Archive for October, 2010

A Sign of the Times: Nordstrom’s New Nonprofit Store

Thursday, October 28th, 2010
Nordstrom

Nordstrom is opening a new philanthropic-based store concept, to debut in fall 2011.

Tony retailer Nordstrom will open its first full-line, New York City store with a twist: All earnings from the new store will be donated to nonprofit organizations.

Yes, you heard right. The retailer known for high-end shoppers and luxury goods has committed to what it’s calling a philanthropic-based store concept, to debut in fall 2011.

Nordstrom is on to something. It has tapped into a shift in the consumer psyche.

Shoppers increasingly want their purchases to reflect more than their own consumption, but some sort of charitable, social or environmental value.

The rise of green, or eco-friendly consciousness evidenced by Americans’ widespread adoption of recycling and purchase of sustainable products is a compelling sign that this is not a passing fad.

Last year, cause-related promotions spiked at retail, from charity-driven special events to shopper donations at checkout and shopping incentives tied to worthy causes.

Perhaps the worst crisis since the Great Depression helped heighten the public’s sensitivity to matters ranging from saving the planet to helping out those in need.

Whatever the reason, shoppers are in a more charitable state of mind.

And the proof is in the numbers.

According to retail consultancy, Kantar Retail, 83 percent of consumers surveyed said they want products and retailers that benefit causes, Lois Huff, senior vice president, said during the company’s conference in New York this week.

In turn, cause marketing is on an uptick.

Huff pointed to Shopkick, which designs retailers’ smart phone applications and created the CauseWorld iPhone app. It rewards shoppers when they check into a particular store on their cell phone with Karma Points that can be redeemed for advertiser-funded donations to charitable causes, such as the American Red Cross.

These days, it’s not enough to sell good products, carve a distinct niche, and boast a savvy merchandising and marketing strategy. Retailers need to marry commerce with social responsibility.

Barbara Thau has been covering the retail industry for 15 years, currently as a contributing writer for CNBC.com, STORES magazine and Specialty Insider magazine.
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Delays, Discovery, Data Analytics and Fried Fat Balls

Wednesday, October 27th, 2010

There are worse places to get stranded.

Hiking trails and winding roads are framed by fall colors at SAS' Cary, NC, headquarters campus.

When Tuesday’s “Great Lakes Cyclone” (or the snappier “Chiclone“) canceled my flight home from SAS’ sprawling headquarters campus in Cary, N.C., my first thought was: what about that quadruped I adopted the day before? Sure, my husband is there to kittysit but I am missing all the fun of watching that furball figure out his new surroundings.

Discovery is a fascinating thing. While this little bluepoint baby was learning how to push buttons of my very rattled resident cat in Chicago, I was soaking up my own revelations during SAS’ Media Day, the precursor to SAS’ Premier Business Leadership Series under way this week in Las Vegas. Some 600 attendees are expected to turn out to learn how companies like Chico’s FAS and Harrah’s Entertainment are exploiting data analytics to make better business decisions.

Interest in “unstructured data” – that being information generated by video, voice, in-store encounters with customers and dialogues occurring across social networks – is on the rise. Companies are driven to harness this intelligence to better understand and engage consumers. Only 5% of data is structured, Jim Davis, SAS senior vice president and chief marketing officer, told about 30 editors and analysts before the whole group jetted off to Las Vegas. That leaves a boatload of untapped (un-understood?) data out there.

The desire to exploit unstructured data is not all that new. More than five years ago, Saks EVP and CIO Bill Franks talked about mining unstructured data to identify merchandising opportunities. “Right now, we throw a spear in the darkness and if we hear a scream, we know we hit the enemy,” he said. The challenge with unstructured data is figuring out how to collect, clean, categorize, analyze and apply it in useful ways. This is harder than extracting data generated by transactional systems. And if you’re in a highly distributed environment, good luck with that.

