News

Oakley’s Eyewear Revolution

BY CSA STAFF

Oakley, a wholly owned subsidiary of Luxottica Group, the world’s largest eyewear company, is looking to take its performance-driven, namesake brand to the next level. On the heels of its first global marketing initiative, the company has opened a state-of-the-art flagship on Fifth Avenue in Manhattan. (Oakley operates stores under the banners of Oakley Stores, Bright Eyes and The Optical Shop of Aspen, and has a varied optics brand portfolio that includes Eye Safety Systems, Oakley, Oliver Peoples and Paul Smith Spectacles.)

The Fifth Avenue boutique showcases how the brand is tapping digital technology to enhance its interaction with shoppers and add a heightened theatricality to the merchandising of its premium eyewear and lifestyle products. The pièce de résistance of the space, which is Oakley’s most sensory rich and immersive environment to date, is a dramatic, nine-screen digital ceiling installation engineered by Moment Factory. . The store also features an optician-staffed optical center that uses new motion-capture technology to streamline the process for fitting prescription eyewear.

Erik Searles, VP of Oakley Retail, spoke with Chain Store Age about how the flagship leverages new technology to express the brand’s innovation/ industrial-design driven DNA in fresh ways.

What factors prompted the launch of the flagship?

Fifth Avenue offers great exposure for the Oakley brand, and a great opportunity to showcase where Oakley retail is going. The other Oakley stores located in the market (Times Square, SoHo and JFK Airport) have received a tremendous response from local residents and visitors. Opening an innovative flagship store was the natural next step to bring every element of our brand directly to our customers.

How does it create an immersive digital experience?

It starts with a state-of-the-art immersive digital ceiling — the largest interior digital installation on Fifth Avenue. The ceiling display enables Oakley to share brand stories with customers in an unexpected and engaging way. Stories are told using nine integrated screens that feature iconic Oakley products, design sketches, art pieces, animation and athlete videos. Visitors might see metal and glass twitch, bend and pull apart to reveal the day or night sky depending on the time of day, athletes performing beyond reason, or images ripped and pulled apart as the screens become one or function independently.

We wanted to create a curated experience consisting of main stories and transitional stories. The next phase will include consumer interaction.

Who are you targeting with this store?

Our store sites are chosen to reach Oakley’s core active-lifestyle customer — those who push beyond limits in sports and everyday life.

How does the store use digital technology to enhance the shopping experience?

Oakley is using digital technology and mobile devices to service customers in its new in-store custom and prescription eyewear centers, which are launching in all Oakley stores in addition to the new Fifth Avenue flagship. Customers can now partner with our experts using a tablet to build their own personalized Oakley eyewear. The experience includes millions of combinations of lens tints, frame styles and colors, some available exclusively through Oakley’s custom program. The eyewear is built on the iPad and then right in front of the customer, ready to take home.

Oakley is also utilizing mobile POS to help customers via quick transactions.

What is Oakley doing in the prescription eyewear space?

We are revolutionizing the process for prescription eyewear with the addition of in-store optical centers. Oakley stores pioneered the use of digital-dispensing practices on a mobile device so that our opticians can provide customers with the most accurate vision correction possible.

Our certified opticians use a lightweight device that Oakley helped develop to ensure a perfect fit. The device fits onto the customer’s chosen frame, and with the snap of a camera, the program reads and records all the needed measurements. Customers also see photographs of themselves in the eyewear before they complete their selection.

We think it’s critical to have an optician on staff. The customer doesn’t want to speak to someone like me for his or her eyewear needs.

Warby Parker has made a splash in the eyewear wholesale and retail sector. How have they altered the competitive landscape in your business?

They [Warby Parker] are price-conscious and simple, where as we are creating [premium] lenses and frames.

Unlike any retailer, at Oakley, it’s in our core to identify problems, solve them by creating inventions, and then wrapping those inventions in art. Our products and our store experiences are completely unique, which is why our brand enthusiasts love Oakley so much. If our products aren’t good enough for the world’s best athletes and most extreme environments, they aren’t good enough period. That’s why we partner with leading athletes to develop our products.

What does Oakley hope to achieve with the new flagship?

Our Fifth Avenue flagship store represents the best of Oakley retail. It offers a sensory experience unlike any other Oakley store — fusing breakthrough technology with iconic Oakley design. It enables us to share brand stories with customers in an unexpected and engaging way.

What is the rollout plan for the flagship concept?

Oakley will monitor the customer response to the elements in the Fifth Avenue flagship, and roll out key elements to other stores. Currently, we are in the process of rolling out our in-store custom and prescription eyewear programs to all 163 Oakley stores in the United States.

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News

What the CFO Needs to Know: Energy & Sustainability

BY CSA STAFF

Investing in energy conservation makes business sense: According to ASHRAE, energy is the second highest retailer operating expense. A new white paper by the Retail Leaders Industry Association (RILA) and Schneider Electric notes that recent weather extremes have increased energy costs for retailers, and the trend is expected to continue. Factor in potential electricity price increases in the near future, and increases in energy costs could be significant. Making stores more energy efficient mitigates the risk of energy-related cost increases, while also helping the environment.

Energy is a strategic asset and should be managed that way: Deploy energy management systems that track and measure energy consumption and develop processes for continuous improvement.

“It’s also important to communicate the value of energy management and reduction across the organization — from senior-most executives to the front-line associates,” said Adam Siegel, VP sustainability and retail operations, RILA.

