Customers are Talking. Are Retail Execs Listening?

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RETAILWIRE DISCUSSION TOPIC

Engaging in Digital Consumer Conversations – 1/30/08
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TOPIC SUMMARY:

With countless digital consumer conversations increasingly swaying opinions across the world, the most successful companies will be those that “merge traditional and digital consumer data and integrate them into their everyday operations.” That’s the conclusion of a report by PricewaterhouseCoopers, How consumer conversation will transform business.However, the report also found that although executives recognize the potential of digital consumer conversations, they still have difficulty interpreting and reacting to them.

Discussion question: Do you also find that executives are having “difficulty interpreting and reacting” to the opportunity around digital conversations? How do you think companies should approach exploring the value behind digital conversations?

My post:

Executives in many (most?) companies don’t take the time to fully understand social media – what the conversations mean, their individual and aggregate relevance, the potential ROI from this arena, etc.  They tend to fall back on what they know and interpret social media data through the filter of traditional marketing and consumer data gathering methods.  With social media driving more and more consumer opinion and behavior, executives must engage those with social media expertise.  They need to determine how much weight to give social media in strategic planning and decision making.  It is not too late to attack this, but it soon may be.

 Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

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GO TO THE FULL STORY AND DISCUSSION:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12726   

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Another Good Move by J.C. Penney’s Ullman

J.C. Penney plans consolidation, up to 200 layoffs

12:18 AM CST on Thursday, January 31, 2008

In today’s Wall Street Journal article, Myron Ullman, Chairman of JC Penney provides excellent insight into today’s retail climate.  He also provides clues for any retailer striving to not only survive, but thrive in the months and years to come.  He’s done a masterful job, in my opinion, converting a once-stodgy and irrelevant retailer into a successful multi-channel retail force.  Unlike many retailers, he is directing prudent belt-tightening that does not impact the long term growth strategies based on innovation and relevance for today’s (and tomorrow’s) consumer.  Well done!

Read the Article Now

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

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Wal-Mart to the Rescue?

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RETAILWIRE DISCUSSION TOPIC

Economic Downturn? Wal-Mart to the Rescue– 1/30/08
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TOPIC SUMMARY:

While much of the retail industry is hoping that Congress will pass a stimulus package that will get consumers shopping again, Wal-Mart is looking to jumpstart spending with a price rollback of 10 to 30 percent on thousands of items in its stores and on its website.

Discussion questions: How effective will Wal-Mart’s latest rollback public relations effort be in driving traffic to its stores and grabbing market share in the short and longer term? What will be the response from Wal-Mart’s competitors? Can they handle a prolonged price war with Wal-Mart?

My post:

During market downturns, companies with strong cash reserves invest heavily in building market share.  This is what Wal-Mart is doing, and capitalizing on its leadership as a “low price leader.”  The move is smart, timely, and most importantly it is congruent with their vision and mission.  Weaker competitors will suffer more than stronger ones, but Wal-Mart’s move will certainly challenge all purveyors of consumer staples – as they always have.

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

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GO TO THE FULL STORY AND DISCUSSION:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12723  

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Is ‘Martha Fatigue’ Possible at Macy’s?

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Destination: Wedding – Martha Stewart Collection with Wedgwood Launches in Macy’s Stores – 1/29/08
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For those who love all things Martha Stewart, you will be thrilled to know that she has partnered with Macy’s and Wedgwood to bring Martha-branded china, crystal & flatware to a Macy’s near you (and online).  From this morning’s press release:

NEW YORK–(BUSINESS WIRE)–Jan. 29, 2008–Shopping for those special items to last a lifetime will be a little easier for nuptial-bound couples this spring with the launch of the Martha Stewart Collection with Wedgwood exclusively at Macy’s. This new tabletop line, featuring 10 fine bone china patterns, six crystal stemware patterns, and six stainless steel flatware patterns, is now available at Macy’s (NYSE:M) stores, macys.com and macysweddingchannel.com. 

“I have always been an avid collector of fine china, crystal and silver, and my personal collection includes many Wedgwood pieces I am very proud to own. Our line with Wedgwood offers a range of beautiful and timeless pieces that can be collected and enjoyed for years to come,” said Martha Stewart, Founder of MSLO. 

I absolutely applaud Macy’s strategy of negotiating exclusives with mass-appeal designers like Martha Stewart and Tommy Hilfiger, to name just two.  Target has certainly shown us the power of the excusive deals which positioned them as relevant arbiters of trends – even in a discount environment.  Of course, Macy’s is not Target and is supposedly courting an aspirational customer, including those who may now be shopping at Target.

Macy’s is seeking to make department stores relevant again and this is one of many well-considered strategies they are employing, as well as effectively positioning their own brands (INC, Hotel Collection, etc.), improving the store environment, etc.  

