Thursday, May 12, 2016

Know Your Market

This may be a Phoenix yet to rise and retail stores are not dinosaurs, although in some cases they appear to resemble them, it is an industry in immense flux and apparent decline due to the standard "blame the internet" cry that we hear about every industry in transition/decay/decline.

I do think that end is near for both Sears and J.C. Penney's as they are stores that have frankly never made any attempt to do more than be anchors at malls for years. That brief moment when Penney's misguidedly hired the former Apple chief to redesign and upgrade what defines literally as occupying the last storefront  in the mall was bizarre and once again a belief that the tech sector is the savior to all things America. And of course as we see repeatedly given their mantra it is good to fail, he managed to do just that and was engineered by no less of a vulture than a hedge fund executive, Bil Ackerman, who doesn't care too much for that mantra but he needed his wings clipped. Business Insider does a great historical review of the fall and fall some more story of J.C. Penney's and that of Ron Johnson's history as well.

Growing up working class with a mother who worked at Nordstrom shopping a Penney's or Sears was for home products, the sheets, towels and tools that filled a home. I think many of us recall the Kenmore and Craftsman brands for their durability and reliability. Today I would not willing buy either and living in a home with Kenmore products, I cannot wait to leave them behind as they define crap.

I recall J.C. Penney's attempt into fashion first with Halston and that was a fashion don't, then later even Tim Gunn tried to resuscitate the store image with Liz Clairborne and other tried bridge brands that were important fashion lines from two decades ago. Then came the attempt to build the store again with Johnson and his concept to incorporate Martha Stewart into the Penney family. It cost a penny to end that lawsuit with Macy's, as one only poaches eggs with Martha.

Then comes the store within a store concept as we have seen many retailers have pop up shops, vendors and other contracts with outsiders to sell their brands within the store themselves and no one does it better than Macy's. Or should I change that to say "did" it better.

Macy's is the Tyrannosaurus Rex of dinosaurs as they are part of the Federated Chain of Stores that includes Bloomingdale's, a store that has always been careful of being everywhere that their little brown bag is. But they swallowed almost every department store chain across the country at one point it was Jurassic Park meltdown with Macy's taking one local retailer after another and well like all dinosaurs extinction does await.

I worked at our local Bon Marche later bought by Macy's and I have actually worked at Macy's. Both were unionized gigs where I made commission. My mother as stated was at Nordstrom in its' early days, also unionized and they created a profit and share program (the early baby dinosaur to the tech sectors concepts of options) which left my Mother was a decent retirement fund. She did not live to spend it, I however did and it paid for my post grad education.

But the nascent days of retail are gone. The elegance, the women in black dresses with careful coifs and excellent service are replaced by a coterie of idiots who could ring you up while chewing gum at the same time. Funny now that our GDP is reliant upon the service economy, service actually sucks and odd oxymoron if ever.

The elegant shopping experience, the Neiman Marcus a once family owned chain, Sak's Fifth Avenue and Barney's are too also owned by varying chains or hedge funds while some local stores still remain - Lord and Taylor and the Hudson's Bay, Holt Renfrew of Canada chain still exist. Well who do you think own Lord and Taylor, a store once written off as dead but now still exists and does well in middle market, the area that Macy's once excelled. And in turn they own Sak's and the online marketer Gilt Group. This is group that used to be fur traders, they clearly get their market.

Knowing your niche in a department store was like knowing your customer and knowing your product. They are not mutually exclusive as any Salesperson can tell you that is the key to satisfaction. But now you are pushed a credit card as the close and very little salesmanship is involved. They used to train you, guide you and have their own schools to build management staff and buying teams. I have no idea what they do now as I have been out of the game a decade both as salesperson and as customer. I moved online myself largely to take better advantage of sales and as I know how merchandise is marked I can wait.

On the heels of Nordstrom a perennial Wall Street favorite now too facing a shortfall, the role of the retail store in the mall as well as in our downtown core has changed. I used to recall fashion shows and lunches, annual holiday events that were sponsored by the stores, including parades, tree lighting's and celebrity sitings. I think the last one of note was Paris Hilton and well that pretty much sums up that.

So how can retail shake of their old dinosaur bones? Well look at your local Macy's does it seem dated? Ours does. The Nordstrom's are remodeling with more food and beverage services, bars and coffee shops and that I have to say is what makes a store a gathering place and then you may stop and pick up something on your way out or in. But I miss the luncheons that were for everyone, the fashion shows, the trunk shows that allowed some of us to rub shoulders with the designers and the fashionistas that set the tone of what defines the "in". I miss elegant women and men waiting on us and that includes a basic "uniform" in which to identify who is there to actually take my sale. I pretty much use Nordstrom to go to the bathroom en route to light rail and I may pick up a coffee, anything else I look at then search the net for when I get home. Why? I truly hate the Salespeople and they are not much better anywhere else. This is largely why I think people prefer Topman, Zara and H*R as you do help yourself to well cheaply made poorly fitting garments (and too think the Gap is in trouble!) and when ready stand in a queue and wait to be rung up.

