Posts Tagged ‘Target’

2011 Retail Analysts in Review – Part 6: Matthew Fassler, Goldman Sachs

by Quantum Retail • January 4th, 2012 • Write a comment »

Matthew Fassler, analyst at Goldman Sachs made predictions for what the 2011-year would hold for the specialty retail sector. Fassler focused his predictions on Best Buy, RadioShack, OfficeMax, Borders, Home Depot, Lowe’s and AutoZone.

A strategic growth plan lead by Best Buy

For Best Buy, Fassler essentially had a neutral rating. He trimmed his price target to $38 from $39 believing a more streamlined growth strategy would happen in 2011. He also believed warranties would help Best Buy’s profitability where past sales lacked stating that consumer electronics retailing has been “historically a low-margin business that is dependent on extended warranties for profitability.” As content business – music and movies – has continued to shrink over the years, extended warranties would prove to be even more valuable to Best Buy in 2011, according to Fassler.

Best Buy planned to open 6-to-8 large format stores in the U.S. and a total of 18 stores in the U.K., Mexico and Canada throughout 2011 and 2012. The retailer also announced its closing of namesake stores in China, shifting U.S. growth to smaller formats instead of its familiar big boxes–all part of their strategic growth plan. And as a result of restructuring, Best Buy said it would incur charges of $225 million to $245 million over fiscal year 2011, diluting earnings.

Global expansion provides retailers with ample opportunity. However, keeping sight local while expanding has proven tough. Retailers can stay competitive while aligning with customers’ wants and needs on both a domestic and international front. Quantum’s chief consumer officer explains how here»

Best Buy reported net earnings of $651 million for fiscal fourth quarter in 2011 down from $779 million for the prior-year period. Their pre-tax restructuring charges totaled $222 million consistent with what Fassler had discussed. In line with their growth strategy for 2011, Best Buy announced plans to re-brand China stores as well as exit the Turkey market in 2012.

In terms of profitability, the company continued to advance its strategy to sell more mobile phones, broadband and TV connections to customers through the evolution of its product offerings and selling model. This correlated to Fassler’s notion that Best Buy would find new ways to increase profitability due to content business slowing. The retailer saw a 20 percent growth in annual sales with 9 percent acquired from mobile phone revenue in the U.S. Moreover, Best Buy made no mention of how extended warranties fit into their 2011 strategies.

RadioShack puts focus on mobile

Significant market changes made it an appropriate time for RadioShack’s CEO Julian C. Day to retire. With that said, before Day left, he mentioned three areas that RadioShack might consider focusing on in 2011:

Mobility: The retailer would start to expand their presence in the mobility sector moving to 2-to-3 carriers nationally allowing consumers to have choice and product comparison.

Re-allocation of space in stores: The second major change Day determined RadioShack would encounter within the company’s business was to reallocate the space in their stores for mobility and some signature categories such as power.

Financial strength: Day sighted T-Mobile struggles as part of the gross margin issue RadioShack was experiencing and decided that it would probably persist. Day thought getting a better handle on their accessories would be their biggest growth margin rate opportunity to improve the financial strength of the company.

Integrating mobile commerce into your business requires a plan. Learn more here»

2011 was a transitional year for RadioShack: they phased out T-Mobile and launched Verizon Wireless products and services in their company-owned stores, and they focused on offering a more compelling assortment of brands and products. As Day mentioned, their mobility platform was a key component of their growth strategy as it represented 50 percent of their revenue. The Shack recognized there was still future potential for expansion as they positioned themselves as a multi-carrier wireless retailer.

During second quarter 2011, RadioShack ended operations in their Chinese manufacturing plant and, as a result, incurred closure-related costs of $11.0 million for the first nine months of 2011. For third quarter, comparable store sales for company-operated stores and Target Mobile centers decreased 4.0 percent which was primarily due to the decline in T-Mobile postpaid wireless sales. Having ended their relationship with T-Mobile and beginning to pay attention to offering consumers more carrier options and accessory assortments, RadioShack began on the right path to success just as Day predicted.

OfficeMax slump could be permanent

Analysts were divided over whether or not the big three office supply chains – Staples, OfficeMax, and Office Depot – were in long-term danger. Fassler expected stocks to fall, but in a research note he indicated there was some promise in OfficeMax’s forecast. The rise in retail competition with the likes of Wal-Mart, Costco and Target as one-stop mass merchants has been a huge headwind for the office supply giants as well as the decline in paper usage. Although paper itself isn’t lucrative, Staples, OfficeMax and Office Depot derived about half of their revenues from those operations, which sell in bulk to other companies. Paper sales also provided sales of other products such as ink, staples and printers, and therefore, have the potential to pose a big threat for superstores long-term.

