Posts Tagged 'Dick Seesel'

Can low prices alone drive loyalty?

Not for the first (or last) time on RetailWire, panelists engaged in a conversation about whether low prices or compelling sales can make or break retailers’ loyalty programs. I think there’s a lot more to it:

Most retailers’ so-called loyalty programs are little more than extra discounts layered on top of existing sale prices. It’s a transactional approach to the business, if you believe that true loyalty is developed by moving customers from “satisfied” to “committed.” And it’s the easy way out.

A value-oriented retailer will argue that deeper discounts are part of its brand equity — which may be true — but this is not the same thing as building an emotional connection through great content, execution and service. If anybody thinks that Amazon has built brand loyalty (among Prime members and others) strictly on the basis of competitive prices, they are missing the point of everything else Amazon is trying to do.

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.

Target finds small-format stores are more productive

Today’s RetailWire discussion centers on Target, which is enjoying more productivity in its expanding base of small-footprint stores. I don’t think this is rocket science:

Locating smaller-format stores in higher density areas (especially city neighborhoods) should drive more productivity. If these stores aren’t generating much higher sales per square foot, they are unlikely to be profitable given the higher occupancy costs (rent, loss prevention, etc.). So Target needs to hold these stores to a higher standard in the first place.

That being said, the focus on fewer categories and tightly edited assortments probably doesn’t hurt, either, and might be a lesson learned for the full-sized Target stores. I assume that most of the small-format stores contain much smaller grocery assortments, which is a good thing considering the low margins in an area where Target has struggled.

Walmart on a roll?

Walmart’s 2nd quarter results were strong, although their stock price may or may not be rewarded for it in the short term. RetailWire panelists addressed a simple question — is Walmart unstoppable? — and here’s my response:

I would never say “unstoppable,” but Walmart’s strategies in its stores and omnichannel certainly seem to be paying off. They do need to anticipate the impact of the Amazon-Whole Foods tie-up, in terms of its impact on online grocery retailing. But Walmart is seeing payback from its multi-year investments in upgrading brick-and-mortar, focusing on better execution in food, and getting its full-size prototype right

Walmart is the most obvious case of a retailer figuring out how to leverage its e-commerce business into store traffic, but Target’s results seemed to point to the same thing. Even stores like Kohl’s with comp-store decreases suggested 2nd quarter improvements in store traffic — so maybe the stores with the most aggressive omnichannel effort are starting to see results.

How do vendors meet Walmart’s price demands?

From a recent RetailWire discussion…it’s always been challenging for vendors dealing with Walmart, but never more than now when it’s waging war on multiple competitive fronts. Here’s my opinion:

Walmart has always been tough on its suppliers when it comes to costs — it’s part of the company culture. Recall several years ago when suppliers were dealing with escalating cotton costs but Walmart didn’t budge on the prices charged to its customers. And the company is not going to cede its price leadership to Amazon if it can help it.

What can vendors do? As the article suggests, they can try charging more to other customers, they can find cost savings in their supply chains or (the least desirable but most probable outcome) they can compromise product quality.

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.

Is Wayfair “Amazon-proof”?

As Amazon expands further into home furnishings, RetailWire panelists discussed Wayfair — one of the hottest online retailers out there — and whether it can keep growing in the face of new competition. Here’s my take:

Nobody is “Amazon-proof,” because the company has a quick learning curve (and willingness to investment-spend) whenever it decides to move into a category. But Wayfair is in a better position than Amazon’s competitors in other industries: It has a niche, a following and a strategy that are serving it well right now. Something to watch: Will Wayfair decide down the road that it needs an omnichannel game plan through a footprint of brick-and-mortar showrooms or a strategic alliance with another furniture retailer?