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Exploring the future of retail

What’s In A Name? When It Comes To Coining Retail Holidays, Not Much…Anymore

Three things have become strikingly apparent during the start to the 2016 Holiday season:

  • Retail sales are off to a very good start, driven by strong promotions and a big influence from online sales. 154 million shoppers were reported to have gone shopping over the Black Friday weekend, spending an average of $289. Rough math suggests around $44 billion in sales to kick off the season. So yes, consumers are spending money. The big question is where are they spending it? While stores remain a big source for revenue for the Black Friday shopping day, online is growing at a faster rate both in terms of sales and physical traffic.bf
  • Online, driven by growth in mobile, continues to lead the charge, at the expense of brick and mortar sales. Online accounted for $3.3 billion on Black Friday alone and an estimated $5.27 billion over the weekend, according to the Adobe Digital Index, an 18% growth rate and accounting for roughly 12% of overall sales. Some estimates reported store traffic down more than 10% year over year. And while it is true that a sale is a sale, pure play retailers like Amazon are more likely to take disproportionate market share over traditional brick and mortar retailers. Mobile is beginning to emerge as a significant shopping driver, with nearly 36% those online sales coming through a mobile platform while Walmart.com reports 60% of its online traffic emanating from mobile.
  • Tags like Black Friday and Cyber Monday have lost practically all meaning as Holiday sales began earlier and the lines between on and off line are now forever blurred.  Black Friday has become less important as a shopping day and Cyber sales clearly began well before Monday. While my inbox is cluttered with Cyber Monday deals, most of those began well before Thanksgiving and will extend well into December.

As Shakespeare suggests, “a rose by any other name would smell as sweet” and revenue is revenue, no matter which day it comes in. An encouraging social trend is that Thanksgiving Day sales seem to have retreated somewhat as more retailers and shopping centers elected to stay closed. Yes, customers had ample cyber opportunities, apparently stealthily shopping by mobile during their Thanksgiving feast.

In all, it is good news for retailers in general, who will now be hard pressed to keep up the momentum, and deals, throughout the Holiday season.  As always, it remains to be seen whether pushing Holiday sales earlier actually grows overall retail sales or simply creates a greater trough until the next big event—Super Saturday falls on December 17th this year and procrastinators will get a Saturday prior to a Sunday Christmas this year.

Neil Stern for Forbes

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A Look Forward To Food Retail In 2017: What To Look Out For?

I recently had the privilege to speak at PLMA Live breakfast session at the Private Label Manufacturing Association Conference held in Chicago on November 15th. PLMA is the world’s largest trade organization dedicated to store brands. The organization has grown and is thriving as private brands are becoming farther reaching and more sophisticated.

The key question, and topic, was a simple one: What should retailers be focusing on in 2017? The answer is always more complicated. I identified three big macro trends and then put a further focus on disruptive formats that are changing the face of retail.

The macro trends were as follows:

• An unprecedented election and an uncertain future. The election captivated American consumers and the result was an unexpected one. What does it mean for retail? Hard to say or even speculate at this point other than Americans voting for change which leads to greater uncertainty. Both parties signaled a shift in attitudes towards greater regulations in trade and perhaps limiting global trade in favor of domestic production. The impact to retail and to consumers could be huge if restrictive tariffs are placed on products with a reliance on domestic sourcing. While manufacturing in the U.S. is a noble cause, we lack the infrastructure, skilled labor and cost competitiveness to effectively replace global sourcing, certainly in the short to intermediate future.

• Deflation is crippling food retailers. We are seeing deflation across the board impact multiple food categories with meat and dairy impacted the most. Retailers are not able to raise prices and are seeing their comp store numbers hit as they need to sell more units just to break even. There is no relief in sight which will further pressure results.

