From TheRobinReport.com ---

At 90,000 square feet and six stories, the new RH Gallery retail location in Manhattan’s trendy Meatpacking District does more than just dominate the neighborhood landscape. It also dominates the retail landscape as a model for what companies across the entire retailing spectrum need to be doing to stay vibrant, prosperous and above all, relevant to a customer base increasingly picky about where they shop.

The new location – don’t you dare call it a flagship…much less a store, says CEO Gary Friedman – is the continuation of the company’s ongoing reinvention and reformation as the leader of the home furnishings pact.

From a $300-million-a-year seller of housewares doodads and stiff mission furniture called Restoration Hardware that never made any money and was a couple of payrolls away from going under, RH has evolved into a role model for retailing. The new Gallery personifies everything RH has been working towards over the past decade. Here are 10 ways it sets the playing field for any retailer faced with the same challenges.

1. If You Build It…You’d Better Build It Nice

You can see just about every penny of the $50 million RH spent to build the place. Resembling a luxury condominium more than a retail store, it sports premium building materials from its dramatic staircase and its soaring atrium to its glass elevator. If you’re going to ask somebody to get off their computers and go to a store, it needs to be a quality environment where the customer feels special. And RH delivers in spades.

2. If They Come…Give Them Something Special to Do

A cornerstone of the RH merchandising strategy is to include hospitality along with the furniture. The new RH Gallery features a rooftop restaurant and bar that will probably prove to be one of the toughest reservations in town to get. “If you give people something to eat and drink, they’re probably going to stay longer,” said Freidman, not needing to say they will probably spend more too.

3. If You Sell Elegant Products…Present Them Elegantly

While most stores that sell furniture are endless mazes of confusing vignettes with credenzas lined up like tombstones, RH has a refined visual design plan based on using merchandise displays in mirror-imaged vignettes opposite each other to reinforce the look. This provides a symmetry that is both pleasing to the eye and to the selling possibilities of seeing the same merchandise twice.

4. If You Cater to High-End Customers…Give Them a High-End Experience

RH has a private elevator to allow high-profile customers to navigate the store without getting trapped in small spaces with the common folk. The premium experience extends down to the smallest detail: coat checks carry the RH logo and are printed on premium paper stock. No generic plastic numbers here.

5. If You’re in a Design Business…Be Serious About Design

RH has segmented its in-house interior design staff into five glassed-in private work spaces off the selling floor. This effectively separates them from floor sales personnel, making their role clearly exalted. It clearly says, “We design here.”

6. If You Are Opening a Special Store…Tell the World in a Special Way

The Sunday before the store opened, RH took out a four-page, broadsheet-sized, free-standing advertisement in The New York Times making the announcement. The white-on-black copy opened with “The Death of Retail” as the only wording on the first page. The second page continued “Is Overrated.” As an attention-getter it more than did the trick.

7. If You Have a Successful Format…Learn How to Layer on Additional Levels

RH is well aware that its design aesthetic, while clear and consistent, may not appeal to all demographic groups. It is why it splintered off the RH Modern sub-brand a few years back and plans additional spinoffs including RH Color and RH Beach House. All are being pursued without muddying up the existing design statement.

8. If You’re an Omnichannel Retailer…Have a Consistent Merchandising Presentation

Too many retailers struggle with aligning their online presence with what a customer sees when they walk into a physical store. They rarely match up. But at RH they do. The merchandise presentations, the signage, even the typefaces all are consistent and on brand.

9. If You Get a Customer into the Store…Give Them Something to Buy

While the bulk of RH’s business is in furniture and big-ticket home décor, the new Gallery has a full display of bedding and bath products, as well as candles, soaps and small accessories. Not every customer is going to spend $10,000 on every store visit – and some never will – but there are things to buy and ways to get the shopper engaged with the purchasing process, an oversight many furniture stores make.

10. If You’re Going to Build a Store That Raises the Bar…Keep Raising It

While this new RH Gallery is the logical progression from the 18 new-format locations that came before it, number 20 is likely to have even more new elements. New York will have the first RH GuestHouse by the spring, which makes you wonder what the next Gallery will have to do to up the bar higher.

And that’s exactly the way RH wants it.

Warren Shoulberg liked to shop at the old Restoration Hardware but he’d love to LIVE in the new RH.

The post 10 Things RH Does That Prove Physical Retailing Works appeared first on The Robin Report - .

From TheRobinReport.com ---

I considered myself ahead of the curve when last April I wrote “Victoria’s Secret: Behind the Curve.” Now, I consider myself behind the curve, so to speak. I should have written in that same article that Henri Bendel was even further behind the curve than VS. Recently, L Brands, headed by famed Les Wexner, and owner of both brands along with Bath & Body Works, La Senza and Pink, recently announced that it would close all 29 Henri Bendel stores and its website in January. Perhaps he should have read the Bendel’s curve differently and not have acquired it in the first place in 1985 for a little over $3 million.

Wexner stated his logic for the closures: “We have decided to stop operating Bendel to improve company profitability and focus on our larger brands that have greater growth potential.”

Henri Bendel was a blip on The Limited’s, and subsequently L Brands’ radar screen, bringing in sales last year of a mere $85 million out of L Brands’ total revenues of about $12 billion. And they were operating at a loss for at least the past two years. In fact, Henri Bendel never amounted to any more than a blip since Wexner acquired it. At the time, he was declaring it could become a billion-dollar brand. It never came close, estimated to have reached $100 million in sales at its peak. So, one could say the brand might have been “curving” into maturity from the day Wexner acquired it.

However, we’ll never really know. Because at the time he acquired it, CEO and part owner of Bendel, the iconic, Geraldine Stutz, who between 1957 and 1985, had transformed the money-losing retailer into a money-making classy, chic, modern and very upscale Manhattan specialty store, left in 1986. Upon the acquisition, Stutz was initially very enthusiastic about being able to expand the unique model that was Bendel’s, using The Limited’s “deep pockets.” So, her departure in 1986 was surprising. And it was downhill from that point forward.

Observers in the industry said at the time that Leslie Wexner, chairman of The Limited, had interviewed several candidates for Ms. Stutz’s job. Perhaps Wexner, with his inimitable out-sized ego and penchant for running things his way, ran into another potential equal retail star in Ms. Stutz, and decided he needed total control.
So, in my opinion, it’s doubtful that in 1985, when Bendel’s shiny halo was a go-to luxury shop full of unexpected surprises and unique experiences, that it was about to curve into maturity. I do believe Bendel would have had a chance to scale nationally by maintaining its special model under the leadership of Ms. Stutz offering her dazzling curation and celebration of all things coveted by savvy, stylish customers.

The Victoria’s Secret Distraction

But that was not to be. Furthermore, and a potential larger reason for Bendel to float off quietly into the night, forever to be a blip on the larger screen, was the fact that three years earlier, in 1982, Wexner had acquired the Victoria’s Secret brand, store and catalogue for $1 million. He also bought 207 Lane Bryant stores that year, and a chain of Lerner stores in 1988. But, forget those two. Victoria’s Secret was a self-propelled rocket ship to the moon.

In 1983, Wexner repositioned the Victoria’s Secret’s brand. At the time, “modern, sexy and European lingerie” were a few defining characteristics of the brand, appealing to the new age of confident feminists and men who would browse the stores, looking for sexy gifts for their wives or significant others. By 1986, (one year after the Bendel acquisition and Stutz’s departure), Victoria’s Secret was the only national chain of 100 lingerie stores, expected to grow to 400 by 1988. And today, of course, there are over 1000 stores in the U.S., (and more overseas) and the brand still has close to a 30 percent share of the lingerie market.

