Focus on: Site Selection and Optimization
Since Perfumania opened its first store in 1987, the Bellport, N.Y.-based fragrance retailer has made a name for itself in shopping malls and strip centers nationwide, establishing itself as the single largest player in the promotional designer fragrance space. In 2008, Perfumania’s publicly traded parent company, Perfumania Holdings Inc., added a lineup of wholesale and manufacturing businesses and fragrance consignment programs to its retail presence, and fiscal 2009 net sales for the combined companies was $511 million.
Today Perfumania operates 350 retail stores in the United States and 20 in Puerto Rico. The company opened 57 stores in 2009, and nine stores in 2010. This year, it plans to open 10 to 15 locations, and is considering a Canada market debut.
Perfumania has outlined an aggressive growth strategy that could ultimately see 600 retail doors in North America and Puerto Rico. But the downturn has slowed its expansion rate.
“Our expectation is that we will be in a good position to expand when the time is right,” said Michael Katz, president and CEO, Perfumania Holdings Inc. “We have the infrastructure in place to expand as economic recovery occurs, but we are not actively chasing growth until that happens.”
To prep for expansion and to shore up its real estate position, Perfumania retained New York-based RCS Real Estate Advisors in January 2009 to act as its outsourced real estate arm. RCS responsibilities include lease renewals and renegotiations, terminations as required and, for new locations, all site selection and lease negotiation duties. But, according to Ivan Friedman, president and CEO of RCS, the top priority from day one has been portfolio evaluation and maximization.
“Before we joined Perfumania in 2009, we reviewed the portfolio, and we discovered a host of locations that were operating under lease rates that were too high,” Friedman said. “Because of that, the company had a lot of unprofitable locations.”
RCS’ focus has been on aligning the existing portfolio of 370 locations so that the rents are acceptable and the stores are profitable. “We will use renewals, kickouts and individual negotiations with landlords to accomplish this,” Friedman said. Going forward, he added, it will be crucial to ensure that all new sites are set up for profit.
“We will make sure to control how much rent we can afford to pay based on the location,” Friedman continued. “I see that as the continuing priority for 2011, just as it is for all retailers.”
Perfumania regional mall sites require 1,500 sq. ft., of which about 1,200 sq. ft. is selling space; outlet mall stores require 2,000 sq. ft., 1,700 sq. ft. of which is selling space.
“About 80% of our stores are in regional malls, outlet malls or strip centers, and we have a few lifestyle center stores,” Katz said, “though those haven’t been as successful.”
Perfumania also has some urban street stores that have been successful. The challenge with the urban stores is achieving the rent-to-sales volume ratio, according to Katz.
The typical Perfumania customer is a 25- to 45-year-old female. Positions next to high-traffic retailers provide the best results.
“If every one of our stores could be located next to an Apple store, we’d be happy,” Katz said.
A strong mall can provide an opportunity for not one, but multiple stores. For example, Perfumania operates two similar (same name, same design, same inventory) stores in the Mall of America and is eying a third location.
“The product is so much of an impulse purchase that if you’re on two sides of a really big mall, and it’s a great mall, why not?” Friedman asked.
Friedman predicts that for profitability reasons, much of Perfumania’s future growth will come from its outlet concept.
“One of the most profitable parts of its business [is] the outlet stores, which is not unusual,” he explained. “Many retailers that have venues within traditional malls and shopping centers are so much more profitable in the outlet centers than in the malls. Expanding the outlet footprint for Perfumania would be our No. 1 expansion strategy.”
Both RCS and Perfumania also have a list of traditional malls slated for future openings that they target as locations become available. The western United States is slated for expansion, as are the southeastern and southwestern United States.
“The opportunities in the Midwest haven’t been as great over the last 12 to 24 months,” Katz said.
Canada also has significant appeal, especially since it lacks a national fragrance player. Katz said there are three or four Canadian cities that Perfumania would target for stores.
Friedman feels the expansion possibilities for Perfumania are almost limitless.
“It is a strong company with clout and strong financials,” he said. “Growth is restricted only to finding the right locations for the right price.”
Editor’s note: Additional coverage of Perfumania, its expansion progress and its leadership via a one-on-one interview with Mike Katz will be featured in the upcoming February issue of Chain Store Age.
