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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Amazon: A Bad ‘Hood For Luxury Brands?

The Wall Street Journal: “Amazon is courting companies across the retail spectrum, but one sector is still mostly holding out: the world’s club of luxury brands. Swatch and others in the luxury industry say Amazon’s online marketplace undermines the strict control they say is key to maintaining a sense of exclusivity—and keeping prices high. While some makers of luxury products have decided to join Amazon, many of the industry’s biggest players—including Swatch, Gucci owner Kering, luxury-watch maker Cie. Financière Richemont SA and LVMH Moët Hennessy Louis Vuitton SE —are staying away for now.”

“The absence of high-end products has hampered Amazon’s push to be a force in the fashion industry, despite years of working to expand the merchandise it sells officially though its website. Adding luxury goods would help Amazon boost margins and build loyalty among customers of Amazon Prime, its premium service favored by higher-income shoppers that offers faster delivery and other perks, according to former executives familiar with the company’s shopper base.”

“One of the biggest worries for these luxury companies: The difficulty of segregating their product listings from the rest of the goods sold through the site. That means a $5,000 suit from luxury Italian menswear company Brioni, a subsidiary of Kering, can appear next to a $200 suit from Kenneth Cole.” Jean Cailliau, executive adviser at Paris-based investment bank Bryan, Garnier & Co., comments: “That contradicts the essence of luxury selling and shopping, where the product is the product also because of its environment.”

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Starbucks Shutters Digital Store

The New York Times: “As customers increasingly shift their retail shopping toward e-commerce, Starbucks is bucking the trend: It shuttered its online store … Maggie Jantzen, a company spokeswoman, said that the decision to shut down the online store was part of a push to ‘simplify’ Starbucks’ sales channels … The company’s chief executive, Kevin Johnson, spoke on Starbucks’ most recent earnings call about a ‘seismic shift’ in retailing. To survive, he said, merchants need to create unique and immersive in-store experiences.”

Starbucks chairman Howard Schultz told investors last April: “Every retailer that is going to win in this new environment must become an experiential destination. Your product and services, for the most part, cannot be available online and cannot be available on Amazon.”

“Starbucks said it would continue to sell branded products like coffee through grocery stores and some online sites managed by its sales partners. But it broke the hearts of some fans by ending retail sales of a cult-favorite product line: flavored syrups. The mixes used to concoct drinks like the Pumpkin Spice Latte are generally not for sale in the company’s stores, but Starbucks stocked them on its website … On eBay, a jug of Starbucks pumpkin spice syrup could be had on Sunday for $100.”

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Disney Brings Its ‘World’ To Retail

The New York Times: “Quietly, like a mouse on tiptoe, Disney overhauled its retail store at the Northridge Fashion Center mall in late July. Out went the twisty Pixie Path aisles, the ornate displays, the green walls and the color-changing fiberglass trees. In came a movie-theater-size screen, a simplified floor plan, white walls and more items for fashion-conscious adults … the Disney Store here was a prototype, and the company has been monitoring sales and consumer feedback as it prepares to revamp its 340-store chain.”

“The redesign makes Disney’s stores a bit more like Disney’s theme parks. For instance, daily parades at Disneyland in California and Walt Disney World in Florida will be streamed live to those colossal video screens. During the parades, store personnel will put out mats for shoppers to sit on and roll out souvenir carts stocked with cotton candy and light-up Mickey Mouse ears. The screens could easily be used to stream other events, such as red carpet arrivals for Disney movie premieres. That kind of programming could bolster foot traffic, and thus sales — while also turning the stores into a more potent promotional platform for Disney’s films, television shows and theme parks.”

“As it attempts a new mall strategy, Disney is also remaking its e-commerce operation. ShopDisney.com is replacing DisneyStore.com. The new site will have a less cluttered look and a vastly expanded assortment of designer merchandise aimed at adults (Mickey-themed Ethan Allen furniture and a $350 Siwy denim jacket with Minnie embellishments will be on offer). The site will also stock more items that previously were available only in stores inside Disney theme parks.”

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Retail Apocalypse: Fact or Fiction?

USA Today: “In 2017, U.S. retailers have opened, or plan to open, 1,326 more locations than they will be closing, according to IHL Group’s Debunking the Retail Apocalypse report, which was sponsored by several companies. When you add in restaurants, the increase jumps to 4,080 new openings in 2017 with another 5,050 planned in 2018. Or, to look at it another way, between chain stores and restaurants, 10,123 will close in 2017, but 14,239 will open.”

“To compile the study, IHL looked at over 1,800 retailers and restaurant chains with more than 50 U.S. locations across 10 retail vertical segments. It found that for every chain with a net closing of stores, 2.7 brick-and-mortar retailers would be posting a net gain in locations. The research firm also noted that if you add in retail chains smaller than 50 locations (including restaurants) the number of new openings in 2017 climbs to over 10,000.”

“It’s not a retail apocalypse, but how Americans shop is changing. The ease of online shopping means physical retailers need to be about more than the ability to put goods immediately into consumers’ hands. That does not mean that brick-and-mortar retail is dead or dying, it’s simply shaking out the winners and losers.”

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