Returns: The New Retail Battleground

The Wall Street Journal: “This year traditional and online retailers have expanded the number of locations and routes consumers can use to return merchandise, from in-store kiosks and lockers to the mall concierge, grocery stores, parcel shipping locations and at-home pickup … Online retailer Amazon.com Inc. said it has expanded options for in-person returns this year, with a network of 2,000 ‘locker’ locations, including 400 at Whole Foods stores, where customers can drop off items to be returned. Amazon also partnered with Kohl’s Corp. stores in Chicago and Los Angeles, which are accepting returns of Amazon goods bought online.”

“Wal-Mart Stores Inc. is touting its Mobile Express Returns kiosks, located in its stores, where it says customers can complete the return process in less than five minutes and receive a refund within a day or so. Returns to Target Corp. and Wal-Mart are free—customers can either bring the items back to the store or print a shipping label online and drop off merchandise at a designated shipping location. Kohl’s and J.C. Penney Co. Inc. have similar policies, but don’t cover the cost of return shipping.”

Meanwhile: “Returns have become a ‘battleground’ among online retailers trying to attract and retain customers, said Tobin Moore, chief executive of Optoro Inc., a logistics provider that helps companies like Target and Best Buy Co. to take back and resell returned merchandise … Mr. Moore of Optoro estimates that goods purchased online are three times more likely to be returned as goods purchased in a physical store. In total, Mr. Moore said roughly $90 billion in holiday merchandise—purchased either in stores or online this season—will be returned over the next few weeks, with more than a third of it coming back before the new year.”

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Wausau Story: Mom & Pop Comeback

The Wall Street Journal: “Wausau Wisconsin shows how an economically thriving community might shop in a post-mall age. No longer are shoppers willing to drive distances to hit a clothing retailer. That is an online task. They are willing, however, to make an event of going downtown, to the compact shopping district where two-story brick buildings line the streets, to patronize Wausau’s local boutiques.”

“On 3rd Street, the bell chimed at The Local every few minutes one recent Saturday afternoon, signaling a customer coming in to check out Wisconsin-made Christmas wreaths, coasters cut from pine trees and candles in recycled beer bottles. Owner Alison Magnuson, 26 years old, said shoppers her age want something they can’t find just anywhere. She got the idea to open a physical store with products handmade by more than 30 local artists after selling her own work on the online crafts marketplace Etsy Inc.” She comments: “People want that mom-and-pop store again. It’s all coming full circle.”

“Three blocks from the mall, the century-old Janke’s book store was bustling on a recent Saturday. Inside, in the shadow of a 10-foot bear shot by a member of the Janke family, shoppers were buying children’s games, handmade cards and books by local authors … The store has adjusted to changing consumer demand by offering more educational toys and locally made products, Jane Janke Johnson said. Business is good for now, she said, but the recent acceleration in online spending scares her more than any other trend she has weathered. ‘People will come in here and click, click, click, they’ll buy it in front of my eyes,’ she said. ‘That hurts’.”

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Retailers Miss Mark With ‘Targeted’ Emails

The Wall Street Journal: “Traditional retailers were once pioneers of using data to zero in on what customers want. But as the importance of their catalogs and mailings have been overtaken by email and other online media, they have struggled—sometimes to the frustration of their customers.”

Brendan Witcher of Forrester comments: “Nearly 90% of organizations say they are focused on personalizing customer experiences, yet only 40% of shoppers say that information they get from retailers is relevant to their tastes and interests. The ugly truth is that most retailers haven’t done the (hard) work of understanding how to use the data.”

“At no time is that more evident than during the year-end shopping bonanza, when retailers deluge customers with messages. During last year’s holiday season, retail emails increased 15% compared with the rest of the year, but shoppers opened 15% fewer of them, according to a study of eight billion messages by marketing-services firm Yes Lifecycle Marketing.”