The vast majority (75%) of companies do not know where in the social media universe their most valuable customers are discussing their brand; 31% do not measure effectiveness of social media; only 23% use social media analytic tools; and a scant 7% integrate social media into marketing activities. These are among findings that surfaced when 2,100 Harvard Business Review magazine subscribers were surveyed on behalf of SAS. “The New Conversation: Taking Social Media from Talk to Action” was released today.

Over lunch in the SAS cafeteria, Chico’s CIO Gary King told me he has interest in unstructured data but the focus on analytics now is on campaign management and cultivating the online shopper. Although online shoppers generate just 7% to 8% of sales at Chico’s, they represent 3x the spend of in-store shoppers, when viewed in terms of lifetime value.

“This idea that a customer only wants to interact with you in one channel is falling by the wayside,” he told editors and analysts at Tuesday’s Media Day.

Chico’s, which also sells under the Black House | White Market apparel and Soma intimates brands, has gathered useful insights on fit and quality via Facebook. King said the company also works hard to engage influential fashion bloggers by reaching out and emphasizing differentiating factors of concepts and merchandise.

Just announced today: To help retail marketers enhance customer engagement on Twitter, SAS will launch its SAS Conversation Center in January 2011. The software module, which complements its Social Media Analytics application, captures Tweets in real time and identifies the most influential posts based on metrics like volume of content created by the Tweet author and how often their content is perpetuated by others in the Twitter community.

Two more takeaways from SAS Media Day:

• A bus tour of SAS’ 350-acre campus where 4,600 people work demonstrates there are companies that care for their workers. On this beautifully landscaped property, employees and their families have access to many fitness options (swimming pool, tennis courts, gym, hiking trails, soccer fields), three cafeterias serving healthy fare, subsidized day care, two Montessori schools and a health facility where you can get minor surgery done on your lunch hour. You can even get your car detailed without leaving the grounds. An army of landscapers, custodial workers and two resident artists are on staff – not outsourced – to maintain an idyllic environment. This feeling of “calm” made my extended stay far more bearable than being stuck in, oh let’s say, Bayonne, N.J.

• A popular new delicacy in Texas is deep-fried butter nuggets. Deep. Fried. Butter. That most definitely trumps the cheese curds I discovered in Door County, Wis., last year. Not really relevant to business analytics but Laura Brumley, my indefatigable SAS liaison from the Lone Star State, enlightened me so I am compelled to share. Come to think of it, butter nuggets may actually have a significant role in data analytics for retail. Apparel retailers trying to master size optimization and refine pre-packs can analyze the popularity of butter nuggets in a given geographic location, and …poof! That’ll tell you how many size 2s you need for a San Francisco store location and how many size 14s you need in Dallas. Elvis, a fan of Las Vegas and deep fried Twinkies, would approve. So would Atticus, who was waiting for me when I got home.

Atticus

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Good and Green

Tuesday, October 26th, 2010
Target gave away 1.5 million reusable shopping bags on Earth Day 2010

Target is one retailer that "walks the talk"

This past semester, I taught public relations to a group of graduate students enrolled in the International Business Institute at SUNY New Paltz. These students were from all over the globe: Sweden, Finland, Germany, and Mexico. They were bright-eyed and enthusiastic as we discussed PR issues such as the impact of social media or the recent BP oil spill.

We also weighed in on what companies were doing on the corporate social responsibility (CSR) front. Their impression? U.S. companies were great at issuing CSR reports and launching related websites, but they were lousy at communicating these efforts to the public and could do a better job of “being green” instead of just saying they were green. As my friends at SDialogue often note, companies struggle with “walking the talk.”

For example, during a one of the classes, my students asked why U.S. retailers were having a hard time getting consumers to switch from paper and plastic bags to reusable bags. They said that many retailers talk up their green initiatives, yet my students’ shopping experience while living here reveal stores that push paper and plastic. It’s such a simple fix, the students said, that can save resources and promote a retailer’s effort to be greener. What was the problem?