So, is it possible that the VS rocket was a distraction from the strategic positioning of Henri Bendel for future growth? Along, of course, with the mistake of losing Geraldine Stutz? I believe it was. VS was just too seductive.

Has the VS Rocket Flamed Out?

As pointed out in my previous article, VS comp store sales declined every month in 2017, and were down six percent in the fourth quarter alone. Sales were down between 10 percent and 14 percent toward the beginning of the year and by single-digit numbers toward the end of the year. Is the rocket flaming out?

Will Victoria’s Secret soon follow the fate of Henri Bendel, but for a different reason? When Bendel would be everything today’s customers ask for – inspiring experiences, unique merchandise, a store of shops that were ever-changing, VS has become irrelevant among the new young consumer culture.

As this new, largest generation of shoppers powers full-on creation of their own new world, Les Wexner will realize that today’s new world speedboats (as I like to call the new brand upstarts) now circling his aging battleship picking off a share here and there, have suddenly fired enough shots across the bow that his ship will soon sink. And VS’s demise will not be solely a behind-the-fashion-curve product problem. It will be a brand problem; the whole enchilada of its brand positioning and the many years and billions of dollars that Victoria’s Secret has spent pounding into our brains precisely what the VS brand stands for. Therefore, it doesn’t even matter if they pivot their fashion styling to serve the desires of the new consumer culture. The brand has simply become irrelevant.

Victoria’s Secret is entering maturity. it doesn’t mean the brand has to die. Levi Jeans and the Gap have significantly declined in size over the years, but they continue to slog along. But VS will have to find a new customer base or live with the fact that its business is scaled back forever.

So, Mr. Wexner, even though you seem to be behind the curve on VS, enjoy the challenge of managing a smaller, mature brand that will hopefully be a profitable brand appealing to the fewer legacy consumers who still love what it stands for.

It’s too bad you didn’t give Henri Bendel, under the leadership of Geraldine Stutz, the same focus and runway where she might have reinvented the rocket ship and soared to success.

The post Henri Bendel: Adrift from the Beginning appeared first on The Robin Report - .

From TheRobinReport.com ---

The Container Store has launched a new space program. And its target is not necessarily the moon, but to reach for that most unworldly retail destination these days: relevance.

The retailer that practically invented the idea of a store devoted just to the idea of storage and organization, only to fall victim to changing demographics and a bit of inertia, has more recently come back to life with an exciting prototype store concept, updated merchandising and a much better balance sheet.

Both shoppers and investors have taken note. In it most recent quarter it handily beat estimates on comp store sales, hitting a 4.7 percent rise on an overall sales increase of almost 7 percent. And its stock has nearly tripled over the past 12 months, moving from the dreadful under-$4 level up to as high as $12 this past summer.

For Container Store, this retail renaissance has to feel good. Long loved by employees – it consistently ranks as one of the top companies in the country to work at – and loyal customers alike, it has drowned in bad news since going public in 2013. Some people referred to as the best company that should have never stopped being private. That’s all changed over the past year, though it must be noted that the Container Store still turned in an unprofitable quarter earlier this year and has much work to do to roll out its new merchandising tactics across its 90 or so locations, as well as continue to ramp up its online business. But as it celebrates its 40th anniversary this year, it has undertaken a number of new initiatives that are contributing to the improving situation.

• A new marketing campaign is built around the slogan “Where Space Comes From” that highlights both its philosophy and its product mix.
• While company co-founder Kip Tindell – best known for both his strong commitment to “conscious capitalism” and his too-honest-to-be-a-CEO statement several years ago that the business was in a “malaise” – remains as chairman, active management for TCS has passed to company veteran Melissa Reiff who has made some dramatic changes in the way the retailer does business.
• The new next-generation store in suburban Dallas near company headquarters was an existing unit — often considered its flagship – that was gutted top to bottom to present a new merchandising vision that is attempting to bridge the in-store and online worlds…with initial positive results.

Walking into the 25,000-square-foot-store, which opened this past June across the parking lot from the upscale NorthPark shopping center, one is immediately struck by the open floor plan and expansive site lines, two layout tactics that break from typical Container Store floor plans. “We wanted to be more approachable,” said Val Richardson, vice president of real estate and one of the key people in the development of the nextgen store. “We recognized that we might be giving the customer too much.” So, the store features lower fixturing and a pared down merchandise assortment with the SKU count reduced by about 15 percent, although all classifications are represented on the selling floor. “It’s a balance, the line in retailing is always about being comprehensive versus curating.”

The result, she said, is a more “playful” store with 18 digital screens – many interactive – throughout the selling floor. “The digital screens help organize the store,” she said, adding that some of these replicate functions a Container Store online shopper would find, bridging that holy grail equation that every retailer is currently seeking. “We wanted to envision what the future will be,” said Richardson, an 18-year veteran of the company.

The store also features several of what she calls “play spaces” that draw attention to specific organizational areas of the home, including kitchen and closets. An “organizational studio” workroom parallels an online feature.

Closets remain a central element of the Container Store merchandising strategy. “Closet domination is a real target for us,” she said. Using its Elfa brand – which Container Store bought in 1999 – as its anchor, “We wanted to create a beacon for our customers by placing it in the middle of the store” rather than off to the side as it is in many existing doors. “This is our milk and eggs.”

Right now, the Dallas store remains the lone nextgen location and both Richardson and Tindell refer to it as a “laboratory” to see what works and what doesn’t. “Four-wall EBIDTA will be the measure of the design,” Tindell said “and right now it’s still too early to tell. This new concept will be better than it is now in nine months.” Both said they expect to begin rolling out elements of this test store to the rest of the chain next year.

Tindell, who says his role now is “to stay out of the way,” never shies away from taking account of the company’s up and down fortunes. “We’re figuring out how to be a public company, remain a unique retailer and stay true to conscious capitalism. “We’ve experienced being the darling of Wall Street and then being the dunce. It’s much better being the darling.”

Warren Shoulberg believes he needs The Container Store to organize his entire life, not just his closet.

The post The Container Store Reimagines Space appeared first on The Robin Report - .

From TheRobinReport.com ---

It is finally happening: Sears is on the brink. I’ve been predicting this from Eddie Lampert’s Bezos-like “day-one” declaration that he was going to return Kmart and Sears, two iconic American brands, to their once storied greatness. By his own actions and inactions, I argued his true (and unstated) intent was to financially engineer the failing retail business so that cash would flow into his own coffers. And it was, sadly, a chronicle of a death foretold.

I say, “on the brink,” because although Sears filed for bankruptcy, there is a very slim chance it may severely downscale the business and come out of bankruptcy a much smaller business, but still breathing. But don’t bet on it. While revenues and profits have been tanking year-over-year since his first day at the helm, he “pulled many rabbits out of his hat” (aka financial engineering) during that long, downward journey to create an illusion that he would find a way back to stability and potential growth. But as the rabbits piled up, the world tired of his illusions. Grabbing for yet another rabbit isn’t going to fool anybody.