OfficeMax announced the closing of 20 stores in 2011 in addition to downsizing existing units and curtailing expansion costs as third quarter saw a 2.1 percent decrease in same-store sales contributing to a 1.8 percent decrease in comp-store sales overall. But OfficeMax wasn’t the only one feeling the pain in 2011. Office supplies was one of the biggest revenue losers in 2011. Staples only saw a slight gain in Q3 at 0.5 percent and Office Depot saw a 2 percent decrease appearing as if Fassler’s thoughts on long-term decreases were correct.

Barnes & Noble fares well over Borders bankruptcy

As Borders listed a debt of $1.29 billion and assets of $1.28 billion at the end of 2010, they were left to file for bankruptcy. By the time the retailer embraced new strategies and tactics such as e-commerce, the competition had already established a firm lead. Rival and leading bookseller Barnes & Noble stood to be the biggest winner in the light of the filing in 2011. Before such, Fassler upgraded Barnes & Noble to ‘neutral’ from ‘sell’ ahead of the filing.

Barnes & Noble reported record sales of $7 billion for fiscal 2011. Digital growth fueled 78 percent in fourth quarter at BN.com and increases were also driven by sales of the company’s NOOK. Strong sales for the retailer were speculated to have developed out of new business from people who used to shop at Borders.

Home Depot to improve, Lowe’s to transition

Two similar home renovation retailers have been found going in different directions. After years of evolution, Home Depot was poised for new levels of profitability while Lowe’s began to undergo a transition. Because of this, Fassler upgraded Home Depot to ‘buy’ and downgraded Lowe’s to ‘neutral’. He forecasted improvement in same-store sales over the first few quarters in 2011 in reference to a focus on home repair, remodeling and maintenance and less emphasis on appliances for Home Depot. As for Lowe’s, the company’s management has undergone substantial shuffling causing Fassler to note their biggest challenge: introducing new and innovative ideas, that there had been too much redundancy in years past.

Fassler’s prediction for Home Depot was spot on. Home Depot experienced growth in 2011 ending the third quarter of the year with net earnings of $934 million compared with net earnings of $834 million in the same period of fiscal 2010. Home Depot accredited their success to the strength in their core categories and their exceptional customer service. Like Fassler mentioned, the retailer spent prior years on transforming their merchandising efforts and introduced new initiatives to benefit the customer. 2011 was the year it all came together for Home Depot.

In regards to Lowe’s, Fassler made some very accurate projections on their current transitional stage. Lowe’s managerial moves put them in some difficult corners; however, they were necessary for the retailer in order to see new growth. Along with leadership changes, Lowe’s also experienced changes in the number of stores they operated. Store closings and discontinued projects led to reduced pre-tax earning for the third quarter, and forced Lowe’s to create strategies focused on advancement and becoming a “home improvement company” as opposed to a “home improvement retailer”. The 2011-year positioned Lowe’s with strong potential as the company continued to transform realizing that they needed to go beyond the confines of a brick and mortar store, providing customer support whenever and wherever a consumer chose.

Learn more innovative strategies for your hardlines business here»

AutoZone takes the driver’s seat

Chairman of the Board, CEO and President, William Rhodes, spoke highly of AutoZone’s success in 2010 experiencing growth in domestic and Mexico businesses as well as in both commercial and retail sectors. Servicing the customer and providing the degree of trustworthy advice continued to be a key differentiator in the marketplace, Rhodes stated. Fassler went on to say that their incentive comp would remain close to current levels in 2011.

In 2011, AutoZone, for the first time, exceeded $8 billion in sales increasing 10 percent versus 2010. The company still believed providing great service was their number one focus and the main contribution to their growth. The retailer put an emphasis on growing the commercial business, leveraging the Internet, and investing in technology in 2011 as other sources of development. Rhodes admitted that 2011’s numbers weren’t easy to reach, but hard work and dedication put them in the driver’s seat.

The specialty retail sector has had an especially difficult 2011-year. Shoppers continued to cut back on unnecessary purchases, products that were once lucrative came to a standstill, and some retailers were found caught in the midst of an identity crisis. Whether it was Lowe’s and Home Depot or AutoZone and Best Buy, specialty retailers had one thing in common: trying to keep up with consumers’ always-changing wants and needs. But that was just the beginning. Retailers then had to determine how and when shoppers were going to make purchases.

