Specialty Retail Blog

The Future of Shopping

This may change brick and mortar instead of just fitting rooms!  WOW! How do you see this changing the strategy for your client base?  Imagine loading your inventory into your pos system and then customers just pick what they want from a unit like this.
Thanks to affiliate <a href=”http://www.management-one.com/about/affiliates.php?affiliate=r-natelson#bio” title=”Rick Natelson in Monmouth Junction, New Jersey” alt=”Rick Natelson in Monmouth Junction, New Jersey”>Rick Natelson, in Monmouth Junction, New Jersey</a> for sharing.

Thanks again to Neal Esserman for sharing this blog posting from Retail Design Diva called “A Recession is a Terrible Thing to Waste.”

It discusses how the current crisis has forced many companies and people to reinvent themselves positively, and in ways that they simply would not have had the courage to if their current groove had remained rosy and adequate.

 ”6 Ways to Deal with Small Business Stress”

Good article forwarded to me by Neal Esserman. Worth the read

<a href=”http://boss.blogs.nytimes.com/2009/10/06/six-ways-to-deal-with-small-business-stress/?emc=eta1″>

I was waiting for my wife to shop at the mall the other day and began watching kids at an arcade. The game that intrigued me the most was something like Bob a Bunny. I used to play that with my kids and was surprised to see it still existed. The difference was this time I was an outsider, not involved with a mallet waiting for the next pesky bunny to rear its head so I could bop it on the head. As an outsider I could see the relevance of the game to small businesses with which we deal.Many business owners operate their business like the bop a bunny. They come to work each morning armed with a mallet and then wait for the phone to ring or a shipment to be delayed. When it happens they spring into action with the hammer. Bop! Then the accountant sends the financial report for the month. Expenses are too high. Bop! We restrict everyone’s time and maybe let one person go. So then quality and service suffer so what do we do…. Bop! You would think that once you bop a bunny it would stay down but no, here it comes again. The same bunny you just bopped a second ago.

The fact is that without a strategy and a view of the business from an overall perspective, bopping one bunny will cause another to pop up somewhere else. Your business struggles to survive but you never really prosper. At some point your money runs out and it’s Game Over. Now you search your pockets to find another infusion of capital to keep stay in the game. If you don’t change something though, that quarter will run out after you bop a few more bunnies.

The problem is that if all you have is a mallet, every problem and issue is addressed like the bunny. Problem solving takes a real process, time, effort and diligence. When we see a crisis, we look for the underlying problem in order to find a solution to eliminate the problem. That’s one bunny that won’t pop up again.

In order to solve problems effectively we must first establish a strategy for the business. In bop a bunny the goal is to get as many points as possible. In business it is to get a certain revenue or profit. The problem in business is that it isn’t as simple as just taking a mallet and bopping a bunny. The bunnies have no interest in your success or failure. That isn’t true of the bunnies you are bopping in your business. Your bank, your employees and your customers all care about how you treat them and handle their concerns, issues and problems. They are willing to contribute to the success of the business IF you let them. Successful businesses have meaningful strategic plans and solve problems efficiently and effectively. Businesses that struggle seem to bop at problems just like the kids in that arcade.

Just like the rest of America, I was shocked to see the major US banks post huge profits. These are the same banks that were about to fail a few months ago if swift inputs of huge cash infusions were not made immediately.  My concern is what the effects of this huge shift would be on the retail community.  Here are a few of my thoughts:

1.       This does nothing for credit availability for retailers to work from. At the same time these behemoths were posting huge gains, CIT was entering bankruptcy. These profits were from trading which is the exact source of the meltdown in the first place. These banks are not making profits by loaning money to buyers or store owners!  These profits don’t mean our economy is any stronger than it was.

2.       There is a rapidly growing class warfare brewing in the country. A few years ago people were hopeful of becoming rich themselves so they were hesitant to be critical of a class they aspired to. Now with huge unemployment, foreclosures and the appearance that the bonus class will prevail on the backs of the majority, resentment and animosity is at high levels.  When hope dissipates it is replaced with despair.

