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30 Aug 2010 at 11:51pm
All eyes are on back-to-school sales figures and the soon-to-be-released August same store sales numbers that will report those back-to-school results. If the back-to-school consuming season is considered to be a reliable predictor of the Christmas holiday shopping season, then how can we predict that this year's retail Christmas is going to go?
The answer depends on how you interpret things.
A recent National Retail Federation (NRF) survey found that more than 40% of back-to-school shopping was completed by the second week in August, and that families did their shopping early because of coupons, sales, or promotions. So, does that mean the shopping cart is half empty or half full? Bulls see spending. Bears see the same old highly competitive promotional environment that eats into profits.
The interesting thing is that even though many aspects of the U.S. economic situation are supposedly "up" compared to the 2009 mid-recession back-to-school season, the number of back-to-school consumers in 2010 who looked for back-to-school bargains and coupons was also up. This year 17% of people looked for back-to-school discounts and coupons to motivate their spending. That's up from the 14.7% of discount sales shoppers last year.
So, rather than spending more freely in this year's back-to-school season as the NRF predicted in its Back-to-School Intentions and Actions Survey, consumers seem to be getting even more price sensitive. Even though Ben Bernanke announced that the recession was over just about a year ago, he forgot to send a copy of that memo to U.S. consumers. They're bargain hunting more than ever, which bodes well for dollar and discount stores this Christmas holiday season, but not necessarily for the entire U.S. retail industry overall.
While most U.S. retail chains have been focused on luring back-to-school shoppers in the stores with back-to-school season promotions, one retail chain wins the prize for winning the attention of back-to-school consumers without heavy advertising of deep discounts. Kohl's (KSS) has created considerable buzz for itself on Facebook and in the news with its "Kohl's Cares" school contest. By the time the Kohl's Cares promotion is completed this Friday, twenty schools somewhere in the U.S. will each be ready to cash their $500,000 checks and turn their educational wish lists into shopping lists, thanks to Kohl's.
Here's what other members of the U.S. retail industry can learn from the Kohl's Cares promotion. If you ever want to flip the switch on a viral marketing campaign, just hold a big bag of money out in front of a group of people who are stuck in a chronic state of not-enoughness. Here's just a sampling of what schools are doing to get their Kohl's Cares voting campaign (and the Kohl's name, by association) to go viral:
A Jewish Chabad school in North Carolina enlisted 50 teenage alumni to bring their laptops to the school and participate in a vote-a-thon. One-by-one these cyber campaigners contacted all their online friends and asked them to vote. By the end of the teen-run vote-a-thon, the Chabad school had 45,000 votes, and Kohl's gained as many as 9,000 new Facebook fans.
Since there is only a small built-in network of 276 students at Lucas Christian Academy in Plano, TX, students and supporters are reaching out to the community by setting up laptops outside of supermarkets, colleges and churches to get votes for their school, and new Facebook fans for Kohl's. Lucas Christian also reportedly formed a survivor-esque alliance with two other Christian Schools to share votes. And if that isn't enough, how about a little voting bribery? A vote for Lucas Christian Academy will also get you a chance to win a free iPad.
Principles and staff from three schools in Racine, WI are camping out on the roof of one school to raise awareness and gain (sympathy?) votes.
A couple of schools may actually win with a straight and simple sympathy angle. A Seventh-day Adventist high school in Bozeman Montana is the little-school-that-could with only 75 students. Another school in San Jose, CA sustained $10 million in damage last month and will use the money to replace teachers' supplies that their insurance policy doesn't cover.
Two schools in Ely, MN have enlisted the help of a Facebook fan page dedicated to two bears. This, apparently, is an extremely active group of 111,000 bear fans who just helped the North American Bear Center win $100,000 in a similar online popularity contest. The Ely schools hope to rally the bear lovers successfully to create another social media voting victory.
Campers and fires and bears - oh my! The free publicity that Kohl's is getting in both the traditional media and online is as generous as the prizes they are giving away. Funny how that works, eh?
So, why is Kohl's taking $10 million which could be used to advertise its Back-to-School Stock Up Sale and giving it away in this type of promotion? Obviously there's the goodwill factor which Kohl's hopes will earn them some customer loyalty and goodwill spending in the educational community, whether their favorite school wins or not. Certainly it's nice to pick up a few hundred thousand new Facebook fans, who Kohl's can send marketing messages to for a long time to come.
Perhaps, though, its just as simple as this... Kohl's has made the effort be a socially responsible retail operation and a friend to education because it can. Kohl's is cash rich. The Kohl's chain has more cash equivalents on hand than any other department store chain, and it was that way all throughout the recession. When you're not mired down in debt, you can afford to be generous, and you also have the freedom to run a campaign with a focus that is completely different from the desperation discount marketing of your competitors.
Does Kohl's really care? There are at least 22 groups of people who don't care if Kohl's really cares - the twenty schools that win half a million dollars each, and the Facebook customer acquisition team. Those groups are the big surprise winners of the 2010 back-to-school shopping season.
