Keeping consumers happy and loyal

June 28, 2009

DISCUSSION TOPIC

Customer Loyalty in a Post-Recession World 6/16/09

TOPIC SUMMARY:

Retailers will need to focus on keen pricing, rewards for loyalty and paramount customer service to keep consumers happy in the post-recession world.

According to Experian’s latest Insight Report, consumers are less loyal and more doubtful about retailers than before. Additionally, more than 80 percent of shoppers are increasingly aware of the price of goods and services. Both sentiments are likely to stick around after the recession.

“In the post-recession U.K. we are going to see the rise of the promiscuous, bounce-back consumer, one whose loyalty has to be won and re-won every day,” says Future Foundation planning director Joe Staton.

In the grocery sector, U.K. consumers are already scaling back. A Nielsen study found 32 percent of shoppers will continue to cut back on food expenses after the recession.

This focus on value has decreased brand monogamy. Historically brand-loyal consumer groups are demonstrating “volatile and promiscuous” shopping behavior.

“The recession will mean different things to different people, but there are some things that are certain,” says Bob Bayman, a director and partner of brand consultancy i-am Associates. “If you have customers, you must keep them.”

It costs five times as much cash to get a new customer as it costs to keep a current one, yet Mr. Bayman says many retailers are more focused on winning new shoppers than establishing loyalty.

Regardless of the economic climate, he says, losing customers and spending extra money to try and attract new ones is a waste of precious resources.

Experian’s report listed three elements key to winning bounce-back consumers: Price, loyalty and service.

Post-recession consumers will be more price-savvy so brands will need to keep costs transparent, highlight benefits and revisit all-inclusive and package deals.

Sainsbury’s “Feed your Family for a Fiver” campaign and expanded Basics range with many £1 items has helped grow the company’s like-for-like sales 4.5 percent. Already 70 percent of customers buy into Basics, making it the chain’s fastest growing sub-brand this year.

Caring for a consumer during the recession, however, will not guarantee loyalty later on. Reward points schemes, personalized discounts and targeted one-to-one communications will help establish customer allegiance.

Bounce-back consumers will be able and willing to look for the best customer service experience in addition to good value.

“True customer loyalty comes out of an emotional bond,” says Mr. Bayman. “So therefore think of building a brand that has character, human traits and personality. This leads us to giving unconditionally without expecting or talking about a deal.”

Discussion questions:  How might customer loyalty and retention change after the recession ends? What strategies will best win back customers post-recession?

My post: 

One clear truth of the post-recession period will be a continuing lack of the easy credit that allowed consumption to grow seemingly without limit.  Consumers will usually be spending only this month’s available cash vs. overspending on their credit cards.  Retailers will be fighting for a slice of a smaller pie for the foreseeable future. Therefore, the necessity for developing meaningful customer experiences becomes paramount in the fight for loyalty.  There is no single solution or set of solutions. Rather, the successful retailers of the future will first, truly believe in delivering a great customer experience.  Words won’t cut it – management must demonstrate commitment to this through their actions and investments in customer-centric environments, services, technologies, etc.  Second, successful retailers will continuously listen to their customers in every way possible:  focus groups, surveys, blogs, Twitter, and more.  Finally, successful retailers will never forget they are merchants – and continuously deliver products that surprise and delight their customers.  Sounds easy, doesn’t it?  We’ll see…

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13808

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Lower prices at Neiman’s?

June 28, 2009

DISCUSSION TOPIC

Neiman Marcus Capitulates on Price 6/15/09

TOPIC SUMMARY:

After reporting a 24 percent decline in third quarter sales, Neiman Marcus Group disclosed plans to offer more lower-priced goods and promotional marketing events. On a conference call last week, Burt Tansky, Neiman’s CEO, said that while customers hadn’t questioned the chain’s prices in the past, “we are sensing a shift in our customer’s mind-set.”

The new merchandising strategy, according to The Wall Street Journal, “will strengthen our position in mid-price” goods, the company said, and equates to a “rebalancing” of its mix to include some lower-priced goods among its designer collections.

However, Mr. Tansksy cautioned, “This is not something that will occur overnight,” and the larger impact won’t happen until Spring 2010. In the meantime, more promotional and other events are being planned to boost sales.

