Urban Outfitters Shows Recession In Retail Is Not A Given

Philadelphia’s upscale specialty retailer continued to defy the consumer downturn, thrilling investors with a 79 percent increase in second-quarter profits. The profit surge came off a 30 percent increase in sales, which reached $454 million, compared with $348 million a year ago.

Customers bought a lot of merchandise at original prices — not on clearance racks — which is the most profitable way a retailer can sell clothes. Internet and catalog sales were up 42 percent, while sales at stores open at least a year were up 13 percent.

The strongest performance came from the company’s namesake Urban Outfitters stores, which saw same-store sales spike 19 percent. The company’s two other apparel store lines did well, too, with comparable sales up 7 percent at Anthropologie and 10 percent at Free People.

These are the types of stories to look for, not more doom-and-gloom.  Success is out there - make it yours!

Macy’s Hires dunnhumbyUSA: Putting Lipstick On A Pig

Macy’s wants to better understand its customers. That’s why the department store announced today it has hired dunnhumbyUSA to analyze its sales data, develop customer segmentation models and help the chain develop more targeted programs to drive same-store sales.

Terry Lundgren, CEO of Macy’s, said in a joint press release, “For Macy’s to continue to build a sustainable competitive advantage, we need to fully understand our customers and mold our offering to satisfy each customer’s specific needs. Leading retailers worldwide have benefited from the insights developed through dunnhumby’s expertise, and we believe that experience will be invaluable to Macy’s.”

Why is it that CEOs continue to pour more money into more BS in hopes of the NBT [Next Big Thing]–while looking the other way to how their business is actually being performed?

I’ll tell you why. It’s tougher. It’s more complicated. And it isn’t sexy.

Case in point. I went to Macy’s Herald Square to look for a tie last week. That’s when I noticed the power of threes. Everywhere you looked, there were three employees gathered and talking. Three in front of the Clinique counter, three in back of the Levi’s counter, three in jewelry and two sets of three in ties.

Mind you, the store was FILLED with shoppers. I had to ask one of the three leaning on the tie table to please move so I could look at one. Their response? Not a word.  The magic of Macy’s.

You want to know how to find the NBT? Get out and work on your floor, mystery shop, or try shopping your store. I’ll guarantee surprises.

Because only if you are willing to connect the dots from the promise you pay megabucks for agencies to create and the actuality your customers experience, is your money wisely being spent.

If not, you’re just Macy’s with a different widget to sell–putting lipstick on a pig. 

Retailing In A Recession: There Is Good News Out There

After you sift through Reuters five paragraphs yesterday reporting how the US Commerce Department’s latest figures proves how awful retail sales were off in July (mainly due to autos,) you find that sales at department stores and other general merchandise stores rose 0.3%. Sales at furniture stores, hurt by the slump in housing, rose 1% in July.

The news isn’t all bad; you just have to look for the silver lining. Stay focused and brace yourselves for the pundits to predict a horrible back-to-school and holiday.  If there is something to fear – they’ll find a way to attach it to retail.

Hopefully, the sales numbers will continue to prove them wrong, even if the encouraging news is buried several paragraphs down the page. 

Live From Beijing? Nope It’s Video Fireworks

The news waves and NPR were full of talk yesterday about NBC’s coverage of the opening ceremonies for this summer’s Beijing Olympics.  The joke, it turns out was on us as nearly 70 million viewers in the US who thought we were seeing real fireworks burst across the nighttime sky Friday - were actually watching computer generated graphics.

NBC didn’t create them — the footage was provided and controlled by Beijing Olympic Broadcasting, a Chinese company. A Chinese Olympics official told The Daily Telegraph of London that it would have been too expensive and too dangerous to tape the actual fireworks — though there were actual fireworks set off that night.

So, the vivid fireworks on the broadcast were really computer graphics created by a team of hundreds of Chinese visual effects specialists who worked for nearly a year to pull it off.

Critics carped that viewers were deceived, but NBC Sports spokesman Adam Freifeld shrugged it off. “It’s not our production,” Freifeld said. “Our guys are very clear that this was animation.”

Hey, it’s marketing – it’s all smoke and mirrors.  Who doesn’t realize magazine ads are airbrushed to reduce wrinkles, add abs or reduce waists? TV is entertainment – it doesn’t have as much reality as we sometimes believe. 

This was not a case of putting lipstick on a pig – it led us to wonder at the enormity of the production in a “gee whiz” way like all the 2000+ drummers and the moveable type actors from the same night.  I wasn’t cheated; I was uplifted, and thrilled.  They gave me what I wanted to believe was real.

Wouldn’t it be great if all marketing were like that? 

Settling For Lousy Service, Economy, Lives - It’s Our Own Fault

We’ve settled for too long in this country. Settled for a president who is out of touch. Settled for employees who couldn’t give a damn about our business. Settled as customers to accept inferior service. We’ve got to win back America and not settle!

The pioneers had nothing to go on. They couldn’t make excuses. If the wheel fell off of their wagon train, they couldn’t just sit in the desert- they’d die. They had to find a way to make it work and move on. They weren’t content to live in their misery. Pioneers in business could be the first to market such as Starbucks, Nordstrom, Amazon – they had to continually earn people’s business.