Stay ahead of the game with Quantum Retail. Check out our free white papers and reports for more insight on innovative strategies and retail trends. Read more about Q, our profit-driven merchandising platform.

Read Fassler’s full prediction here»

Please note that the information provided above is sourced from public releases and reports and does not include any undisclosed information from or about the retailers named.

Sign up to receive updates throughout this series

 

Be the first to like.
Unlike

2011 Retail Analyst Predictions, Part 5: Charles Grom, JPMorgan Chase

by Quantum Retail • March 17th, 2011 • 1 Comment »

Charles Grom, JPMorgan Chase analyst, discusses how increasing gas and commodities are affecting retail.

Increasing gas prices to cause pullback in consumer spending

Same store sales rose 4.2% in February, according to the International Council of Shopping Centers (ICSC). Consumer confidence recently hit a three-year high and the Bureau of Economic Analysis reported that spending on goods last quarter surpassed 2008 levels, stated CNN Money.

But retail analysts have begun to sound warnings about the danger that high gas prices pose for the sector. In the same report that announced the rise in February sales, the ICSC added that the rising cost of crude was “the big worry” facing consumers and the economy.

“All told, with gasoline prices expected to be up almost 6% in 2011, there is likely to be some pullback in retail sales and consumer spending as a result,” wrote J.P Morgan’s Charles Grom in a recent note.

It’s easy to see why rising gas prices have alarmed investors. When people pay more for fuel, they’re less likely to drive to stores. Once they’re there, they have less money to spend, said CNN. Every $1 increase in the price of a gallon of gas lowers consumer spending by $100 billion, stated the CNN article. If gas prices were to stay at $3.47 through the rest of 2011, resulting in a yearlong average of $3.41 — a $0.67 increase from 2010 — consumer spending would decline by $67 billion.

Meanwhile, the companies that were worst off when gas prices were high were value-oriented chains — Family Dollar, Dollar Tree, and 99 Cents Only. Because those companies’ customers tend to be less well off, they spend a larger proportion of their overall budget on gas. As a result, when gas costs go up, their purchasing power goes down.

CNN explained that however, if gas prices stay high for long enough, even if their usual customers spend less, more consumers will move to shopping at value chains for that time.

Grom thinks Wal-Mart’s U.S. same-store sales deterioration could be a lasting trend

In an interview with CNBC’s Fast Money, Grom discusses why he chose to downgrade his target on Wal-Mart from $59 to $54.

3 Reasons Wal-Mart is struggling:
1. Same store sales deterioration in the US
2. Heightened competition from the niche grocers and dollar stores
3. Lack of free cash flow due to international expansions.

How can Wal-Mart turn itself around?
If you look back over the past couple of years, Wal-Mart has gone from guardrail to guardrail trying to fix its traffic issues, stated Grom. A few years back they tried to go upscale and be like Target, last year they went aggressive on price, and over the balance of the second half of last year they tried to unwind some of those mistakes. “What we’ve been able to tell from some of the Nielsen data and store checks we’ve done is that their traffic simply remains elusive,” said Grom.

JPMorgan Chase is concerned for Wal-Mart’s U.S. performance in 2011. “We’ve become increasingly concerned that the company’s recent same-store-sales deterioration in the U.S. could be a secular problem that could last multiple years — not just a few quarters,” Grom wrote in a research note. Despite good outlook for international expansion, Wal-Mart’s U.S. base is suffering. Since nearly 80% of Wal-Mart’s business comes from the U.S., they will seriously need to focus some of their spending on traffic-driving initiatives. “We’ve been big advocates of trying to fix the mothership before trying to expand internationally,” Grom told CNBC. “They need to figure out how to compete more effectively against the dollar stores, against the niche grocers, and against some of their traditional supermarket peers like a Kroger.”

One of the ways that retailers can become more competitive is by having the right products in each location. It doesn’t make sense for you or your customers to generalize your stores. The first place to start with localizing your stores is allocation. If you always have what your customers need when they walk in the door, your customer traffic is bound to increase. Learn more by downloading our 10-Step Guide to More Profitable Allocation »

Costco Wholesale is hesitant to pass on cost increases to members

In a March 3rd earnings call with Costco, Grom noted that their fresh foods margins have been down. Richard A. Galanti, Executive Vice President and CFO, agrees with Grom’s assumption that it is because they haven’t been willing to pass on the price increases to customers. Looking ahead, if price increases continue to rise, Galanti states that they typically will wait several weeks or a few months before raising prices by $0.30 or $0.50 for example, to get back to their regular margin. “That’s not a competitive issue other than we want to protect the prices for the members who are buying these items,” stated Galanti. “We feel that overall margins have been quite good. We really don’t see any major competitive issues in our fresh foods.”