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M&A a Continued Force. Last year saw significant M&A activity with the merger of Ahold and Delhaize, Kroger acquiring Roundy’s, Walmart acquiring Jet.com and private equity scooping up Save A Lot out of SuperValu. Expect more of the same in 2017 as stagnant growth will lead to further consolidation as retailers attempt to gain more scale.

• Format Disruption Taking Many Paths. From a format standpoint, I see the following trends shaping up:

  • Fresh and Natural Stores Find New Paths to Growth. Whole Foods will be expanding its 365 by Whole Foods format as it looks for more cost-effective ways to grow. Formats like Sprouts and Fresh Thyme will continue their expansion as this category rounds into shape.
  • Foodservice continues to capture share of stomach. Overall food dollars are now being evenly split between food retail and food away from home. The rise of fast casual will gain share from both restaurants and food retail.
  • The Discounters are Coming. Aldi is making an aggressive West Coast push as Lidl readies plans to take the U.S. by storm. Better products, better store environments, enhanced service and marketing are taking this format from a niche player to a force to be reckoned with.
  • Omnichannel Explosion. Amazon will continue its multi-pronged attack on food retail with Amazon Fresh, Prime Now and expanding subscription services. Mainstream retailers like Kroger are fighting back using their stores as pick up point and a literal blizzard of third party companies are working on the last mile of delivery, meal services and the like.

If it sounds like it’s shaping up to be a crazy and competitive year, I won’t be surprised. If anything, the pace of change will further accelerate.

Neil Stern for Forbes

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What’s Your Vote? Is the Presidential Election Impacting Retail Sales?

It may be hard to believe that the last time the Chicago Cubs won the world series, this Presidential election hadn’t started yet. What may be even more unbelievable, is that despite how it may seem, this election cycle hasn’t been anywhere close to 108 years and instead, has been a memorable 596 days. Per more than 80 of the chief executives at some of the United States’ largest corporations, the events of the past 596 days have resulted in American’s taking less cruises, holding off on buying RV’s, spending less on cars and car repairs, delaying buying mattresses and putting off purchases on home appliances.  h

Additionally, they are supposedly eating less donuts, fried chicken, Outback Steakhouse, chicken wings, late night food at Taco Bell, KFC and Pizza Hut, and their feelings via. McDonalds (Forbes.com). While 2016’s race has certainly been unique, this perception that presidential elections have a negative impact on consumer spending, is not.

Anecdotally, this theory seems intuitive. Booms and busts in retail sales often seem to reflect the sentiments of the country at large and it would make sense if discretional spending takes a hit in the weeks of uncertainty leading up to election day, but can we go so far as to blame politics for less late-night binge eating and depressed RV sales? A flash poll conducted by the National Retail Federation found that over 25% of consumers reported the upcoming election having affected their spending, and 43% indicating that they will be more cautious about spending because of uncertainty this election season (fortune.com),  and this uncertainty is precisely what will have a lasting effect on retail sales past election day.

At its core, this election is the choice between the known and the unknown. Should the establishment candidate win, retail spending will likely stabilize as the market becomes more confident in knowing what to expect. On the other hand, should the outsider claim victory, we may be in for months of volatility. Either way, the long-term effects will be hard to quantify.

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The Customer Makes the Difference

In the new world of retail, customers are not only deciding retailers’ success, they are becoming part of it. Not only do they want to be served well, they want to be in the driver’s seat and be part of the creation of the product. They believe that the easiest way to fully understand them is just to ask. Retail is no longer just “customer-facing”; it is about inventing tomorrow together with the customers.

So what if the next retail revolution is the customer?

Customer driven retail reminds us that retail is about making products available that will make customers lives better and happier. Several cases featured in Retail Innovations 11 demonstrate this key driver of innovation while showcasing aspects of another key driver: technology.

Frank & Oak, a fashion retailer for men which began as a pure-play retailer in Canada, uses its store layout, retail real-estate location strategy, community and technology to satisfy and engage loyal customers. chicagoseedstore-1

–As part of its real-estate strategy, Frank & Oak invited customers to vote on where its next stores should open. Votes were cast through the purchase of gift cards and based on feedback, the retailer opened two locations, one in Boston and one in Chicago.