Think of all the immigrants that came to America to build New York City looking for a better life!  They didn’t have to rely on other people to tell them how they should be feeling.

And here we are in the 21st century being told (since 2006 thank you very much CNN) that the economy is slowing –no matter how the numbers differ from projections, they keep saying it. Almost as if to make us lose hope. And many have.

We’ve settled for despair.

Newsweek has done two covers with the idea that our best days may be behind us as other foreign powers emerge. This is BS!

I had the privilege of hearing Steve Forbes Monday and here are some of the facts that he shared:

• • We are in a golden age, never before have so many people across the globe progressed so quickly and in so few years.
  • Not since the 1800s have we seen progress like this in America.
  • The US economy expanded between 2003 in 2007 exceeding the entire Chinese economy.
  • The fundamentals of business are sound in America:
    • Right now inventories are not bad.
    • Productivity is twice what it was in the 1990s.
    • Balance sheets for US industries are at two trillion dollars in cash that’s more cash than businesses had onhand since the 1950s.
    • If you took everything that Americans own including annuity stocks bonds houses etc. - the American people as a whole have over $30 trillion. That’s more assets than the rest of world combined.
    • The write-downs we’re seeing at the corporate level are paper.
    • The economy is worth 50 trillion in assets so worst-case scenario is it could lose 1 trillion – that’s something that the economy can absorb.

So why are we settling?  Because we’ve forgotten what got us here. Innovation, hard work, drive. 

Why are employees bored and allowed to still work? Because we as leaders aren’t excited enough to lead.  We’ve settled into routine and settle for third or fourth best. It’s too hard to fight.

Why are our lives boring? Because we love to whine and feel bad - then tell everyone why our lives suck. Enough!

Want to succeed in this marketplace?  We need to get off our butts, look at what our grandparents and their grandparents went through to give us the lives we enjoy right now.

We stand on the shoulders of a lot of people who went before who never settled. The choice is ours: to either make them proud or ashamed.

 

MSNBC - Bob Phibbs Answers Your Business Questions

 

Bob Phibbs and Phil Town

Here’s a clip from my recent appearance on  MSNBC’s Your Business.  If you’re an MSN site member, please watch the clip and vote/comment on it.  Among other topics, we talk about the importance of word-of-mouth marketing. 

Business Answers: Cost-effective marketing

Bob Phibbs, founder of the consulting firm The Retail Doctor, and Phil Town, author of “Rule #1,” answer viewer questions on franchising, adjusting prices, and advertising. 

LINK:  http://video.msn.com/video.aspx?mkt=en-us&brand=&vid=5191edef-3cbb-4545-8ab7-55b662193f7b&f=&fg=rss

Excuse Me, Do You Work Here? No, I Fold Clothes

In a recent article by Jennifer Saranow in the WSJ (July 9, 2009) , Gap Inc. says it has trained “hundreds of thousands” of Gap store employees in the art of folding since the late 1980s.

The folding craze at Gap began in the 1980s when Millard Drexler, who as a boy had sorted towels at his uncle’s towel-delivery service, took the helm as president of the Gap Stores division. Mr. Drexler and his team put tables in Gap stores and had employees decorate them with piles of folded shirts and sweaters. The goal was to better emphasize certain items and color choices and make it easier for customers to sort through clothes.

These former employees now fold their clothing meticulously even going so far as to not be able to shop without straightening up retailers’ folded displays. It isn’t clear whether the next generation of retailers will produce so many compulsive folders.

Contrast that to when I was putting myself through college and the number one thing the seasoned department manager at the Broadway taught me, “Its about selling the merchandise to our customers.” 

A pretty display is one thing but it is passive.  Imagine if Gap and all the trainers who spent hours getting the perfect crease had instead been learning how to sell the merchandise.

BTW, the trend now is to leave the displays looking a bit messed up – it looks like people were interested in the merchandise rather than a museum.

June Retail Sales - What If They Gave A Recession And Nobody Covered It?

The New York Times today reported that retail sales at stores open at least a year, rose higher than expected in June. Analysts were shocked that consumers were even less tightfisted with their stimulus checks in June than in May.

Again, oh my gosh – the sky isn’t falling! Just because CNN and the rest of the media can’t put the big red R on the news, and the oil prices continue to bubble upwards and the stock market remains a roller coaster  - people are still shopping.

What would happen if we had a recession and nobody covered it? Would it still happen?

Business owners must be careful to not let the “Sky is falling” phenomenon sweeping the news contaminate their own thinking about their business.

Here are some of the numbers. June same-store sales at Target increased more moderately, 0.4 percent.  Costco Wholesale Corporation’s same-store sales rose 5 percent, excluding fuel.  Kohl’s same-store sales increased 2.3 percent.

Unfortunately, Limited Brands, which includes Victoria’s Secret and Bath & Body Works, said same-store sales decreased 9 percent.  Nordstrom’s same-store sales decreased 18.6 percent, with the shift of its “half-yearly sale” into May. Neiman Marcus same-store sales decreased 2.8 percent.