Grom also noted that Costco said gas pricing had hurt them in the second quarter. Galanti explained that gas is still a profitable business, but a very low margin business. “A business as I mentioned before requires some (stomach lining) occasionally but, nonetheless, we are getting good frequency,” stated Galanti. “But certainly when prices spike for a week or two here you see some relatively flat numbers, whether it’s plus a little bit of profit or minus a little bit of loss, it’s not a real big issue.”

For more insight on how to be innovative with your grocery business, check out our Grocery Innovation Report »

Target expects substantial growth with entrance into Canadian market

In a February 24th earnings call, Target stated that they expect to invest about $2.5 billion, plus or minus $200 million, in capital in the U.S. Retail segment in 2011, up modestly from the $2.1 billion they invested in 2010. This increase is driven in part by a larger remodel program and in part by modestly higher investment in future new stores as well. In their Credit Card segment, they expect receivables will continue to decline, although the pace of decline should begin to moderate as the year progresses.

With their movement into the Canadian market, they expect those stores to help the company exceed $100 billion in sales in the next 6 to 7 years, increasing earnings per share by 10-12% annually in the next few years, and even stronger after that.

Grom stated that in the fourth quarter, Target’s gross profit margins were down about 40 basis points, and it sounds like that’s mostly from their PFresh grocery and 5% Rewards credit card initiatives. In response to a question Grom asked about whether or not that is a good proxy for 2011 when looking at Target’s gross profit line, Douglas Scovanner, Chief Financial Officer, Chief Accounting Officer and Executive Vice President, clarified that the combination of the impact of PFresh and the 5% Rewards program adds up to more than the gross margin rate decline. So net all other factors, they are slightly positive, and therefore, as an outlook, particularly as these strategies build to more importance in 2011, the combination of the two will be larger, not smaller than 40 basis points.

When it comes to consumer outlook, Target explained that, following a pullback in the second and third quarters, consumer optimism is once again increasing and close to where it was in the first quarter of 2010. Even so, guests are telling us that they are still risk-averse. They’re concerned about losing their jobs and focused on controlling household budgets, leading to increased coupon use and a focus on promotions. For everyday purchases, guests often choose the good items rather than the better or best items within categories. In turn, they use those everyday savings as justification to occasionally splurge on the best items in categories most important to them. This has created softness on better items in some categories, making it more important than ever for us to help our guests understand features, quality, and value at every price point.

Quantum Retail’s CEO, Vicki Raport, recently spoke at the Target Analytics Forum on the future of business intelligence. Watch the video here»

Macy’s sees 2011 as another positive year

In a February 22nd earnings call, Macy’s stated that their 2010 4.6% annual comp store increase was their best performance in at least 15 years and it compared favorably to their key competitors. At this time last year, they expected comp store sales growth of 1% to 2% for 2010 and they obviously far exceeded that. “That delta is important and enabled us to produce higher-than-expected earnings and cash flow,” said Karen Hoguet, Chief Financial Officer and Executive Vice President.

Looking at 2011, Grom noted that on the gross profit margin line, it sounds like Macy’s expects their first quarter to be down. Hoguet confirmed that it could be down by more than the fourth quarter was, primarily due to non-merchandising margin issues, but she does think it will come back as they go through the year. She also expects a 3% comparable store sales increase for 2011 and does not see a huge deviation from quarter-to-quarter.

Grom stated that when they met in the past, she had spoken to year three of the My Macy’s program as an inflection year. Hoguet responded that she thinks the progress will continue. She stated that when looking at the top districts or the top regions for 2010, it’s many of the My Macy’s pilot districts and particularly the Upper Midwest, Chicago, Minneapolis and Detroit, one of their best performing regions on a comp percent versus the prior year. In fact, they had an increase over a two-year basis, which was not true for the company in total.

When it comes to commodity price increases, Hoguet said that it is a challenge Macy’s is taking very seriously. “As a better-fashion retailer, we are less reliant on opening-price-point basics and have the ability to add quality features and fashion details that command a higher price point,” she continued. “Average unit retails in these categories will increase, but into a lane in which we have successfully played prior to the recent recession.”