I explained to them that many retailers were doing well on this front, and that the expansion in the market of reusable shopping bags continues to grow. I said U.S. consumers were catching on to this green benefit, but that it was taking some time. During the practical-exercise portion of the class, the students brainstormed a program for Target Corp. where the retailer would sell reusable shopping bags at cost and then offer consumer incentives for using the bags in the form of “points” that could be redeemed for discount coupons and/or products. Great idea, I said.

Later, I recalled that Target Corp. does a lot on the green front and its social responsibility efforts are broad and deep – despite a recent boycott call from shoppers over campaign contributions. On Earth Day in 2009, the retailer doled out 1 million free reusable bags for shoppers who made purchases. The giveaway included a $2 coupon for a GE compact fluorescent light bulb. And this past year, Target handed out 1.5 million bags during Earth Day. Perusing its social responsibility website, I also learned that Target ranked first on Greenpeace’s Seafood Scorecard.

I also learned that Target was working on several initiatives on the operations level. According to its CSR report, which can be found here, Target not only turns down the thermostat and has installed more energy efficient lighting and low-flow toilets in its stores, but the company is building better stores too. Target’s latest prototype store has “energy features providing an average of 16 percent energy reduction versus our previous prototype,” the retailer states. “Our previous prototype was recognized by many utilities as one of the most energy efficient designs in retail.”

Moreover, Target created a “garment hanger reuse program” that “keeps millions of pounds of metal and plastic out of landfills,” the company notes in its CSR report. “We send clothing to our stores already on hangers, each of which gets reused an average of four times or until it’s no longer functional.” As a result, over 430 million hangers were saved from going into landfills. Broken hangers, by the way, are recycled. And, since the apparel already has hangers on the garments, sales associates at the store level don’t have to do that work.

Good green, work, right?

Yes it is. And it makes me wonder why more retailers are not engaging in these types of efforts. As a shopper who reads labels, buys local, and uses reusable bags, where I choose to shop is directly influenced by the social and environmental responsibility of a company.

Arthur Zaczkiewicz is a columnist for RetailConnections as well as a freelance journalist and editor, and has previously served as senior editor, financial, of Women’s Wear Daily (WWD). As a reporter and writer, Zaczkiewicz’s work has appeared in WWD, WWD The Magazine, WWD Scoop, DNR, Footwear News, Home Furnishings News, HomeWorld Business, Hotel Business, Newsday, the Times Herald-Record, New York House magazine, Retail Traffic, BNET, Specialty Insider magazine and Ulster Publishing. He has also appeared on CNBC’s On the Money and on Northeast Public Radio.
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Bloomingdale’s Tries Mandela’s Way

Thursday, October 21st, 2010
Michael Gould

Mike Gould, CEO of Bloomingdale's

Mike Gould has been the chief executive officer of Bloomingdale’s for 19 years, and has been a merchant for over 40 years.

He’s been steering retail teams for decades, and has given countless talks on management and leadership.

But it’s only just recently that Gould underwent a transformative awakening on how to lead that was sparked by the book, “Mandela’s Way: Fifteen Lessons on Life, Love, and Courage,” by Richard Stengel, which has become required reading for Bloomingdale’s managers. They, like Gould, are eating the book up, and passing its lessons on to their direct reports.

Gould shared his epiphany with Columbia Business School students as a guest speaker during the Retailing Leadership course given by professor Mark Cohen, the former CEO of retailers such as Bradlees and Sears Canada.

Throughout 42 years in the business, Gould “never had a more impactful day” than when he shared the book at a Bloomingdale’s leadership seminar, he said.

Mandela, the iconic former president of South Africa and anti-apartheid activist, spent 27 years in prison confined to a space “from this wall to wall,” Gould said, marking off a small portion of the lecture hall near the blackboard.

Mandela frames his insights in a list of lessons that might seem deceptively simple.

But as a primer on leadership, those insights are invaluable, Gould said.

“What are the core principles of business and your life?” Gould asked the class, referencing the Mandela lesson, “Have a core principle; everything else is tactics”.

After all, Bloomingdale’s is not in the business of selling merchandise, he said. “There’s nothing in my store that you can’t get within a few city blocks.” But what does distinguish the retailer is its people and the store’s atmosphere, he noted.