Furthermore, In the real world, the only people that mattered to Sears were the dwindling number of customers. And they were not tricked by any of his illusions. They saw the reality of crumbling, dirty, dull and unraveling stores full of boring merchandise, lousy service and had a generally unhappy experience. At the end of the day, consumers, who are the only reason for any retailer’s existence, were driven away by the actions and inactions of Mr. Lampert, and accordingly, they drove Sears to the brink. And they are not going to haul it back up and save it from death.

For historical perspective (I have been covering Sears for 40 years), here’s what I wrote in The Robin Report in November 2004. It is predictive and Eddie proved me right by barging ahead and running Sears right off the cliff. Here is the report, written 14 years ago.

SEARS HOLDINGS CORPORATION: TALKING THE VALUE TALK = WALKING THE VULTURE WALK

1. A New Beginning for a Real Long Ending

How many times have these two dying relics, Kmart and Sears, come back up for air, just to slip back under? And I’m not referring to bankruptcy, although it applies to Kmart. I’m referring to their long, painfully slow and “lumpy” (to use an Eddie Lampert term) descent into the abyss: Sears for a quarter century and Kmart for at least 15 years. The Titanic metaphor, used to describe Sears’ sinking woes in my past articles, would have been equally appropriate for Kmart.

However, together they now come up for air once again. Together, they have another chance. Together, under Sears Holdings Corporation, they have a new beginning. Will they create “Grand” new retail value, as the newly formed management troika is talking-the-talk about? Or will they walk the Eddie Lampert vulture walk, picking off billions in cash from these slowly dying brands to turn around and invest it in the next leverage opportunity?

My opinion? It’s going to be the vulture walk. But it will be a real long ending, a continuance of the slow and lumpy descent into the abyss. Therefore, the final metaphor might be “Two Titanics” in a great sinking synergy, kind of a swan dive to the bottom.

The end, however, will not come before a new beginning created under the newly formed Sears Holding Corporation is orchestrated by the troika of chairman Eddie Lampert, previously chairman of Kmart and head of his own hedge fund, ESL Investments; vice chairman and CEO Alan Lacy, previously chairman and CEO of Sears; and president Aylwin Lewis, also to be CEO of stores over the newly merged Kmart and Sears. Just prior to the merger, Lewis left his COO position at Yum Brands (Taco Bell, Pizza Hut and others) to take over as CEO of Kmart. Lewis has had no retail experience. He is, however, highly credited for his knowledge of operations.

The conductor of this orchestra will be Eddie Lampert, who will own about 40 percent of the combined $55 billion company, with about 3500 doors (1482 Kmart, 871 Sears “full-line” and 1100 specialty stores). Mr. Lampert, a widely acclaimed financial genius, has amassed billions of dollars for his ESL Fund.

Of note, his genius status grew from his ability to identify great deals, particularly distressed retailers that he snapped up. The other part of his MO is simply to cut costs, improve returns on capital, increase cash flow and boost per-share earnings.

Not only has this financial model contributed billions to his Fund (and himself, to the tune of 20 percent of the Fund’s gains per annum), it also fuels the other part of his self-professed master plan.

2. Eddie Lampert as Warren Buffet?

Eddie thinks of himself as a latter-day Buffet. In the footsteps of his role model, Lampert looks to generate cash, as Buffet did with his original investment in ailing Berkshire Hathaway. Eddie’s idea is to invest in other bargains so he can begin the cash-generating bargain hunting cycle all over again.

However, in this case, Lampert departs from Buffet’s formula by not only buying two losers, but losers who have long been and still continue to be badly beaten by dominant competitors. He has also placed himself in charge of the mess. As business writer Jesse Eisinger wryly points out, “Mr. Lampert is no longer just a hedge-fund whiz against whom it is suicidal to bet. He is also chairman of a mastodonic retail company that has to compete against companies with better brands, better management, more money, and more customers.”

Another Buffet tenet that Lampert has borrowed and rephrased his own words, “Managing the business strategically…for the long-term without having to worry about figuring out how to make monthly same-store sales hit a specific target, and without giving any type of quarterly earnings guidance and then trying to manage the business for that guidance.” In other words, he would focus solely on return-on- investment.

Good luck, Eddie. Perhaps if I were a retail analyst and Mr. Lampert were the grand Poohbah of retailing (say a Les Wexner, Allen Questrom or Lee Scott), and he was telling me to forget same-store sales increases and to focus with him on his long-term strategy of creating a retailing powerhouse (out of two cripples), I might (read: might) go along with him. However, while he may be the Grand Poobah of finance, he’s no retailing Poohbah, much less a grand retailing Poohbah. And I can’t imagine too many investors who would be lured to Sears’ negative 2.1 percent year-to-date comp store sales, or Kmart’s negative 13.7 percent.

But wait a second! Upon announcement of the merger, the “greater fools” raced, lemming-like, to run up the stock prices of both brands. That, folks, is the talk-the-value-talk strategy, so well played out by Mr. Lampert. Can it work… and for how long?

Consultant, Howard Davidowitz, was asked what would result if Sears Holdings were to pull off exactly what they are talking about, that is, gaining synergies from real estate moves, cross marketing brands, and supply chain economies. His answer: “A cadaver.” He went on to say of Mr. Lampert: “He doesn’t invest in stores, he cuts costs, he cuts expenses, and by the way, here’s another thing he cuts: customers.”
So, we have a new beginning with two financial guys and an operations guy talking the talk of taking two really enormous and sick retail businesses and making them healthy. I don’t think so!

3. Talking the Value Talk

The grand charade (If my assessment is correct) about the ultimate end of Kmart and Sears is why will it take so long? First of all, Lampert declares to the public-at-large and specifically the financial community that the troika is committed to create value where very little now exists. All this says is that the resuscitation efforts to stall off the ultimate demise will take a very long time. The guile of Mr. Lampert is that the longer he can keep these losers afloat, the more cash he can generate for himself. So, the talk and the walk tell us that Kmart and Sears will lump along for a long time before their many assets are finally sold off (that’s assuming they still have any value at the end). In fact, Lampert himself declared the path ahead as lumpy progress over time. Indeed!

Anyway, the greater fools and the public at large will view this lumpy and long final act as a valiant, sincere and purposeful attempt to rejuvenate the iconic Sears brand and perhaps save and reposition a much smaller Kmart. Realistically, maybe he should just turn them into a “super” dollar store chain in urban markets.

As I’ve said before, the greater fool theory is stronger than ever, and there are more fools than ever before, jumping on even the slightest win for the new holding company. Watch them throw good money after bad, pumping up the stock price.

However, this is but one part of the grand charade and the final act. How long will it play out, or more accurately, how long will Mr. Lampert play it?

I don’t know, but you can expect the following plot for Act III before the curtain rises on the final act.

4. Act III, Scene I

The troika will likely initiate many of the tactical moves the pundits have been speculating on since the merger was announced.

Real Estate

Sears will continue its off-mall strategy, now able to move into those select Kmart stores (including the larger Kmarts, to be re-named Sears Grand, which will locate them closer to their desired consumer segment of higher income homeowners. A repositioned merchandising strategy might pit them effectively against Kohl’s. Or, wait a second, is it Kohl’s they target as their primary competitor, or is it Walmart, Target or Home Depot? Who knows?