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Back-to-School Sales Predict the Need for Christmas Sales, Kohl's and Facebook Win Big Back-to-School Buzz with Kohl's Cares Contest (KSS) originally appeared on About.com Retail Industry on Tuesday, August 31st, 2010 at 04:51:05.
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23 Aug 2010 at 11:47pm
Here's why the U.S. retail industry in general and Target (TGT) and Best Buy (BBY) in particular can't afford to ignore the ongoing boycotts that are being led by the LGBT community in protest of corporate campaign contributions to an anti-gay rights politicial candidate. According to statistics quoted by the Human Rights Campaign (HRC), a gay rights advocacy organization:
The buying power of the LGBT community was $759 billion in 2009
78% of LGBT people are likely to do business with companies that are known to have gay-friendly workplaces
More than 300,000 people have used the LGBT shopping guide published by the Human Rights Campaign (HRC) to make buying decisions
The largest U.S. retail chains have a customer base in the millions, so 300,000 lost customers scattered around 50 states may not seem significant. But in the past three years, we've seen retailers do some crazy Hail Mary marketing in order to lure customers through the front door. To alienate 300,000 consumers in one fell swoop is not an insignificant thing. And certainly it is not fiscally responsible in the midst of what is only a technical recession recovery to drive consumers with $759 billion in their pockets to the doorsteps of the competition.
Last week the HRC announced that it would be removing both Target (TGT) and Best Buy (BBY) from its list of gay-friendly companies recommended on its LGBT shopping guide. The HRC has apparently made good on that threat because as of this writing, Target and Best Buy are now absent from that list.
Target has been the main target of the consumer protests that refuse to die, but Best Buy is equally as culpable in... >> more >>
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Best Buy and Target Risk Losing $759 Billion in LGBT Consumer Spending From Gay Rights Boycotts (TGT, BBY) originally appeared on About.com Retail Industry on Tuesday, August 24th, 2010 at 04:47:43.
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16 Aug 2010 at 10:42pm
Four weeks after the Target Corporation (TGT) made a contribution to a political support group in Minnesota, the candidate that benefited from the Target money is still under fire, the controversy is still in the news, and angry consumers are still staging brick-and-mortar protests and virtual social media rallies. Target is the target of a significant consumer backlash, and a grass roots boycott is demonstrating the power that Facebook, political protests, and customer dissatisfaction wield in the U.S. retail industry.
Just this past weekend, a group of approximately 50 consumers staged a rally in front of a Target store in Chicago to protest the retailer's recent contribution to the political campaign of a candidate who openly opposes gay rights. Fifty people hardly represent a massive movement. If there were, say, 62,000 protesters, then Target would probably need to take notice and do something about it.
At this writing, 62,000 is actually the number of fans of the "Boycott Target" Facebook page which was launched less than a month ago in response to Target's controversial political contribution. There aren't too many retail leaders on the planet who don't recognize what a significant accomplishment it is to gather 62,000 Facebook fans organically in less than month.
But even 62,000 cyber protesters don't seem all that significant compared to the 1.6 million fans on Target's own Facebook page who presumably still "like" the discount retailer. The truly significant thing about this consumer backlash is how it became organized. The protesters boycotting Target organized with the speed of a cyber flash mob, proving once again the power of social media and its ability to support real-time grass roots movements in a tangible way.
The "Boycott Target" group seems to think this is a gay rights issue. The MoveOn.org group that is sending out messages to its left-leaning e-mail list seems to think this is a corporate political contribution issue. At this point, I think it's mostly a good old-fashioned service recovery issue. From a customer satisfaction/dissatisfaction point of view, Target needs to quickly realize that this is about damaged customer relationships that might become irreparable.
A statistic that is frequently quoted by customer service experts and widely attributed to the Harvard Business School addresses customer dissatisfaction which results in the loss of business to competitors. Reportedly, companies that reduce their customer defections by 5% could improve their profits by 25%. Doing the math, the 62,000 fans of the Boycott Target Facebook page is equal to 4% of Target's own Facebook audience. If statistical extrapolations hold true, then Target has alienated 4% of its customer base, which should result in an immediate plunge in profits - possibly as high as 20%.
This seems like an extreme statistical prediction, but it is not too much of a stretch to believe that there will be some negative financial fallout for Target. It's even possible that Target may be in the process of joining BP as a cautionary case study illustrating the fiscal consequences of losing customer trust and respect.
In the land of the free and the home of the opinionated, businesses are allowed to have a point of view and to assert that point of view with their products, services, and public policies - even if that means alienating potential customers. American Apparel (APP) and Abercrombie & Fitch (ANF) are great examples of companies that openly express a point of view that many consumers find offensive. But these two retailers stay true to their offensive identity without apology. Whether consumers "like" American Apparel and Abercrombie or not, at least it's clear what these two companies value (and what/who they devalue).
