On the Upswing?
I’m feeling pretty good about our industry after attending the ICSC New York Deal Making Conference earlier this month. In a marked change from recent years, the mood at the annual convention was noticeably upbeat. And, surprisingly — in a good way — there was an obvious buzz in the air about expansion plans. There are some intriguing new retail concepts in the pipeline and the recent influx of international brands making their brick-and-mortar entry into the U.S. market gives us what I think are genuine reasons for optimism in the New Year.
I saw three broad categories of retailers driving the expansion buzz: the first being hot U.S. retailers. For example, Francesca’s and Vera Bradley, strong brands in women’s apparel and accessories, both recently went public and now have cash to establish a strong expansion pipeline. Sur la Table also has the resources to grow. The second category is made up of brands that are new to brick-and-mortar, like Dermalogica (a cosmetics and skin care retailer). They have traditionally positioned their products in department and specialty stores, but recently opened two stores of their own and are looking to open more. The third category is, to me, the most interesting: the international brands and concepts that are new to the U.S. market. Big international names like leading Japanese clothing retailer Uniqlo, Canadian retailers Joe Fresh and Aritzia, and European high-end skin care brand Aesop are all new to the U.S. retail landscape. We’re mostly seeing them open on the coasts first, but I would expect them to move inward to major mid-American markets like Chicago and Denver once the coastal locations are established.
I think these expansions are actually part of a larger shakeup in American retail. Along with the rising stars, we’re sure to see some brand casualties. The closings we see going forward aren’t going to be the result of another economic downturn, though, but more of a natural brand evolution in a changing marketplace. Let’s face it — a lot has changed over the last four years, especially the way consumers shop. So it shouldn’t come as a surprise when we see some prominent names announce store closures, particularly after the holidays. Pacific Sunwear has already announced 200 store closures nationwide, along with Draper’s and Damon’s. Specialty women’s and teen apparel concepts are both pretty vulnerable right now with the exception of those brands that offer youthful fashion at an affordable price like H&M and Forever 21. I do think Chico’s has adapted and is finally starting to move in a more positive direction, but not everyone showing signs of distress in the past will be so lucky.
I guess my biggest takeaway from the conference is that the overall state of the market is very promising: there are more chains waiting in the wings to take over spaces than there are store closings; probably for the first time in the last four years. And, it’s nice to see that there are plenty of retailers eager to get into brick-and-mortar across the United States.
If these expansions take off, the really interesting question to me then becomes: where will they all go? There might be a bit of a supply-and-demand issue in the near future, given the fact that construction is still, for the most part, at a screeching halt. But I don’t want to put the retail cart before the real estate horse, so maybe that’s a topic for another day … what do you think? Did you experience the same positive buzz at this year’s ICSC convention in New York? Where do you see the most potential for expansion? What do you think about the international brands invading the United States?
Please make a public comment below or feel free to e-mail me privately at [email protected].
Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.
Click here for past columns by Jeff Green.
All quiet on the pricing front as inflation moderates
There were no new surprises during November regarding prices at Walmart, but then that is to be expected. The everyday low price strategy to which Walmart has a newfound adherence is boring and that’s the way the company and presumably its customers like it.
According to the monthly price comparison conducted by Credit Suisse, Walmart’s prices on a basket of goods in the Chicago and Dallas markets were essentially flat with the prior month, but 6.4% higher than the same month the prior year. The increase is due to inflation, which all retailers have been passing through to varying degrees, and the firm noted that inflation appears to be moderating somewhat. Credit Suisse also noted that Walmart’s price gap relative to the universe of competitors it studies narrowed somewhat during November to 16.3% from 16.9% the prior month.
“While Walmart is looking to maintain its price leadership into 2012, its price gap versus other retailers narrowed in November, possibly indicating that they are not as aggressively focused on achieving this goal as management had previously suggested,” according to the Credit Suisse monthly price report.
As in prior months, Target’s prices were closest to Walmart’s with a gap of only 2.7%.
“While year over year inflation remains in the mid-single digits, pricing is beginning to stabilize on a sequential basis,” according to the firm. “Most retailers kept pricing flat compared to last month, although Safeway, CVS and Albertson’s actually lowered prices sequentially. We expect that inflation will continue to moderate in the first half of 2012.”
Show how much you really don’t care
C’mon people. Christmas comes the same time every year and every year there are those scrambling to make last-minute purchases. Walmart is looking to appeal to this shopper segment with some interesting solutions that leverage its multichannel capabilities and give new meaning to the phrase “last minute shopping.”
The company’s Pick Up Today service was being aggressively promoted with email marketing and social media efforts to remind gift-givers products ordered online by noon on Christmas Eve would be available for pick up in store by 6 p.m.
That’s a convenient option for those who waited, but it is also somewhat of a risky undertaking for Walmart with a lot of moving parts to make store level operators nervous and susceptible to outrage on the part of customers. Imagine a shopper who bites on the service offering, orders online for same day pick-up and arrives in store only to discover the merchandise can’t be located even though the online system showed the product in-stock. It won’t be a pretty sight at the customer service counter, even though it is the customer who sabotaged his or her holiday by waiting until the last minute.
It would be nice to believe the system will work flawlessly, inventory will be in place and there will be zero disappointed customers when the merchandise pick up cutoff arrives at 6 p.m. Christmas Eve. But that just doesn’t seem likely considering the potential already exists for issues to arrive with the order online/pick up in store same day service offering. Then, layer on the fact that store level inventories are likely to be in a distressed situation, and there will be a general level of insanity in stores on Saturday, Dec. 24 and conditions are right for difficulties to arise.
If that proves to be the case, the distressed shoppers could surely substitute something or resort to the ultimate fall back plan. They can send one of Walmart’s 61 different e-gift cards in amounts ranging from $5 to $200. This is truly a last minute gift-giving option for those who like to live dangerously since the technology exists to order an e-gift card on a mobile device Christmas morning and have it sent to a recipients email address within minutes so they can view on a smartphone while the family is huddled around the tree Christmas morning.
Oh, you shouldn’t have.