The Issues:

• What is the repositioned Sears value proposition for customers in these new locations?
• Is there a potential cannibalization of current Sears locations?
• How many of the Kmart stores that Sears might want to have refurbished, and at what cost (the type of investment costs Lampert historically avoids or cuts, in favor of profits)?
• What does Sears do with its current off-mall Sears hardware division with its eroding appliance share against Home Depot and Lowe’s?
• When they want to sell off remaining underperforming stores, or those in bad locations, what do they do when they realize that those stores and locations are also undesirable for potential buyers as well?

Brands

The cross-merchandising of proprietary brands is expected to provide a synergy. Sears brings its revered Craftsman, Kenmore, and DieHard brands to the table, along with Lands’ End and the lesser-known Apostrophe, Covington, and Lucy Pareda to the apparel table.

The Issues:

• A big gain for Sears, of course, will be Kmart’s Martha Stewart brand. And they may find Kmart’s Thalia Sodi apparel brand a complement to their Hispanic-targeted Lucy Pareda. Other strong apparel brands from Kmart are Jaclyn Smith, Joe Boxer, Route 66, and Sesame Street.
• What are the combined Sears and Kmart value propositions they think will make these synergies work?
• Will Kmart’s more down-market image dilute Sears’ brands? Conversely, will Kmart’s brands diminish Sears’ image?
• How will the national wholesale brands view potential negative crossover effects on their brands?

Supply Chain Synergies

Reportedly, Sears Holdings Corp. expects to realize $300 million annually in cost savings from merchandise procurement, marketing, technology and supply chain activities.

The Issue:

• According to many experts, both of their supply chains are woefully lagging behind Walmart, the industry gold standard, particularly in technology, logistics, and distribution. As one pundit put it, “What do you get when you put two messes together? You get a bigger mess.”

5. Without a Strategic Position and Value Proposition, none of it Matters.

Kmart and Sears must determine strategically who their consumer is and how they are going to be competitively positioned, or will be trapped chasing tactics searching for a strategy. They will therefore have possible short-term wins, but in the long-term, they will continue to sink.

Who is their core consumer? What do they stand for to those consumers? How are they competitively positioned for sustainable advantage? What is their superior value proposition for their very clearly defined consumer?

Some or all of these questions may have been addressed separately by Sears and Kmart over each of their many declining years. Their performance, however, indicates a total lack of execution. Without clear answers to those questions, they have no strategy. Without a strategy, tactics are irrelevant. And with questionable execution, they will certainly not be able to create one viable retail entity (much less two, if they choose to keep the Kmart nameplate).

6. The Competition Never Sleeps and the Consumer Never Waits

Forget about all the textbook stuff. The Lampert troika will soon start the long march of figuring out how to position each business, merge cultures, reorganize, decide on what stores to switch and/or get rid of, what brands to cross-market, how to upgrade their technology, systems, and supply chain processes and ultimately how to create the backend economies they so sorely need.

However well they execute this gargantuan task, it really doesn’t matter how quickly they accomplish it because It will not be soon enough. If they decide to keep the Kmart nameplate and keep it positioned in the discount sector, Walmart and Target will continue to gobble up their share even faster as Kmart is distracted by the merger.

Likewise, and perhaps worse, Sears has many more competitors, a situation that was largely of their own making. They failed in the late 1970s to define who they were and what they stood for, led by a president who described the retail business as “mature.” At the end of the 1980s they failed to focus and reorganize around the home sector, and during the 1990s new leader Arthur Martinez arrived and departed asking the same question, “What is this company going to be? What does it stand for?”

Finally, under Alan Lacy, just prior to the merger, it became obvious that he was no better at figuring out who they were and what they stood for. In 2003, he made the statement, “We’re just Sears, a broad-line merchant.”

What that meant for Sears in the 70s, and what that means for Sears now, is that they do not stand for anything. They are selling everything to everybody, therefore meaning nothing to anybody. What this did to them competitively then, and what it is doing to them now, is allowing competitors from many different sectors to steal their business until it is all gone. And like Kmart, the competitive onslaught will accelerate during the merger period. Walmart and Target are killing Sears from below. Home Depot and Lowe’s are killing them on their flanks. Kohl’s, JC Penney and even some of the department stores are taking direct chunks out of them. And of course, the specialty chains continue to pick away big pieces.

7. Amazon is Coming

By the way, there’s a big $64,000 question: What are they going to do about Amazon? Folks, it’s over.

8. Act III: Final Scene, Year 2007

It’s 2007, and the Two Titanics, with sterns majestically spiking vertically up above the icy cold surface of the Atlantic, are poised for their final plunge into the swirling abyss. There are no deck chairs left onboard. Those that were not sold at an earlier “pre-sinking” auction, now slide quickly into the briny deep.

But just before they plunged beneath the surface in their surreal dive to the bottom, the captain and his two remaining officers telegraphed an urgent request. This was not an S.O.S., but a “sinking sale” offer for their final assets. The next day, headlines appeared in newspapers around the world: “Kmart and Sears brands sold for a song.” This was no Nearer My God to Thee. Eddie Lampert’s latest deal nets him billions. As the officers’ lifeboat raced to escape the inevitable undertow, an aerial photo captures Captain Lampert and officers Alan Lacy and Aylwin Lewis racing away from the wreck toasting in celebration of the consummation of their final deal.

9. Quotes to Remember from the Sears-Kmart Merger

I have compiled numerous quotes taken from individuals as well as various publications that have covered this monumental merger including The New York Times, Wall Street Journal and WWD. Many are from Mr. Lampert, which might be retained for future reference, once the “talk” turns into a different “walk.” I found some of the quotes witty and entertaining, however, all of them are instructional and I felt they might either support your thinking or provide you with new ideas about how this event is going to unfold. These quotes are random in no defined order, and some individuals wanted to remain anonymous.
“The Kmart takeover of Sears could be Eddie Lampert’s Waterloo, and he isn’t the Duke of Wellington,” according to business writer Jesse Eisinger. Continuing the analogy, he concluded with a remark about Sears and Kmart’s competitors: “It will take quite a lot to successfully meld two creaking retailers whose foes eat Napoleons for breakfast.”

“I don’t think any retailer should aspire to have its real estate be worth more than its operating business,” declared Mr. Lampert to investors, analysts and reporters.

Mr. Lampert on running a retail business: “If you can ship a product on June 29 to make the quarter look better, but you can sell it for more the next month, it’s worth holding off on the sale. The way to create value is to see businesses run better, and that may not be how they are traditionally run. A lot of CEOs are constrained.”

More from Mr. Lampert on Sears’ real problem: “The problem is they are not where the customers are, and that’s the big opportunity. It’s not that the retailer per se is weak, but if you have the greatest store and it’s not where the customers are, that’s a problem.” My question: Just who is the customer, Eddie?

Jim McTevia, chairman of his own turnaround firm said of Kmart’s hiring Aylwin Lewis: “For Lampert to get his hands on this kind of person tells me that the powers that be at Kmart are thinking about other ways to make Kmart a viable company other than selling merchandise. Lewis has the ability to put deals together.”

Mr. Lampert described the merger as a blending of the two, “into one culture, an operation under one culture with two brand names…this is a great opportunity to explore commutations and permutations.”

Investment banker Peter Solomon commented on the merger of the two cultures: “That would be the $64,000 question,” noting the past history of the two operations and lack of success on execution.”

Retail consultant Walter Loeb commented: “I think this is a marriage made in heaven by non-merchants. I can visualize that this can take several years to sort out and that the identity of both retailers will be blurred in the customers’ minds.” I say, “Walter, they have been blurred for years. It can only get worse.” Yours truly.

