Global Retail Executive Council

HAPPY NEW YEAR!

I hope you all had a wonderful holiday season and are looking forward to 2011! I thought it was fun reading so many posts on 1/1/11 by my friends on Facebook that were adamant that 2011 WILL be better. "It HAS to be better!" they implore. It couldn't get worse right? Preliminary holiday numbers show that "it's getting better" is the mantra of retailers this season.

Well, to some degree I agree with them that 2010 was tough and I'm glad it's over too. But on a deeper level, all in all, it wasn't that bad and I think that despite a lot of things blamed on the economy, some great things came out of it.

For one, I witnessed a lot of people helping each other out - especially through Facebook, the enfant terrible of social media. Friends helping friends find jobs, being supportive through divorce, illness or even the death of a loved one were commonplace. Many of these situations were very difficult, but it was comforting to see people reaching out to one another and making a difference.

It was only a few years ago that we never had visibility into so many people from our past and present all at one time. It's amazing and I personally agree with the choice of Mark Zuckerberg (founder and CEO of Facebook) as Time Magazine's Person of the Year for 2010.

But the most significant social outreach I witnessed in 2010 was without a doubt the response to the disaster in Haiti. It's sad that when you look on CNN today you don't hear a word about it... but the groundswell of charitable giving that came immediately after the earthquake was incredible.

What I want to believe is that the support for Haiti and the large amounts of  aid that were created to help the victims are just the beginning of the "new normal" in charitable giving, so I'm going to offer a couple observations on how retail can play a bigger role in this phenomenon.

1. Do good by doing well.

The old saying is that you will "do well by doing good." In other words, if your heart is pure and you do good, eventually profit and success will follow. Retailers need to remember that staying true to your core values goes hand in hand with being profitable and serving your customers. Embracing the latest cause celebre will not get you anywhere. Your connection to charity needs to resonate with the brand. It makes sense for Whole Foods to donate money to local food programs: they buy a lot of their food locally. Patagonia and REI supporting conservation initiatives? Spot on. But shoppers can spot hopping on the bandwagon a mile away, and they don't like it.

2. Charity starts at home.

It's inspiring when the world comes together to help in global tragedies like Haiti or the 2004 tsunami. But other than the customers of a handful of truly global retailers, most shoppers will care more when they can see the results. One local retailer here in Portland chose something simple but amazingly impactful: donate a coat, get 20% off. Anyone who has ever driven past a homeless person in the cold rain will connect with this simple, heartfelt and local effort.

3. Don't guilt your shoppers.

Safeway has done an admirable job of raising money for breast and prostate cancer research. But... No one wants to have the pinpad ask me electronically if I want to "round up"... then be asked AGAIN by the cashier if I'm sure I don't want to "round up"... Over-asking for gifts is a faux pas no matter how admirable the cause. Ask ONCE and make sure that NO ONE feels guilty or awkward declining. Remember that bad economy of 2007-2010? Charity begins at home, but so does saving money. And alienating shoppers by asking too hard is a poor idea.

A side note: if you promote your charitable causes, embrace transparency. A simple Google of "safeway rounding up buzz" yields a host of negative comments about both how the money was raised and what it was spent on.

4. Choose a passion, not a pasttime.

This post comes on the eve of one of the most amazing charitable events in the retail industry. A group of analysts, tech vendors, and retailers is coming together on Saturday for the Retail Orphan Initiative's "Super Saturday" event. This single day will raise almost $300,000 for orphan-related projects around the globe.

Why is this group successful? Because everyone who touches it has their own reason for embracing the cause. It's not a "corporate donation," it's a mission.

Authenticity counts. And being authentic, respectful, connected and local will ensure that retail + social + charity = amazing.

PS - If you'd like to support the efforts of the Retail Orphan Initiative, click here.

Every retailer is anxious this year. Many think they've got just one shot at it and their pulling out all the stops. SOME will do well, others unfortunately will crash and burn.

