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Index: Promotional intensity causing Q1 profit pressures

BY Mike Troy

Retailers’ margins could be under pressure during the first quarter as a new index tracking promotional selling shows full price sales have declined and promotional activity has increased.

Retailers are relying heavily on discounts and promotions so for this year, continuing the trend from the 2015 holiday season of pulling the promotional lever far too often, according an analysis of $5 billion in consumer transactions from January through March conducted by DynamicAction.

According to the DynamicAction Retail Index: Spring 2016, released at the inaugural Shoptalk conference in Las Vegas, retailers did the following in the first quarter:

  • Retailers sold less at full price in Q1 2016 vs. a year ago, with full-price sales down 4% for the quarter and orders using a promotion up 63%. March was an especially promotional month, with an 86% increase in orders using promotions compared to 2015.
  • Retailers found it harder to convert first-time buyers into second-time buyers, with those conversions down 6% compared to last year.
  • While revenues were up 10% in the first quarter compared to 2015, retailers’ ability to control profit has been unstable in early 2016. Retail profits were up an average 5.2%, however most gains occurred in January, with increasing volatility in February and March.

“The antiquated strategy of retailers relying exclusively on their promotional calendars to run their operations has fostered an ingrained need for discounts by consumers, who are increasingly being trained to wait for promotions or discounts prior to making a purchase,” said John Squire, CEO and co-founder of DynamicAction. “The very best retailers are preparing right now to answer customers’ needs and beat shareholders’ expectations during the holiday season of 2016, by focusing on curbing the promotional addiction and utilizing their full data set to better manage inventory and operations.”

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Barnes & Noble brings beauty to more colleges

BY Mike Troy

The newest concept in beauty retail is called The Glossary and it is arriving on more college campuses courtesy of Barnes & Noble College.

The Glossary concept was piloted at the Barnes & Noble Emory University and Southern Methodist University bookstores and more recently expanded to the campuses of Tulane University and the College of William & Mary. The newest location set to open in August will be on the campus of the University of California at Riverside.

The Glossary is a store-within-a-store concept that Barnes & Noble College describes as a “dynamic shopping environment that offers students the opportunity to explore, sample and purchase a wide variety of mass and prestige beauty products.”

“We built our reputation as one of the most trusted campus retailers by continuously innovating and creating new merchandising ideas we know our students are looking for,” said Joel Friedman, chief merchandising officer with Barnes & Noble College. “We are excited to introduce The Glossary to our college partners, making the brands and products students want easily accessible to them for the first time.”

To execute the beauty concept, Barnes & Noble College is working with global retail design and build firm RPG to design, brand and manufacture The Glossary, and prestige health and beauty brands distributor EC Scott Group to stock its shelves with product.

To distinguish The Glossary from the main bookstore, RPG used warm colors and hand-drawn original art to create a unique, approachable presence. Main drive-aisle spaces and in-store locations position The Glossary for high traffic, while product displays create and encourage in-store experimentation. To appeal to a diverse spectrum of college students, The Glossary features a wide range of products, from prestige brands like Smashbox, Philosophy, Bliss and Lipstick Queen, among others, to traditional mass-market brands including Burt’s Bees, CoverGirl and Maybelline.

“Through in-depth student discussions and focus groups, we recognized a gap in access to beauty solutions on campus and worked with them to help shape The Glossary,” said Lisa Mazzio, director of merchandise, fashion trends and beauty, Barnes & Noble College. “Their feedback informed the categories and brands we sell, the look and layout of the stores themselves, and the format that inspires self-discovery rather than in-aisle beauty consultants, which students expressed were less desired.”

According to Mazzio, RPG created a concept that appeals to a wide array of campus consumers and the concept’s design attracts value seekers, product perfectionists and brand devotees. It is also scalable to add, evolve and change the product mix in the future as Barnes & Noble College looks to extend the concept to its 748 stores on campuses nationwide.

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Lowe’s takeover of Canadian home improvement chain gets regulatory OK

BY HBSDealer Staff

Lowe’s takeover of Canadian home improvement chain gets regulatory OK

With regulatory hurdles out of the way, Lowe's Cos. is one step closer to completing its acquisition of Canadian home improvement retailer Rona Inc.

Lowe's has officially been granted approval under the Investment Canada Act and clearance from the Competition Bureau. Rone operates nearly 500 stores in Canada.

Lowe's announced it was buying Rona in February for about $2.3 billion. It previously tried to buy Rona in 2012, but the agreeement fell through.

"We are very pleased that Canadian regulatory agencies have authorized the transaction and we look forward to the benefits it will bring to stakeholders across the country," said Lowe's Canada president Sylvain Prud'homme. "We have made significant commitments to the Canadian market overall, to Quebec and to the communities in which the company operates. We believe these commitments will serve customers, employees, dealer owners and our partners well on a long-term basis."

Rona president and CEO Robert Sawyer added, "Today we have completed a major step toward the closing of the transaction, which will be very positive for the future of Rona, its employees and all of its stakeholders."

With this last bit clicking into place, the road is now clear for the final closing of the transaction, which is expected to take place on May 20.

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