcing culture that passed along savings to its customers, developing an almost cult-like global reputation in the process. For all the jokes about the difficulty of assembling IKEA furniture, there is no doubt that millions of customers own home furnishings of decent quality that would once have been out of reach.

As to the in-store experience, I shopped the IKEA at the Mall of America last summer and it seemed noticeably easier to navigate than I remembered. (And yet I worked my way through the entire store.) Maybe IKEA has taken seriously the critique that its shoppers are like lab mice lost in a maze.

And yes to the meatballs…but don’t miss the lingonberry preserves near the checkout lanes!

Macy’s drops out of the Plenti program

Macy’s was one of the charter members of the Plenti loyalty program, where shoppers could earn points by buying gas at Mobil, renting a car from Alamo, and so forth. Here’s a quick RetailWire comment about the move, which rightfully places the spotlight on Macy’s own Star Rewards program:

As a Macy’s shopper, I was confused by the purpose of the Plenti program and wasn’t sure of the benefits. I wasn’t necessarily interested in some of the other brands participating in the program, and it “muddied the waters” of the Star Rewards program. I’m sure that I wasn’t alone, and Macy’s is right to focus on revamping Star Rewards with more personalized, data-driven rewards for its best customers.

Will an off-price concept fix H&M?

H&M is jumping on the off-price bandwagon with a new concept called Afound, with the objective of liquidating its goods more effectively. (It’s also a hot segment with a lot of new players over the past few years.) Here’s my comment from a recent RetailWire discussion about what really ails the company:

I’m not sure that another off-price brand in an increasingly overcrowded market is a long-term solution to H&M’s problems. They need to address a few core problems in their existing stores first, as the article points out:

1. How does H&M move faster in the product development cycle, to compete more effectively against Zara and even Forever 21?
2. How does the company figure out a more effective liquidation strategy for its existing stores, instead of leaning on a new concept?
3. How does H&M play catch-up on omnichannel, considering it was late to the party?

H&M stores have always avoided the chaotic, “treasure hunt” feel of a typical Forever 21 store — and with a bigger focus on basic, affordable “wear to work” apparel for budget-minded shoppers. But this has come at the cost of becoming boring and predictable, compared to Zara’s unbeatable speed to market.