She asserted that a significant portion of Macy’s businesses are in categories that are not impacted by the escalation in raw material prices. Hoguet said Macy’s has established a pricing team to provide more analysis on pricing decisions. The retailer is also monitoring consumer reaction to price increases on spring merchandise. In addition, it is editing peripheral assortments to improve costs and working to maintain its value position relative to competitors when passing along price increases.

One way retailers can adapt to rising commodity costs is by editing their assortments and having the right amount of stock levels. Check out our Guide to Creating a SKU Rationalization strategy that works»

Look out for next weeks’ post with insight from Matthew Fassler, of Goldman Sachs.

Sign up to receive updates throughout this series.

SOURCES: CNN, Business Insider, CNBC, MSN, Seeking Alpha

Download a PDF of the full series HERE»

1 person likes this post.
Unlike

Watch on Demand: Quantum Retail CEO, Vicki Raport, discusses Retail Decision Analytics at Target’s Analytics Conference

by Quantum Retail • February 10th, 2011 • Write a comment »

Quantum Retail’s CEO, Vicki Raport, was invited to speak at Target Corporation’s Second Annual Retail Analytics Conference on Dec. 16, 2010

In this presentation, Vicki Raport, CEO of Quantum Retail, discusses the concept of Retail Decision Analytics. Going through the history of Business Intelligence (BI) Vicki breaks down where BI is headed today, why analytics need to be actionable, what makes BI successful, and how results-driven transformation can be achieved. The presentation is also followed by an interesting Q&A.

Runtime: 45 mins

Watch on Demand here»

Click here for more information on the conference.

Be the first to like.
Unlike

Customer Centricity: Adapting to the new consumer

by Mike Hrabe • April 6th, 2010 • Write a comment »

2010 Retail Outlook Review Series – Part 3

This series will outline retail trends, innovation and best practices for retailers in 2010. To view part 2 click here. Look for Part 4 next week. Please engage! What are your thoughts and strategies for the new retail market?

It’s a whole new ballgame for retail

“It is going to be mano a mano, not based on square footage and capital. It’s based on execution, differentiation, knowing your target customer … and fighting for every one of them.”

- Glenn Murphy, Chief Executive, Gap

The recession has brutally changed retailing. It has exposed and eliminated retailers that took consumer spend and loyalty for granted and rewarded others who have a defined strategy to maintain and grow marketshare. Retailers are competing in an era in which consumers have more information, more choices and more channels than ever before. The pace of change is increasing exponentially. Keeping up will require new and modern answers to the complex questions of our time.

What we see now are two kinds of retailers:

1. Retailers that survived the recession

2. Retailers that are thriving because of the recession

Retailers that have survived – are realizing that in order to regain lost ground, lost sales and lost customer loyalty – they need to quickly transform their processes, their strategies, their pricing and their marketing.

Retailers that are thriving – were able to cope with the changes in their customer’s shopping habits and adapt quickly. These retailers had a strategic model in place that allowed them to respond to consumer behavior – but they need to take new steps to maintain what is sure to be a short lived advantage.

Customer-centric

The customer has always been at the center of retail, but the concern for the individual customer has faded out. It’s not logical anymore as a retailer to look at what consumers were doing in the past. It’s all about now. What are your customers doing today? What are they buying? What are they not buying? How much are they buying? How often are they buying? Are they buying it at the same place? These trends have changed.

Retailers can generalize no more. Today is all about the individual. And if you don’t have what they need when they come in your store or search your website, chances are they won’t be back. And that’s not all, they want to see something new, something fresh, something green, and they want it for less and they want it now.


The market is asking new questions

Today’s new market is asking retailers some very difficult questions – questions that their existing processes and tools do not have the answer to.

  • How do you regain brand loyalty?
  • How are you doing more with less?
  • How will you protect your market share?
  • How will you align your business strategies with today’s customer?
  • How quickly can you react to the pace of change?
  • How do you plan to fulfill the local demands of your stores?
  • How do you plan to meet the needs of new channels?
  • How will you meet the challenge of internationalization?
  • How do you manage 1,000 stores like they are your only one?
  • And mostly, Where’s your sense of urgency?

Consumer mindsets have done a 180

Because the recession caused many loyal customers to seek out lower prices and better value, many brands may have lost long-time customers. Shoppers have become more intelligent about what they are buying and they are buying less of it. Frugality in a recession changes long-term habits, not just short term ones. Customers now know that they can survive off of less, they know where they can cut corners, and they have now learned exactly where to go to find the best deal.

