Archive for the 'Retailing' Category

Changing of the guard at J. Crew

The decision by longtime J. Crew CEO Mickey Drexler to step aside was widely reported yesterday. (I recently discussed the departure of the company’s creative director.) Drexler is being replaced by James Brett, current president of the West Elm lifestyle brand. RetailWire panelists discussed what to anticipate at J. Crew, and I wrote the following:

First, keep in mind that Mickey Drexler is not exactly riding into the sunset: He retains his chairman title and a significant ownership in the company. So it remains to be seen whether Mr. Brett has the freedom to reshape the company as much as it needs. It’s not always easy for somebody with Mr. Drexler’s track record to walk away.

As to the reshaping, I expect to see a few things happen: First, a faster expansion of the Madewell business. Second, a course correction for the J. Crew brand itself, perhaps back to its legacy positioning as a more affordable (but still aspirational) alternative to Ralph Lauren. (Right now it’s nowhere close to a clear point of view.) And, third, expanding the J. Crew brand (once it is fixed) into new categories, just as Mr. Brett has done by treating West Elm as a lifestyle business.

JCP pursues B2B opportunities

Here’s a new RetailWire comment on Penney’s announcement that it is going after B2B opportunities with hotel operators, property developers, etc. to place its home goods in these kinds of facilities. It’s another example of CEO Marvin Ellison taking a page from his Home Depot playbook:

I’d be less concerned about the borrowings from Home Depot if I didn’t see improvements on the softlines side happening at the same time. There’s evidence (at least to these eyes) that the new merchant team at JCP is making some headway especially in women’s apparel, where the assortments and brand identity look crisper than they have for awhile.

That being said, the B2B initiative is a puzzle to me. Penney may see it as a volume opportunity — and a branding opportunity to place its private-label home goods inside hotel rooms, etc. But will hotel operators and franchisees be interested in dealing with a middleman, if they already source their linens and towels through the buying power of brands like Hilton, Marriott, etc.?

Another frontier for Amazon to cross?

Amazon is reportedly scaling up its infrastructure in order to tackle the major appliance and furniture markets. Panelists weighed in on RetailWire about the challenges and opportunities, and I see the upside:

I commented a couple of weeks ago that Amazon had not yet made big inroads into the major appliance market — but obviously they are headed in this direction, along with furniture. To some degree IKEA has already figured out how to generate furniture sales not tied to its showrooms, so it’s clearly an opportunity for Amazon too. No doubt that they will figure out the logistics of bulky products but this still seems like a business where customers want to “kick the tires” — so perhaps Amazon ought to test showrooms in their early test markets.

J. Crew changes its creative director

Here’s a recent comment from RetailWire about Mickey Drexler’s decision to replace Jenna Lyons, the longtime creative director of J. Crew, in light of a continuing sales slump:

Product development is the lifeblood of a brand like J. Crew. There is no question that the company’s merchandise assortments lost their way for the past several years, and Mr. Drexler has been frank about design mistakes in his public statements about J. Crew’s sales problems. While retailers are chasing the success of fast fashion stores like Zara and Forever 21, these tactics may not be right for J. Crew’s preppy brand identity and higher-end positioning.

As to the change in creative directors (after many years where Ms. Lyons’s efforts were instrumental to the company’s success), I guess it’s like a baseball team: If you’re the owner or the GM, it’s easier to fire the manager instead of all the players.

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.