Target, on the other hand, is fueling the wildfire of consumer disapproval by seemingly pretending to be something that it is not. The boycotters would probably have been pacified fairly quickly if Target had taken some kind of definitive and sincere action immediately. Instead, the best response that consumers have gotten so far is an e-mail sent by CEO Gregg Steinhafel to his employees which said, "Let me be very clear. ...Target's support of the LGBT community is unwavering, and inclusiveness remains a core value of our company."
Target wants the public to believe that it is unbiased towards both the gay community and political parties. The political contribution evidence, however, is pointing consumers to a different conclusion. I think it's going to take more an internal employee communication leaked to the press to get this wildfire of customer dissatisfaction under control for Target.
Transparency is neither a fad nor an option in the U.S. retail industry any more. Consumers can easily find out about the size and source of political campaign contributions made by retail companies and their leaders. It's also fairly easy for consumers to find out about CEO compensation, environmental responsibility, reputation, customer service practices, and the workplace environment of just about any company in America. Major retail organizations and leaders can't hide things behind boardroom doors for very long any more.
Retailers around the world should be following this Target customer retaliation movement closely because it could affect the balance of power between retailers and consumers dramatically. If a social media-fueled consumer uprising makes a substantial impact once, rest assured the strategy will be used by consumers again. I would be willing to bet that Gregg Steinhafel has fielded more than one phone call or e-mail from retail heavyweights in the past four weeks reminding him that it is not a good idea to negotiate with terrorists, kidnappers, political activists, or a consumer with a picket sign, a Facebook account, and an attitude.
What is the takeaway so far for corporate leaders whether they're in the retail industry or not? Say what you mean, mean what you say. Be who you are without apology. And don't assume that consumers are gullible, stupid, or politically unaware.
Apparently, consumers don't like that.
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Target Is the Target - Boycott Demonstrates the Power of Facebook, Political Protests, and Customer Dissatisfaction (TGT, ANF, APP) originally appeared on About.com Retail Industry on Tuesday, August 17th, 2010 at 03:42:17.
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10 Aug 2010 at 12:21am
Retail analysts must not spend much time in the malls because if they did, they would know not to have such high expectations of consumers who are willing to wait in a queue line to save less than $100 at the Apple store on tax free weekend. July same store sales may have overwhelmingly disappointed analysts, but for those who have had their expectation dials tuned to consuming reality in 2010, July results were neither surprising nor unexpected.
Expensive credit minus a plentiful job market multiplied by a newfound frugality yielded little or no consuming without sales, discounts, promotions or the motivation of an obligatory holiday in the first six month of 2010. Only analysts who still believe in their own "pent up demand" fairy tale were disappointed in the July 2010 same store sales. To everyone else, July same store sales told the same sales story that consumers have been telling every month. More shopping doesn't mean more spending and splurging this month is balanced by saving next month. Consumers have proven many times this year that... read more >>
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July Same Store Sales Tell the Same Sales Story, Not an Analyst's Pent up Demand Fairy Tale originally appeared on About.com Retail Industry on Tuesday, August 10th, 2010 at 05:21:18.
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2 Aug 2010 at 11:33pm
Even though plans for new store openings are still outpacing store closings four to one, the numbers from the U.S. retail industry unfortunately won't dismiss all fears that the U.S. economy is sliding into a "W" recovery. With economic eyes from around the world focused on the U.S. retail industry for solid signs of recovery, what is seen are some surprising store closing announcements and a large number of U.S. retailers abandoning their own economy to defect to other countries, in search of customers with shopping dollars to spend.
Isn't that why the world's largest retailers used to want to set up shop in the U.S.?
Surprising Store Closing News
When Liz (LIZ) announced that it was closing all 87 of its outlet stores, it wasn't exactly a shock, but it was still a surprise. Outlet stores have been doing well in the frugal economy. Chains like Bloomingdale's are entering the outlet business because that's the direction where consumers have been headed with their shopping dollars. For a well-known apparel chain like Liz Claiborne to admit that it can't operate its outlet stores profitably is at least a little bit disconcerting.
The Claiborne people didn't - and shouldn't - point all of their fingers at the economy, however. The Liz Claiborne label has been attached to some questionable pieces of clothing in the recent past, and lots of loyal Lizzers have gotten confused and alienated because of that. Perhaps creative director Tim Gunn has spent too little time in the office, and too much time with wannabe designers in the Project Runway workrooms. Whatever the reason, a 31% year-over-year drop in quarterly sales proves that Liz Claiborne outlets could not "make it work" any more.
Another surprising store closings announcement came from Winn-Dixie (WINN). That supermarket chain has decided to close 30 of its 518 stores. While this is not even a 10% downsizing, what's surprising is that Winn-Dixie is generally perceived to be a low-cost place to buy groceries, and often the only grocery store in town. This is another case where the economy isn't the culprit, but rather, the store's own reputation and operational execution.