Lewis Kaplan, retired owner and publisher of Clothes Magazine, weighs in on the blurred meanderings of both searching for an identity: “The merger of these two losers reminds me of Denny Dimwit, famous for his quote: ‘Who am I? That’s what’s bothering me.'”

UBS analyst, Gary Balter, commented on the competitive situation: “This move effectively adds a new hardlines competitor in 1300 stores overnight, which is a negative primarily for the home-improvement retailers and to the extent that the brands in Kmart drive traffic, Walmart.” I say, a threat to Walmart? I think not, Gary.

Business author Tom Peters noted that there was little logic in merging two losers and added, “If you think they’ll be able to take on Walmart, I’ve got a nice bridge.”

“This is cause for celebration for competitors,” said consultant Burt Flickinger.

Anonymous comment on the statement that both “Sears and Kmart are moving into the unknown”: “Both have been doing business in the unknown for years.”

“This merger does bring some economies of scale to the picture. Now Walmart can finally put both companies out of business at once versus having to do it one at a time.” Anonymous.

“The complexity and time it takes to merge two healthy companies is an enormous, time consuming and often deleterious undertaking. With these two crippled behemoths, the merger dynamics alone could kill them both.” Anonymous.

“With two financial and an operations guy and reputed ‘dealmaker’ running the company, and now that Vornado has bought significantly into Sears, let the great asset sale of the century begin.” Anonymous.

10. The Last Word: The Fat Lady Is Singing

So, the fat lady is finally singing. Eddie “The Magician” Lampert has no more rabbits, and Eddie “The Doctor” has no more life support. And his “vision forward” is now an oxymoron. R.I.P.

The post Sears: From Behemoth to The Brink appeared first on The Robin Report - .

From TheRobinReport.com ---

Wow! Another huge disruption coming out of McMillon’s Walmart. They seem to have one speed only: meteoric. One could say I spend too much time covering their warp speed, almost-daily initiatives. But, how can I not? As the largest retailer in the world, that could have been stuck in the old world under the sheer weight of its size and arguably antiquated culture, it found a rocket ship commander in CEO Doug McMillon who is blasting through old paradigms and not waiting for anybody. Message to employees: put your jet packs on and hope you can follow this guy or find another job. Disruption ain’t for the faint of heart. And McMillon is turning out to be the disruptor in chief, turning the lumbering behemoth into an agile, innovative startup.

Walmart’s latest announcement was made at a recent ICSC event in Atlanta. They are reimagining their enormous supercenters along with the land and parking lots surrounding them. Walmart describes its vision as a Town Center concept. They are planning to lease the underutilized space to gyms, farmers markets, food halls, in-house and free-standing restaurants like Shake Shack, Caribou Coffee, Orangetheory Fitness, skateboard parks, ice rinks, dog parks, movie theatres, bowling alleys and a myriad of other entertainment and recreational facilities.
Not every location will include all of these. And each location will be unique, developed in partnership with the communities in which they are located, with a sensitivity to the lifestyle desires of each community.

Am I Talking About Walmart? Wow!

Speaking at the ICSC event, Walmart’s VP of U.S. Realty Operations, LB Johnson said, “A transformation is underway.” That’s an understatement LB. He continued, “We are working with the local community to really master plan a vision, not only for Walmart, but shared with the municipality.”

I beat the personalization (including localization) strategy to death whenever I can. This is just another enormous example. Walmart is building local lifestyle Town Centers as compelling go-to places where consumers, particularly the emerging Gen Z cohort, will want to spend some time hanging out.

Currently they are planning for more than a dozen Town Center concepts across the U.S. in Washington, Missouri, California, Texas and Arkansas, among other states. They intend to develop their first supercenter Town Center next spring in Longmont, Colorado, which includes 12 acres of adjacent vacant land around the supercenter as well as six to eight acres of underutilized parking space.

Beginning of the End of the Word, “Store”

Stores are for storing stuff, as we commented in our co-authored book, Retails Seismic Shift. And as I have repeated in so many presentations over the past couple years, and often included in The Robin Report, the industry’s leaders need to delete two words from their vocabularies: “retail store.” When those words are spoken or written, the automatic mental visual is of a big building full of stuff. This is the biggest barrier to change. Apple SVP, Angela Ahrendts, redefined Apple stores as Town Squares. She drives that vision 24/7 in communications and reality by creating customized Town Squares as community gathering places with unique appeal to consumers in each of Apple’s locations.

Envisioning your brand and your locations as assets that can be redefined and redesigned in the community as social and entertaining gathering places (not “retail stores”) is a powerful strategy. And at the risk of creating an oxymoron by comparing Walmart’s reimagined retail stores as Town Centers, with Apple’s Town Squares…I just did.

Walmart’s LB Johnson said, “We want to provide community space, areas for the community to dwell – a farmers market, an Easter egg hunt, trick or treating. We want to provide pedestrian connectivity from our box to the experiential zones that are planned on our footprint. We want to augment these experiences and activities with more food and beverage, with health and fitness, essential services and entertainment.”

This major strategic move in the physical world also mirrors their acquisition of Jet.com and building out a long tail of cool tech-driven brands. Both initiatives are intended to compel younger, more affluent consumers. Walmart didn’t invent the necessity of this strategic vision and they are not the first to attempt its implementation. However, they are the biggest, and may very well spur an acceleration among the other major players who are defining their own strategies for building experiential communities: Macy’s, Kohl’s, Target and Nordstrom, among others. And old -world mall and shopping center developers/owners should take note.

There was also a guy named Ron Johnson who had this same kind of town center concept for JC Penney several years ago. I believed in his vision. He was just unable to pull it off. But the legacy of his prophetic vision lives on.

I believe McMillon can and will pull it off.

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From TheRobinReport.com ---

Mention Bleecker Street to someone and, depending on their age and the context, you will get a myriad of answers. To certain people, Bleecker will always be the heart of New York City’s Greenwich Village of the 1960s, the home of intimate folk music clubs, head shops and a disturbingly large number of falafel restaurants. Others know Bleecker as the coolest shopping street around, home to a mini-mall’s worth of Mark Jacobs stores, at least two Ralph Lauren outposts and enough upscale specialty stores to max out one’s Amex card in a matter of hours.

But today Bleecker Street is undergoing yet another transformation that could place it in the forefront of the reinvention of the physical shopping experience.
Most recently the home to more “For Rent” signs than retail nameplates, a critical stretch of Bleecker is being recast as pop-up store experiment extraordinaire by mega-developer Brookfield Properties. How it works out could say a lot about the future of retailing.

Earlier this year, Brookfield – which can be more often found in the world of shopping centers with over 148 million square-feet of space under its ownership – bought up seven individual (and quite empty) stores along Bleecker, in the stretch west of Seventh Avenue. Once the heart of this shopping area was teeming with all manner of consuming consumers, but has been pretty much abandoned, a victim of greedy landlords who kept jacking up rent rates for as long as they could…until they couldn’t anymore. Rents reportedly topped out in the $400 to $500 a square-foot range. The once thriving independent stores were priced out of the market and when the national chains saw that sales weren’t justifying the rents they pulled out as well, creating the retail wasteland. Brookfield’s idea is to repopulate the street with test stores from startups and other brands who aren’t ready to commit to long retail leases…and ever-escalating retail rents. The company told the Wall Street Journal earlier this fall, “For us it’s a great learning experience and hopefully something we’ll take globally. Part of the problem in the retail world,” it said, encapsulating the overall dilemma physical retailing faces these days, “is that things got very commoditized.”