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The 3 C’s of Retail Revival

Quartz: Ryan Raffaelli of Harvard “studies how mature organizations and industries faced with technological change reinvent themselves. Raffaelli has termed this line of research ‘technology reemergence.’ It began with his study of the Swiss watch industry, which collectively reinvented itself (and thus survived) in the wake of digital watches. Five years ago, he set out to discover how independent bookstores managed to survive and even thrive in spite of Amazon and other online retailers.”

“Here are some of Raffaelli’s key findings so far, based on what he has found to be the ‘3 C’s’ of independent bookselling’s resurgence: community, curation, and convening. Community: Independent booksellers were some of the first to champion the idea of localism; bookstore owners across the nation promoted the idea of consumers supporting their local communities by shopping at neighborhood businesses … Curation: Independent booksellers began to focus on curating inventory that allowed them to provide a more personal and specialized customer experience.”

“Convening: Independent booksellers also started to promote their stores as intellectual centers for convening customers with likeminded interests—offering lectures, book signings, game nights, children’s story times, young adult reading groups, even birthday parties. ‘In fact, some bookstores now host over 500 events a year that bring people together,’ Raffaelli says.” He adds: “The theoretical and managerial lessons we can learn from independent bookstores have implications for a wide array of traditional brick-and-mortar businesses facing technological change.”

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Black Friday Tricks of the Trade

The Wall Street Journal: “Instead of copying Amazon.com Inc.’s playbook, retailers such as Wal-Mart Stores Inc. and Target Corp. are coming up with new tricks to maximize sales ahead of Black Friday … In the months leading up to the holiday, Target has shifted away from ‘up and down’ pricing moves, streamlining the number of promotions to focus only on ‘impactful’ sales … The company has also reduced the phrases it uses for discounts from 28 last year to seven, dropping language like ‘weekly wow’ and ‘as advertised’ … It is also offering extra incentives to its loyalty card holders, such as early access to Black Friday promotions.”

“Wal-Mart, which has long emphasized an ‘everyday low price’ message, has been experimenting with a new online system, which at times results in higher prices online than in stores for goods that would otherwise be unprofitable to ship. Some product listings on its website now indicate an ‘online’ and ‘in the store’ price … The Bentonville, Ark., retailer said it would sell more exclusive products this holiday as compared with last year.”

“For the first time, Best Buy Co. offered hundreds of Black Friday deals on TVs and other devices in early November in hopes of driving sales before the competition heats up. The electronics giant has a price-matching guarantee, but the offer doesn’t apply to items on sale Thanksgiving through Monday.”

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Real-Time Retail: Fanatics Seizes Micro-Moments

The New York Times: Micro-moments “happen all the time in sports: A player reaches a milestone, has a breakout performance or is traded to a new team. Apparel companies have traditionally been poorly positioned to meet the accompanying fan demand as it surges. Fanatics … a sports merchandise company … is changing that and, in the process, carving out a lucrative niche in a fiercely competitive online-retail industry largely dominated by Amazon.”

“The company is similar to fast-fashion retailers like H&M, Uniqlo and Zara, integrating design and manufacturing with distribution to fulfill orders within hours. After the Chicago Cubs won the World Series last year, Fanatics used Uber to deliver championship gear to some fans within minutes … As a result, Fanatics has more than doubled its revenue in just a few years.”

“Among the micro-moments that highlighted the new need for speed was Jeremy Lin’s emergence as a sudden star for the New York Knicks in 2012 amid the so-called Linsanity phenomenon.” Fanatics chairman Michael Rubin comments: “When Linsanity happened, within 12 hours to 24 hours, there were no jerseys to get. So you had this huge demand, and there’s no jerseys available. Then you order them like crazy, and by the time they get in, the moment’s over.”

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Start-ups Bring Novelty to Shopping Malls

The Wall Street Journal: “Landlords of top U.S. malls used to rent most of their space to the biggest national retailers, which boasted the best credit and the most desirable selection of goods. Now they are looking beyond big chains and toward lesser-known retailers and startups that started online but have amassed customers and brand recognition.”