Mr. Tansksy also said he doesn’t see a turnaround occurring soon. “We believe that the recovery is tentative and any improvement will be gradual,” he said. As a result, it is pursuing a “conservative” merchandise-buying plan for the fall and will curtail capital spending by 25 percent in its next fiscal.

Neiman’s move follows several similar ones by other luxury purveyors to lower prices:

  • Barneys has been opening more of its “Co-op” discount stores while closing some of its regular boutiques;
  • Saks announced plans to open several of its “Off 5th” outlet stores while skewing pricing at its full-price stores more toward affordable merchandise;
  • Pottery Barn Kids, following in the footsteps of its parent Pottery Barn, will substantially increase the number of lower-priced products it offers starting this fall;
  • Longtime fashion designer Max Azria in early June reached an agreement to develop a Miley Cyrus/Max Azria collection for Wal-Mart Stores. Prices top out at $20 per item.

Tiffany is among the fewer and fewer high-end stores stating that it would not cut prices.  But the luxury jeweler is finding its customer looking for bargains as well, even to the point of haggling at counters.

“Everyone feels compelled to ask the question for fear of feeling foolish after the fact,” Tiffany chief executive Michael Kowalski said at the Reuters Global Luxury Summit in New York. “And yes, the questions are being asked more often and the answer is the same — the price is the price is the price.”

Discussion questions:  What’s the best strategy for Neiman to offer more value in their offerings without impairing its upscale positioning?

My post: 

I find this development disheartening.  I have always admired Tansky’s firm resolve to remain a true luxury retailer and never succumbing to the lure of lowering their standards due to short term economic difficulties – no matter how severe.  In fact it was Tansky who belittled former CEO Terry Lundgren’s “much better” strategy in the early 90’s when he tried to add moderately priced product, with disastrous results.  The customer for this product can find it in any other department or specialty store, and in Tansky’s words, the true Neiman Marcus customer is not interested in buying lower-priced merchandise.  Within each luxury brand’s assortment, there is the opportunity to lower the average price points through careful product selection and increasing the mix of accessories, etc.  It is a monumental mistake to risk the brand of Neiman Marcus by adding moderate product.  I fear the real reason for this isn’t Tansky changing his tune – but rather the private equity owners forcing his hand in order to deliver short tem results.  Private equity buyers seldom hold onto their purchases for more than 3-5 years.  Could a sale of NM be in the cards in the next 24 months? 

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13804

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Optimistic at Penney’s

June 28, 2009

DISCUSSION TOPIC

Penney Feeling Good About Q4 Prospects 6/13/09

TOPIC SUMMARY:

Like many others, J.C. Penney did not have a good fourth quarter in 2008. It’s hoping for a better performance this year and CEO Myron “Mike” Ullman is feeling optimistic that new styles and affordable prices will help the chain succeed.

Like others, Penney has been reducing inventory to help it limit the number of markdowns it has to take to move merchandise.

Mr. Ullman believes Penney has benefited from its standalone stores located outside of shopping malls. 

“Off-mall discount venues are tending to do better in this climate because people are shopping more for need and closer to home,” Mr. Ulllman told attendees at Reuters Global Retail Summit

Discussion questions:  Is J.C. Penney positioned better than most of its department and specialty store competitors to rebound by the fourth quarter of this year? Do you share Mike Ullman’s optimism about the Christmas selling season?

My post: 

Penney is better positioned than most department stores, although that isn’t saying much.  Ullman continues to update and enhance the assortments and update stores.  The off-mall locations definitely help, but they still have mostly mall locations with many of those malls desperately hurting due to bankrupted tenants.  I think Penney will continue to hobble for awhile longer.  Back-to-school has traditionally been a strength of Penney so they should do reasonably well as some pent up demand gets satisfied.  Christmas should also be fairly decent, but mostly due to the dreadful last-year numbers they are up against. 

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13804

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Will Back-to-School be the start of better days for retailers?

June 28, 2009

DISCUSSION TOPIC

Retailers Get Ready for Back-to-School 6/10/09

TOPIC SUMMARY:

Classes have yet to let out for the summer but quite a few people in and around retailing are already looking toward the back-to-school season as the next test of just how well the business is coming along.

“I’m not arguing that business is going to be positive,” Jeff Van Sinderen, a retail analyst with B. Riley, told Reuters. “I’m arguing the declines will start to moderate, that’s what we’d like to see happen. If business is up, I’d be surprised.”