3.       This despair may be more widespread than people realize and it is not based on net worth or income. It is based on a sense of control and priviledge.  There are many wealthy business owners that are frustrated by trying to get capital, depressed by falling profits and scared by the huge amounts being spent by government with the promise that their taxes are going up.  They feel out of control and very nervous about what the future holds.  They resent the seeming control that the banks have in the government and financial institutions.  There are more and more taxes and restriction on businesses while the banks flit unfettered in their actions.

4.       The more depressed, frustrated and confused people are, the less likely they are to spend their money.  The less likely they are to go out and shop. That means that retailers must make a greater effort to reach these people with a positive message. Retailers may need to abandon their old myths and drag these people kicking and screaming out of their comfort zones and into stores to have a good time.  Shopping may be incidental.

Some retailers are getting on the side of the “downtrodden” whether they truly are or just feel that way. The market is changing and buyers thinking is vastly different.  Make sure you are adapting to those changes in your marketing, message, merchandising and strategy!

With the many changes in the economy, everyone seems to have a different prediction about about what kind of retail landscape will remain after the tremors of the recession dissipate. One view is that the future is in single branded stores run by vendors. In this scenario, small independent specialty stores cannot survive because of the following three reasons:

1. Credit will be unavailable

2. They will have little or no leverage with the big vendors

3. They will not be able to out-bid the major vendors for prime retail space

Although there has been a boom in single branded stores over the past decade, there are definite reasons to believe that the independent specialty retailer sill flourish. My belief is that the credit shortage is a short term adjustment in the credit market and soon there will be lenders waiting to cash in on the demand for credit from viable borrowers.

The second assumes that the big branded vendors are the only future of retail. My view of reality is that the major brands may be the past of retail. Branding is expensive and requires a significant marketing effort. That expense must be added to the cost of the products. One lasting remnant of the recession, once it is finally over, will be a switch to value on the part of the marketplace. That value orientation combined with the speed of knock offs and the high value offerings of many smaller vendors will challenge the dominance of the big branded vendors. That is not to say there won’t be some vendors that will survive in retail but there will be just as many that don’t. Manufacturing apparel is less expensive than retail. Retail requires a major investment into a very different world of real estate, sales forecasts,strategy, leadership, management, training and cash flow planning.

Third, if the big vendors bid up the cost of prime retail rents, they will have to add those costs to their merchandise. Again, value would dictate that higher prices and lower value will not be a winning combination. If it were, you would be seeing a flood of vendor leases flooding the retail market rather than a flood of empty boarded up stores in many malls and location. The following are merely two scenarios that specialty retail may follow to not only survive, but thrive. No one knows exactly which paths the world will follow but these scenarios make sense with the changes we are witnessing. The biggest challenge that specialty retailers have to wrestle with is a lack of any unified leadership. The biggest threat to their survival is their reluctance to view themselves as one group with common challenges, goals and obstacles that will best be overcome together rather than fighting one another. Independent specialty retailers will survive and prosper by working together to challenge the vendor stores, department stores, internet and other retail competition. The new scenario for the future will emerge over time but the following two are not only possible, but waiting to happen.

Scenario One

Unemployment in the U.S. has reached 9.5% and is climbing. Among US born blacks and Hispanics unemployment is 24.7% and 16.2% respectively. Unemployment among immigrants is about 11%. This high unemployment begs for an answer and specialty retailers may be one solution. Cottage industries have grown up in many spots around the world. People with skills in knitting, sewing and even clothing design work at home to produce goods that are then sold on the market. These people tended to be stay at home moms, older workers etc. With all this pent up potential to work, retailers can revive the “specialty” label that was lost. When the mom and pop store began to carry the labels that the department stores carried and the brands that could be purchased everywhere, they no longer were specialty stores but rather, competitors in luxury commodities. If the mom and pop store can no longer compete with the major branded vendor then he needs to find another strategy that cuts into the market share the branded vendors have. The future of retail is not with the major branded vendors! The future of retail may be in creating a new, unique and effective private label offering based on putting this pent up labor pool to work producing luxury items that are below the radar. Customers will be attracted to value, specialty goods and a private label that is more than slapping your label on over priced commodity items. The challenge is to supply a reliable market for value rather than just provide a high priced commodity This scenario gives the specialty retailer the ability to go vertical just as the big branded vendors are going vertical!