The MEME class are so insecure and well brain addled about actually speaking to people they make both hideous customers and the associates whom are ringing them up. Watch an exchange of that some time and you will scurry home immediately to hit the web. My favorite is that when I ask why they don't shop in retail they claim it is to find better quality items that stores don't carry but when I ask specifically what those are, I get bland references to products that are "good for you and the environment." And those are? I suspect it is like me, they can't afford it but by surfing you find the best deal and that is good for you and the environment.

Go to a mall and have a wander it is bleak and then say why did you like before?  Oh because it was a meeting place. We seem to not have those anymore either in any manifestation. 

Macy’s dismal earnings are a bad sign for the whole retail industry
By Sarah Halzack The Washington Post May 11 2016

Things went from bad to worse at Macy’s in the first quarter, with the department store giant reporting a 7.4 percent plunge in revenue as customers didn’t spend like the retailer hoped they would in key categories such as apparel.

Given the dismal results and the company’s perception that shoppers remain in a cautious posture, the retailer on Wednesday cut its outlook for the full year. While it had previously said it expected a 1 percent decline in sales at stores open more than a year, it is now expecting a decline of 3.5 to 4.5 percent.

The bleak start to 2016 continues a disappointing streak for Macy’s. But it also stokes fear in the wider retail industry about how much consumers will spend in the months ahead. The conventional wisdom has been that as the economy improves, shoppers will start buying gear to refresh their closets and redecorate their living rooms. And yet, despite low gas prices and a jobless rate hovering near a post-recession low, consumers just aren’t hitting the mall.

“We’re, frankly, scratching our heads. We see the same economic data you all see,” said Karen Hoguet, Macy’s chief financial officer, on a conference call with investors.

Hoguet also did not seem particularly upbeat that the consumer would change course anytime soon and give the retailer a jolt. Macy’s depends heavily on spending from international tourists at its flagship locations in major cities, and has recently suffered as those travelers held tight to their pocketbooks due to the strength of the U.S. dollar. Macy’s once predicted such caution would be something of a temporary blip, but on Wednesday Hoguet indicated that executives see the headwind continuing. And she did not seem particularly optimistic that domestic shoppers would open their wallets wider either.

“We are not counting on consumers to spend more this year, but we are working on giving them reason to shop more with us,” Hoguet said.

Macy’s stock was down more than 15 percent on Wednesday, and its gloomy results sent a chill through the broader retail sector. Stocks for Nordstrom, Kohl’s, JCPenney and T.J.Maxx parent TJX Cos. also fell, likely an indication that investors think the performance at Macy’s is a harbinger of weakness throughout the industry.

Macy’s has been attacking its business problems from a variety of angles. It is experimenting with a new off-price chain called Macy’s Backstage that it hopes could help it capture a new customer. It is ramping up its line-up of exclusive and private label merchandise in an effort to give people more reason to shop at Macy’s instead of another department store. And it has hired a senior executive to re-evaluate its highly valuable real estate portfolio.

And while those measures may indeed end up boosting Macy’s over the long haul, business continue to slow in the near term. Macy’s, which includes the smaller but more upscale Bloomingdale’s chain, has now delivered five consecutive quarters of declining revenue and decreasing sales at stores open more than a year, an important measure of a retailer’s health. It’s 6.1 percent drop in comparable sales for the quarter was the worst it has experienced throughout this recent rough patch.

Macy’s has a host of big-picture challenges to tackle: It has more than 700 stores in the United States, a fleet that chief executive Terry Lundgren has said is simply too large for the era of Internet shopping. And many of its existing stores are anchors in the kinds of smaller, regional shopping malls that are seeing fewer visitors. In this quarter, transactions at Macy’s — a figure that is a proxy for foot traffic — were down 7 percent.

Meanwhile, Macy’s digital business was a relative bright spot in the quarter, posting what Hoguet said was a “strong double-digit” increase in sales growth, though the pace has slowed. That suggests that the retailer still has plenty of work to do to shore up its e-commerce operation and to become more of a serious player in that channel.

Macy’s posted a profit of $115 million, or 37 cents per share during the quarter, down from $193 million, 57 cents a share, a year earlier. Revenue was $5.77 billion, down from $6.2 billion is the same quarter last year.

While some departments performed well for Macy’s, including jewelry, coats, and men’s tailored clothing, those strengths were more than offset by sluggish sales in handbags, watches, women’s shoes and luggage.

Macy’s will continue to experiment with new ways of re-imagining its stores to drum up sales. It is piloting a new way of merchandising its upscale jewelry, and will start a similar pilot with its shoe department in the fall. It has recently seen success with a test in which it moved all clearance items to a central location in the stores instead of scattering them throughout departments. This set-up is to be rolled out more widely across the store fleet in coming months.

Macy’s is also adding Bluemercury shop-in-shops to its department stores and is speeding up its expansion of standalone locations of the beauty chain.

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