“The question to me is the amount of the decline, and probably low single digits would be our guess,” said Sandra Reese, principal at Grant Thornton Corporate Advisory and Restructuring Services, who also spoke with Reuters.

An emphasis on trimming inventory has some hopeful that while retailers may see a slight dip in year-over-year sales, they might be able to squeeze more profits from dollars spent. Recent reports have suggested that merchants are engaging in much less discounting than they had toward the end of last year and the beginning of ’09. 

Discussion questions:  What are you looking for in the upcoming back-to-school season? Do you think there will be any surprises? Will we see retailers doing things a bit differently to find the right emphasis on top and bottom line growth?

My post: 

I do think we’ll see signs of life this back-to-school season.  The students themselves will drive some of it, because their spending power has not taken a hit from stock or housing losses.  The best of the retailers out there will continue to innovate and offer cool must-have apparel. My concern is that with so many retailers still unable to get solid financing, most will play it safe, get too basic and alienate the core customer.  The winners are likely to be the H&Ms of the world, who have shown the ability to continuously source and deliver great looks at terrific prices.  I predict a reasonably decent BTS, leading into a reasonably decent fall and holiday.  But only because last year was so dismal.  The weaker players will file Chapter 11 in growing numbers and the strong will significantly grow market share.  Watch for newer niche players with no debt and interesting products/concepts to rise up. 

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13798

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The CEO hunt goes on

June 28, 2009

DISCUSSION TOPIC

Good CEOs are Hard to Find 6/3/09

TOPIC SUMMARY:

Sears Holdings has been searching for a permanent chief executive officer since September 2007. Barneys New York has now been hunting for over a year for a new CEO. So, what’s the problem?

Many, in the case of Sears Holdings, say the sad shape of Sears and Kmart along with the prospect of going to work for Edward Lampert is enough to keep top talent from considering the job. Mr. Lampert, a hedge fund manager who is also the chairman of Sears Holdings, gets really low marks for his retail acumen while having developed a reputation as a micro-manager.

A RetailWire survey in February found that 86 percent believed it was very or somewhat likely that Mr. Lampert’s hands-on management style was keeping the company from hiring a new chief. That same month, an article in the Chicago Tribune reported that Sears had met “a number of very talented individuals” about the CEO job but none had been made an offer.

In the case of Barneys, concerns about liquidity have caused many to wonder about the company’s viability. The company’s owner, Dubai investment fund Istithmar World, gave Barneys a cash infusion in April to allay the fears of vendors and lenders alike. Even with this action, Standard & Poor’s lowered Barneys’ credit rating to CCC (“distressed debt”). Not having a CEO contributed to the rating.

“When we evaluate the company from a credit ratings standpoint, one of the key attributes we look at is management,” David Kuntz, an associate director at Standard & Poor’s, told The Wall Street Journal. “Without a CEO in place, it’s very difficult for us to gauge what the direction and leadership of the company is.”

David Lord, a search-industry consultant, said searches that go beyond a year suggests, “the board does not know what it wants or that something is preventing good candidates from being attracted to the position.”

On the other hand, there are those who point to CEO-less companies as evidence that executives within organizations can do the job needed without having anyone looking over their shoulders. Imran Amed, a consultant to luxury goods firms, told The Journal that there was no “concrete evidence that a CEO-less Barneys is suffering any more than other retailers in luxury retail.” 

Discussion questions:  What do extended and unresolved searches for top executives say about companies such as Sears Holdings and Barneys? Does the fact that companies without a permanent CEO continue to operate suggest that chief executives are not as important to a company’s success as often assumed?

My post: 

Effective leaders seldom make it to CEO because effectiveness requires talents not understood by most boards – the talents of true leadership.  Boards tend to hire CEOs that can create short term shareholder value vs. long term sustainability and growth.  If the boards of Sears Holdings or Barneys wanted a CEO, they’d have one.  There is no shortage of folks willing to be a CEO and given the ownership of these two (financiers, NOT retailers/merchants), there are plenty of folks out there who can drive a short term P&L result.  No, these boards have chosen to go leaderless. Why is anyone’s guess.  In any case, it is not healthy for the viability of these companies, and is certain to lead to more talent defection because great people want to work for great leaders. 

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13783

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