Effective energy management hedges against uncertainty in costs: Energy prices have a direct impact on a com-pany’s profitability. They frequently fluctuate based on service territory demand and can spike during unanticipated weather events, making energy budgeting requirements highly variable, according to Siegel.

“Minimizing energy use reduces the susceptibility to these price fluctuations,” he said.

The cost of energy is complex: Using an expert to procure energy can help control, or even lower, a company’s energy bills with no other investment. And once an investment in energy efficiency is implemented, the initiative needs to be periodically checked to ensure a continued ROI.

Sustainability is good for the bottom line: According to RILA, 50% to 80% of retail sustainability activities provide reduced costs, brand enhancement and risk management, as well as numerous fringe benefits.

Finance’s sustainability role is on the rise: In a Deloitte Touche study, 26% of CFOs from large companies indicated they had sustainability authority, up from 17%. Nearly two-thirds of these finance chiefs expect their involvement to increase by the end of 2014.

Operational benchmarking is key to unlocking higher performance: Benchmarking for sustainability involves analyzing your operations site-to-site and measuring your performance against peers, and it is increasingly required by law, noted Patrick Leonard, manager, portfolio services practices, PMP, LEED AP, Paladino and Company.

Two states (California and Washington) and eight major cities (New York City; Philadelphia; Washington, D.C.; Minneapolis; Boston; Austin; Seattle; and San Francisco) require commercial property owners to disclose and benchmark utility energy consumption (and sometimes water also), with the goal of highlighting the opportunity to improve efficiency.

“Even if not required by law, benchmarking is a useful first step in analyzing where to invest the time-improving performance in your organization,” Leonard said.

Investors Care About Sustainability

Professional investors are increasingly factoring sustainability into governance policies, portfolio decision-making processes and investment allocations, according to a new study from PwC’s Investor Resource Institute.

PwC’s research reveals a number of reasons for the upswing. At bottom, the study finds, investors have apparently made a judgment that the problems and challenges associated with sustainability issues — ranging from extreme weather events to resource scarcity to social responsibility and good corporate citizenship — expose the companies they invest in to greater risks and potential loss than conventional economic/financial accounting and reporting lets on.

Risk mitigation was the primary driver for investors factoring sustainability issues into their decision-making processes, followed by enhancing performance returns.

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REAL ESTATE

What the CFO Needs to Know: Real Estate

BY CSA STAFF

Understand the assets covered by your leases: Taken together, leases are more than just one of a chain’s largest costs — they are the largest fixed expense, and they are fixed for the long term. As a rule, individual leases average seven to 10 years.

“Understanding that is critical,” said Michael P. Glimcher, chairman and CEO, Glimcher Realty Trust, Columbus, Ohio. “For a cost so large, you should have a strong knowledge about the assets covered by your leases.”

See locations for yourself: Glimcher noted that while CFOs should staff real estate departments and rely on real estate experts when making decisions, they should get out from time to time and check out sites.

“Real estate happens in the field,” he said. “Go out and walk the property, drive the market and talk to experts. The savviest senior executives that I’ve met learn their real estate and evaluate pluses and minuses from a vantage point in the field.”

Play offense and defense: A chain can manage a retail real estate portfolio proactively or defensively.

“Proactive management looks for growth opportunities,” said Mark Richardson, principal, Huntley, Mullaney, Spargo & Sullivan, a San Francisco-based real estate and financial restructuring firm. “Perhaps, for example, a certain trade area is attracting more of your customers and can support another store. Defensive management protects assets that are doing well and maximizes the time they can contribute to the brand,” he explained.

“Defensive management also trims poor locations out of a portfolio or looks for problems that have cropped up. Changes in a trade area, for example, could mean you need a smaller
store,” added Richardson, who recommends periodic portfolio reviews that look for proactive and defensive opportunities.

Close problem units: A portfolio review with the real estate department or a consultant is likely to turn up good locations that are out-of-lease options coming up on expiration.

“Currently, good available locations can be hard to find, so those leases should probably renegotiate those leases now,” Richardson said. “Where rent costs are more than 33% of EBITDA before rent in any location, the bottom-line profit prospects for that store will be low or negative. Close them. Problem locations drag down the whole portfolio.”

Utilize construction contracts: Stores may be scheduled for renovations or expansions, and that entails construction contract documents. You can develop your own with legal counsel, or purchase industry standard documents from the American Institute of Architects for a reasonable fee.

“The architecture, engineering and construction associations jointly developed these [industry-standard] documents, and industry players are familiar with them,” said Robert D. Benda, CEO, Westwood Contractors, Fort Worth, Texas, a national builder specializing in retail. “You and your attorneys can also tailor the documents for individual jobs.”

Industry-standard contract documents form an integrated suite. The prime contract, along with the subcontractor and vendor contracts (all of the many contract documents a project may require), employ the same concepts and language in order to avoid misunderstandings and conflicts of responsibility, Benda explained.

The industry-standard documents “also reflect a national legal perspective, making them less likely to conflict with local jurisdictional statutes,” he added.

Mall Trends

Class A malls are hot, with quality space hard to find and rents rising aggressively for trophy centers, according to a report by Cassidy Turley, while older Class B centers are under pressure to upgrade lest they fall into the C sector, where vacancy is at the 10% level. For most retail real estate companies, redevelopment, as opposed to ground-up development, is the name of the game — with the exception of the outlet center sector and in cities. In general, landlords are working hard to create tenant mixes that give shoppers more reasons to visit, with a big emphasis on restaurants and other food purveyors, entertainment and beauty and wellness concepts.

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