So, its plan is to de-commoditize the street. Enter, among other new tenants: Fleurotica, a floral design shop; Lingua Franca, a cashmere sweater seller; and Bonberi, offering health food and personal care products. Many of the stores are offering special events and experiences to try to drive traffic, consistent with what the best independent specialty retailers throughout the country have found to be a successful tactic to revitalize in-store shopping. While the city of New York is working on legislation to allow tenants to go to arbitration on leasing rates, in the short term the city is overrun with a very noticeable retail vacancy problem.

And there are skeptics – maybe we should call them cynics — out there who think Brookfield’s test is only a short-term Band-Aid to tide the space over until more permanent (and profitable) solutions are found for all those empty storefronts.

Maybe, but maybe it’s also the case of a big real estate owner realizing it better find an answer to the problems besetting physical retailers before it’s too late. This is especially critical for Brookfield, which earlier this year doubled down on retailing with its $9.25 billion purchase of General Growth Properties, another big mall operator.

In the early days of New York City, the area around Bleecker Street was a farm, owned by the Bleecker family, of course. Today, if Brookfield isn’t exactly betting the farm on this test, it is most certainly wagering that it has found a possible remedy for the struggles of physical retailers. If it doesn’t work, the sad answer may reside at 147 Bleecker Street: The Bitter End.

Warren Shoulberg has experienced all the guises of Bleecker Street over the years…except when it was a farm.

The post Brookfield Is Trying to Turn a Bleaker Street Back into Bleecker Street appeared first on The Robin Report - .

From TheRobinReport.com ---

A little over a year ago, I wrote an article, “Kudos to Kohl’s CEO Kevin Mansell – Greatness Agenda Kicks In“. It was entitled rightfully so, as Kohl’s Chief Mansell deserved kudos for leading his teams to successfully implement the strategies framed in the Agenda, which broke five years of flatlining revenues, yielding a 7 percent jump in the 2017 holiday season (a 30 percent online increase).

However, larger kudos should be sent his way for hiring his successor, Michelle Gass, in 2013 as Chief Merchandising and Customer Officer. She was tasked with architecting the Greatness Agenda. She became CEO in May of 2018. Mansell knew what he needed as Kohl’s was entering its slow growth period. As reported in a Fortune article, “he and the board agreed, they needed someone who could sustain Kohl’s left-brain discipline on pricing and inventory management – but who could also tap into his, or her right-brain, creative daring side.” Talk about “right-brain daring,” Gass is a daredevil. Coming from Starbuck’s where she built the Frappuccino into a billion-dollar business, she is daring to innovate on all fronts, essentially reimagining the traditional department store model in tradition-breaking directions. This is the type of leadership necessary for transformation into a successful 21st Century model.

The Consumer as Point-of-Sale

First, she totally gets the consumer part, no doubt heightened by her P&G gig (considered by many to be the world’s greatest consumer marketing company). She developed Crest for Kids toothpaste while there, and then went on to Starbuck’s, which is obsessed with satisfying consumers. Now running Kohl’s and understanding what I coined as “positioning drift,” Gass knows Kohl’s must not drift older as its current core consumer base of 35-55-year-old moms are retiring out of core. Kohl’s must evolve to serve the NextGen cohort who are tech-infused and have entirely different value and shopping expectations.

Second, Gass knows the consumer is the new point-of-sale, wherever they are and whenever they want to shop. And she knows that since they have the world’s largest marketplace packed into their mobile devices, Kohl’s must create compelling reasons for this time-starved young consumer to physically come into Kohl’s stores.

So, Gass partners with Amazon and now houses 30 of their shops operated by Amazon personnel, selling smart home technology. Kohl’s is also testing offering Amazon returns in 100 stores. Since 85 percent of the U.S. population lives within a 15-mile radius of a Kohl’s store, returns are convenient. Both the smart shops and easy returns are traffic builders. Kohl’s further incentivizes Amazon returns with a discount offer for its own merchandise. This new traffic-building strategy in addition to Kohl’s BOPIS program results in impulse purchases when the customer is in the store, estimated to add 20-30 percent to the transaction.

The Amazon partnership is still in its test phase, however in my opinion, the strategy will eventually roll out to the entire fleet. It’s a win-win synergy for both.

Pop Culture Style

Next up: With more than a million of NextGen women following the PopSugar media platform, Kohl’s made a deal to create an apparel collection that leverages PopSugar’s propriety data analytics. The PopSugar line is also central to Kohl’s speed to market initiative, which reduced the supply chain cycle by about 40 percent. They launched Scott Living Drew and Jonathan Scott, the twins whose “Property Brothers” programs on HGTV has a following of millions of viewers and fans. And, as the plus-size market continues to grow, with 60 percent of women being size 14 or over, Kohl’s launched the EVRI brand.

Active and wellness are two lifestyle priorities of the new young consumer culture. Check that one as well. Gass has increased the activewear space by 40 percent, and its footprint is a whopping 25 percent of total floor space. Nike and UnderArmour dominate. Speaking of wellness, Gass dared to create another out-of-the-traditional-box idea. Working with another daredevil, Mindy Grossman, CEO of WW (formerly Weight Watchers), they placed an 1800 square-foot space in a Chicago area Kohl’s which sells WW Healthy Kitchen products and host WW Wellness Workshops for local WW members. There is also a specially curated WW space for Kohl’s customers and associates. It’s still in test, but I opine they will roll this concept across many of their locations. Is it a stretch to imagine WW yoga and exercise classes, complete with a WW active wear line?

Tech Talk

Am I forgetting technology and e-commerce? Not a chance! As counterbalance to Gass’s marketing daring side, she has a President, Sona Chawla, who came from Walgreen’s in 2015, where she was CMO and President of Digital. She is all things technology and e-commerce, upgrading Kohl’s tech infrastructure throughout the enterprise.

According to the Fortune article, early experimentation with tech’s gizmos like holograms for product display and augmented reality mirrors at beauty counters didn’t yield any measurable lift. Chawla is focusing on innovating and testing in areas that can result in immediate and efficient results. For example, RFID tags on merchandise enable associates and shoppers to find an SKU wherever it may be — from distribution centers to all of their stores — so the product can be picked and delivered to the customer. This is a part of an overall inventory optimization process, driven by AI and data analytics. This capability drives a demand-driven flow of goods. Thus, as sales are increasing, their inventory has been decreasing. Furthermore, it enables localized assortments based on consumer preferences in each of their locations. Not only does this tech and data driven precise inventory flow reduce markdowns, while increasing margins, it also frees up space for compatible traffic-building partners like Amazon and Weight Watchers. They are also testing of Aldi grocers (in 10 stores). Finally, the remaining space occupied by Kohl’s locally assorted goods will have greatly increased productivity.

Other tech initiatives are a price-checking app that cuts through all of the discounting confusion to get the bottom-line price, a smart cart discount or rewards for online orders to be picked up in store and “wait-less” handheld checkout devices to break up bottlenecks at checkout counters. They are also testing a Service Center concept in two pilot stores, testing self-checkout kiosks, BOPIS lockers, a new centralized customer service concept and a new merchandising approach for an impulse zone at the front of the stores.

