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.

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.

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.

The impact of “activewear as sportswear”

It seems more apparent than ever that some of the “women’s apparel” problem is actually a long-term lifestyle change. RetailWire panelists discussed this in the context of Gap’s Athleta activewear division:

I was in Madison, Wisconsin last week and walked down the pedestrian mall running from the state capitol to the University. It was impossible to ignore that the vast majority of women were wearing “activewear as streetwear” — in particular, black yoga pants instead of jeans. And these were college students for whom jeans would have been “the uniform” five years ago.

On the last wave of quarterly earnings calls, most retailers complained about the lack of traction in their women’s sportswear businesses — while mentioning the rapid growth of fitness wear. It’s increasingly clear that activewear is cannibalizing more traditional women’s apparel, so Gap ought to push the growth of its Athleta brand as hard as it can for as long as this lifestyle shift continues.

Are social media driving the speed of trends?

The short answer to my own headline question (above) is “yes,” but there is a lot more to this issue. Here’s my comment from a recent RetailWire panel discussion:

Social media may be a factor in fashion trends going Aeand moving faster. But the influence of “fast fashion” retailers (Zara, Forever 21 and others) can’t be understated. They mastered their supply chain in order to bring new goods to the selling floor a lot faster, and in order to react to early test orders in a big way. Most traditional retailers built their logistics around long lead times, especially on private-brand goods, and are scrambling to catch up.

The idea of “speed to market” requires a change in mindset — affecting supply chain management, the willingness to chase big ideas, and the ability of retailers’ vendors to move just as fast.

Macy’s reshuffles the merchant deck

Macy’s new CEO Jeff Gennette announced yesterday the hiring of a new president (with background at eBay and Home Depot) and the restructuring of its merchant organization. The company also announced plans to grow its private brand penetration from 29% to 40%. Here’s my comment from a recent RetailWire discussion:

I’ll start with this point: Growing private-brand penetration from 29% to 40% will only drive Macy’s sales if the company gets the merchandise content right. I’d argue that there are already too many private brands and lack of clarity between them, especially in women’s apparel. Macy’s execs may be able to tell the difference, but I doubt the average shopper can define what Karen Scott vs. Style & Co. vs. Charter Club (and so forth) really stand for. Let’s face it: Most stores trying to grow their private label business are doing it as a margin play, not a loyalty tool, and it’s often moved the sales needle in the wrong direction.

As to the new hires and restructuring: It’s clear that Macy’s is doubling down on omnichannel with the hiring of Mr. Lawton. It’s also clear that streamlining its merchant organization is meant to bring more speed to the decision-making process. Let’s see if the new team can tackle those “clarity of offer” problems after all.

Second quarter sales show a pulse

The stock market did not react well to most stores’ second quarter earnings, but there were hints of improvement from most retailers. My comment below (from RetailWire) focuses on Nordstrom in particular but several other stores show signs of figuring out omnichannel too:

The results of Nordstrom’s Anniversary Sale (and the “less bad” sales reports from Macy’s and Kohl’s) may point toward a stronger second half than expected. It’s too early to tell if we’re seeing a full-fledged revival of women’s apparel sales (still reported as a weak spot on Kohl’s earnings call), but the Nordstrom numbers are encouraging.

I shopped the Anniversary Sale in a couple of markets, and you’d be hard pressed to find a robust sale offering in men’s or women’s — so there must have been some traffic-driven regular-price selling in the mix. Hats off to Nordstrom for sticking to its promotional discipline, and for continuing to ride the success of its Rack and e-commerce businesses.

H&M switches to quarterly reporting

H&M is joining most other retailers in reporting comp-store sales on a quarterly basis, not monthly. I joined other RetailWire panelists in commenting on this change:

I agree that there used to be too much focus on monthly comp-sales numbers, given changes in the promotional calendar, holiday shifts from one year to the next, and weather deviations. So I understand H&M’s desire to report quarterly sales as a more accurate measure of its business trend.

On the other hand, it’s hard to conclude that the retailers who switched from monthly to quarterly reporting awhile ago saw any benefit to their sales trend. (In some cases, just the opposite.) If anything, the change has put even more spotlight on quarterly earnings rather than the long-term strategic view for many of these companies.

Is Amazon Prime Wardrobe another disruptive move?

Amazon is introducing a new feature for Prime members: Risk-free trial of several apparel items with the ability to return what you don’t like. (And price incentives to keep more of what you chose.) RetailWire panelists mostly see this as another Amazon “game changer,” but I view it a bit differently as their response to the lack of physical stores:

If Amazon aspires to be the top seller of apparel in the U.S. (and it’s already getting close), it needs to add a “try before you buy” feature to keep driving more Prime memberships. It’s responding to the challenge of concepts like Trunk Club — but it’s also acknowledging its lack of a physical footprint. Think about it — stores like Kohl’s and Macy’s already have huge numbers of brick-and-mortar locations where you can return unwanted clothing that you bought online. This may be a rare case where Amazon responds to a competitive weakness in its formula.