–Frank & Oak’s ambassador program, a private network of customers across North America, helps ensure innovation within the merchandise mix by enabling its online community to provide feedback on existing products and new merchandise.

–The Toronto flagship store is a multi-use space showcasing products and engaging customers. The space also serves as a bar offering whiskey tastings for loyal customers on occasion.

In India, Creyate is a platform that functions as a 3D design studio, enabling customers to use advanced technology to create, personalize and customize garments that fit them perfectly. Creyate extends beyond the traditional techniques of customization and personalization, allowing customers to create their own garments on iMacs, using 3D technology to create a rendering of the item where it can be customized with the individual’s choices. Creyate customers can access their designs online and in-store. creyate-1

–Customers at Creyate enjoy a QR code based shopping experience. QR codes contain fabric choices and design options, which appear on screen. Stores are also equipped with a virtual wall mirror / digital screen integrating Kinect-based, augmented reality, enabling customers to try clothing on virtually, making the experience of customization feel “real”.

–Designs are mixed and matched at Creyate, providing a curated collection of fabric and design details, allowing for 100,000 unique products.

–Specialists help customers choose designs that suit them and take measurements so the product is a perfect fit. They also tailor recommendations and facilitate a unique and memorable customer experience. They consult on specific garments and complete wardrobe solutions and are also available for home visits.

While technology remains a major driver for innovation as retailers seek to understand the customer, it must be usefully applied to serve a consumer need. An understanding of how people live, dream and shop is at the heart of customer driven innovation.

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Store Employees Are Thankful This Year, and So Are Shoppers

Until last year, retailer priorities over the Thanksgiving holiday was to squeeze out every penny out of the holiday shopper, leaving sales associates and other retail employees to cut short their holiday time to open doors and cater to early bargain hunters. From a pragmatic business perspective, opening doors earlier can be a zero sum game; yes, it might boost early blogsales but in the end, it simply extends the season without meaningful revenue gains and at a cost to employee morale.

Several stores have decided to close their doors again this year on Thanksgiving Day, with employees in mind, along with the goal to improve efforts to boost morale among the company and front-line workers. “Over the past few years, we’ve heard a great deal of moaning and groaning by employees who have to come into work while their family is at home, enjoying Thanksgiving,” Avila, founding of HH Gregg Center for Professional Selling. “People simply don’t want to walk away from young children or older relatives on what is supposed to be a very special day in our country.”

As year’s go by, so does the increasing influence of online. Retailers still have an opportunity to grab sales in other modes. Online gives retailers a place to redeploy their assets and fire up their offering. Shoppers can log on to retail websites at any time of day and get their Thanksgiving or Black Friday fix with the push of a button (and no lines!). Also, retailers can capitalize on shifting retail dollars toward web specials and marketing sales earlier in the week, while also offering in-store promotions following the holiday and into the weekend.

Last year, REI had their #OptOutside initiative which is back to strike again this holiday for both Thanksgiving and Black Friday, encouraging shoppers torei go outdoors. The promotion and store closure was wellreceived and appreciated by customers. This year other retailers like Costco, American Girl, Ikea, Menards, Lowe’s, Home Depot, Neiman Marcus, Petsmart and Publix are following suit.

Additionally, a number of malls are also following suit including the biggest of them all, Mall of America, as well as 72 of the 89 malls operated by CBL & Associates Properties. Although the malls will be closed, retailers inside and anchors, will have the option to open. Regardless of this, most of the stores will likely remain closed and MOA has reported that up to 14,000 employees will be able to spend the holiday with their friends and family.

We are hoping that the Black Friday insanity (earlier hours, bigger discounts) might be subsiding and retailers can go back to sweating out their Holiday sales through rationalized store hours and a bigger on-line presence.