To read the customer and employee comments following news reports of Winn-Dixie's closings is to know the real story behind the underperformance of 30 Winn-Dixie stores. Apparently, no matter how low your prices are, customers do not like to shop in dirty, smelly stores that carry the lowest of low quality products. At least that's what the customer comments indicate. Who knew?
Despite Winn-Dixie's latest quarterly profit increase of 26%, there have been hints that the company outlook is not so sunny. There were 77,792 hints, to be exact. That's the number of shares of Winn Dixie stock that the company's own senior executives have sold off in 2010. As a matter of fact, CEO Peter Lynch sold 52, 360 shares at the beginning of July, prior to the store closing announcements at the end of July.
Winn-Dixe shares are actually selling for a slightly higher price today than Lynch got for his shares, but the other senior executives (including the CFO) saved themselves a bundle by selling when they did. Of course they all know more than we do. But looking at the seven big chunks of stock that have been sold should make all Winn-Dixie investors wonder exactly they what the Winn-Dixie executives do know.
Store Openings Continue at a Fearless Pace
Store openings in the U.S. are not so much surprising as they are fearlessly aggressive. Intent on snatching up the best of the vacant retail space deals available, retailers are ignoring "W" recovery possibilities, and boldly moving forward with their expansion plans.
Not included in the 864 newest additions to the 2010 Store Openings list are 555 Blockbuster kiosks that will start popping up at QuikTrip convenience stores across the U.S. It's not that these budget movie rental kiosks will be huge profit centers for Blockbuster. It's more of a defensive move that allows the struggling Blockbuster chain to establish a kiosk presence before it is completely shut out by Redbox. Even though Blockbuster has fallen far behind, they're desperately trying to stay in the race. And the key word in that sentence seems to be "desperate."
Riding the Subway to Global Retail Domination
Even though retail chains are expanding at a pace that is far ahead of the economic recovery reality, it is even more notable to observe the growing number of U.S. and global retail chains that continue to follow the money to other countries where consumer dollars are easier to capture. Just in July, major U.S. retailers announced new global expansion plans which will land U.S. retail chains within the borders of 14 different countries. This month's retail defectors include Blackberry, Domino's (DPZ), Tasti D-Lite, 7-11, Marshall's, and Subway.
The biggest global expander is Subway, which continues its quest for fast food world domination at a pace that even Wal-Mart could envy. Out of the 1,000 stores that Subway plans to open in 2010, only half of them will be located in the U.S. By the end of the year, Subway will have added more than 500 Subway restaurants to the 2010 Global Store Openings list from 11 different countries.
Even with more than 33,000 restaurants in 90 countries, CEO Fred DeLuca is clear that opening stores at a breakneck pace will not secure Subway's global domination forever. "The world doesn't stand still," DeLuca has been quoted as saying, "and we don't deserve to be where we are unless we stay ahead of things and take the necessary steps to remain competitive."
How is the seller of five-dollar footlongs "staying ahead of things?"
A Subway iPhone app first developed in New Zealand allows customers to locate the nearest Subway, place their order before they get there, and bypass the line completely, even during the busiest of mealtime rush hours.
The introduction of a breakfast menu instantly established Subway as the world's largest seller of breakfast sandwiches.
"Drive views" allow Subway drive-through customers to see their sandwich being made, just like they can inside the store.
Subway is the sponsor of a new multi-channel entertainment show called "Golf Therapy," which is still so abstract that it's difficult to describe (or understand), but is rumored to be on the leading edge of sponsored entertainment and quite buzzworthy.
In order to establish their "healthy" brand in Japan, Subway is growing its own organic hydroponic vegetables on-site.
Right now it seems retail expansion has the ability to stimulate economic recovery more than economic recovery has the ability to revitalize the retail industry. But unless the wizards of the U.S. retail industry make an agreement to take on the burden of jump-starting the entire economy, it's tragically possible that the retail expansion that's been done this year will put some retailers into trouble again while recovery drags its feet. Beyond the economic impact, double-dipping into recession would take a great psychic toll on the American people.
That is definitely a price Americans can't afford to pay.
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U.S. Retail Industry Update - 264 Store Closings, 864 Openings, U.S. Retail Chains Leave W Recovery Behind and Defect to 14 Countries With Money to Spend (LIZ, WINN, DPZ) originally appeared on About.com Retail Industry on Tuesday, August 3rd, 2010 at 04:33:52.
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26 Jul 2010 at 11:59pm
Today is the 11th anniversary of the grand opening of the first Starbucks (SBUX) store in Korea. To commemorate the occasion, Starbucks has staged events at stores around the world throughout the month to keep Starbucks in the news, and in the minds of Starbucks customers around the world.
A fake robbery attempt was staged to draw attention to a British Columbia Starbucks store. It had to be fake because how else can you explain why a would-be criminal would cut in line in front of two police officers in order to make money demands of a barista armed only with a menacing beverage?
