Archive for the 'Strategy' Category

JCP today, fitness center tomorrow?

The Simon development group is taking a three-level JCP store — soon to close at Southdale Center outside Minneapolis — and redeveloping the space as a fitness center. I’m among the RetailWire panelists discussing this smart “reinvention” strategy that can be applied to malls around the country:

Creating a fitness center out of an existing mall anchor is a creative way to reinvent excess real estate — instead of waiting for another retail tenant or tenants to energe (unlikely) in today’s overspaced environment. I’ve been in the JCP store in question and it was grossly overspaced for the volume it probably generated during the last few years.

Students of retail history (and Minnesota natives like me) know that Southdale was the first fully enclosed regional mall in the U.S. It served its purpose as a retail mecca — and community center — for many years, but the mix of anchors and nearby competition from Mall of America has made it less relevant in its current form. So the Simon team deserves credit for finding new reasons for people to come to Southdale and other malls like it.

Are off-pricers bulletproof?

Off-pricers represent the hottest segment of brick-and-mortar retail right now, even more so than “fast fashion” retailers. RetailWire panelists discussed whether they are invulnerable to challenge, especially in a soft demand cycle for apparel. Here’s my point of view:

The “wheel of retailing” is a longstanding premise that new formats overtake old ones….only to be overtaken themselves when a newer innovation comes along. Off-pricers are playing a hot hand right now: Customers like the values and the “treasure hunt,” However, the category runs the risk of oversaturation even though the segment is gaining apparel share at the expense of more traditional models, and it faces the ongoing competitive threat of e-commerce.

Given all of this, hats off to TJX for continuing to develop new formats (especially in the home store) as one way to inoculate itself against these challenges.

Thoughts on Macy’s self-service shoe and cosmetics departments

RetailWire panelists just took on the subject of a new test at Macy’s, in which its shoe and cosmetics departments are being converted to “assisted self-service” instead of the traditional associate-driven model. In the case of shoes, Macy’s is getting more of its inventory out of the stockroom and bulked out on the floor, with apparent early success. I’m raising a caution flag, however:

It’s hard to tell whether the reconfigured shoe department is meant to be a sales driver or an expense saver. JCP recently reconfigured a store that I visited to mass out its shoe inventory — DSW-style — instead of depending on salepeople to find the right size in the back. (And these associates are often paid a commission, just like cosmetics salespeople.) But it gets to the heart of what Macy’s wants to be. As Art put it, are they trying to be JCP or Kohl’s? Are they finding the hidden costs of “omnichannel” (BOPIS and so forth) to be unsustainable for a traditional department store?

And one more issue: By abandoning the Nordstrom model (where the salesperson is trained to bring out three pairs of shoes when the customer asks to look at one), Macy’s may in the long run walk away from the sales and margin potential of “upselling” that shoe and cosmetics departments should be known for. A declaration of victory may be premature.

Is the era of brick-and-mortar growth dead?

The wave of store closures this year (and beyond) casts a shadow over traditional brick-and-mortar retailing, but it’s premature to declare it a dead end for companies that still have growth prospects. Here’s my RetailWire commentary on the issue:

In business school many years ago, I took a retailing class from a marketing professor who often said, “There’s no such thing as ‘over-stored,’ but under-retailed.” Obviously the glut of square footage is an even bigger problem than in 1977, given the development of exurban sprawl, big box stores, new mall formats, retail consolidation, and (of course) e-commerce. But the teacher’s point still has relevance today.

Some stores continue to have a good chance to expand their physical footprint. (There has been recent comment, here and elsewhere, about chains like Zara and Uniqlo being opportunistic about picking up others’ sites.) But growth for its own sake means nothing without a clear brand identity, coherent merchandising and smart use of technology to drive loyalty and omnichannel initiatives.

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.?

Can JCP leverage its Sephora success?

It’s probably note the first time (on RetailWire or elsewhere) that I’ve talked about Sephora at JCP. It’s clearly a win and continues to be rolled out or expanded in more and more locations. So how does Penney use it to attract new shoppers and convert them to JCP loyalists? Here are some recent thoughts:

When Mike Ullman (formerly of LVMH) partnered with Sephora (owned by LVMH), he realized that JCP needed a critical mass of cosmetics even though the legacy department store brands like Clinique, Estee Lauder and Lancome wouldn’t sell Penney. (Lancome is now part of the Sephora assortment.) At the same time, Sephora was growing as a mall-based alternative to the anchor stores’ beauty departments with a unique approach to open-sell layout and fresh assortments. It’s turned out to be a win for both companies, especially as those traditional department store anchors lose share and traffic.

Certainly omnichannel is another opportunity for JCPenney, as Amazon continues its inroads into the beauty business. But perhaps the biggest unmet opportunity for JCP is to convince the (younger) Sephora customer in the store to buy more apparel, shoes and accessories on her visits to the beauty department.

And to add some recent comments posted after a store visit, there is visible sign of improvement in JCP’s assortments:

I’ve been critical for several years of JCP’s women’s assortments — too many brands, too many styles, too much overlap between brands. But credit where due: I shopped a Penney store in the past couple of weeks on behalf of a consulting client, and I saw a marked improvement in key item focus and brand clarity. Shoes were merchandised in a more effective way, and fashion jewelry looked improved too (although not yet handbags).

Penney promoted its men’s GMM last year to the head merchant position, and if what I saw is any indication, he’s got things heading in the right direction. It’s a small sample size but perhaps a leading indicator. JCP isn’t going to solve its sales problems until it figures out how to drive its apparel business, no matter how well it’s doing with Sephora or even major appliances.

Who gains when HHGregg loses?

Among several other stores closings announced in 2017, the regional electronics and appliance chain HHGregg may have flown under the radar. It did come to the attention of RetailWire panelists like me:

Best Buy will benefit, naturally, in those markets where HHGregg had a store footprint and market share. There are significant clusters of stores around Chicago, in the mid-Atlantic and mid-South (including Atlanta) and in Florida. But don’t expect it to compare to the demise of Circuit City — not only because HHGregg isn’t a national competitor but also because of the changing retail landscape.

Another retailer that might gain share is JCPenney, as it pushes into the major appliance business. Keep an eye on the big home improvement chains, too; this is one business that hasn’t been dominated by Amazon (yet).