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Malls Owning Retailers – The Beginning of a Trend?

The recent sale of Aeropostale assets to General Growth Properties and Simon Property Group has created a lot of head scratching. Some have suggested this is the start of a new trend.  We think not.  This was a unique set of circumstances involving the top mall operators in the US.  Most don’t have the resources of GGP and Simon.  Plus, with changing retail dynamics mall operators need to stay focused on transforming their properties to operate in an environment of increasedaero1 on-lineshopping and fewer anchor department stores.  Buying retailers (troubled or not) consumes scarce capital and management attention that needs to focused on ensuring that malls remain a viable long-term business model.

So what’s in it for GGP and Simon?  Clearly in the short term it’s a way to keep rent payments coming in and maintain control over locations in their prime malls.  (Over half the US doors to remain open are in new owners’ locations).

But is there value in the Aeropostale franchise?  The implied premise is that the business can be shrunk to viability.  Yet drastically downsizing a business (in this case from 800 stores before bankruptcy 400 stores) to restore profitability has seldom been a recipe for long-term success – companies cannot shed costs and overhead fast enough to get on a firm footing.

While we may see transactions like this in the future, expect them to be few and far between.

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Target’s Cartweel App “Perks” Up a Bit

How Cartwheel Works

Cartwheel is Target’s 3-year-old mobile app that offers shoppers hundreds of savings on products and categories of their choosing. Participating Cartwheel shoppers—of whom there are 27 million—can select from a list of offers they’d like to add to their shopper profile. When they scan their Cartwheel barcode from a mobile device at store checkout, discounts apply to eligible items in their basket. Over time, customers earn “badges” that open up special offers and deeper discounts based on their shopping behavior. The app tracks a customer’s savings and aggregates users’ total savings—which add up to more than $600 million as of September 2016—over time.

“We think of Cartwheel as a way of taking what, for many people, had been a process of clipping the paper coupon from a circular and bringing it to the store, and integrating that experience into one digital, seamless app on your phone,” said Eddie Baeb, a spokesperson for Target. Image result for target updates cartwheel

In turn, Target is able to collect deep data on their customers’ purchases and behaviors to help them truly understand preferences and shopping habits. And not only is this data valuable to Target, it’s sought out by CPG companies and other vendors who sell their products through the retailer.

“What we have packaged is access to our guests,” said Kristi Argyilan, Target’s senior VP of media and guest engagement. “We use first-party data for a very active shopper who has a ring of influence—there are a lot of marketers that would love the opportunity to be able to place ads in front of those consumers,” she said.

“Perks” Pilots in 4 Markets

Last week the company unveiled a new loyalty rewards program as part of an update to its Cartwheel app. “Perks” is piloting in four markets – San Diego, Denver, Houston and St. Louis – chosen for either high or low adoption of app usage. “Perks” rewards Cartwheel shoppers with 10 points for every $1 they spend in stores. Once customers reach 5,000 points, they are eligible to choose a free rewards item from a list of 25 products designed to appeal to them based on shopping behavior. In other words, once a shopper spends $500, they earn a $10-20 “freebie,” be it a pair of shades, a yoga mat or laundry detergent.

Sounds like a retailer-customer win-win, right? Perhaps not so much for guests who favor shopping online given that Cartwheel savings are redeemable for purchases made in-store only. And while Target has hinted that Cartwheel—and inevitably “Perks” assuming a successful pilot test—may soon be made available for online purchases, the retailer must move faster should it wish to stay competitive in the dog fight that is today’s online marketplace.

We’ll give the Minneapolis-based retailer credit for continuing to collect and leverage data to effectively target customers with a curated promotional and rewards offering. But if Target wants to protect share from behemoth Amazon and differentiate from dangerous fellow mass retailers, it should get serious about offering a channel agnostic loyalty program that satisfies coupon-driven and rewards-motivated shoppers. And fast.