Starbucks restrooms were quite newsworthy in July due to a live birth that happened in a Colorado Starbucks restroom, a Britney Spears hair extension that was left behind in a Calabasas Starbucks restroom, and a hidden camera that was set up in a San Diego Starbucks restroom (purportedly to record live births and superstar hairdressing mishaps).
Staged celebrity sightings created a bigger buzz than caffeine intake at Starbucks stores around the world in July when Zac Effrom and his papps grabbed a snack at a New York Starbucks, Nick Jonas cooled down with a frozen Bucks-a-ccino in London, and Kristin Chenoweth got hot under the collar and pitched a Twitter fit after a bad encounter of the barista kind.
Setting up an employee credit card scam to draw attention to a Jakarta Starbucks was a little bit extreme. The suicide jumper who plunged onto a busy Starbucks patio was definitely over the top.
Of course, Starbucks staged none of these events (that we know of), but certainly this eclectic mix of coffeehouse entertainment sounds like it could have been concocted by a creative and slightly demented press-mongering PR firm. To realize that these very odd events all occurred organically, and all in one month, makes you want to hang out more at Starbucks just to see what will happen next.
Outside of the coffeehouse setting, other newsworthy events were happening for Starbucks as well. At an Oppenheimer conference, Starbucks offered these business changes as the reasons why it the company has returned to profitability despite the lingering effects of economic recession:
1/3 of Starbucks stores are global stores, located outside of the U.S.
25% of Starbucks operating profit is now coming from Starbucks branded consumer products
GAAP margins are higher than they've been in five years
The percentage of licensed stores vs. company-owned and operated stores has increased by 6% since 2005
Starbucks is now doing business in 50 markets, compared to 37 markets in 2005
And during an investor teleconference, CEO Howard Schultz talked optimistically about Starbucks' stores in China, where specialized product offerings like black sesame green tea frappuccino and black bean kiwi tarts are generating success.
Starbucks also generated Internet superstardom for itself when it gained its 10 millionth fan on Facebook, and officially became the largest corporate brand on that social media platform. It's impressive what a few well-executed pastry giveaways can buy a company in cyberspace these days.
The undisputed best thing that landed Starbucks in the headlines in July, however, was its decision to offer free WiFi to its customers. Not paid WiFi, not WiFi with a Starbucks card and a time limit, not spotty WiFi service from AT&T for existing ISP customers, Starbucks now has honest-to-goodness free WiFi for anyone who can beat off other laptop users for a table or an electrical outlet. It took Starbucks a while to concede that its customers deserve WiFi privileges for free, but the company did the right thing for its "guests" eventually.
Speaking of doing the right thing, there was an extremely eloquent editorial this month in the Huffington Post about how Starbucks has abandoned its own mission statement, and how the global chain has lost its essence in the pursuit of product prominence. I don't agree with the premise of the article - that Starbucks has forgotten the "why" of its business - but I do think the article makes a great case for why a "why" is important and what the consequences are when you lose it.
Its obvious from Starbucks' most recent financials that the company has turned the corner on its own turnaround, well ahead of the overarching retail industry recovery curve. People are still casting their votes for the Starbucks brand around the world every day, five dollars at a time. And it ain't just because the premium-priced coffee and black bean kiwi tarts are so worth it.
So, Happy Birthday, Starbucks Korea! Check out this video to see how the South Korean Starbucks stores compares to the U.S. Make sure to watch the video all the way through to the last verse of the song, which is in English and somewhat humorous.
More About Starbucks:
The Starbucks Brand of Service
Starbucks Named a "Best Retail Employer"
Global Store Openings Planned for Starbucks in 2010
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Strange Starbucks Events Kept the Coffee Company In the News, Customers Around the World Kept Starbucks in the Black (SBUX) originally appeared on About.com Retail Industry on Tuesday, July 27th, 2010 at 04:59:08.
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19 Jul 2010 at 11:43pm
The International Council of Shopping Centers (ICSC) said last week that American consumers will spend $38.4 billion on back-to-school merchandise in 2010, which would be a record high. But never to be outdone in consuming optimism, the National Retail Federation (NRF) called that prediction, and raised it to $55.12 billion. The NRF's annual Back-to-School Consumer Intentions Survey predicted that the average American family will spend $606.40 to prepare their children for a return to the classroom this year, which would be a generous budget allowance for a consuming population that has needed multiple government rebate bribes to motivate them to open their wallets this year.
From these disparate predictions we can probably safely conclude two things. One, retail trade associations have about as much objectivity as helicopter parents at a dance recital. Two, consumers do intend to spend money in the next two months, and retailers better be ready with the right products at the right price at the right time in order to best capitalize on the temporary spending mood.
The back-to-school shopping season officially started on July 14th. How do we know that? Because Staples (SPLS) said so, of course. Somewhere along the way we gave the Staples corporation the power to designate a back-to-school consuming start date, which they make official when their company representatives ring the bell to start NASDAQ trading on that day. Without a "real" event like Black Friday as a cue, how else will consumers know that they're supposed to start spending money for the second busiest shopping season of the year?