Here’s my question:  Will the consumer (particularly the aspirational customer) ever tire of the next great Martha collection?  

I was shopping in my local Macy’s in December.  I was amazed by the percent of the housewares department devoted to the Martha Stewart Collection.  I did think the Collection was quite good – nice product, effective packaging, good value and quality.  I noticed also the nice chunk of real estate in bedding and furniture devoted to the exclusive Martha products.  And now, the table top department will likely carve out an equally impressive space for the Martha/Wedgwood product.  

My concern is that like anything that seems to be working, stores often find a way to beat it to death. In this case by devoting potentially too much space and crowding out and marginalizing other options. 

The whole idea of “exclusive” in aspirational product includes some level of scarcity.  No scarcity here – you and your entire neighborhood can have the same products in your kitchen (and bath and more).  The mass customer doesn’t mind as much, but the aspirational customers (which Macy’s is trying to court) do care.  They want to feel like what they buy for their homes is a signature of their taste and personality.  Make it look too huge, and this customer will look elsewhere for her kitchen gadget, saucepan, bedding, or china.

A second point particular to the housewares product was that the brand image presented here through packaging, signing and presentation clearly screamed “gift”.  This might help explain the size of the presentation in December, but it makes me concerned for February and beyond.  This gift-oriented packaging and presentation will not play well to customers wanting to pick up a new sauce pan for themselves.

Please, Macy’s.  As you score more of these incredible exclusive deals (i.e. the recent Tommy Hilfiger coup), keep your aspirational customer in mind.  We want the products – but we want them to feel special.  Don’t overdo the presentation or the marketing. 

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

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Urban Outfitters Operating Garden Centers?

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RETAILWIRE DISCUSSION TOPIC

Urban Outfitters Buys a Garden Center – 1/24/08
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TOPIC SUMMARY:

Urban Outfitters Inc. last week announced plans to buy J. Franklin Styer Nurseries Inc., a well-known operator of garden centers in the Philadelphia metropolitan area. The acquisition will drive the launch of the company’s newest green concept, Terrain.

The goal of Terrain is “to transform the local garden center into an experience that celebrates the beauty and abundance of nature while offering an eclectic mix of garden-inspired products tailored for the contemporary customer,” according to a company press release.

What makes the purchase interesting is not only Urban’s launching of a new concept, but its decision to expand beyond retail into a service business. Besides selling mulch, silk orchids, garden books and tools in a comfortable atmosphere that includes a leather sofa and a coffee bar serving upscale La Colombe coffee, Terrain will offer landscape design and construction.

Discussion question: What do you think of the potential of a contemporary garden center chain such as Terrain? What most impresses you about the Urban Outfitters and Anthropologie concepts and how do you think those skills translate to operating a garden center? What are the risks of Urban moving into the services business?

My post:

I am intrigued by Urban going after this business.  My first reaction is cautionary:  Is this part of the company’s core competencies?  If so, terrific – I believe the core customer is certainly complementary to their Urban, Anthropologie, and Free People customer base.   If not, I am concerned about a drain of mind share and resources from their core business at a time when apparel in general has been difficult and their concepts are, in general, thriving due to their unique vibe and eclectic mix of cool environments and great product.  I want to see them continue to strengthen their core businesses.  

My second reaction is excitement.  The garden center business is an incredible opportunity for an organization that wants, as they claim, to fill the void between the small local players and Home Depot.  Just having finished an extensive landscaping project, my wife and I would have loved the opportunity to go to a “contemporary garden center.”  Maybe we’ll have the chance in the near future!

 Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

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GO TO THE FULL STORY AND DISCUSSION:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12721  

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How the Downturn Will Affect High-End Retail

I was asked today to comment for a story on the impact of the economic downturn on the luxury market.  I focused my comments on luxury brands and retailers.

I view the current situation for luxury brands and retailers as a “pause” in the long term growth trend of the luxury segment domestically and worldwide.

• I am optimistic that the financial and housing markets will work through the current situation and we will see a return to confidence, but with a more reasonable expectation of growth.
• The consumer impact is likely to be mostly on the aspirational buyer segment in the short term.
• The high-end will continue to spend.  Their events, functions, etc., will continue and they will buy what they need to look the part.
• I think we’ll see a moderation of conspicuously wealthy looks as people feel less comfortable “looking wealthy” when so many are struggling.

Today’s situation calls for luxury brands and retailers to focus intensely on

• Talent:  acquisition, development and retention
• Product:  design and development
• Marketing:  refining the message and exploring web 2.0 options
• Customer Care:  building the relationship with every interaction

The danger is for companies focused on short term results.  They are likely to slash budgets for talent management, product development, marketing, and customer care.