Scenario Two

The retailer’s expertise is in buying and selling. A vendor’s expertise is in design and manufacturing. If vendors are looking to get into retail, they are entering a strange new world that they truly do not understand. The investments in infrastructure and the management of a retail staff are very different. The tight balance of costs, management of a market, and selling effectively are all different skills that are not intuitive. When you look at the expertise of both the vendor and the retailer respectively, there is a marriage waiting to happen. Split the supply chain in a different place so the mom and pop retailer may benefit by utilizing his unique skills and expertise while the vendor can accomplish his mission much more effectively.

Long ago the grocery industry figured out that the store is the best place to sell the goods and the manufacturer is the best one to provide the goods. Each vendor “owns” a certain amount of shelf space and has representatives that come in periodically and restock shelves, arrange displays and monitor their space. The grocer waits on the customers and handles the daily stocking and sales. It is time for the retail community to look at this same scenario.

Vendors, rather than opening their own store, must evaluate the opportunity to “purchase” shelf space in the existing retail store. The inventory would be owned by the vendor until it is sold and the vendor would be responsible for keeping the right amount of goods in the store in order to be profitable. No longer would there be an open to buy in many classifications on the part of the retailer but the vendor would now be responsible for his open-to-supply! The beauty of this is there is less investment and risk on the part of the vendor AND there is no credit required for the retailer to stock the shelves. Marketing could be a joint effort that provides synergy. The vendor can market his goods and drive business to the store. The store can market to drive traffic to the store too.. The vendor would have reps that, instead of selling at trade shows, travel to the stores in each town or area to teach the local staff, monitor the inventory and give input back to the vendor or planners to hone the Open to Supply budgets as well as develop the assortment plans with the local retailer input.

Both of these scenarios are feasible. There are many other scenarios that are feasible as well. None of them is without bumps in the road and and challenges that will require coordinated leadership to develop and effective management to implement. There are many other potential ways for specialty retailers to emerge from this recession stronger and more viable for the new market and I welcome others to add their scenarios to this blog. As long as the big branded vendors assume the future will be like the past and they just need to continue their direction, we will be heading into the age of specialty retail! Our goal and mission is to stay abreast of the various options and opportunities and work with clients, industry groups and retailers to assure the future of specialty retail.

With the onset of The Great Depression of 2009, we are constantly hearing a lot about change but not nearly enough about balance. Whenever there is change, it brings an imbalance since the change affects different people, different departments and different customers in ways that are not equal. The scramble to balance the system again, or at least to find a new balance, is extremely important.

One example comes in our workforce where millions have now lost their jobs while others are still working. The imbalance in pay that ranges from unemployment compensation to the same old salary is huge. Many companies are trying to stabilize the system through furloughs and pay cuts to rebalance the pay structure and help people keep their jobs. Other companies are eliminating bonuses which has the effect of eliminating a source of incentives too. Some companies are doing surgical layoffs to raise the quality of the staff. With this approach, each worker is evaluated for performance and the lowest performers lose their jobs.

Another balancing act that is critical is that between revenue and expenses. As revenue has fallen in most businesses, there must be a rebalance on the expense side too. Every expense line is part of the rebalancing and some must be renegotiated while others must be eliminated. Expenses you could not live without a year ago now have a good chance of not surviving the new balancing process.

The new balance needed will extend beyond your business and extend into your personal life as well. Personal finances will need a new balance point. Even your other habits will find a new balance as we redefine ourselves for the “new normal” being established. As you go through this process, be aware that, as a store owner, your customers are also doing the same thing in their personal lives.