The U.S. retail industry is still under the mistaken notion that it is in the drivers' seat of consumer spending cycles. The ups and downs of the monthly same store sales figures are telling a different story, however. Marketing-led shopping habits have been significantly replaced by conscious consuming, which is not so easily manipulated. As I strolled through the sea of 75% OFF signs at Macy's (M) this weekend, I couldn't help but think of the many U.S. retail industry leaders who boldly declared at the beginning of 2010 that they would no longer need deep discounts to drive sales since they had mastered their inventory levels and overhauled their supply chain processes.
Consumers, however, have a different opinion about discounts. They still want them, and they still want them to be significant. And they're willing to hold onto their money until they get what they want. Likely this will be the case in the back-to-school season as well.
Consumers made it clear in the NRF survey that they will be doing more comparison shopping online during the 2010 back-to-school season. Because of that, they're not going to be easily fooled by hi-lo pricing smoke-and-mirrors.
But winning the back-to-school retailing game is going to take more than discounts this year. Retailers are also going to need to be good retailers in order to capture the back-to-school dollar.
When I was browsing through the Macy's sales racks this weekend, a peppy, perky Macy's associate walked up to me and asked me if I was finding everything alright, a question which made me laugh out loud. The women's clothing racks were a jumbled mess of sizes and styles, worse than any off-price overstock store I had visited recently. I politely suggested to Macy's Girl that if she wanted me to find what I was looking for, then somebody needed to spend some time putting the right sizes back in the right places. She replied by chuckling and walking away. The net result of my Macy's shopping visit that day was the return of a full-priced item and cash in my pocket. It just wasn't worth the effort.
It's not going to be enough to lure back-to-school shoppers through the front door with discounts. It's the shopping experience once they're inside that will make - or break - the sale. Even though employees and companies may have forgotten this retailing 101 principle, shoppers haven't. The loss of a back-to-school purchase due to poorly executed retailing fundamentals this year will be a big loss because spending sprees are finite in the post-recession consuming paradigm.
Retail industry experts and analysts keep wanting to use increased event spending as evidence of economic recovery, but that extrapolation hasn't proved to be valid in 2010. After each holiday spending uptick this year, there has been a decline, which seems to take everyone by surprise. It's really not that difficult to figure out. If consumers are spending more on back-to-school items, they're likely going to be spending less on other things in the months before and after school starts to make up for it. That's the new normal in a consuming world which is still lacking in jobs and devoid of cheap credit.
If back-to-school spending predictions actually turn into spending reality, the retailers that aren't able to secure a respectable share of back-to-school spending won't be able to blame it on the economy. Some will probably still try to blame it on the economy, but that excuse is wearing thin. It's sell now or hold your retail peace until Black Friday because once the kids are safely tucked into their desks and dorm rooms, wallets are likely going to be shut tight until obligatory Christmas gift-giving pries them open again.
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U.S. Retail Industry Back-to-School Sales May Rise, But Consumers Won’t Be Spending as Freely as Retail Associations Predict (M, SPLS) originally appeared on About.com Retail Industry on Tuesday, July 20th, 2010 at 04:43:56.
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12 Jul 2010 at 8:26pm
Two Abercrombie & Fitch (ANF) store closings happened this month, not because of failed expectations, but because of pest infestation. An Abercrombie store in Manhattan and an Epic Hollister in SoHo were invaded by bedbugs and were closed for business while they got rid of the pesky little bloodsuckers. Reportedly, CEO Mike Jeffries wrote a letter to Mayor Michael Bloomberg blaming the city of New York for their pest problem. Although bedbugs in commercial spaces are not unheard of in New York City, it's questionable whether these particular bugs had a 212 area code before they wandered past the scantily clad greeter guys into the Abercrombie and Hollister stores.
Isn't it more than a little bit curious that both the infected stores belonged to the same company? In the 324 news reports that I scanned about the Abercrombie bedbugs, isn't it also curious that there are no reports of bug problems at neighboring businesses - not even the ones that share walls and roofs with the Abercrombie stores? Doesn't it stretch the imagination a little bit to believe that a city bug problem was discovered in two locations 1.6 miles apart, but at no points in between?
In this case, logic points to the conclusion that the bugs hitched a ride with Abercrombie onto Manhattan island rather than the other way around.
While Jeffries was quite public about his letter to the mayor, there were no public reports of any proactive measures taken by the infected stores to use their carefully captured customer data to contact customers about the possibility of critter-carrying clothing they may have toted home in their shopping bags. If I had made a pricey purchase at one of those flashy NYC flagship stores, I would want to know that my latest fashion acquisitions might come back to bite me - literally.
Exceptional customer service recovery is always the "cool" thing to do, right Mike?