In the Know
When it comes to staying in touch, reaching out and attracting new customers digitally, Facebook is just the tip of the iceberg. There are many up-and-coming applications that retailers can use not only to leverage brands but to bring in big sales. Here’s a look at several sites that should be on retailers’ watch lists:
Groupon.com made headlines in November when Google put in a bid to buy the popular deal-of-the-day site and e-mail newsletter company for a whopping $5.3 billion. News of this was widely spread throughout the industry, raising many questions about how a company that just formed in 2008 could possibly be worth so much. Even more surprising was that Groupon turned down the offer.
The Chicago-based Internet-coupon service is all about geo-targeting, providing its 35 million users steep discounts on things to do, see, buy and eat in various cities. The catch is that a certain amount of people must buy the deal in order for it to actually be valid. Since the minimum amount of daily purchases is almost always met, it has become one of the most recognized group-buying sites around.
Savvy companies from Gap and American Apparel to small salons, restaurants and boutique shops have joined forces with Groupon. (The deal site shares part of the revenue with its retail partners.) In August, it launched its first national, non-local discount by offering $50 worth of apparel and accessories at Gap for $25. About 441,000 Groupons were sold that day, raking in $11 million.
The exposure that sites like Groupon give retailers big and small is a huge traffic- and sales-driver. Plus, it links them to a hip, savvy and budget-minded new brand, according to Susan A. McKenna, CEO of Winnetka, Calif.-based social media firm McKenna’s Marketing.
“We are living in a new social Internet, and good ideas are growing faster than ever,” she said. “Groupon’s concept is one that retailers should take note of and perhaps even consider emulating, especially given their very early success. Regardless, looking for ways to partner with Groupon could be an amazing geo-targeting tool for both brick-and-mortar and online retailers.”
Social Shopping Sites
Many social shopping sites are a gold mine for merchants. GoTryItOn.com, for example, has become a hot new destination site dominated by teens and young adults. Serving as a virtual dressing room, members can use a Web cam or upload pictures of what they are wearing and share it with the community. Those on the site can then leave comments about the outfit, offer style suggestions and, if more than one photo is uploaded, vote on which look is best for them. This also means photos can be snapped from a dressing room of a store, and, depending on the feedback, shoppers can decide whether or not they should make a purchase. Users can also keep pictures private and seek feedback from trusted friends.
“We have thousands of people uploading pictures while in the dressing room at stores,” said Marissa Evans, CEO of Go Try It On. “Brands and retailers could get engaged with our community by reaching back to customers who are at the point of purchase and making the ‘to buy or not to buy’ decision in real time — whether they are in their own stores or a competitor’s shop. Shoppers are usually alone with brand labels in a fitting room, but now retailers can access [those consumers] directly when they are seeking advice and feedback, which could be very powerful.”
Another popular social shopping site is Chictopia.com, a blogging community that offers fashion inspiration from photos of people in places around the world. Launched in 2008 and now with more than 100,000 registered users, Chictopia is a mecca for trendsetters and allows members to post pictures of what they are wearing on the street. Retailers can analyze which styles are trending and determine if any are worth bringing into their stores.
“The ‘word on the street’ is always important for fashion and retail, but so is staying true to one’s brand,” said Lauren Freedman, president of Chicago-based e-tailing group. “However, the interpretation of street trends is the most successful part of merchandising strategies, and this is where Chictopia can help merchants. Fashion trends are also being spread quicker and faster through sites like this, so retailers can listen in and be a part of the conversation.”
Alibaba.com is China’s largest e-commerce company and the world’s largest online business-to-business trading platform for small companies. The site — which is 40% owned by Yahoo! Inc. — connects retailers looking for inventory to worldwide sellers with wholesale prices. Although the site has been around since its launch in 1999, it is a huge resource for small businesses looking to get off the ground and grow their supplier network. In fact, it has more than 50 million registered users in more than 240 countries and regions.
The site, a unit of Alibaba Group, was in the news most recently when the group’s founder Jack Ma had reportedly been approached about joining a private equity group considering a bid to buy Yahoo.
Set up like popular career-networking site LinkedIn, Alibaba encourages users to chat in forums, leave comments and build professional relationships. In June 2010, the company purchased Vendio, a provider of e-commerce solutions to 80,000 retailers, to further its supplier reach and help small retailers run Web stores with various e-commerce services.