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Technology and Fashion, Syncing up at Fashion Week

Just in time for week two of NYFW, Google and rewardStyle’s consumer facing platform LIKEtoKNOW.it, announced a new partnership which will make street style shoppable. Rachel Arthur for Forbes outlined the details of what this would entail for tb1he consumer, explaining how when searching for clothing via the search engine, a “carousel will show up at the top of Google results showcasing images… based on relevant content, or metadata, found in the LIKEtoKNOW.it database.” Selecting an image then launches a complete shopping experience allowing consumers to purchase from looks found on social media in real time, via the search engine.

While this announcement is certainly intriguing, it is far from being the only example of how technology and retail are syncing up this Fashion Week and it’s likely that some of what emerges this month will have a lasting effect on the wider world of retail. Specifically, we should expect to see more and more retailers embracing technology and the ways in which it can be incorporated into the customer experience to encourage interaction and to allow retail businesses to reach a larger set of consumers.

Rebecca Minkoff, for instance, integrated tech into her show on Saturday and expanded the audience beyond the lucky 350 or so guests there in person, by creating a 360 live experience for those of us at home. Additionally, the designer partnered with the app Zeekit, to allow users to upload an image of themselves and virtually “try on” the clothes in the new line, scaled to their size (TechCrunch). Historically, fashion has been anything but fast, requiring shoppersb2 to wait months before runway styles hit stores, yet now, innovations in virtual reality satisfy the consumer craving for instant gratification in a personally unique way.

Tech and fashion also teamed up at a pair of Samsung sponsored shows put on by New York Fashion Week’s event production company FTL Moda. The shows featured Samsung’s “magic mirror” displays transforming a normal mirror into a wonderland for consumers and a valuable tool for retailers. While smart mirrors aren’t new, Samsung’s ML55E mirror combines the “power of digital signage with the visual clarity of a standard mirror” by embedding LCD screen layers into the glass. They encourage a dynamic shopping experience; retaining the traditional functionality of a mirror while simultaneously introducing an element of shock and awe. For the retailer, having the ability to highlight certain products, show product color variations and recommend items complementary to what the shopper is trying on without requiring staff intervention, could potentially drive incremental sales and more efficient use of personnel.

As Fashion Week moves around the world, we should continue to see technology on display as much as design; and then hopefully in stores and devices before we are on to the next big thing.

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Are Your Stores Ready for Online Returns?

Home Depot recently reported that 90% of online order returns are received at the stores.  As online sales continue to grow so will returns of online orders to the stores as the Home Depot experience highlights.  If not properly planned for, these returns have the potential to depress overall margins, degrade the brand image and increase customer frgkchartjustration.

Effective planning for online order returns needs to involve more than just store ops and supply chain.  It needs to include buyers, planners, allocators, and visual merchandisers, and be part of the merchandise financial planning process.  5 key factors can help minimize the negative impacts of online order returns on margins, inventory, brand and customer experience.

  1. Common item numbers/UPC’s for on-line and brick and mortar SKU’s – With more and more returned items showing up in the store, and potentially offered for sale, it’s imperative to know what’s selling and for how much – the use of ‘dummy’ SKU’s in the store just won’t give the detail and transparency into what’s selling and what’s not and may lead to inordinate amounts of trapped inventory
  2. Fact based up-to-date assumptions on returns % and realized margins in the merchandise planning process – Historical in-store return rates will not reflect current customer behavior.  Social media is full of stories of shoppers buying multiple items, not sure of what they really wanted, and then returning the unwanted items.  Return rates need to be monitored and planning assumptions updated continuously, potentially at lower level in the merchandise hierarchy than historically managed
  3. Straightforward in-store return procedures for online orders – As part of the overall shopping experience, a returns process that respects the customer and is handled quickly provides another opportunity to build and reinforce a long-term relationship.  Telling her that the return can only be processed in a certain location or by a certain person, or requiring extraordinary documentation creates a transactional mindset and does little to build long-term loyalty.
  4. Detailed policies for what returns stay in the store, and what gets moved out, back to the DC – With a much larger assortment online there is a high chance that returned items will not be part of the regular store assortment, or even relevant to the local market.  Irrelevant merchandise raises inventory costs, increases markdowns and takes up space.  Yet at the same time the costs to ship an item to another location can represent a significant expense.   A careful balance needs to be stuck and managed at the item/style level in many cases.
  5. Clear merchandising policies for returned items that stay in the store – Just putting everything into a clearance area conditions customers to hunt for discounts first and diminishes the visual presentation and degrades the brand.  Returned merchandise needs to seamlessly blend into the overall visual display.  Markdown cadences need to be adhered to and potentially accelerated when an item is not in the regular assortment.