LOSERS (aka #retailfail)

• TJ Maxx - Offer $100 off the price of the iPad to shoppers on Black Friday. Steve Jobs responds: "TJ Maxx isn't authorized reseller".
• Banana Republic - Decides to be open ON Thanksgiving in many of their locations. When you are the ONLY ones open in a mall - where do you think your foot traffic is going to come from? However in locations where there are Sears stores, they be the only ones, Sears is doing the same thing after 85 years of being closed on the holiday.
• Lowe's - goes all out on it's Black Friday Facebook promotion, crashes website and angers MANY. So here it is retailers as a warning... if your mechanics of an offer aren't bullet proof - expect what you get.

WINNERS (aka #retailfabu)

• Target - buys the Twitter Hashtag #blackfriday
• Walmart - fighting the Amazon dragon head on! Free shipping on over 60,000 items online through December 20th.
• Toys R' Us -  pops up!!! Taking advantage of the proliferation of empty mall space / short term leasing expanding their reach with their Toys R Us Express Stores and FAO Schwarz branded pop-ups. With 600 pop-up stores, they double their national store footprint and gain a lot of new shoppers.

Have any #retailfail or #retailfabu to report? Share it here!

It's become a familiar site in virtually every American city. Sprawling shopping complexes with empty buildings adorned with the ghostly echo of removed brand signs. The stores Circuit City and Blockbuster once occupied now sport perpetual "For Lease" signs, in some cases leaving shopping centers without any anchor tenants at all.

Inside the traditional shopping mall, it's not much better. With vacancy rates at a 20-year high, mall managers are trying everything from discounting rates to short term leases to embracing pop-up retail. And though some of these tactics are innovative and are filling in spaces - for now - for the most part, they are band-aid fixes covering up a far greater problem.

The mall, as we know it in the United States, simply isn't relevant to today's shopper. Gone are the days when the convenience of a collection of disparate stores under one roof is essential: we have the Internet, with infinite diversity only a click away. And time-pressed shoppers want the convenience of in-and-out surgical shopping rather than the long walk from the fringe of the parking lot for a day of leisurely browsing.

The one bright spot seems to be that department stores - a retail sector that has been ailing for some time - are capitalizing on the same trends and re-inventing themselves as the mini-malls of the future. JC Penney is leasing space to Mango and Aldo, and one Sears store has leased 45000 square feet to Forever XXI. The raw scale of department stores and their experience with "store-within-a-store" concepts means this trend is one to watch as it may exacerbate the challenges facing traditional mall operators.

In fact, once you strip away the collection of stores, today's mall simply doesn't offer much: a collection of common chain brands, perhaps a few dingy "local" retailers, and a food court brimming with mediocrity. Free WiFi, mall-based "loyalty points," and early-opening days simply won't resurrect the mall to its former glory, so increased vacancy leads to diminished foot traffic leads to lower sales... and repeat until closure.

But the humble mall does have a chance to reinvent itself. At the World Retail Congress, a diverse group of speakers including a retailer, an architect, and a mall operator all discussed the question: what is the future of the mall?

And surprisingly, a strong consensus emerged.

1. A social gathering place that offers more than just shopping. The shopping mall at Potsdamer Platz in Berlin is surrounded by high-end restaurants, movie theaters, a casino, and a performing arts venue. The streets connecting these locations boast a changing variety of festivals, moving the week we were there from the Festival of Lights to an Alpine festival, complete with pop-up taverns and a temporary downhill ski slope. Inside the mall proper, an exhibit on the "shoeshine boy" culture informed and inspired, even featuring a stand selling the traditional favorite cuisine of the shoeshine boys. And all of this in addition to a great collection of stores, anchored by not one but two grocery stores, one upscale and one discount.