Kohl’s: A Physical and Digital Entertainment and Distribution Platform

In an interview with WWD, Gass explained how she believes Kohl’s proposition is different from other retailers. She said, “We’re certainly unique. We’re positioned so differently. We go against the competitive [grain]. The whole idea of location relative to traditional department stores is different because we’re located off the mall. We drive home the notion of ease and convenience. Digital has put the world at the customer’s fingertips. I say that I want things to be strategically surprising. We really take advantage of all the data we have and being true to the customer. We’re making all the bold, unexpected, disruptive moves we can make to keep the customer interested.

“We’re also thinking of ourselves as a platform to bring in customers who are focused on aspiration, inspiration and accessibility, for bringing exciting ideas and scale. What Kohl’s brings to the table is its brand DNA. Kohl’s is a great operator. We know how to operate in a cost-effective way, and that’s hard. Think about what that says about all the new entrants and new digital native brands. We can push it further. Could Kohl’s be a platform for brands to get exposure? We have that kind of reach. I think we’re uniquely positioned to do that. We have to have a growth mindset. We’re wired that way, for curiosity, excitement, celebration, people and bringing big ideas.”

I used this quote to emphasize Gass’s use of the word “platform,” vs. “retail store,” which is a mental barrier to envisioning anything other than a building full of stuff. Gass can envision the platform as a model to share all kinds of partners and even competitors. How about gyms, restaurants, and on and on? She also envisions smaller platforms, localized assortments in neighborhoods and potentially free-standing specialty platforms, perhaps focusing on single product categories.

Michelle Gass’s vision is limitless, and having had an interesting conversation with her, I believe she is today’s visionary daredevil.

The post Michelle Gass: Kohl’s Chief “Daredevil” appeared first on The Robin Report - .

From TheRobinReport.com ---

You’re not in Kansas anymore.

When you walk in the front door of Planet 13 just off the Las Vegas Strip you are in both a new era for American retailing and a state-of-the art store that rivals anything being done in any consumer product field. Planet 13 is a legal marijuana dispensary, perhaps the largest and glitziest in the country. Open at this location only since this past November and taking advantage of the state of Nevada’s legalization of pot effective the summer before, the store represents both the cutting edge of society…and the cutting edge of retailing.

At 112,000-square feet in total size – only about a quarter of which is currently being used as retailing space — the store is giant. It features multiple video screens throughout the selling space as well as interactive animated panels on the floor and elsewhere to engage shoppers. It is essentially designed as an Apple store by another name…with a decidedly different product mix.

Here’s the shopping process at Planet 13: customers walk into a welcome lobby where they must show a driver’s license for proof of entry which is returned with an entry card similar to a sports or movie theater ticket. They are then directed through a wide decorative corridor to an electronic turnstyle where the ticket is used to open the gate. A greeter welcomes you to the space and gives you the choice of walking around on your own or connecting directly with a counselor who will handle your actual purchasing process.

Walking the Planet

The walk around the store is eye-opening. Most of the displays are in glass cases, showing pods of marijuana leaves, as well as cannabis edibles, lotions and potions and assorted paraphernalia, heavily skewed towards electronic smoking devices. There is also a quick-check-type counter for medical marijuana purchases. Once a shopper has surveyed the goods, a sales agent – usually a millennial-aged, red-shirted eager-to-please male – will answer your more specific questions, explain what’s legal and what may not be and then take your order. He directs you to a counter space where your order has been assembled and payment is processed. Cash is the preferred method though cards can be used with a workaround and a service fee.

By the Numbers

Does it all work? You bet. According to the company, Planet 13 has averaged 2,465 people a day in the store since the first of January. Of that, an average of 1,712 people a day make a purchase, at an average ticket of $89.33.

Do the math: $152,932 a day in average sales and $1.07 million a week. Projected out, that’s close to $56 million a year in sales from this location.
And in case you missed it, Planet 13 has a 69 percent conversion rate of turning visitors into purchasers. Take that Apple.

And they are just getting started, say its owners, Planet 13 Holdings, a public company, traded on the Canadian Stock Exchange. What is calls a “Phase II” expansion will include a coffee shop and a bistro/pizzeria, construction of which has just started in the structure. Although consumption of legal marijuana is not allowed on property, one has to think that anyplace that serves food and snacks will be quite popular with Planet 13’s customer base.

Don’t be surprised if there’s more to come. “This is just the beginning,” said Larry Scheffler, co-CEO of the company. “We are building a one-of-a-kind tourist destination that will be must-see for both cannabis aficionados and people who don’t consume the product. “We are well capitalized and expect to continue to drive results from the SuperStore, while also beginning to leverage our growing reputation into other attractive markets in the U.S.”

Right now, marijuana for recreational use is legal in 10 U.S. states as well as the District of Columbia. A total of 33 states allow for legal medical marijuana use. It is now also legal in the entire country of Canada. And more American states, including New York, are pushing for legalization. The potential for growth – all of it in physical retail locations rather than online – is enormous.

The next time someone complains that there’s nothing new in retailing, tell them about Planet 13. It is out of this world.

Warren Shoulberg needed to visit Planet 13 while in Las Vegas for, er, professional reasons.

The post Retailing Goes to Pot appeared first on The Robin Report - .

From TheRobinReport.com ---

For the past several years, each Earth Day has surpassed the one before it with tons of digital and physical media loudly “talking the talk” about saving the planet. Big shift: There is now a critical mass of vibrant “green shoots” (pun intended) emerging that signal consumers are “walking their own walk,” enough so, that they are driving all consumer-facing industries to “walk the proverbial walk.”

Many media platforms are leading the charge, even turning Earth Day into Earth Weeks and Months. Dare I say it, we are in Earth Day Perpetuity, now “shouting the shout” calling out designers, retailers and brands across all consumer-facing industries who are role models aggressively adapting their business models to support sustainability initiatives. I believe the term “circular economy/commerce” now popping up in the cultural conversation is a more realistic definition than sustainability — because it acknowledges that the profitable growth of commerce and the economy must also be as sustainable as all of the other “green” and humane initiatives.

To achieve both will be very challenging. It will require the melding of two inter-related dynamics:

1. The most powerful force will be the millennial and Gen Z consumers, now overtaking boomers as the largest consumer cohort. They will continue to accelerate their demands for products with social and environmental values and purpose.
2. Businesses must be able to figure out how to build circular strategies embracing social and environmental values that will actually enable cutting, or at least maintaining costs, and will enable maintaining or increasing prices and margins.

This is when I say, “good luck.”

All consumer-facing businesses are just at the beginning of this long, complex and costly venture. And if you are not among the pioneers, you may never catch up.

Innovation in Circular Commerce

For this article, I want to focus on Neiman Marcus’ recent acquisition of a stake in Fashionphile, an online and brick-and-mortar secondhand luxury retailer. One of the reasons I choose Neiman Marcus is that the strategic and structural model they are developing with Fashionphile is translatable across all sectors of retailing, not just luxury.

With the acquisition, Neiman’s has become the first in the luxury sector to essentially create a secondhand shop within select stores. It is a pioneering example among major retailers to initiate one element of circular fashion, in one product category and in one sector. The repurposing of apparel and accessories products by recycling, upcycling, reusing, reselling, swapping or just plain giving away the stuff to people in need is an element of circular fashion that is “low-hanging fruit,” because it is relatively easy to execute and more importantly, there is a ton of research and data that tell us that the new gens are clamoring for preowned products.