Companies must, of course, plan for less growth in the short term, closely control inventory levels, and hold or reduce all non-essential spending.  However, the companies with a long-term view will continue to invest in the critical areas of talent, product, marketing, and customer care.  These companies will emerge from the current “pause” with fiercely loyal employees and customer champions.

Mike Osorio, your Dare to be Contagious! strategist   www.OsorioGroup.com  

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Shopping Behavior Survey Highlights

2007 National Shopping Behavior Study

 A survey on shoppers’ behavior during 2007, conducted by KPMG and Wiese Research Associates for the Gordman Group has some important highlights to consider: 

1.       Retailers who are gaining share-of-wallet are winning by being in-stock with the right merchandise for their customers. Price continues to be a very weak second to selection. 

Retailers who take the time to truly learn their customers’ needs and deliver quality products, in stock when the customer wants them, will always do well of course.  But particularly in apparel, where the offer has been lacking, selection is certainly key vs. price.  My wife would have paid a lot for a warm sweater that wasn’t a ¾ sleeve, cropped cardigan this holiday season. 

2.       88% of consumers are very concerned about the environment and are willing to pay for environmentally friendly products 

If sustainable, eco-friendly, environmentally responsible, etc., are core values for you brand or company, it will clearly benefit you to emphasize this in all internal and external marketing.  However, if these are not truly part of your company values don’t pretend they are or you will be easily found out and exposed by today’s social media-using consumer.  I am concerned that “me-too” marketing may dilute the real potential for this trend to lead to real change in how we protect our environment if it leads to consumer fatigue.  Keep it real. 

3.       52% of consumers checked the country of origin before making a purchase and 31% did not buy 

I believe that this is a temporary situation because the countries of concern, especially China, will certainly do whatever they need to do to reverse these concerns over time.  In the short term, companies with valid “local” pedigrees should prosper.  Again, retailers & brands need to be careful not to overdo the marketing lest the message become lost too soon. 

4.       “Fit” is the primary driver of apparel purchase; designer/brand name are unimportant 

This is no surprise to me, based both on my unscientific experiences with the women in my life as well as my experience as a department store executive.  The cache of a particular label for apparel has been slipping for awhile except for the most exclusive brands like Hermes, Chanel, etc.  Apparel manufacturers and retailers experiencing the most success are providing good design at reasonable prices, but even then, the woman is rarely going to buy something that doesn’t have a great fit.  As our nation has grown heavier, fit becomes a more difficult variable for manufacturers to deal with.  Those that can find a solution to the fit question, and successfully market that solution will find great success. 

5.       Retailers’ advertising had little influence on shopping behavior or timing of purchase 

This is perhaps the most difficult fact for retailers to respond to.  If the customer isn’t coming in because of my ads, why should I advertise?  First, remember that a survey is only as good as the question.  The customers may say that ads did not bring them in, but the ads may still be effective at driving behavior even if the customer doesn’t realize the affect.  Second, the customer may only think of traditional ads (TV/radio/print) when answering the question.  The fact is that “advertising” now must include all on-line marketing including social media that may not even be directly created by the retailer, and these are driving more and more shopping behaviors.  The answer is not to stop advertising, but rather look at the totality of your marketing efforts and measure ROI wherever possible. 

Mike Osorio, your Dare to be Contagious! strategist www.OsorioGroup.com

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Click here to read the Executive Summary. (Clicking here will download a PowerPoint presentation from the Gordman Group.)

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For the love of a Louis Vuitton bag…

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RETAILWIRE DISCUSSION TOPIC

Women Wear Their Wealth on Their Arms – 1/24/08
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TOPIC SUMMARY:

High tickets apparently indicate high fashion, at least where bags are concerned among the mega-rich on both sides of the Atlantic. Whether or not the fad has reached its peak, this season’s must-haves include a couple of bags that are ordered at select parties attended only by invitation. Heaven forbid retailers should expect customers prepared to spend five or more figures to just wander into a store for a browse.

The newest example of the expensive bag genre is one by Burberry, made of alligator skin and selling for £13,000 ($25,737). It’s not as expensive as the Chanel bag with the diamond studded clasp that costs in the region of £100,000 ($197,980) or last year’s Louis Vuitton version that sold out in spite of (or because of?) being priced at £23,484 ($46,494).

For all the show-offs who take pride in owning something that so few other people can afford, there are far more women who are happy to have a large wardrobe of bags that each cost a mere fraction of what their wealthy sisters are flaunting.

There is plenty going on at the less expensive end of the market, however. Whether it be copies sold for pence rather than pounds or eco-friendly bags like those designed by Anya Hindmarch and Stella McCartney, most women can decide what kind of a statement they want to make without taking out an additional mortgage to cover the cost.

Discussion questions: What do you think is driving the trend toward ultra-expensive handbags? Do aspirational purchases represent a bigger opportunity for retailers today than the past? Do you think consumers will back off these types of purchases in light of the current economic climate?