How much has consumer behavior changed?

Retail Forward ShopperScape reports that seventy-two percent of all shoppers recently indicated that their shopping behavior has changed significantly or somewhat as a result of the economic environment, and only 7% have made no changes at all (Figure 1).

The New Consumer Behavior Paradigm: Permanent or Fleeting?

Will your shoppers return? If they have deserted you during the recession, you need to lure them back. However, you may need to change your branding to the tune of the new shopper.

The WPP Group discusses a new report that identifies a shift in shopping behavior and the need for retailers and suppliers to adapt to more conscious, practical consumerism.

New shopping behavior data and demographic trends indicate that an enduring shift has taken place as a result of the recent economic downturn. Retailers and suppliers will need to adapt to consumers’ new shopping behaviors to succeed in today’s evolved marketplace and during the post-recession recovery, according to a new report from PricewaterhouseCoopers LLP (PwC) and Retail Forward, a Kantar Retail company, entitled The New Consumer Behavior Paradigm: Permanent or Fleeting?

As outlined in the report, shoppers will be more deliberate and purposeful in their spending, as conspicuous consumption will give way to more conscious or practical consumerism. Rampant deal-seeking will be replaced by more purchase selectivity and the use of shopping techniques and tools discovered during the recession. Additionally, the affluent segment of Generation X and the young Generation Y will lead spending in the recovery.

The report states that companies need to recognize that there will not be a wholesale return to a pre-recession shopping mode and will need to adapt to changed shopping behaviors and patterns to win in today’s marketplace.

Where do we go from here?

Portrait of the New Consumer: Smart and Scared

Mike Duff, from BNET Retail reported the following from The AlixPartners Consumer Sentiment Index study, which queried about 7,700 U.S. consumers on what they buy and where they buy it. Consumers were asked about 63 factors in five major attributes – Access, Experience, Price, Product and Service – that influence their purchasing decisions at 135 retailers.

1. A new shopper emerges. Consumers have become sharper and better educated about the products they buy and where those are available. Previously, consumers ranked time as their most precious commodity, but now they are willing to drive the extra mile to get a product at a better price.

2. Shoppers search for “good enough.” Just a few years ago, shoppers wanted to purchase the best product in a category. Now they are more likely to accept good-enough products. Consumers won’t rebound quickly from trading down because many have been satisfied with their bargains.

3. Consumers continue their flight to value. In every retail sector, and at every price tier, value is far more important than brand loyalty in purchase behavior. A decade ago, service ranked before price in consumer purchasing decisions. Today, service is the least important attribute in every one of the 16 categories in the study. The danger retailers face is that, if they bungle the price/product balance, their customers may look for a better value elsewhere and never come back.

4. Winners and losers pop up in every retail category. Bargain prices aren’t a guarantee of success and a luxury orientation need not be the kiss of death. Luxury retailers can succeed but they must strike a balance by offering a unique experience – including product, atmosphere, and service – that can offset higher prices in the consumer value judgment.

5. Consumers are pickier: Just 15 of the 135 stores in the study met or exceeded customer expectations. According to AlixPartners, the shares of those 15 stores rose twice as fast as the Dow.

Read the full report HERE.

A greener shift in U.S. consumerism

Yes, a recession causes consumers to spend less and reevaluate their spending, but at the same time the recession occurred, a green revolution occurred as well. Looking at the big picture, what we’re really talking about is a giant shift in U.S. consumerism akin to a second coming of the Consumer Revolution! What has occurred over the last year and a half is recession mentality spending, coupled with an onslaught of environmental concerns. So not only are shoppers looking for a better price, they’re also looking for greener, cleaner, sustainable, ethical, efficient, lower impact products.

Greentailing is officially ‘in’

Kathy Grannis, NRF spokesperson discusses the bigger picture of what is now being dubbed “greentailing.”

Everywhere you turn there’s another sustainable project in the works or an eco-friendly fashion line being launched. Greentailing is officially “in” and we are all realizing that you can be green and more profitable at the same time.  One of our clients is reducing waste on their perishable products while making sure their customer sevice levels remain high…surely you can’t be more green and profitable than that, can you??

In addition to reducing their greenhouse gas emissions, reducing energy levels in their stores or eliminating plastic bag usage, many retailers are finding other creative, sustainable projects to undertake.

Gap has partnered with Cotton Inc. in a new, exciting campaign, “Recycle Your Blues”, which encourages shoppers to bring in their old Gap denim in exchange for 30 percent off their next denim purchase at Gap, GapKids or babyGap. The two-week program began March 5 and ended the 14th. Talk about a great reason to shop!

