LIGHTING/FLOORING/SIGNAGE

New rule will impact retail store signage in Quebec

BY Marianne Wilson

Wal-Mart and other retailers who operate stores in Canada’s Quebec province are going to have make some changes to their store signage.

The Quebec government plans to modify the language laws of the province, where French is the predominant language, to add French to their exterior signage. Companies, however, will not have to change their trademarks.

"Thanks to this change, every person, whether driving on a highway, on a sidewalk, in an industrial area or in a commercial parking lot, will know they are in Quebec, because they will see French on the signs," Hélène David, acting minister responsible for the protection and promotion of the French Language, announced on Tuesday.

The province said the changes would also require that the added French words be well lit at night, CBC News reported. To read more, click here.

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DESIGN/CONSTRUCTION

This teen retailer remains in expansion mode

BY Marianne Wilson

While teen apparel retailers are feeling the heat from online and fast-fashion competitors, Five Below continues to move across the country.

The extreme-value brand for and pre-teens and teens will open its first store in Wisconsin, in Racine, on May 6, 2016.The Racine store is one of approximately 85 new Five Below locations opening in 2016, on top of 71 new stores that opened in 2015.

“We are delighted to continue Five Below’s expansion with our entry into the state of Wisconsin,” said Joel Anderson, CEO of Five Below, Philadelphia, which operates over 450 stores in 28 states.

Five Below carries an ever-evolving assortment of cell phone cases and chargers, remote control cars, licensed collectibles, yoga pants, graphic tees, nail polishes, baseballs and soccer balls, tons of candy and all the seasonal gotta haves. Everything is priced at $5 and below.

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ECOMMERCE

Study: E-commerce having negative impact on retailers’ operating earnings

BY Marianne Wilson

Online sales and returns are taking toll on retailers’ bottom lines.

Operating earnings as a percent of sales has declined by up to 25% due to a shift from in-store to online sales, combined with e-commerce and omnichannel investments and the high cost of fulfilling e-commerce transactions, according to a study by strategic retail advisory firm HRC Advisory.

The study found that investments in supply chain upgrades, digital marketing and IT, variable logistics costs and managing a high level of online returns are generating incremental SG&A costs of 2 to 3 percentage points of sales. The combination of this together with real estate, wage inflation and the declining in-store sales is resulting in a 1-2 percentage point reduction in physical store profit contribution.

“There are a number of ways retailers can strategically mitigate and ultimately offset the negative impact of e-commerce on their operating earnings and return to their historically higher brick-and-mortar performance,” said Antony Karabus, CEO, HRC. “To start, retailers need to re-examine the cost structures of their physical stores and infrastructure, and become more efficient omnichannel operators to staunch the losses from extremely high online fulfillment costs.”

Additional key findings include:

• Pace of online sales growth has decelerated: While online sales were robust in the early years of e-commerce, the growth rate has continued to decelerate as the channel reaches maturity.

Of the retailers analyzed, the online sales growth rate for 11 public department store chains declined from 39.3% in 2012 to 18.6% in 2015, while the online sales growth rate for 22 public specialty stores declined from 17.5% in 2012 to 9% last year.

• Online returns are expensive: While intended as a way to protect and even gain market share from traditional retailers and pure play e-commerce players, high returns as well as unwanted e-commerce orders returned late or in a condition where the product may not be re-saleable at full price, resulting in negative profitability.

• E-commerce volumes not sufficiently high to justify store closures: Despite physical stores’ profitability decline, online sales volumes are not yet strong enough to justify store closures in most instances.

In addition, as many stores have significant lease termination obligations, retailers may incur a substantial cost to close the weaker stores early.

• Price-matching should not be a “one size fits all” approach: Many retailers have introduced broad-based price-matching policies comparable to other online or brick and mortar retailers. While helpful in avoiding a lost sale, this approach has resulted in additional margin leakage.

“Retailers haven’t yet figured out how to grow and maintain brick and mortar profitability while trying to keep up with the likes of Amazon in today’s increasingly digital environment,” said Karabus. “Retailers need to recalibrate and fine-tune their economic business models to reflect today’s new variable cost-oriented online model. Those who can engage customers and meet their heightened expectations, while offering complete visibility of inventory availability, can be lucrative in reducing markdowns and improving inventory productivity.”

The study analyzed the financial data for retailers across three key sectors, including 11 department stores and luxury chains with aggregate sales of $126 billion, 22 specialty apparel and beauty stores with aggregate sales of $67 billion, and four off-price retailers with aggregate sales of $49 billion.

In addition, the study, which was conducted by Karabus, also included interviews with 15 CEOs and CFOs across these sectors to better understand the impact of e-commerce on operating earnings.

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