Latest Store Closing Numbers for the U.S. Retail Industry
All About Abercrombie
Service Recovery 101
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Cause of Abercrombie & Fitch Store Closings Suspicious - Blaming NYC for Abercrombie's Store Closings Defies Logic (ANF) originally appeared on About.com Retail Industry on Tuesday, July 13th, 2010 at 01:26:37.
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5 Jul 2010 at 9:16pm
Much has been reported about the drugstore wars between Walgreens (WAG) and CVS (CVS). The clash of the pharmacy titans seemingly ended when both companies realized that their game of prescription chicken was doomed to end in disaster if they both didn't put the brakes on their very public dispute. The recent cease-fire agreement between the two companies appears to guarantee that the rivals will peacefully co-exist for several years and consumers have come out as the winners in the deal.
Things are not always as they appear.
This CVS-Walgreens dispute is just one example of how large retail pharmacies chains have the ability to make decisions that can affect consumer's freedom of healthcare choice, and how completely powerless consumers are to stop those decisions. Another current CVS dispute demonstrates this in a way that is even more disturbing than the recently aborted battle with Walgreens.
On July 1, 2010, a law went into effect in Connecticut which would require CVS to offer its lowest drug pricing to Medicaid patients. Those lowest prices would include 400 generic maintenance medications that CVS makes available to uninsured and underinsured customers for $9.99 with its "Health Savings Pass" program. CVS says if they are forced to provide those drugs at that price to Medicaid patients, then they're just going to stop offering that price point in the state of Connecticut altogether.
CVS is playing another game of chicken and much like the Walgreens war, this Connecticut dispute seems to be all about power and control. If the Connecticut government backs down, then CVS will have proved its ability to trump the government in making the rules about who will be granted access to the best healthcare, and how that access will be granted, if it is granted at all. Is that a power that should be in the hands of a corporate entity that is inherently structured to put its own self-interest ahead of the public good?
CVS, of course, would argue that it does, in fact, have the consumer's best interest at heart. The company's published Vision Statement is "We strive to improve the quality of human life." But if that was true, wouldn't the company be sitting in a meeting room with Connecticut government officials trying to find a way to improve the quality of Medicaid patients' lives instead of making threats and using the Connecticut population as leverage in a power play ultimatum?
This is not the first time that CVS has been at odds with the state of Connecticut or the Medicaid system. In March, 2008, CVS agreed to pay $36.7 million to the U.S. government and 23 states to settle a Medicaid fraud lawsuit after it was accused of substituting generic capsules for prescribed tablets in order to increase profits specifically with Medicaid patients.
In November, 2009 the Connecticut Attorney General filed a suit against CVS for selling expired products. This was less than six months after the company wrote an $875,000 check to the California Attorney General for the same thing. And that was six months after the New York Attorney General received $975,000 check from CVS for the same thing. Most recently, CVS was busted in the state of Nevada in June, 2010 for the same thing.
This ongoing issue with CVS expired products either proves that the company has some of the most ineffective operations management imaginable, or else it has an unwritten policy to continue to sell all products regardless of expiration dates until state charges and substantial fines make it economically unfeasible to continue.
But one company's "substantial," is just another company's cost of doing sloppy business. You would think that the $2.25 million that CVS paid in 2009 after it disposed of customers' prescription drug records in a dumpster would have been "substantial" enough to influence the company's behavior with private patient information. But just last month, more patient prescription records were found on the street outside of the back door of a CVS store in New York.
Anyone who follows the CVS company or CVS stock is well aware of the company's long history of legal charges and subsequent settlements. The company is currently under investigation by the FTC and 24 state attorney generals for antitrust violations. It's fair to say that the CVS legal team has job security and the CVS legal checking account has plenty of debit entries.
Consumers and investors really want to like CVS. The company has raised and donated millions of dollars for charities like the Special Olympics, the Red Cross, and the Boys and Girls Club. CVS is sponsoring a "To Your Health" tour in 100 inner cities this summer to conduct free screenings and health assessments to residents there. The company has helped its employees purchase their first homes. We want to give CVS the benefit of the doubt that its positive aspects outweigh, or at least offset, its negative business practices. We want to believe the best about CVS, but it's just too much of a stretch.
The company's own customer loyalty program captures the essence of the company itself. The "CVS Extra Care" program rewards customers with a 2% rebate on all purchases and $1 back on every two prescriptions filled. On the surface, these customer loyalty rewards seem kind and generous, and very much in alignment with the company's vision to "improve the quality of human life."
Beyond appearances though, are the operational realities of the customer rewards program. The rewards are not available immediately, but rather distributed once per quarter, and expire after 60 days. In order to use your Extra Care Extra Bucks, you must carry and present a printed receipt with you. A swipe of the barcode on your membership card won't give you access to your "rewards," but that same swipe gives the CVS corporation plenty of valuable marketing information on 64 million of its Extra Care members.