Fast-fashion retailer H&M recently launched its first fully-sustainable clothing line, The Garden Collection. The 80-piece collection hit stores March 25 in a special section of the store and will also include a special shopping bag with a Garden Collection logo.

Target’s new eco-friendly skincare line, One, hit stores nationwide March 1 and offers 28 different product options including lip balms, body butters, solid shampoo bars and bath fizzers. One products come in recyclable, plastic-free packaging.

A few other retailers worth mentioning who are making huge strides in energy reduction and other sustainable efforts:

Kohl’s was recently named 2010 Energy Star Partner of the Year for its commitment to energy management and reductions in greenhouse gas emissions.

With a goal of cutting energy use by 20 percent by 2015, The Home Depot is well on its way having already reduced energy levels 16 percent since 2004. The energy the company has saved so far could power 203,000 homes for one year!

Office Depot is seeking Leadership in Energy and Environmental Design for Commercial Interiors certification for all of its new locations starting in June. Office Depot anticipates 14 new stores will eventually qualify as LEED-certified by the US Green Building Council.

These forward-thinking retailers, and many others throughout the world, continue to find unique ways to do their part to save the earth for future generations of shoppers.

Read the full article HERE

Retailers need to recognize the needs of their customers and give them products that meet these new expectations – and remember, these expectations will continue to change quickly and without notice.  Those poised to recognize and react to this extreme volitility will have the advantage.

Customer-centricity + greentailing = Localization

The current state of the economy has driven the desire to understand the needs of the market at a lower level of granularity. It has caused a need to create local assortments and inventory fulfillment that reacts to local needs. Most retailers’ existing processes and systems were developed to meet the needs of the average, not the individual. In order to increase demand in today’s markets, the next step for retailers is to take on the challenge of localization.

Localization also comes from localizing distribution and utilizing vendors that produce products in a short vicinity of each store. This type of localization is most easily applied to fresh foods and markets – where customers prefer to support their local farmers and local brands.

Best practice now consists of removing the simplifications from the inventory planning process and instead focusing on real-time local demand and the individual product-location-consumer relationship. Retailers need to create an agile inventory plan that is highly reactive to local demand fluctuations, allowing the retailer to be flexible and respond to how their customers are behaving now. This allows the customer to have product availability when and where they want it.

A leveled playing field

In a Financial Times article, Glenn Murphy, chief executive of Gap, discusses the new ‘roll up your sleeves’ challenges facing retail today.

“There will be some Kohl’s [department] stores that will open, and there will be a few more Forever 21s [fashion stores] … but by our crystal ball and the work we’ve done on the next five years its pretty much a level playing field.

“It is going to be mano a mano, not based on square footage and capital. It’s based on execution, differentiation, knowing your target customer … and fighting for every one of them.”

Mr Murphy, who previously headed Shoppers Drug Mart, Canada’s biggest drugstore chain, delivered a frank assessment of the shortcomings he identified when he arrived, including an “almost criminal” weakness in ensuring return on invested capital, and lack of cost awareness.

“It had been a culture that didn’t necessarily embrace really rolling-up-of-sleeves work that needs to get done inside a really great company,” he said.

You need new answers

It takes the proper mix of science, retail intelligence and merchandising art in order to ensure that every store in a supply chain carries the right inventory, while maintaining a high service level and market share. There is a new market and and a new consumer.  If they are to continue to survive and eventually thrive retailers will need to respond to the demands of the consumer in all channels at all times and ALWAYS with the right answer.  It will be a lot of fun watching the retail market evolve over the next few years…without question this rabbit hole goes a lot deeper than we can even imagine!

Get back in the game

Are you ready this year to know exactly what your customers are asking for at every location and in every channel? Are you ready to have the ability to react the instant their wants change? If you are looking for a solution that can drive momentum for your business this year, check out the solutions offered by Quantum Retail. Our customers see valuable results in 8 to 12 weeks, and our implementation approach gives your team access to the system from the beginning, so you can manage changes to your processes, promotions, products and performance with ease. Create profitability in every tier of planning, forecasting, distribution, allocation and replenishment. Quantum Retail continues to help all of its clients drive positive business value more rapidly than anything seen in retail.