 My post:

Handbags and other accessories continue to shine as apparel makers fail to excite us – largely due to retailers over-saturating us with a few looks how many cropped, 3/4 sleeve cardigans does a woman really need?).  Until that changes, expect the accessories market to remain strong as women will continue to desire a great look.

The trend of wildly expensive 1-of or few-of-a-kind bags has been going on for some time now, driven by brilliant marketing from brands owned by the “big 3” luxury players: LVMH, Richemont, and PPR.  Their careful strategies of real and perceived scarcity, artisan craftsmanship, and celebrity buyers will continue to drive the top-end luxury bag market, as well as inspire the aspirational brands and consumers.   The current economic malaise will not last forever, but purchases of aspirational labels like Coach and Dooney & Burke will not be as robust as true luxury brands like Hermes and Louis Vuitton.  Any drop off from the aspirational buyers of these elite brands will be more than made up by the top end.  Further, unless there is a true and sustained worldwide downturn, I expect markets outside the US to keep these brands growing.

Finally, the nascent but growing luxury bag on-line rental services will ensure that anyone of at least moderate income means can sport a Chanel, a Prada, a Louis Vuitton…

 Mike Osorio, your Dare to be Contagious! strategist www.OsorioGroup.com

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GO TO THE FULL STORY AND DISCUSSION:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12710

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How do you feel about haggling?

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RETAILWIRE DISCUSSION TOPIC

The Fine Art of Haggling – 1/22/08
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TOPIC SUMMARY:

While common in many foreign countries, haggling for most Americans is reserved for major purchases such as cars and houses. However some are finding better deals by haggling over credit card rates, hotel rooms, medical bills, gym membership fees, as well as at retail. Discussion Question:

Is haggling more common than thought across retail? Do you think haggling is positive or negative for retail?

My post:

In a difficult economic cycle, the incidence of haggling will increase in all retail environments.  However, unless a retailer’s selling culture is set up for haggling, the results will always be negative for the retailer and often negative for the consumer.  It is negative for the retailer’s profits because their margin expectations don’t take haggling into account and negative for their sales associates and managers who are unprepared to deal with often-difficult hagglers.  It can be negative for the consumer because even if they get a lower price, the process of haggling with an unprepared associate will likely be acrimonious.

Politely asking about pricing options, particularly for more expensive items, is smart consumer behavior.  However, haggling in environments not set up for it is just adding to an already-difficult relationship between customers and retailers. 

There could be an opportunity for a retailer to set themselves up as a haggling, bazaar-type environment that caters to people who like to shop this way.  I doubt, however, that this can be done profitably over many locations due to the difficulty of training this type of selling effectively.  An opportunity for single-unit retail entrepreneurs?

Personally, I like shopping where I am confident that the marked price is an acceptable value, and haggling is by definition unnecessary.  Costco is the king of projecting this perception.

Mike Osorio, your Dare to be Contagious! strategist

www.OsorioGroup.com

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GO TO THE FULL STORY AND DISCUSSION:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12705

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Should Retailers and Brands Run Ads Promoting Social Causes?

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RETAILWIRE DISCUSSION TOPIC:
American Apparel Rallies for Immigration Reform – 1/21/08
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TOPIC SUMMARY:

American Apparel has been running ads over the last month charging that the U.S.’s immigration policy “amounts to an apartheid system” and should be overhauled to create a legal path for undocumented workers to gain citizenship. 

 American Apparel certainly doesn’t skirt controversy. Many critics claim its ads featuring scantily clad young women are pornography. But Dov Charney, founder and CEO of American Apparel and himself an immigrant from Canada, said the issue reflects his personal ideals around freedom. And while other large companies privately lobby the government over various policies, he would rather be open about his position. 

Discussion Questions: Should retailers or consumer brands be coming out with ads promoting social causes? Are certain topics okay (e.g., fighting aids or breast cancer, environment) and others too divisive? Has American Apparel crossed the line in this case and what will this campaign mean to its business?

My post:

 The point is that American Apparel has a very clear vision which includes being controversial and outspoken.  This ad is congruent with that vision and their values.  Therefore, the ad is appropriate.   

I do not think that most brands would do well with stepping out boldly on social and political issues.  Not because it is inappropriate for companies to get involved in such discussions, but rather because it would not be congruent with most companies’ vision and values. The most important thing a company does is define itself: purpose, vision, mission and values.  Every day in every way companies must behave in accordance with their true selves or risk confusing and alienating employees and customers alike.  Whether we agree with American Apparel’s positions or not, I think we can agree that their behaviors are consistent and congruent with their values.  Good for them. 

Mike Osorio, your Dare to be Contagious! Strategist

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GO TO THE FULL STORY AND DISCUSSION:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12702  

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