All one has to do is survey the retail landscape, and it will sink in that the merchants who stand out–be it Starbucks or online shoe store Zappos— are the ones with a resonant personality and culture, he said.

Gould listed some other Mandela lessons, such as, “courage is not the absence of fear, but

Michael Gould leading a discussion

Mike Gould leading a discussion at Columbia Business School

it’s learning to overcome it,” as well as “quitting is leading too.”

He spent some time on lesson 7, “see the good in others.”

“Everyone has greatness in him,” he said.

And a good leader aims to foster an environment in which their subordinate “feels as though they’ve been given an opportunity to be more than they thought they could be,” he said.

Mandela also candidly shares “how he blew it,” Gould said.

Today, Bloomingdale’s assistant managers are leading sessions and discussions on the book, and something like 1,500 copies have been circulating throughout the company, with employees talking of having “a Mandela moment.”

“This has moved an organization,” Gould said.

“Read this book,” he urged the Columbia students, and coming from one of the longest running retail CEOs ever, Gould could very well be on to something.

Barbara Thau has been covering the retail industry for 15 years, currently as a contributing writer for CNBC.com, STORES magazine and Specialty Insider magazine.
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Bound for Glory?

Wednesday, October 20th, 2010
Seeking Alpha's Best Performing Retail Stocks

From Seeking Alpha's Best Performing S&P 500 Stocks 2010 Through Q3

Specialty apparel retailer Abercrombie & Fitch got slapped with a downgrade to its stock this morning by Brean Murrary. The downgrade took the stock to “sell” from a “hold” position as the equity firm noted that ANF’s valuation was simply too high.

The stock has been trading between $40 and $45 over the past month, and today’s downgrade sent shares sliding a bit. This got me thinking about how investors are now viewing the specialty retail sector. Have stock prices reached their peak in the sector following a sustained period of depressed valuations? Perhaps. From my seat on the sidelines, Wall Street is doing its best to anticipate where and when consumers will spend.

In Seeking Alpha’s roundup yesterday of the top- and worst- performing stocks year to date in the S&P 500, only two retailers — Limited Brands and Family Dollar Stores — made the list of top performers. What’s interesting about these retailers is that they home in on a very specific demographic slice. For Limited Brands, this means fashion-forward women with a taste for self-indulgence, spa-like treatments and luxury goods. With Family Dollar, the target is the head of household who requires bargain pricing on a variety of products.

Sure enough, during a recent scan at local malls and strip centers in Ithaca, N.Y., which is located in the Finger Lakes region of the state, I noticed that shoppers seemed to be gravitating toward the high end or the low end. For example, Victoria’s Secret seemed to be humming along at the Ithaca Mall with plenty of consumers spending while adjacent specialty shops that offered mid-priced apparel appeared empty. Back home in Kingston, N.Y., I’ve been noticing more folks swarming around the dollar stores as well as the bargain-hunting retail brands owned by TJX Companies.

These are my own casual observations, but it seems to reflect what others are seeing in the market. In this past weekend’s The New York Times, Robert H. Frank notes that incomes for all classes swelled following World War II, but “during the last three decades the economy has grown much more slowly, and our infrastructure has fallen into grave disrepair. Most troubling, all significant income growth has been concentrated at the top of the scale. The share of total income going to the top 1 percent of earners, which stood at 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average inflation-adjusted hourly wage declined by more than 7 percent.”

This explains much of what’s going on in the retail market, and helps to shed some light on a recent Bain & Co. report that shows strength in the luxury sector. Still, the idea of “income inequality” is jolting. I’m left wondering if this trend can support a U.S. economy that is mostly driven by consumer spending — at all income levels.

While you ponder that, think about a recent analysis of U.S. poverty, which showed a sharp increase in 2009. According to this report, we’ve reached a level of poverty not seen in 51 years. The report includes a chart of where the poorest people live, and based on the map, it looks like most are living in the south.