For more information on Quantum Retail solutions, visit: http://quantumretail.com/solutions

Get resources on how to adapt to the challenges of today’s retail market HERE »

Download this blog as a PDF

2 people like this post.
Unlike

2010: Retail Innovation – Kohl’s, Nordstrom, Home Depot lead innovation

by Dave Landreth • March 9th, 2010 • Write a comment »

2010 Retail Outlook Review Series – Part 1

This series will outline retail trends, innovation and best practices for retailers in 2010. Look for Part 2 next week.

As 2010 gets underway, retailers are prepared for sales to trickle back. 2009 forced retailers to make some necessary changes. The general pattern for the year was slashing inventories, getting back to the basics and battling for the lowest prices. The following are results and projections from the National Retail Federation for 2009 and 2010.

2009 – a hard hit for retail

2009 was an extremely difficult year for retailers. Industry retail sales (excluding autos, gasoline and restaurants) declined by 3.3% in the first quarter, 3.4% in the second and 3.8% in the third quarter compared to the previous year. Fourth quarter sales rose a slight 0.3%. Despite overall sales slump, lower inventories enhanced retailers’ profit margins. The National Retail Federation forecast that holiday sales (November and December combined) would be down 1.0%, but instead, preliminary results showed a gain of 1.1%.

2010 – projected sales to increase by 2.5%

In 2010, the retail environment will remain difficult, but the improved economy and easy comparisons will result in positive sales gains. NRF forecasts that retail sales will increase by 2.5% vs. the 2.5% decline in 2009.

Interestingly, some retailers were able to thrive in 2009 and take advantage of a very difficult time in retail by having the ability to proactively understand in real time what was happening to their business. These thought leading retailers adjusted their business strategies to meet the local needs of their shoppers and better leverage their inventory investments.

This year, these same retailers have the best possible understanding of what to expect during the spring and fall shopping surges and are formulating their plans to leverage this knowledge to grow their business. It’s about bending to the customer and giving them what they want at prices they are willing to pay.

Technology helps retailers adjust to the “New Normal”

While retail has stabilized somewhat, all indications predict that customer buying habits have forever shifted. Consumers are still clipping coupons and getting into the habit of buying products, fashions, and food that has the most value and is long-lasting. With these new consumer patterns, forecasts of past shopper behavior are no longer relevant. In a recent interview with Barron’s, Deborah Weinswig, Citigroup Investment Research’s retailing analyst said “retailer’s must adjust to the New Normal, conspicuous consumption is definitely out.” Weinswig, who focuses on major retailers such as Wal-Mart Stores, Home Depot and Target, states that “technology stories are key,” when she considers investing in retailers.

“Retailers who are investing in optimizing their environment to localize their decisions about the customer are the only real winners,” states Weinswig. One of these retailers Deborah is enamored with is Kohl’s. She states that they have “completely pulled away from the pack.” She continues, “Kohl’s has done such a great job in terms of delivering value to the customer at the right price that Target has lost share to them on apparel and home goods.” Kohl’s remains progressive and has continued to grow through the recession, while most retailers saw a negative trend in their comps.

Why is technology so important?

Weinswig states, it is “because retailers have been so late to the game. That’s the underlying story at Saks. They have invested a lot in technology. So has J.C. Penney, which has spent a lot of time on cycle-time reduction. And there’s Home Depot, which is upgrading its technology. That’s the common thread in terms of the retailers we have Buys on. Consistent with this theme, Nordstrom did a major technology implementation in 2004 and now they have some of the best inventory turns in my coverage universe.”

One area where retailers have really seen results through the recession is by utilizing intelligent inventory planning and management technology that can help retailers decrease excess inventory to align demand with store need. To do that, retailers need to look for solutions that can give them real-time visibility to their chain, their product performance and customer buying habits at each store.

When they have this kind of visibility and can utilize this intelligence in their merchandise planning, forecasting, ordering, allocation and replenishment processes, they can manage each store effectively, rather than aggregating and averaging their data. When you combine automation that turns store data into profitability monitoring and strategic merchandise management, this creates instant ROI for retailers.

Get back in the game

Are you ready this year to know exactly what your customers are asking for at every location and to have the ability to react as their wants change? If you are looking for a solution that can drive momentum for your business this year, check out the solutions offered by Quantum Retail. Our customers see valuable results in 8 to 12 weeks, and our implementation approach gives your team access to the system from the beginning, so you can manage changes to your processes with ease. Quantum Retail continues to help all of its clients drive positive business value more rapidly than anything seen in retail.

For more information, visit: http://quantumretail.com/solutions

Download this blog as a PDF

1 person likes this post.
Unlike