“The reason: such retailers tend to offer novel products that resonate with web-savvy customers, particularly millennials, a massive group of potential customers landlords are eager to cultivate.”

“Some of these stores are showrooms and don’t carry inventory so customers will have their purchases delivered to them or they could pick up their purchases at the store at a later time. Such stores take up less square footage since they have don’t need to hold inventory at the back of the store.”

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Amazon-Whole Foods Yields Instacart Boomlet

Forbes: “As the obits piled up, Apoorva Mehta couldn’t help but shake his head. It wasn’t his death that the press was heralding, but that of his startup, Instacart, a five-year-old grocery and retail delivery service valued at $3.4 billion. That morning in mid-June, Amazon stunned the world by announcing its purchase of Whole Foods for $13.7 billion. As shares of grocery chains plunged, many in the tech press noted that few had more to lose than Instacart.”

Yes, but: “As Whole Foods executives broke the deal news to Mehta and Instacart’s chief business officer, Nilam Ganenthiran, in a 6 a.m. call, the two messaged each other with thumbs-up emojis. As if on cue, Mehta’s and Ganenthiran’s phones began ringing and lighting up with text messages shortly after–and they didn’t stop all day. It was execs from grocery chains, including some of the ones whose stocks were cratering, calling to talk business.”

“Within months, Costco announced that it was deepening its partnership with Instacart and would offer delivery directly from the Costco.com website. After discussions that spanned four years, grocery giant Kroger inked a deal for Instacart to deliver from its Ralphs subsidiary. Several smaller chains also signed up, bringing Instacart’s partner count to more than 165.” Mehta comments: “It really was like a thermonuclear bomb against the entire grocery industry.When we look back, that may have been a turning point for Instacart.”

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Lord & Taylor Sinks Its Flagship

The New York Times: “In selling its Italian Renaissance-style building to a WeWork joint venture for $850 million, Lord & Taylor and Hudson’s Bay are acknowledging that even the grand physical shopping spaces of old are now worth more as office space catering to millennials.”

“As Lord & Taylor struggles to find its footing in the e-commerce age, WeWork is capitalizing on the needs of the new economy. The company is offering flexibility and informality to a generation that is increasingly untethered to traditional offices. It allows workers like entrepreneurs or graphic designers to choose the size and style of the space they prefer, and to lease it for as long or short as they want.”

Hudson Bay executive chairman Richard Baker comments: “What we figured out is that, for the retail business, we could make our stores more interesting and younger.” WeWork, he added, “was looking for great locations that were convenient and fun.”

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Late & Great: Arthur Cinader

The New York Times: The late Arthur Cinader “decided to start J. Crew in the early 1980s while running the Popular Merchandise Company, a business, founded by his father in Rye, N.Y., that used a catalog to sell affordable clothing and home furnishings directly to consumers … The new venture took the word “crew” from the water sport and affixed a J in front because it was thought to be graphically appealing … Mr. Cinader empowered his daughter, Emily Scott, to conceive of the company’s aesthetic and oversee the design of its apparel while he focused on the financial side of the business and on marketing through the J. Crew catalog.”

“J. Crew opened its first store at the South Street Seaport in Manhattan, followed by stores in San Francisco, Chestnut Hill, Mass., and other places. The segue proved successful, and by the mid-’90s the company had several dozen stores collectively generating revenue in excess of $500 per square foot … The success of the company owed much to Mr. Cinader and Ms. Scott’s scrupulous focus on their target demographic: affluent, high-achieving people who wanted to signal a certain pedigree with their fashion choices, but not one so stuffy that they would think twice before associating with it.”

“Articles in the business press over the years have described J. Crew’s niche as one notch below Ralph Lauren and one notch above retailers like Gap or the Limited. While the company’s first catalog featured photographs from the Weld Boathouse at Harvard, J. Crew marketed itself to the man or woman who might have attended any college or university and simply wanted to evoke a hint of the Ivy League.”

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