The ‘Do or Die’ list
Let’s begin with the not-so-good news. RIS News recently reported in an article that with the slow economic recovery still looming, 2013 will be tough for some retailers. Four retailers, in particular, have landed themselves on the Wall Street Journal’s ‘Do or Die’ list. This doesn’t mean they are doomed, it simply means there is work to be done.
In the article, Ann Zimmerman and Dana Mattoli wrote, “These unlikely retailers are going into the New Year with extra woes: slipping sales, questionable strategies and tight finances – which is why they are the ones to watch.” Who are these retailers? RIS News and 24/7 Wall Street highlight the difficulties each of the four retailers are facing:
JCPenney: With promises of new pricing strategies and a new direction from CEO Ron Johnson, the results have confused customers and led to steep sales declines. The retailer has nowhere to go for bottom line improvement other than deep cost cuts and store closings.
Best Buy: Particularly hard hit by showrooming, Best Buy needs to find a way to overcome or embrace the phenomenon. A Harris poll quoted in the Journal article reported 25 percent of shoppers who had showroomed did so at Best Buy. The retailer recently announced plans to enforce a price matching guarantee permanently to help combat showrooming. However, the retailer is predicted to close 200 to 250 stores in the coming years.
RadioShack: The retailer made a major decision to sell more mobile phones and tablets, which resulted in increased sales; however, it also resulted in much lower margins compared to merchandise such as cameras and computers inevitably eating into profitability. Additionally, consumers believe the products it sells can be found elsewhere, usually at a cheaper price and with better customer service.
Sears: Same-store sales have declined for six years and profits have continued to decrease as well. To maintain cash flow, the retailer has been selling off pieces of its enterprise, but this can only last for so long. The good news is, Sears is the process of launching new initiatives such as same-day pick-up service and ramping up its product assortments.
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Lessons from the top
The Hot 100 Retailers
STORES Media ran a special report on the Hot 100 Retailers and listed three of the hottest areas in retailing right now: groceries, trendy fashion, and the intersection of e-commerce and telecommunications. And those retailers who play in these areas are exactly the ones to make the list. Sprouts Farmers Market, Lowe’s Market Place, Kroger, Whole Foods, and Trader Joe’s all topped the list as well as clothing retailers Michael Kors, lululemon athletica, Under Armor and Rue21.
Who made it onto the top 10? Sprouts Farmers Market found itself in the No. 1 spot and chances are good that Sprouts will rank among the hottest retailers again in 2013 since earlier this year it merged with Sunflower Markets to expand in the natural-and-organic supermarket niche. Like Sprouts, Lowe’s Market Place, coming in at No. 8, is a family business. With the majority of its stores in Texas, it has locations in other states under several banners including Big 8, Family Center and Fiesta Foods.
As for the clothing retailers to make the top 10, all three share many similarities: All are roughly two decades old, are publicly held and have developed customer bases that border on cult followings. That said, “Each of these retailers has a differentiated, unique offer that is not subject to price/style feature comparison among shoppers who want the look offered by the brand,” says Mary Brett Whitfield, senior vice president, Kantar Research.
Highest ranked at No. 3 is Michael Kors, a Hong-Kong based company with U.S. headquarters. The retailer’s North American comparable-store sales increase was 37.2 percent in 2012 and the company forecasts comparable-store sales increase of about 35 percent for the 2013-year.
At No. 4 is lululemon. Headquarter in Vancouver, B.C. with offices in nearby Sumner, Washington; lululemon was founded by yoga-enthusiast Dennis “Chip” Wilson whose stated mission was to “elevate the world from mediocrity to greatness”. Lululemon achieved $1 billion in worldwide sales for the first time last year. For 2013, the company anticipates same-store sales gains above 20 percent.
Next, at No. 5, is Under Armour. The retailer also produces and sells athletic apparel. Founded in 1996, the retailer didn’t open its first retail outlet until 2007.
CEOs making big waves
Chain Store Age put out a report on retail’s big power players emphasizing retail executives that are taking their companies to great new heights. On the list was Michael Duke, CEO of Wal-Mart. Under his leadership, Wal-Mart has emerged as a frontrunner in e-commerce and digital innovations and even forged an alliance with Facebook all while investing in store expansion. The company has begun to roll out its smaller sized Wal-Mart Neighborhood Market to help it enter urban markets and compete with the dollar-store format. Duke is in his sixth year as Wal-Mart’s CEO and continues to explore new ways to grow the enormous company in today’s highly competitive, 24/7 retail marketplace.
Deemed “the tech trailblazer,” Jeff Bezos, founder and CEO of Amazon, morphed the company from an online bookseller into a $100 billion mega retailer of anything and everything, then to a tech manufacturer with Kindle. What’s so impressive is how, under Bezos’ leadership, Amazon continues to reinvent itself and entire industries. The one thing that remains the same, though: Bezos’ unwavering focus on the customer. It’s the key to the company’s success.
Next up: Howard Shultz, CEO of Starbucks. As the coffee industry faces increased competition from Dunkin Brands, McDonalds and even drug stores, Starbucks’ Schultz did what he has done throughout his career: He forged onward. Following an eight-year hiatus, Schultz returned as CEO in 2008 to successfully turnaround the faltering retailer.
Starbucks is no stranger to the front page. The company has made news lately as it pushes to expand its empire beyond coffee. In 2011, Starbucks purchased premium juice maker Evolution Fresh and in June 2012, the company acquired a small artisan bakery chain. This past November, Starbucks also purchased Teavanna Holdings. The company is expected to expand in all three formats.
Top goals for 2013
During the National Retail Federation’s BIG Show in January, retailers shared their biggest growth opportunities and business goals for 2013 with Forbes.
Whole Foods: The high-end supermarket chain’s growth reflects a nation increasingly interested in heath and wellness. Its appeal is expanding. Originally “built by boomers”, the retailer is winning over Generation X and millennials. “It’s these younger shoppers in particular that respond to the notion of “conscious capitalism,’ ” co-CEO Robb Walter said.
Goals for 2013: Incorporate the tenets of conscious capitalism – higher purpose, stakeholder orientation, conscious leadership and conscious culture – into its business practices.
Saks Fifth Avenue: As pointed out in the previous post, technology – especially omnichannel – is a major focus for many retailers in 2013. Saks Fifth Avenue is betting on the delivery of a seamless integration of bricks-and-mortar and online to bring its business to new heights this year.
Goals for 2013: The chain invested $100 million last year to “be an omnichannel retailer”. The goal is for “Saks shoppers to be able to order online and pick up merchandise at the nearest Saks store,” Steve Sadove, CEO, told Forbes.
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Ethan Allen: The home goods and furniture retailer plans to capitalize on the recovering housing market this year. “People are now back to buying homes, prices are rising after the Great Recession, and we are ready,” said CEO Farooq Kathwari.
Goals for 2013: After giving its product mix a style makeover, expanding its team of interior designers and moving 60 percent of its stores to better locations, Ethan Allen will ramp up advertising to spread the message.
Another retailer banking on the housing market rebound is Home Depot. The retailer plans to hire 80,000 seasonal workers for spring, up from 70,000 last year. Analysts estimate that Home Depot will report a 10 percent rise in fiscal fourth-quarter sales, its biggest quarterly gain since 2007.
We are all in this together
When you add it all up, leadership, innovation and perseverance are the strategies that stand the test of time. Retailers should share and evolve from each other’s hits and misses in turn providing direction for the entire industry. Regardless of store count, retail vertical, etc., we can all learn from one another.
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