If I was a specialty retailer that served lower-income shoppers, I’d take a hard look at that map and explore rolling out stores in places that suited my target demographic the best. This would be places such as Texas, Arizona and New Mexico.

And if I were someone like Limited Brands or Abercrombie & Fitch, I’d be bound for New Jersey, New York and Connecticut.

Arthur Zaczkiewicz is a columnist for RetailConnections as well as a freelance journalist and editor, and has previously served as senior editor, financial, of Women’s Wear Daily (WWD). As a reporter and writer, Zaczkiewicz’s work has appeared in WWD, WWD The Magazine, WWD Scoop, DNR, Footwear News, Home Furnishings News, HomeWorld Business, Hotel Business, Newsday, the Times Herald-Record, New York House magazine, Retail Traffic, BNET, Specialty Insider magazine and Ulster Publishing. He has also appeared on CNBC’s On the Money and on Northeast Public Radio.
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A Mobile Holiday

Thursday, October 14th, 2010
mobile ecommerce

This could be the holiday season that mobile retailing really takes off

As smartphones gain mainstream appeal, 2010 could be the holiday selling season that mobile retailing comes into its own—much like online retailing did over a decade ago.

Retailers have been coming up with myriad ways to tap consumers on their web-enabled devices, looking to generate sales from shoppers on the go.

So this holiday season, we’ll see a host of new mobile-commerce sites and mobile apps designed to whet shoppers’ bargain-hunting appetites.

Retailers will also increasingly target consumers when they’re already strolling the store aisles to sway purchase decisions.

For example, a shopper will check into a store on their smartphone, hunting down that hot holiday toy. The retailer will recognize the customer, know how many times she’d shopped the store over the past few months, reward her with a 30-percent off coupon just for showing up, and offer a special promotion based on her buying history.

More apps will boast barcode scanning functions that enable shoppers to access customer reviews on a product by scanning that item with their mobile device.

Indeed, just as it has become commonplace for shoppers to research a product online before buying it in a brick-and-mortar store, retailers are now working to stoke a new habit: getting consumers to research a product at the point of sale (then hopefully buy it).

Then there’s the whole social-shopping aspect of the equation: the convergence of social networks and mobile devices.

People will share product images and holiday gift ideas with friends and family on sites like Facebook, get their opinion in real time and then make a purchase—all from the computer in their pocket.

Barbara Thau has been covering the retail industry for 15 years, currently as a contributing writer for CNBC.com, STORES magazine and Specialty Insider magazine.
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Five Reasons Why Retail Businesses Fail

Thursday, October 7th, 2010

The other day I had lunch with a former retail CEO who was in tsk, tsk-mode at the current state of the industry.

In between bites of paella, he pointed to what department, discount and specialty stores were doing wrong today: from betting big on product lines by celebrities past their sell date to launching ill-conceived spin-off concepts.

He then invoked a list of the five reasons why businesses fail by Stephen Cooper, chief executive officer of turnaround and restructuring firm Zolfo Cooper.

Cooper lays out the most common pitfalls that lead to companies digging their own graves.

While the warning signs on the list might seem obvious, businesses still make these mistakes time and time again—and a number of now-extinct retailers come to mind.

1. Failing to respond to mega trends

The recent bankruptcy filing of Blockbuster Video is a prime example, as the chain underestimated the rise of Netflix.

Tower Records was also guilty of missing the boat on the emergence of digital music, and Barnes & Noble is now at risk with the growing popularity of electronic book readers.

2. Ignoring execution risks of expansion

Steve & Barry’s, the apparel retailer that signed on names like Sara Jessica Parker to sell super-cheap, chic fashion, expanded at a bold pace, only to go under.

3. Wandering from core competency

Circuit City’s foray into the used car business with CarMax comes to mind.

4. Sacrificing long-term health of the enterprise for short-term performance

In the year leading up to its demise, home furnishings giant Linens ’n Things got overly promotional and slashed prices so much that margins eroded.

5. Management denial

Now-defunct west coast merchant Mervyns didn’t seem to want to acknowledge that Kohl’s, which adopted its discount/department store hybrid formula—and improved on it—was eating its lunch.