ThredUp, a managed online marketplace for all brands-from GAP to Gucci, recently released their 2019 Resale Report, which is mindboggling, in terms of the projected size and rapid growth of the resale market, consumer demographics and the innovation and technology that created the resale revolution.

I won’t belabor the need for this resale solution (which you are all aware of). Roughly $400 billion worth of excess apparel inventory ends up in landfills or is destroyed every year. Only one percent is repurposed back into commerce.

So, what is the solution and the opportunity? According to ThredUp’s report, here are some of the topline numbers (there is much more in the report, well worth reading):

• The secondhand market will reach $51 billion in five years, up from $24 billion in 2018, and has grown 21X faster than all of apparel over the last three years.
• Resale will exceed the size of fast fashion retail by 2028.
• 64 percent of women bought or are now willing to buy pre-owned products, up from 45 percent in 2016
• Millennials and Gen Z’s are driving the growth, 2.5X faster than other age groups

Click to Enlarge

Neiman Marcus: A Pioneer

So, Neiman Marcus is the first in the luxury sector to launch a resale model within its stores. Its acquisition of Fashionphile (founded in 1999) gives it a leading edge with the overnight inventory of 15,000 pre-owned ultra-luxury handbags and accessory items with “best-in-class authentication.” As opposed to The Real Real and Poshmark, two other pre-owned competitors, who are solely digital and operate as consignment models, Fashionphile buys the pre-owned luxury goods and owns the inventory.

Customers bring their used goods to the Fashionphile salons within Neiman’s where they are greeted by ambassadors. The goods are authenticated and valued by the experts. The purchase is then made, or the customer may use the quote as a credit to shop at Neiman’s for other products.

According to a company press release, the goal of the model is to “create an elevated pre-owned experience for consumers by matching the physical footprint and loyal customer base of Neiman Marcus with Fashionphile’s digital inventory of ultra-luxury items. And because there is limited overlap between buyers and sellers in the pre-owned luxury market, the partnership will help Neiman Marcus reach new, younger shoppers ahead of their peak spending years.”

Click to Enlarge

According to Geoffroy van Raemdonck, CEO of Neiman Marcus, the decision for Neiman Marcus to invest in resale came out of a customer survey the retailer conducted last year, which found that half of its shoppers were shopping on resale sites but were dissatisfied by the available services.

The resale customer is younger than the core Neiman Marcus customer, so as they begin to shop in the Fashionphile salons, the amount of collected data will be invaluable for personalizing engagement with the emerging young shopper, gaining their loyalty and cementing the relationship into the future.

Neiman’s plans to open five to seven Fashionphile salons in the fall, projected to generate about $200 million in revenue this year.

The fact that Neiman’s is out in front with this model should send a message to both the other luxury players and the entire industry. The next gen’s desire for earth-saving, social and humane values, along with wanting access over ownership, is real. It’s gaining speed and it will leave you at the station, if you don’t figure out how to adapt and transform your business model to fulfill those desires.

Don’t dismiss the power of the pre-owned, resale apparel market. It is an important piece of circular, sustainable fashion and easy to participate in. And it’s the tip of the melting iceberg.

Go for it!

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From TheRobinReport.com ---

Four years later, I still say, “The TJX business model is not easily copied.” In fact, one could make the case that the specific differentiators and advantages that have been crafted into its DNA cannot be duplicated, period. With the exception of Ross Stores and Burlington, smaller and not pure copycats, TJX Companies, (T.J.Maxx, Marshalls, Sierra, Homesense and HomeGoods) with sales of about $27 billion in 2018 all but owns the so-called “off-price” space it dominates (Ross and Burlington sales, $11 and $7 billion respectively).

Hey, you guys in the other sectors, in the middle of the “perfect storm” of an overstored, intensely competitive retail environment, with omnipotent tech-armed consumers driving you into the insanity of the retail share wars, you can only dream of being in such a position.

There is no greater rush of the addictive brain chemical dopamine than the one unleashed when a loyal shopper pulls into the parking lot of one of the TJX Companies’ stores. The jolt of anticipation is not just about one awesome experience in those stores. It’s about five expectations, all within the four walls. Baked into the entire process is a “sell low, buy lower” mindset at TJX.

1. It’s about a “treasure hunt.”
2. It’s about affordable luxury brands (the largest purveyor of upscale brands in the world).
3. It’s about “fast fashion.”
4. It’s about localization.
5. And all lumped together, it’s about the best value you can find anywhere.

Deja Vu

I originally wrote these opening paragraphs on May 11, 2015. I’m repeating them because they are a perfect lead-in to TJX’s recent commitment to boost their e-commerce strategy.

In 2015, I also referred to the “elephant in their room.” They acquired off-price internet retailer, Sierra Trading Post and launched T.J.Maxx.com in 2013. In my opinion, they were testing the space, particularly to learn if there was any real synergy to gain additional growth with an omnichannel model. Accordingly, they proceeded with caution, continuing to focus on managing their phenomenal brick-and-mortar growth.

Although though they have no real direct competition, other than the off-price chains Ross and a much smaller Burlington (whose e-commerce progress is even slower), TJX has decided that the time is now to satisfy the steady beat of the new consumer culture to be able to access brands wherever and whenever they wish.

They intend to launch Marshall’s e-commerce business in 2019. On a call with investors, Ernie Herman, CEO of TJX, said, “We have learned a lot from tjmaxx.com. We really believe it drives incremental store traffic. Our e-commerce businesses have another year of double-digit sales growth. tjmaxx.com added new categories and well over a thousand new brands.”
While e-commerce sales are growing in double digits, it still only accounts for a minimal of about one percent of TJX’s annual revenues of around $27 billion. Fourth-quarter comp sales increased six percent for the overall company.

The T.J.Maxx and Marshall’s online strategy is to highly differentiate the product mix from what they have in the stores. I believe that part of this decision is due to the fact that some of the branded deals offered in the stores cannot be replicated online without alienating the brands that liquidate through this channel. Herman believes this will avoid cannibalization and they will not lose any store traffic. While they will may not benefit from the BOPIS traffic and impulse purchasing when the customer comes to the store for pick up, they will achieve a conversion lift in sales when the customer returns goods. So, they view the strategy as “complimentary” between the physical and digital channels.

A Final Check-Off for the Next-Gen

Not only is TJX demographically democratic, it attracts next-gen customers like crazy and has focused on selecting more contemporary brands and styles, marketing through social media sites such as Facebook, Twitter, Pinterest and Instagram.

Less than 15 percent of the merchandise in store is from previous seasons, a particularly important feature for younger consumers. The company changed its marketing to emphasize details like this because it realized its old strategy was talking to existing customers, when it really wanted to attract new ones. The price tags says “past season” if it is.

To accommodate the more rapid turnover and constant flow of newness, TJX’s stores are easily adjusted. Since there are no walls formalizing a branded or category segment, they are continually resetting the floor to showcase the rapidly flow of new merchandise and brands. This also heightens the thrill of discovery and the hunt and provides a continually new shopping experience for consumers. The TJX Rewards credit card allows customers to accumulate points for expenditures that can be redeemed for reward dollars at TJX’s stores, further cementing its relationship with customers, drawing them back into the store.

With the new digital strategy, next-gen consumers will be able to enjoy the treasure hunt wherever they may be and whenever they desire the experience.

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