Your business will be affected in many ways that you may predict and others that will only become clear in the rearview mirror. For example, many vacations are being cancelled or curtailed. Will people buy less resort wear? Will they shop more with you because they are not shopping while on vacation? Will they shop less because they are not preparing to go on vacation? The responses will vary but the questions must be asked.

The new balance will make our old rules of thumb into myths. The faster you can find a new balance, establish new rules and move forward, the more successful you will be.

Yesterday is gone.

How long has it been that you have had “change” thrown at you? (And I don’t mean coins). Now you realize, ‘I either change, or my business is one for the history books’. Change what? Change how? Is it too late? Is it worth the struggle?

This is a time of opportunity! Great change brings on new hope. Rules are being re- written and everyone has an opportunity for a fresh start. As you watch your competition melt away, your suppliers have become more flexible. Your creditors, landlords, and most of your other providers are demonstrating a willingness to change their rules. Contracts are being re-written, debts are being renegotiated and for many small businesses this can be one of a second chance. The doors around you are opening in a way you could never have imagined.

Can you seize this moment in history?

Consumers have not stopped spending; they may be looking for better deals and more value. When the economy bounces back, customer loyalty to those retailers that have responded will clearly remain intact.

Let’s address the elephant sitting in the room. What is the willingness of the consumer to spend? What is their ability to spend? These are significant issues as they are the crux of forecasting demand.

As demand diminishes so do prices. In step, supplies will also decrease until there is some equilibrium. Appropriate strategies need to be addressed and put in place and measured, as changes are occurring rapidly. For example; Coach, a luxury maker and retailer of expensive handbags, has identified that the right price to increase demand for their products is $300. Coach is one of 20 successful retailers that are doing well in the current economy. Yes a luxury retailer! They have responded and found the price where they can generate demand.

One strategy is to break key classes into price points. Some of our retailers have already addressed this issue. Denim, Woven’s, Dresses, Tops, Shoes, etc., above $XXX and below $XXX. Every retailer needs to rediscover where the demand exists and at what price.

This concept relates to Elasticity and is at the core of the theory of supply and demand. The measurement is to determine how price changes impact demand. Previously, when items stopped selling the retailer would generate a markdown or price reduction to force demand for a product where the real demand had either never transpired (a bad buy) or extinguished as fashion or a season may have changed.

However, now we must look at creating new value in what we sell and aligning that to price models until we recognize an increase in demand. The product mixes must include complement and substitute goods to replace goods that customers have lost interest in at their current price structure.

Part of what I believe is happening in the luxury market is an inverse relationship. For the past 15 years revenue was driven by the prestige of buying luxury and not necessarily in the product itself. As the price of that luxury item diminishes so does the prestige value and thus the demand, especially among the “aspirational” customer, who has evaporated in the current economy. This is called the Veblen effect and is named for the Economist Thorstein Veblen, who was the first to develop the theories of conspicuous consumption. Those customers will now seek more attractive alternatives.

This however opens the door of opportunity. This is a chance to bring in new alternatives at better terms, better markups and in reality to present your customers with more value. This means for the present circumstances, there is lagging interest in labels and increased interest in value. As the prestige element has been removed it needs to be replaced and done so swiftly.

Yesterday is gone, but tomorrow never dies for those who are prepared to seize the moment!

Marc Weiss-
April 09, 2009

The following article was written in 2001 after 9/11.  I updated some wording to reflect this last economic disaster but I was amazed how pertinent and meaningful the message is for surviving this latest economic disaster.

Déjà vu All Over Again

The events of September 11 underscored the globalization that has occurred in the world. The enemy strikes when we least expect it and then retreats, invisible until the next strike.

Many businesses are faced with the same globalization effects in the Great Recession of 2009 . Retailers, manufacturers, construction moguls, Wall Street Wonks and professionals operated  businesses assuming that they were insulated from the effects of what happens elsewhere in the world and their business success would go on forever. Then comes the sudden attack when the world turns upside down. You feel victimized and vulnerable because everything you built is now threatened and none of it was your fault.