Penny Auction Sites
Penny auction sites have seen exponential growth in the last 12 months due largely to the down economy in the United States and other parts of the world. The business model for sites such as Swoopo.com, Beezid.com and Quibids.com allows shoppers to bid on factory-sealed products at huge discounts, from mobile phones and laptops to cameras and TVs. First, users have to place a bid on products. At Swoopo, each bid costs $0.60, but bid-packs are sold at a discount (e.g. 40 bids for $24.00). To win, shoppers have to be the leading bid when the auction clock runs out. On average, winners end up saving 65% off the retail price.
Some industry experts recommend retailers take a look at this business model and even partner with sites like these to get rid of surplus or clearance items. According to McKenna, these sites may also become viable channels for retailers looking to establish an online brand for new products.
“Retailers of any size that ignored eBay, Amazon and Overstock.com as distribution channels for products regretted it over time, and the same might be true for the penny auction sites,” McKenna said. “They are not only taking the Internet by storm, but even challenging the eBays and Amazons, especially in this economy. Where these will end up, I’m not sure, but the model and current popularity certainly should be noted by merchants.”
Keeping on Task
The Pantry has advanced it goal of providing “fast, friendly, clean” service across its network of convenience stores by implementing a task management solution. The solution, which is designed to help the chain deliver consistent task messages to its store managers and prioritize tasks based on importance, will support the chain’s efforts to better serve its shoppers.
The new task management system is a far cry from the e-mail messages the chain was using to communicate store-level tasks and deadlines. Under the old system, it wasn’t uncommon for managers to receive up to five messages weekly, all containing task details, deadlines and other proprietary information such as surveys, operational updates and reminders. The abundance of information also made it difficult for store managers to decipher which tasks were paramount or ancillary.
The Pantry did its best to slash the amount of e-mails and within three years had reduced the five messages to one all-encompassing weekly message. However, these weekly e-mails did not help managers prioritize their workloads.
Eager to get on the right path, The Pantry’s management team instituted a new philosophy to help set the tone for its managers to complete tasks and still provide its shoppers with “fast, friendly service and clean stores.”
The chain first created a set of corporate standards and accompanying guidebooks and policies to support these operations. But the key ingredient was adopting technology “that could point us in the right direction and enable consistency across the chain,” explained Michael Ursini, director of operations and support, The Pantry, Cary, N.C., which operates 1,642 convenience stores (the majority under the Kangaroo Express banner).
Since the retailer was eager to improve guest relations and ensure it had the best associates on the front line ready to serve customers, The Pantry began evaluating time and attendance and labor scheduling systems. As Ursini began to learn more about task management solutions, however, he shifted his focus.
Task management software measures productivity and plans and communicates business objectives and store-level operations across the enterprise. The Pantry’s ideal solution had to meet a rigorous set of prerequisites, such as ease-of-use and flawless integration within the chain’s labor scheduling solution. The chain also wanted to monitor store progress through a Web-based portal. After reviewing its options, The Pantry selected Task Manager from Dedham, Mass.-based Reflexis Systems.
Here’s how it works: As store managers log on to the portal at the beginning of their shifts, they receive a message illustrating all tasks planned for the day.
“Messages are weighted by importance, allowing managers to focus on priorities first and allocate the best resources needed to complete these operations,” Ursini explained. “When nothing is filtered, everything seems to be a priority. That was the problem with our e-mails — managers had trouble distinguishing critical projects. Too many would struggle to complete as many tasks as possible.”
As tasks are completed, managers input this information into the portal, and data is transmitted to the company’s support center at corporate, where all information is monitored on an hourly basis. While the process may suggest a “Big Brother” undertone, Ursini reported that the solution is purely to make its associates’ jobs easier.
“Our goal is to gain better control of the consumer experience and generate more service and store sales,” he said. “If our managers and associates spend their time on paperwork and manually monitor whether tasks were completed, then our customer experience suffers. We believe this [technology] provides better visibility into the operations sent to stores, and we have a benchmark to determine if they are truly adding value to our operations.”
The chain has been piloting the solution since October 2010 and plans to go live with the solution chainwide later this month. The Pantry is currently working on the next phase of the project, which encompasses the addition of labor scheduling and time and attendance modules.