Archive for retail

Hey Fast Fashion, Don’t Out-do Yourself!

Posted in Blogroll with tags , , , , , , on March 29, 2009 by nmb

Forbes recently called the European fast-fashion retailers that have hit our shores “America’s favorite foreign retailers,” http://is.gd/py8t  implying that H&M, Zara and the like are an exception to the current recessionary rules. The fact is that they too have struggled in the current retail climate (even as some U.S. specialty retailers such as Urban Outfitters have flourished) and, while their operating models have given everyone in the fashion business a run for the money, I’m not sure that these advantages will be sustainable.

Interesting that the Forbes article was published at about the same time that Liz Claiborne announced that it is going to begin outsourcing its manufacturing to Li & Fung, http://is.gd/py9E  particularly since Liz’ single fast fashion retail holding (and competitor to the European disruptors), Mexx, is said to be on the chopping block! Liz is going in the exact opposite direction of its fast-fashion competitors (though in lock step with the major retailers that are at once the brand’s competitors and its customers). It will be interesting to see if they somehow “win” with this contrarian strategy.

The fast fashion model of complete process and inventory ownership, from design inspiration through to retail sell-through, has been a killer advantage; one that has thrown a wrench in the traditional fashion calendar, compromised the relevance of the catwalk to retail floor journey and set an impossibly high performance bar for other apparel retailers. After all, these vertical retail machines can get designs interpreted (from the runway shows, of course), executed, produced and sold at an astounding speed. The mega cost savings realized from their highly efficient operations help offset the expense of airing new designs to stores; providing yet another speed-to-market advantage. Alliances with celebrities and well-known designers create excitement in the stores and keep the assortments from getting too generic.

I do wonder though if the demise of the very fashion system that these retailers have compromised will in the end cause them problems. If there is no system to buck and outperform (or if that system continues to conform to the new standard they have set), where will they be? “Fast” and “fashion” are fast becoming table stakes!

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It’s all Just one Big “Misperception”

Posted in Blogroll with tags , , on January 29, 2009 by nmb

Its official: Starbucks’ earnings are down 69% for the quarter and immediate plans are to close 300 additional stores (eliminating up to 6,000 jobs). Sure the economy sucks and (just about) everyone is paring down . . . but according to Starbucks, there’s another problem: Consumers’ “misperceptions” of the brand, specifically, that Starbucks is a “premium” brand. Is it me or did Starbucks do everything in its power to create that perception in the first place?

Back in November, Target began grousing that it too needed to overcome “misperceptions” that its products are more expensive than Walmart’s. Now if there’s any retailer who masterfully manipulates perception, it’s Target! Groovy marketing, designer exclusives, upscale private labels . . . All of that to make shoppers perceive Target as the low cost leader? I think not.

Soon you’ll see “value pairings” at Starbucks (want a scone with that latte?) and perhaps you’ve noticed that Target has begun sharing prices in its commercials for the first time (something that before was considered to be beside the point). There’s nothing wrong with tweaking your POV during difficult times . . . but blaming the consumer for buying in during the good ol’ days seems not-so-smart. Instead of saying that the consumer got it all wrong to begin with, why not just say “My bad”?

Sam’s Club Exec. Speaks: “Differentiate. Differentiate. Differentiate.”

Posted in Blogroll, Regular Posts with tags , , , , , , , , , , on June 20, 2008 by nmb

Bentonville Chamber’s Champion University series.

Greg Spragg, Sam’s Club’s EVP of Merchandising, chose “Navigating Difficult Economic Times” as the theme for Thursday morning’s crack ‘o dawn presentation before a packed house of caffeinated vendors and support firms. Delivered by anyone else, the chosen theme could seem presumptuous; after all, times are more than tough and retail numbers in particular have taken a death-defying plunge. Who within retail would have the cred to talk about not only weathering the storm but charting a course into clear blue water?

Enter Mr. Spragg, the first Sam’s representative to address the Champion vendors, and what timing! Wal-Mart and Sam’s downturn-defying sales achievements can’t be chalked up to price alone (were that the case, a sea of clearance crazy competitors would be winning the race). Time to listen up for a lesson in what’s working.