The United States and the world essentially shut down while we stabilized the situation, recovered from the disaster and developed a new strategy going forward. You need to take a similar approach as the economy enters recession, people lose jobs and spendable income ends up in savings accounts instead of new goods or  services. It will not be business as usual which means that you need to:

§  Stabilize the situation: Work with existing customers to assure they are committed to your business.  Customers you counted on before are reassessing their own situation.

§  Recover from the disaster:  Develop SWAT teams to find new ways to generate sales and reduce expenses. Even though the disaster was not your fault, don’t sit back assuming YOUR recovery is not within your control!

§  Develop a new Strategy: Reassess your markets, products, people and growth. Develop new objectives and direction for the company if that is required. Down size if necessary. Diversify if warranted. Study the situation and figure out how the environment has changed and refocus efforts, energy and assets to achieve greater success.

Sometimes survival is the first step to success but survival is never an end in itself. This country learned a lot in the hours and days after the attacks. Those lessons need to be understood in our personal lives for our security and in our business lives for our well being. We are in control if we take control. We have learned about teamwork, commitment and unity. The organization is going to change if it is to survive. Don’t act like a victim. Our future lies in our resolve, resilience and productivity.

“Sometimes I get the feeling the whole world is against me, but deep down I know that can’t be true. Some of the smaller countries are neutral.”     Robert Orben

If there is one word that I hear over and over again since the “great recession” started, it is VALUE. Value was always important but not nearly as much as when trying to convince frugal, crafty shoppers to invest in your product.  I do not use the word “invest” lightly here since value implies a return expected on that investment. As a retailer, you are responsible for establishing the value proposition as part of your brand image. Very possibly your brand image has revolved around what is new in fashion.  Ask yourself, “Is that still working for me now?”

For those of you who answered that question with a resounding yes, STOP. No need to read further.  Find a reliable host or blogging account and begin your own blog to share your wisdom.  Please include a link to this blog as well!  For those of you whose answer was somewhat shy of shouting out YES, read on.

We have had many recessions before this one and there have been some lessons learned in those. This blog will serve the purpose to make you think in some different ways and consider some new approaches for your business.  None of these are proven to work every time, in every case or in isolation.  Finding the right mix for your store is your challenge. Just keep in mind that if what you are doing now is NOT working, you must search for alternatives that will work.

One observation is that people are still searching to fill their dreams but their dreams become more realistic and practical. Instead of a new dress, they might buy a new sash to change the look. Instead of a new pair of shoes for work and one for the party afterwards, they might look for a pair that can fill both purposes. Fashions tend to change at a slower pace during a recession which means that clients may be able to wear an item for a longer length of time and that means that quality construction is more important. Even if that quality costs a little more, the value is there. Value might come from being closer and more convenient which saves time, gas, wear and tear in addition to hassle.  Value might come from promotions where a purchase ALSO buys admission to an event. (Remember, people have stepped their entertainment down a notch so an added event becomes value added!)  Certainly markdowns add to the value but at great expense to the retailer and also the brand image for upscale retailers. Some, like Louis Vuitton, have determined that their value comes by refusing to cut price thus protecting the exclusivity to only those people who feel they have not been tainted by the great recession. The point here is that every retailer should be re-evaluating his or her business to determine how to offer more value, promote that value proposition and establish that value proposition into the brand image.

Being from Cleveland, I always pay attention to Allstate commercials. The reason is that they star Dennis Haysbert who also played Pedro Cerrano in “Major League”, the classic fiction movie about the Cleveland Indians winning the World Series in my lifetime. (For non-Clevelanders, he also played president Palmer on “24”.)  One recent commercial reminds viewers that Allstate has been in business for 78 years and has seen no less than 12 recessions. The observation is that “after the fears subside, a funny thing happens: People start enjoying the small things in life. It’s back to basics and the basics are good.”  This whole recession is, in great part, about getting back to basics. Your job as a retailer is to define how you fit into the basic lifestyle of every prospective customer and your target audience.