Returns represents an important opportunity to interact and build a relationship with customers.  As online sales and returns grows, proper planning will be key to maintaining the customer relationship, company profitability and brand image.

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Grooming the Next Generation

Recent shakeups in the men’s shaving landscape point to the changing behavior and expectations of today’s more style-focused male consumers

Men’s Subscription Shaving Models Gain Ground

On the heels of Unilever’s announcement that it would acquire the subscription-based men’s shaving service Dollar Shave Club for $1 billion, Target has rolled out a chain-wide partnership with New York-based Harry’s, another subscription-based ecommerce startup that offers German-designed razors and other grooming products aimed at the next generation of male consumers. Altogether, the two subscription services boast a Millennial-driven subscriber base of more than 5 million consumers.

Does Target’s Partnership with Harry’s Have the Makings of a Perfect Shave?

Harry’s can expect the partnership with Target to take the brand offline, introducing the online pure player to a new audience of customers across Target’s 1,800 U.S. store footprint.

The exclusive addition of Harry’s to Target differentiates the company’s male grooming department, upgrading the assortment and providing a sophistication to entice a more style-driven young male consumer.

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Endcap at Target Showcasing Giant Harry’s Razor in Iconic Orange

Endcap at Target Showcasing Giant Harry’s Razor in Iconic Orange

Describing the Target collaboration, Harry’s co-founder and co-CEO Jeff Raider said, “With companies like Harry’s, the men’s grooming industry is changing quickly. This evolution is largely driven by the way men are shopping these days. They’re extremely selective, buying online more than ever before, and also care more about expressing their personal style than past generations.”

Today’s Guys are Prioritizing their Style

Our 2016 multinational shopper study of consumers in 11 countries across North and South America, Europe and Australia revealed that nearly 1 in 2 (47%) Millennial men 18-34 say they enjoy shopping for fashionable products, a sizable increase compared to 31% of men over the age of 35 who say the same.  In the U.S. alone, Millennial guys are even more interested in style and fashion, with 54% indicating they like shopping for fashion items vs. about 44% of American men over 35 years old. The next generation of men are looking to brands and retailers to fulfill a need to express their personal style, including their grooming products and rituals. There’s been a rise in salon services tailored specifically to men, as evidenced by the expansion of concepts such as the 23-unit Texas-based Boardroom Salon for Men, founded in 2004 and offering services, such as shave, hand and foot grooming exclusively for men.

What does the Future Hold for Men’s Grooming?

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Harry’s Occupies about Four Feet of Branded Shelf Space at Target

Harry’s Occupies about Four Feet of Branded Shelf Space at Target

Men’s grooming was considered an emerging global health and beauty category as recently as a decade ago, and the market more than doubled in the past 10 years. Recent figures suggest the global men’s grooming market will more than double once again in absolute value by 2025, soaring to over $90 billion and outpacing the projected growth of other major personal care segments, such as fragrance, haircare, and skincare.

We commend Target for their forward-looking partnership with Harry’s that aims to attract a new consumer who is increasingly looking for an alternative to not only pricey traditional razors in the market but better-designed products that reflect a more discerning and style-focused consumer palate.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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