No Pollyanna, Mr. Spragg began the presentation by hitting the horrible headlines: consumer insecurity, slow-to-no growth and consumer cut backs on fripperies (redefined lately as anything other than food). So far, consumers seem to be applying any extra lucre that comes their way to paying down debt . . . And, If individual consumers have a cough, small business owners have a very bad cold, particularly in food service. However, as anyone who works with Wal-Mart or Sam’s knows, problems are “opportunities” and many of the consumer behavior insights that Mr. Spragg revealed play right into Sam’s strengths:

  • Shopping is being driven by necessity
  • Consumers will attempt to maintain their lifestyle but are reducing non essentials and luxuries
  • Consumers will reward themselves with simple luxuries
  • Newness motivates discretionary spending
  • Consumers are seeking safety in trusted name brands (and let’s not forget that the retailers themselves ARE brands)
  • Channel switching is rampant; consumers are moving toward discounters
  • Consumers are improving living spaces and doing so through accessories, not big purchases

As you may have heard, Sam’s has renewed its focus on small business; in fact, they are set to test a new concept in Houston next month called Sam’s Business Center, which will focus on offering business-friendly bulk items to restaurants, convenience stores and offices.  Apparel, recreational items and anything else that veers off the business core will not be represented. (My after-preso inquiry to Mr. Spragg as to whether the concept is intended as a lab or a ready-for-rollout launch, confirmed that Sam’s is testing the waters). As for mainline Sam’s stores, we were reminded that Sam’s offers many bennies for members to include early morning shopping hours, the ability to order online or by fax (and you get to use your non-Discover™ credit cards when you shop online – free tip from me). Mr. Spragg admitted that Sam’s has more work to do getting the word out on the many membership value-adds (most of which were news to me and I’m in their targeted demo).

Lest anyone think that Mr. Spragg would shelve high-minded causes in favor of hunker-down strategies during this tricky time, he made it clear that gains made toward sustainability now will pay off big time once the turn-around cometh. P.S. In terms of timing, his predictions agreed with Terry Lundgren’s (Macy’s) and several other retail leaders-of-note: we’re looking at about 18 months until  the droop subsides.

But hey, what about the vendors? Surely Sam’s has wrung every possible cost efficiency out of the system by now and everyone can just hit “replenish” and chill. Not so fast . . . when it comes to price leadership, there’s more work to be done; specifically:

  • Moving to “dead net costing” – “Sweating the details” to lower cost continually
  • Sam’s mantra is and will be “how low can you go?” . . . even in inflationary times
  • Ever heard of “intelligent loss of sales?” May sound like an oxymoron; however, just think of it as the retail version of “when in doubt, do without.” Sam’s is in an item-driven business and those items have to deliver value. If they don’t, no sacred cows/see ya!

In the perception defies reality realm (my take), Wal-Mart had Target to deal with (finally past tense) and of course, Sam’s still has Costco; however, Costco’s high-stakes game of ruthless cost-cutting and simultaneous quality upgrading, particularly in private label, is obviously a game that two can play. Sam’s private label, Members Mark, is getting very “Kirkland” with its expectation of above-national-brand quality at a value and constant item expansion (100 new items were added to the program this year).

Mr. Spragg pointed out that club members are switching to Members Mark for quality, not necessarily price, so his plan is to continue to position Sam’s private brand proposition from OPP to NIV (newness, innovation and value). For the suffering restaurant trade, there’s relief in the form of Bakers and Chefs, Sam’s high-performance private label for professional foodies.

As much as we’ve been hearing about retailers’ near-term plans to stay the course, not grow an innovation brain and replenish into the safe and performing, Sam’s is taking a different view. New” and “different” are driving general merchandise at Sam’s and predictable just isn’t as productive. Case in point: Hankering for a salad spinner?  Enough Sam’s customers did to drive a 50% sell through within two weeks.

. . . And, back to sustainability, we were reminded that, when done right, it actually drives innovation. Here he cited Honest Kids organic drink pouches; not only a sales success, but a marvel of sustainable collaboration and innovation. The packaging, developed through Sam’s sustainability networks, saved 33% in fiber, 25% in energy and 41% in green house gas emissions and 40% of Sam’s active replenishable items have been made more sustainable in some way (through product, package or process).

Clearly, the message of the day wasn’t to stay the course during tough times but rather, to push limits, raise expectations and set new standards that will lay foundations for the future.

In other words, this too in time shall pass and the audience was left to ponder how ready everyone will be 18 months from now when the sun comes back out.  In the meantime, cursing the darkness isn’t an option

So vendors, what are you doing to drive differentiation? Sam’s isn’t in for plug and plays and everything is up for scrutiny. Time to get creative!