Just like its loyalty program, CVS superficially gives the impression that it cares about improving the quality of human life, but beyond the surface, the company's daily operations reveal a reality that seems to prove that it really is only concerned with its own best interest first and always. After CVS has proven time and time again that it is willing to cheat, poison, disregard, and abandon its customers, it can only be concluded that profit is really the only value the company has, despite what any written mission statement proclaims.
So, this is the fundamental philosophical challenge that we are all facing up to with health care reform. For-profit health care companies are riddled with conflicts of interest. If sick people contribute to profitability, there is no inherent motivation for a company to create or support wellness. If the government doesn't have the power to intervene (i.e., if the state of Connecticut doesn't hold its ground with CVS), then eventually all the healthy citizens of Bedford Falls will soon find themselves lining up for hospital beds in Pottersville,
If CVS was really interested in improving the quality of human life, wouldn't it be focusing resources on making organic and nutrient-rich foods available to inner city food deserts instead of just diagnosing chronic maladies that will require long-term CVS remedies? If CVS was truly interested in improving the quality of human life, wouldn't it be expanding its product mix to include pedometers and treadmills instead of adding more private label and prepared foods to compete with Wal-Mart?
Ultimately it is the responsibility of every publicly-traded company in the U.S. retail industry to make a profit and increase the value of its stock. The question is, will attention to the best interest of customers create the best returns for shareholders of a health-related companies in the retail industry?
So far this year, CVS's profit-motivated legal tangles and public showdowns have led its stock down 12% from the beginning of 2010, and off 22% from its 2010 high. Perhaps aligning its daily business dealings with its own stated corporate mission, vision, and values might be worth a try?
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U.S. Retail Industry Stock Update - CVS Pursues Profits With Power Plays, But Government Battles and Public Walgreens War Leads to Stock Losses (CVS, WAG) originally appeared on About.com Retail Industry on Tuesday, July 6th, 2010 at 02:16:04.
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28 Jun 2010 at 12:22am
Not surprisingly, U.S. retail industry stocks have been on a down trend, due more to recovery euphoria fantasy self-correction than any particular government data or industry reports. The S&P Retail Index has declined more than 7% and the S&P 500 has declined more than 3% in the past ten days. JC Penney (JCP) has beaten them both with a 15.3% decline, which put the JC Penney stock at the losing end of retail stock declines, and at a 52-week low at the close of Wall Street on Friday. The JC Penney brand makeover is in mid-transition and Wall Street's game of make-as-much-as-you-can-as-quick-as-you-can generally has no patience for transitions.
Earlier this month, JC Penney became a strategic partner by providing financial sponsorship to the FIRST (For Inspiration and Recognition of Science and Technology) Robotics Program. On Saturday, American Idol heartthrob Constantine Maroulis performed along with the Broadway cast of "Rock of Ages" at the Manhattan JC Penney flagship store to kick off the summertime "Broadway in Bryant Park" performances.
While community involvement has always been an important part of the JC Penney mission statement, strategic corporate giving really should be aligned with causes that also appeal to its customer base. The match between JC Penney, rock 'n roll fans, and robot geeks (and their dads) isn't obvious. At least it's not obvious to me.
While exposure to these different audiences might bring them into the JC Penney stores, will they find anything that they want to buy once they get there? When I think JC Penney, I think Midwestern soccer mom, not robot building science geeks. The funny thing is that there are plenty of Midwestern soccer moms in Constantine's fan base, but that's exactly the kind of customer that the New York JC Penney store doesn't cater to, with its proprietary product lines and designer labels.
The point is, just as Sears seems to be suffering from an identity crisis, JC Penney is another great American brand that may need a big splashy public image makeover. JC Penney's brand positioning right now is "Style You Want. The Quality You Expect. The Price You Love." However, I'm not sure the average American consumer generally associates the words "style," "quality," or "price" with JC Penney. They seem to deliver a not-great, not-bad experience on all three points, which is not enough to make any of them a unique selling proposition.
Mike Ullman came out of retirement in 2004 to help the JC Penney chain regain its relevance. The changes are happening inside the stores, but are they happening inside the minds of the customers?
The good thing about being around forever is that everybody knows you. The bad thing about being around forever is that everybody thinks they know you, no matter how hard you work to change yourself.
It seems like JC Penney is in the middle of a brand transition period and will probably announce to the world what its new brand positioning is when the timing is better. Unfortunately Wall Street really isn't oriented towards long-term results and JC Penney isn't a very sexy stock in the short-term. Even though JC Penney's stock isn't moving in the right direction right now, overall the company probably is.
See Also:
JC Penney Complete Same Store Sales Roundup 2010
JC Penney's Brand Makeover
James Cash Penney - Principles in Business
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U.S. Retail Industry Stock Update: JC Penney Stocks Hit A Low As the Brand Transitions, Wall Street Loses Patience, and Recovery Euphoria Self-Corrects (JCP) originally appeared on About.com Retail Industry on Monday, June 28th, 2010 at 05:22:37.
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