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Gearing Up for the Holidays in an Election Year

BY Bill Martin

When the days grow shorter and the air starts to turn chilly, retail companies prepare for their hottest time of year. As they get ready for the holiday season, retailers will do well to keep three additional factors in mind:

u Adjust for the presidential election. Typically, retailers market heavily in October and early November to drive store foot traffic as the holidays begin. Early marketing efforts, however, will not go as far this holiday season.

ShopperTrak’s analysis reveals shopping activity tends to lessen before national election days. During the 2004 presidential election, for example, retail foot traffic saw a year-over-year decline of 0.7% the week before the election and 2.2% the week of the election. Similarly, in 2008, retail foot traffic declined 3.7% the week before the presidential election and 6.3% the week of the election, when compared with the same period the year before. While economic factors account for some of these declines, especially in 2008, the data show elections do have an impact on these rates.

Retailers should plan for decreased traffic leading up to the Nov. 6 election this year and keep the marketing powder dry until after the election. Scheduling marketing efforts to coincide with when customers are ready to shop will make a bigger impact.

• Schedule against the calendar. Retailers that schedule operating hours and staff based simply on last year’s store performance and calendar will lose out this holiday season.

Movement of key shopping days on the calendar affects each season. For example, in 2010, Dec. 26 fell on Sunday, a day that generally features church service conflicts and abbreviated shopping hours. Last year, however, Dec. 26 fell on a Monday — and people who took Monday as a holiday stormed stores in record numbers. So, while Dec. 26 is often a busy day, many retailers were ill-prepared to service these additional shoppers and lost business that day.

Another casualty of calendar shift last year was the Friday and Saturday right before Christmas. Those days lost some retail steam because shoppers were more likely to stay home and begin their holiday weekend early. Dec. 17, the Saturday one week before Christmas, therefore, was the third-busiest shopping day of the season and generated $7.4 billion in sales.

Based on more than 20 years of historical foot traffic data, ShopperTrak expects the weekend before Christmas (Dec. 21 to Dec. 23) this year to be one of the biggest of the season. Since Christmas 2012 falls on a Tuesday, last-minute shoppers will go to stores that weekend without sacrificing any of their holiday plans. This year, retailers that use historical traffic patterns and benchmarking tools will gain similar, critical insights to beat out those that don’t.

• Earn customer loyalty all year. The holidays may be retail’s busiest time of the year, but shoppers make buying decisions all year long. Retailers that wait until the holidays to build customer loyalty and bring in new business are too late.

The 2011 holiday season accounted for only 21% of annual sales. And while holiday sales improved 3.7% over 2010, in-store foot traffic decreased 3.1% compared with the previous holiday season. While foot traffic has slightly improved this year, retailers must be prepared to make the most of every shopper opportunity that walks through the doors — all year long.

Holiday preparedness is more important than ever. Retailers able to stuff their stockings a little fuller this year will earn customer loyalty early and plan for positive customer experiences based on historical foot traffic.

About the author

Bill Martin is the founder and executive VP of ShopperTrak, a leading retail technology company that anonymously counts people, analyzes data and identifies opportunities to increase revenue for retailers, mall developers and entertainment venues. Find out more at Shoppertrak.com.

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Spotlight on J.C. Penney

BY Marianne Wilson

All eyes are on J.C. Penney Co. as it rolls out the first wave of its branded shops to nearly 700 stores nationwide.

The shops are the linchpin of CEO Ron Johnson’s ambitious plan to transform the Penney shopping experience from the standard department store model to one that is made up of some 100 branded shops and a central “Town Square” area. Some of the shops will focus on one brand; others on a variety of labels. All will feature their own fixtures and signage. As for the Square, Johnson told analysts and investors at a presentation in August that it will feature seasonal merchandise and will also function as a central meeting place offering classes and other activities.

The first three shops, opened in time for the back-to-school selling season, are focused on denim, with concepts for three brands — Levi’s, i jeans by Buffalo and The Original Arizona Jean Co. Set to open at press time: shops for Liz Claiborne; Izod; and jcp, a new private brand of fashion basics. Other brands that will be eventually setting up shop in Penney range from Maidenform and Vanity Fair to Carter’s and Cynthia Rowley to Martha Stewart Living and Betsey Johnson.

Also in the wings is Joe Fresh, the Canadian cheap-chic retailer, whose branded shop concept will launch in spring 2013. The brand, owned by Loblaw Cos. Ltd., operates only a handful of U.S. stores, all of them in the New York metro area.

Of the initial batch, the Levi’s shop, dubbed Levi’s Denim Bar, is the most detailed. Each Denim Bar is equipped with iPads so customers can access more sizes, styles and finishes through a virtual experience. Trained stylists from Levi’s are available to help customers. The shop is a first for Penney in that it offers mobile checkout.

But it certainly won’t be the last. Johnson has said he wants to eliminate traditional checkouts by the end of 2013, replacing them with mobile checkout devices and self-checkout kiosks. And by February 2013, the retailer will move to a 100% (item-level) RFID deployment.

Penney’s reinvention has been rocky. Its new three-tiered pricing strategy was not well received by customers. The chain has since simplified the model and is fine-tuning its advertising to better explain the changes. The company lost $147 million in the second quarter, ended July 28, 2012, compared with net income of $14 million a year ago. Revenue plunged almost 23% to $3.02 billion amid a 21.7% drop in same-store sales.

Despite the miserable quarter, Johnson is holding firm. (And to be fair, with only the first wave of shops rolled out and the new merchandise just now arriving, the transformation is really still in its initial stages.) He told analysts at the meeting in August he has seen some hopeful signs in the business since early August. He noted that sales of Levi’s merchandise are up 25% in the stores that have the branded Levi’s shops.

“I am completely confident that our transformation is on track,” Johnson said.

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CityTarget love amid modest 2Q growth

BY CSA STAFF

MINNEAPOLIS — Target’s second-quarter sales increased 3.5% to $16.5 billion and the company’s profits grew 2.9% to $1.06 per share, five cents better than analysts expected.

The company’s second-quarter results were negatively affected by pre-opening expenses related to next year’s entry into Canada. Excluding those expenses, Target said its profits would have increased 4.6% to $1.12 compared with $1.07 last year. Including expenses related to Canada, Target increased its full-year profit forecast to a range of $4.20 to $4.40 from an earlier guidance range of $4.10 to $4.30.

“We’re pleased with Target’s strong second-quarter financial performance, which reflects a continued focus on delivering an outstanding experience for our guests and disciplined execution of our strategy,” said Gregg Steinhafel, Target’s chairman, president and CEO. “In addition, we’re very pleased with the initial response to the July opening of our first three CityTarget locations in Seattle, Los Angeles and Chicago. We look forward to serving guests in these dense urban areas with an exciting store format and uniquely-tailored assortment.”

The company also is looking forward to opening its first stores in Canada early next year and incurring considerable expense in advance of the openings. Thus, Target has taken to reporting two sets of financials results, one set that includes expenses related to the Canadian entry and another that breaks out those costs to present investors with clearer view of the performance of the U.S. business.

In the case of the latter, investors seem to like what they see and have propelled shares of Target to a 52-week high, despite relatively modest top line growth and declining margins. Operating profits at Target’s U.S. retail segment advanced 2.9% to slightly more than $1.1 billion in the second quarter and gross margins declined to 31.3% from 31.6%. The company said the decline reflected, “the impact of the company’s integrated growth strategies partially offset by underlying rate improvements within categories.”

To offset the gross margin decline the company has maintained tight control of expenses within its U.S. operations and as a percent of sales expenses are now 21.1% compared with last year’s 21.3%.

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