Victoria’s Secret, even with those lagging sales, announced in Advertising Age that they are expanding the success of its Pink Label, to include a Collegiate Collection of licensed products rooting for the University of Michigan, Texas A&M, and Harvard—to name a few of the 33 universities.

In addition, the Collegiate Collection is taking it to the streets for promotion with a campus tour program and two to three paid brand ambassadors at each of the 15 campuses. 15,000 people are expected at Pink’s July 17 official back-to-school program, Pinkapalooza, at the Santa Monica Pier. To up the ante, the event will feature competitions between rivals USC and UCLA, and a concert performance by Fall Out Boy.

The problem with many retailers today is the employees don’t wear the clothes the store carries, robbing the stores of the chance to literally sell the clothes of their back. Victoria’s Secret’s Collegiate Collection is right on.  In the old days, we’d let things naturally work – people asking people where they purchased an item. VS paying to prime the pump is very smart. Now will we see the same attention in their stores?

With the explosion of celebrities licensing their names, it is important to not just have a pretty picture in a magazine, but also see the outfit on the backs of employees – whether that is on a college campus or in a mall.  The lesson any retailer should remember is basic – people buy more when they see it on.

And that isn’t a function of pricing or discounts.

Fat Farms Fighting For Fuel Dollars

This was the headline in AdAge this week “Weight Watchers, Jenny Craig Suffer as Consumers Have Less Money to Spend on Losing Weight.” It went on to say, ”As gas and commodity prices rise, consumers are finding themselves with fewer spare dollars to reduce their spare tires. As a result, marketers of organized diet programs such as Weight Watchers and Jenny Craig are expected to feel the pinch.

“It’s definitely a discretionary dollar,” said Michael Binetti, an analyst who lowered earnings-per-share guidance for Weight Watchers last week. Even though the iconic diet program enjoys an advantageous position in that it has strong brand equity and low start-up costs, Mr. Binetti said the 20% of Americans who describe themselves as being on a weight-loss regimen have increasingly been reporting that they are “on their own diet.”

Well what isn’t a discretionary dollar? If we want to go somewhere, we make a choice to put over-priced fuel into the tank and go – nothing is compelling us.  What about getting to work?  You could take a bus. Walk. Carpool. But we don’t.  We decide we’d rather use the money and have the freedom of our car or SUV.  Everything is discretionary income; this is important for any retailer, service business or manufacturer to remember when reading such articles.

This article was based on the expectation people will cut their spending to lose weight – it hasn’t even happened yet. 

If a weight-loss business were my client I would try several approaches but one might be a direct mail or online marketing campaign, “Perhaps you’ve discovered you eat more when you’re stressed – like now.  We can help.” Or “There’s A Reason They Call It ‘Comfort Food.’ Break the link. We can help.”

In this economy you either dumb-down your expectations, or slash and burn costs or you take the challenge and run away with your competitors’ business.  My advice? Run.

Starbucks At A Crossroads

As reported in the London Observer today, Starbucks CEO Howard Schultz acknowledged recently that the company has lost its “edge” after moving from a culture of entrepreneurship and creativity to one of bureaucracy. Schultz is proposing a number of changes. 

A decade ago, the company had just over 1,000 outlets. As it expanded, there seemed to be no limit to its growth. Less than two years ago Schultz told analysts and investors that Starbucks would one day have 40,000 locations - more even than McDonald’s.

Some analysts are saying Dunkin’ Donuts could take Starbucks on.  That’s because other analysts are saying that simplicity could be Starbucks’ path to restoration. The true innovation, those analysts say, is for the company that convinced consumers to spend a hefty multiple on a latte when they could have spent far less on coffee with milk, to offer a quicker, less accessorised or complex ‘coffee experience’. In essence, dumb-down the handcrafted coffee beverages to Dunkin’ or McDonald’s.

That would be a big misstep. Why? Average check. Anyone in the coffee business knows that you don’t make a lot of money on drip coffee due to its price point so you either have to sell a heck of a lot of it or use the espresso-based beverages to raise your average check above $4.25.

People like to compare Starbucks to McDonald’s; such comparisons are ridiculous.  People don’t line up at McDonalds’s, speak another language and tip for the privilege. Starbucks was first to market gourmet specialty coffee to the masses. Starbucks did it right the first time building a brand, a lifestyle, not just a cup of coffee. As such, they will continue to get the sweetheart deals for prime locations which no one else gets. Why? They can back up any claim with real data from their 15,000+ locations. Starbucks owns the word “coffee” like McDonald’s owns “hamburger,” Dominos owns “delivery” and FedEx owns “overnight.”  

While smaller chains and one-of-a-kind local coffee houses can thrive in the wake of Starbucks, forthe larger national rivals, Starbucks’ top of mind will be hard to overcome in the specialty coffee market. Especially when disposable income is being challenged on many fronts.  

It will be interesting to see how Mr. Schultz navigates between what he knows in his heart is right and what analysts say the path to a higher stock price entails. And those store closings- not a big deal in the big scheme of things.