Here's a round up of recent press of the state of the retail industry and, as expected, we're starting off the year with lots of trouble brewing for our retailers. As we say a lot here, however, some of these problems are self-inflicted, with way too many brands selling pretty much the same thing with no point of differentiation at all. We all saw that during the holidays. Everybody selling the same thing. That's why we're already seeing some retailers go under, like Circuit City, because they didn't stand out in a crowded brings & mortals business and they certainly fared even worse when compared to online retailers.
Now, to be fair, there are plenty of sucky online retailers out there as well, but online retailers like Amazon & Zappos.com have really made a name for themselves by creating not only a breadth of product, but by scoring extremely high in their customer experience as well. Too many retailers have become as customer focused as the typical motor vehicle office. It's almost like it's a burden that we're there. And that's just when it's a neutral experience. Sometimes, it's much worse then that, with employees being down right rude.
So, when you start to look at the world of physical retail, you start with a couple of challenges right off the bat:
Lack of variety in the malls and too much variety in the stores. Once you’ve made it through the parking experience and you get into the malls, you find a lot of the same thing. A lot. And once you’ve passed the first 5 or 6 stores or selling the same things, they all start to blur together. And when brands blur together, then I start shopping on price, which is not really where you want the consumer to start. Listen, in today’s economy, the consumer will almost certainly get to price sooner or later, but if they start with price, where do you go from there?
Take a look at lululemon athletica. Now, those of you who actually know me, know that even when I was in good shape, I wasn’t really the yoga type. I really have a hard time relaxing. So, I’m not their target audience. But if you haven’t been into one of their stores, everything there speaks to their story. They use green building materials. The employees are dressed in their clothing and actually look like they can do yoga, if they’re not doing yoga. At their location at the Garden State Plaza, they even do free classes in the morning for people to do some de-stressing. And take a look at monthly challenge, which for January is a BHAG, which stands for Big, Hairy, Audacious Goal!
Or how about Adrenalina, the extreme store. With their in-store, Flowrider system, they don't just show pretty pictures, they bring the experience to life right there in their store.
What value-add to you bring to your customers? Do you give them something other then merchandise as a reason to walk through the door? When they get there, do you make it as easy as possible to buy something or do you put up barriers because of our internal procedures? Are your employees excited to be there or is it just a job to pay the bills? Have you created an environment that fosters enthusiasm for your employees? If not, you can't expect them to create an atmosphere that fosters enthusiasm for your customers.
For years, retailers could afford to be sloppy about running their businesses because customers kept buying. No more. Stung by the worry that shoppers — who cut spending by the most dramatic amount in at least 39 years this holiday season — may not start spending again for a long time, stores are making drastic changes. They are cutting out marginal suppliers, hiring outside experts to keep inventory lean, holding special events for those who are still buying and making extraordinary efforts to gauge customer satisfaction. (Emphasis mine)
The new discipline will be mostly good news for shoppers, who will find stores less cluttered and see an array of products at lower prices, from ordinary groceries to jeans from brands they could once only aspire to.
In another article from the Wall Street Journal, they discuss the continued, weakening retail sales. Interestingly, they also note that foot traffic is down as well, indicating that people aren't even using the trip to the mall as low cost entertainment, something I do all the time! And if they're not in the stores, they sure ain't buying.
The slump in U.S. consumer spending worsened last month as sales fell at a wide range of retailers, restaurants and car dealers, raising fresh concerns about the U.S. economy in 2009.
Retail and food-services sales fell in December for the sixth month in a row, sliding a seasonally adjusted 2.7% from November to $343.2 billion, the Commerce Department said Wednesday. Sales were down nearly 10% from December 2007, the biggest yearly drop since records began in 1968.
Economists at Goldman Sachs said in a client note the declines were not only bad news for U.S. economic growth in the final three months of 2008, "but it also starts us into [2009] on very weak ground."
The combination of deep discounts and feeble sales has led numerous retailers, including Wal-Mart Stores Inc., Macy's Inc. and Gap Inc., to warn this month of looming weakness in quarterly or annual profits. ShopperTrak RCT Corp., which estimates retail sales and visits, said this week it now expects U.S. foot traffic to decline 16% and sales to drop 4% in the first quarter from a year earlier. (Emphasis mine)
And where there's trouble with retailers, there's going to be trouble at the malls. I like what Susan Reda wrote about the mall business in the January issue of STORES:
They arrive with high expectations – that they’ll find the perfect outfit, buy the anti-wrinkle cream that will make them look 10 years younger or enjoy a relaxing bite to eat with friends. But it turns out a majority of those shoppers are not having as much fun as they’d anticipated. They complain that there is nothing new or unique at the mall, and they gripe about the limited variety of restaurants.
Other gripes ranking near the top of the list, according to a study conducted by the Baker Retailing Initiative at the University of Pennsylvania’s Wharton School and Toronto-based market research consultancy Verde Group, include too many stores carrying the same products and difficulty finding a parking space. Overall, it reveals an undercurrent of dissatisfaction among shoppers that overshadows problems they may have with individual stores.
“What we refer to as discovery – or the ‘what’s around the corner’ factor – seems to be missing,” says Stephen J. Hoch, faculty director of Wharton’s Jay H. Baker Retailing Initiative. “Roughly half of the problems we heard about can be summed up by saying that malls are becoming mundane.
“In this economic climate, malls can’t afford to be mundane,” he says. “A real opportunity exists for developers to be more creative and to ramp up the level of discovery for shoppers.” (Emphasis mine)
In the same article, Michael Brown, retail strategist with Kurt Salmon Associates says "in a down market there are always opportunities for those who are willing to take chances.” We try to tell this to our clients every chance we get and, in a down economy, feel that this is more important then ever.
Now, in a recent post on Retail Design Diva, they talk about yet another challenge to the whole retail brand issue, faux brands. And not only that, but an entire mall in China built around faux brands. I mean, how do you not at least give them points for Pizza Huh?
But in China, knockoff lovers might soon have an entire mall at which to ponder the benefits of a "Coached" bag, a pair of "Poma" or "Adidos" sneakers, and even a pair of "A & G" designer jeans. (Don’t tell Dominico Dolce.) That's according to the Mirror UK, (article by Hannah Wood 01/05/09), which has photos of some of the faux food and knock-off retailers that have already set up shop at the mall, located in Nanjing, just a stone’s throw east of Shanghai. They include a McDonald’s look-a-like dyslexic restaurant called McDnoald’s, a Starbucks-style coffee shop called Bucksstar Coffee, KLG Chicken and a wannabe Pizza Hut, called Pizza Huh. Given that China banned dog, and monkey meat during the Olympics, I'd be suspicious of consumables from imposter food chains, but then again, how hard would it be to replicate Pizza Hut's operations? The Pizza Huh version couldn't possibly be much worse. Pizza, Huh? It’s just the kind of blasé question Doug Heffernan might ask Carrie in an episode of “The King of Queens.”
So, if you're a retailer or mall developer today and you're just holding the status quo, it's not going to be a good year for you. Take advantage of this market to boost your in-store experience, not pull back on it. It might mean that you'll be behind for a quarter or two, but you'll probably be around for the long haul.
Retailers prepare for a new, frugal future - Retail - msnbc.com.
STORES - January: Breaking The Monotony.
Retail Sales Keep Sliding, Declining 2.7% in December - WSJ.com.
Retail Design Diva.
Fake brands shopping centre set to open in China - pictures - mirror.co.uk.
