Archive for the 'Retailing' Category

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.

 

 

 

 

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.

Should Bass and Cabela’s maintain separate brand identities?

Bass is acquiring Cabela’s, and one key question it faces is whether to keep separate branding for the two giant outdoor goods retailers. Here’s my thought, as recently posted on RetailWire:

I think it’s arguable that Macy’s made the right call over the long haul, as the only traditional department store with a national footprint. It was important to create brand equity for the “Macy’s” name instead of trying to support a bunch of nameplates with regional appeal. (Bon Ton Stores, on the other hand, decided that “localized” brand identity was a better tactic.)

In the case of Bass and Cabela’s, I think both brands are worth maintaining. These are superstores usually drawing from large trade areas, and not necessarily in direct competition with each other — and both companies with loyal customer bases. There is no point in shutting down the Cabela’s brand in the short term when there will be plenty of other merger-related challenges to deal with first.

What matters more: Merchandising or marketing?

I realize the answer probably depends on your background in retailing, but you can tell from my RetailWire comment that I have a point of view on this one:

With all due credit to marketing consistency, I think it’s overrated as the key driver of customer loyalty — at least in this survey. Communicating to customers — wherever they look for marketing messages — is an important building block in branding, but it doesn’t happen in a vacuum. Marketing needs to function alongside merchandise content, pricing strategies, customer service and so forth — and in a consistent way with the other pieces of the retail puzzle — in order to turn a satisfied customer into a committed one.

By the way, since retailers are in the business of selling goods and services…isn’t merchandise content (the right product in stock when the customer wants it) the most important attribute? If stores don’t execute this, does marketing matter?

NRF’s 2016 fourth-quarter forecast: Blue skies ahead?

I published the following comment on RetailWire after the NRF forecast a 3.6% sales increase for Q4 but before the outcome of this week’s election:

If somebody tracked the annual NRF holiday forecast compared to actual results, I think they would find that this trade organization is consistently too optimistic. I feel the same way about their 2016 number.

And does their number include surging growth by e-commerce retailers, especially Amazon, or strictly brick-and-mortar and multichannel retailers like Macy’s? There isn’t much evidence from the numbers we’ve seen all year (especially from midtier retailers) to expect a sudden surge in demand. Some retailers have especially easy comparisons to 2015 (which will help), but I’d be pleasantly surprised to see numbers beyond the 2-3% range.

And I’m adding a couple of other comments posted just before and just after the election:

Consumer confidence measures are rising, along with the GDP, but the rosy forecasts for 4th quarter sales still feel high. General merchandisers are likely to benefit from soft comparisons and colder weather than last year, but there is nothing in the sales trends so far this year pointing to a huge comeback. There also isn’t much evidence of a big merchandise idea or key item likely to drive customers to stores.

Without tipping my hand, I also believe that next Tuesday’s election results could provide a “relief rally” by providing some closure one way or the other. Of course, I said the same thing before the 2000 election…

Now, a post-election post-mortem:

I’m trying to set aside ideology here, because the split verdict on the election leaves voters uncertain on both sides. Will Mr. Trump live up to his harshest platform promises or try to moderate his views? Today, nobody knows whether the answer to that question will chill 4th quarter sales or stimulate them.

So the only way to answer this over the long haul is to look at the economic impact on consumers. Tax cuts and infrastructure spending are good for businesses and consumers but (on the other hand) protectionism and tariffs will lead to higher prices. And any effort to restrict (or reverse) immigration patterns will stall the population growth that our economy depends on.

Finally, the plans to “repeal and replace” the ACA may have a huge impact. On one hand, lower costs benefit consumers and small businesses; on the other hand, if millions lose insurance coverage they will face an economic threat that will crimp their spending for the foreseeable future.

 

Are retail managers evaluated the right way?

I’m no HR expert, but I enjoyed being part of this RetailWire discussion about whether retailers are updating their “annual review” methodology fast enough:

Like it or not, retail is a business of measurables as well as intangibles…at least for line managers (merchants or store managers) responsible for things like sales, gross margin, turnover, shortage and store expenses. So it’s important to hold people accountable for those metrics for which they’re responsible. If you don’t like the idea of a report card (even looking at daily sales) you are in the wrong business.

The problem is that the system seems unchanged at least since I started getting performance reviews in the late 1970’s and surely predating that. The intangibles (like ability to collaborate with a team, to train others , to work effectively with vendors) ought to be given more weight and should be evaluated much more often than once a year. This kind of frequent feedback will prevent the year-end review from becoming a surprise and will also have a positive effect on the metrics.

Is Costco neglecting e-commerce opportunity?

RetailWire panelists (including me) weighed in recently on the question of whether Costco is missing “omnichannel” opportunity right now:

Costco is not wrong in “sticking to its knitting,” especially while it continues to have the opportunity to open more of its destination stores around the country. (It started with one store in the Milwaukee area and gradually grew to four.) It’s clear from observing grocery carts at the checkout lane that fresh good and bulk groceries are key drivers of Costco sales. (It’s also apparent that the switch from Amex to Visa was a win.) It would be tough online to duplicate the variety of goods bought on a typical Costco shopping trip if you’re looking online for a single item.

That being said, Costco can do better online — not only in terms of product sales but especially in terms of ancillary services. B2B, insurance, travel, etc. are all big opportunities to leverage the Costco website.