Mervyns liquidated in 2008.

Barbara Thau has been covering the retail industry for 15 years, currently as a contributing writer for CNBC.com, STORES magazine and Specialty Insider magazine.
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Service With A Smile

Tuesday, October 5th, 2010
Slash Root Cafe

Slash Root Cafe's exceptional service should serve as an inspiration

Here’s a tried and true equation for successful retailing: high-quality products plus top-notch service equals exceptional customer experience.

This sounds so simple, yet it’s one of the most challenging aspects of the retail business today. Let me give you an example:

This past week, after a horrendous technology fail of my old Dell Inspiron laptop, I quickly beelined to the nearest office superstore. I was ready to drop a few hundred bucks on a netbook since all of my writing and storage needs are web-based and done with Google Docs. All I needed was a cheap netbook to get onto email and onto the Internet. Done.

Once in the store, though, my shopping experience turned sour after the sales associate first questioned why I wanted a netbook and then said he was “out of stock anyway,” and that I couldn’t even buy the floor model. No worries. I then zoomed over to a competing office superstore. Although I found a slightly more congenial sales associate, he quickly said he didn’t have any netbooks in stock and was also “unable to sell the floor model.” Ok. So I raced over to a mega-electronics chain store, but got there just as they locked the door at 9 pm sharp.

Frustrated and emotionally spent, I went home netbookless. After sleeping on it, I headed out the following day to Slash Root Cafe (/root)– a local, non-profit cafe and open source/tech repair shop that is located in the small upstate New York college town of New Paltz. After my mass retail experience, it was retail nirvana. Slash Root Cafe is a collectively owned coffee shop and art/music venue that offers computer repairs and website construction for nominal fees. With the food, coffee (Fair Trade, single-origin coffee from Monkey Joe Coffee Roasting in nearby Kingston), teas and other drinks, there’s a menu, but no prices posted. Slash Root Cafe allows customers to pay what they feel is the right value. (Crazy, huh? Can you imagine going into Starbucks or Seattle’s Best Coffee and paying what you feel like is the right price?).

As soon as I entered the cafe, I was warmly welcomed by one of the co-founders, Amanda Catherine Stauble, who immediately connected me to one of the tech experts. The twentysomething shook my hand and said he uses the same laptop. He asked me what my computer needs entailed, and what software I use. He listened quietly, making good eye contact. Then he gently walked me through various options for repairing the Dell. Overall, he was pleasant, well informed and patient. In the end, I left the shop with a restored Dell that was freshly installed with a virus resistant, open source operating system and lifetime service help – all for a flat rate of $85. I nearly cried with joy.

This level of service and quality of product (not to mention innovative menu pricing for food and drink) from a non-profit specialty retailer may be unattainable at mass, but is an idea certainly worth pursuing.

A few days later, I found myself reflecting on what sets this business model apart. I reaffirmed that its the level of service that made it a wonderful retail experience. Back home in Kingston, I stopped by Monkey Joe Coffee Roasting to investigate this notion of exceptional service. If Slash Root Cafe had good products and a high-level of service, its vendors must too, right?  Sure enough, despite a brutal recession that has many retailers closing their doors, I found owners Gabe and Kathy Cicale noting that business is thriving. “It’s our staff that makes the business succeed,” Kathy said. “Gabe has also developed the craft of coffee roasting. It is a high quality product. But it is the people that make a difference.”

Arthur Zaczkiewicz is a columnist for RetailConnections as well as a freelance journalist and editor, and has previously served as senior editor, financial, of Women’s Wear Daily (WWD). As a reporter and writer, Zaczkiewicz’s work has appeared in WWD, WWD The Magazine, WWD Scoop, DNR, Footwear News, Home Furnishings News, HomeWorld Business, Hotel Business, Newsday, the Times Herald-Record, New York House magazine, Retail Traffic, BNET, Specialty Insider magazine and Ulster Publishing. He has also appeared on CNBC’s On the Money and on Northeast Public Radio.
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