Archive for the 'Retailing' Category

End of the line for Toys “R” Us?

Big retail news of the day (as discussed at RetailWire) is the announcement that Toys “R” Us is throwing in the towel. Here’s my post-mortem:

It’s unlikely that Toys “R” Us is going to stay afloat, and this is a big deal for those who follow the recent history of retailing. They were among the first “category killer” stores with broad assortments of a single category in a big-box format. There have been others (Linens ‘N Things, Sports Authority, etc.) but this one stands out. If you see reporting on “the Amazon effect,” it’s more complicated than that.:

It’s tough to survive in a highly seasonal business like toys given the growth of e-commerce and the dominance of discounters in the same category. And there has been a generational change, where many of today’s kids are interacting with technology (smartphone apps, streaming video games) instead of the toys of a short time ago.

And one more lesson learned: A mountain of private-equity debt doesn’t help.

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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.

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.

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!

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.

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.

Holiday 2017, in several observations

Starting with Black Friday, I’m stringing together a few comments on RetailWire about the holiday 2017 shopping season. By all estimates (and retailers’ reports), sales were better than expected considering the doom-and-gloom early in 2017 about the “death of brick and mortar” at the hands of Amazon. Here’s the thread:

1. Most of the anecdotal evidence and reports from retailers suggests that foot traffic was down, especially on Friday, but overall sales volume was good. This suggests that stores’ omnichannel strategies are working to drive total sales, instead of the “silo” effect of looking at e-commerce and brick-and-mortar as two separate businesses.

There is also a sense of higher discretionary spending, which will tend to benefit department stores along with off-pricers specializing in apparel. Early cold weather doesn’t hurt, either.

2.┬áSeveral factors came into play, including low unemployment, the “wealth perception” of high stock prices, and a break on the weather that helped drive sales of seasonal goods. But I think there are two other key factors in this holiday season’s apparent success: First, the large number of store closings during the first half “cleared the deck” for those left standing to gain market share. And, even more important, most brick-and-mortar stores finally figured out how to leverage their own e-commerce business into a true “omnichannel” experience for their customers.


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