 

2. Integration with the virtual world. Eric Kuhne of CivicArts spoke on some of the innovative malls they have designed around the world. While the retail redevelopment of Moscow's Sheremyetvo Airport into a mall instantly captured my imagination (Combining a mall with an aviation museum? Yes, please!), it was the Bluewater mall in Kent, United Kingdom that offered perhaps the best lesson. Aside from the "new basics" for malls (stunning architectural design, community integration, entertainment as a destination), Bluewater features an incredibly innovative solution to two problems that vex most malls. With a two-story limit imposed by local council, Bluewater created a virtual "third floor," an online-only part of the mall that holds virtual stores for retail brands waiting for store space to open up in the mall. With 0% vacancy, the waiting list for the 320 store spaces currently has 189 brands, all of whom can engage mall shoppers "virtually" and test the waters with brand concepts and offers prior to physically moving into the mall.

 

3. Popup retail is a part of the draw of the mall. In many US malls, vacant space is filled twice a year: costume stores before Halloween and Christmas stores right after. But popup retail is now attracting luxury brands to create a time-urgent destination for shoppers such as Dunhill's New York popup and Longchamps' temporary store in Tokyo. This marriage allows the mall to get more affluent and upscale shoppers onto the premises and gives luxury brands a presence in markets that can't support a year-round branded store.

These ideas aren't a prescription for all that ails the American mall, but rather a diagnosis of what needs to improve for long-term sustainable viability for these properties. And despite the rough economy of the last few years, this is the time for malls to draw inspiration from new retail development around the world and create something that isn't there for many malls today: a reason to shop there.

Despite nearly a 6 month delay to this year's World Retail Congress (thanks for the volcano, Iceland!), we were rewarded for our patience with a huge attendance by retail executives from all over the globe, excellent speakers, and the opportunity to visit - and shop - the beautiful city of Berlin.

Within a few blocks of the Hotel Intercontinental, where Congress was held this year, is one of Berlin's most famous shopping districts - Ku'Damm (Kurfürstendamm). Berlin's most celebrated department store, the Kaufhaus des Westens (known colloquially as "KaDeWe") is located in this district along with a who's who of global fashion brands: Nike, adidas, Bally's, Burberry, Versace... just to name a few along this two-mile stretch. One in particular that I first encountered at the 2009 World Retail Congress in Barcelona and was VERY excited to see again was Desigual.

Desigual is a women's, men's, and children's fashion retailer that began in Barcelona in 1984 and continues to expand their global operations. They entered the U.S. market with a store in New York City's Soho district and recently opened a second location in NYC on 34th.

Desigual is known for their colorful and 'atypical' fashion style, something I personally ADORE them for. But beyond the style of Desigual's clothes, I want to call attention to one aspect of their retail approach that I find very 'atypical'. It's their "internal" outlet model.

Many fashion brands have an outlet presence. The lagging economy has pushed even more high fashion retailers into this arena. Outlets generally reside in a mall-like cluster found on the outskirts of the metropolitan core. Prada, Tommy Hilfiger, adidas, Dolce&Gabbana, Versace, GUCCI, Mango, Nike, Replay, Levis, and Burberry, just to name a few. Germany is NO different than in the U.S. in terms of the proliferation of outlets. In fact, before I went to Germany I was informed that Germans LOVE and expect a deal. (Remember, this is the country whose discount-centric grocers sent Wal-Mart packing...) What is different though is that there are strict regulations in Germany that prohibit retailers from having separate price labels on a garment, so the same outlet strategy we have here in the U.S. isn't possible in Germany.

In their Berlin store along this most fashionable street, what Desigual has done differently is actually position the outlet WITHIN the store on the top floor. Why is this a good strategy in my opinion? Well, first you don't have shoppers immediately divereted away from the premium offering to a discount one. Second, the shopper maintains the brand perception of quality instead of feeling they're in a "lower-end" section. And third, it ensures that shoppers are exposed to two floors of the latest designs and styles before getting to the bargains.

Like many other brands I mentioned above, Desigual has a huge following of "loyalists" who are constantly looking forward to the next new debut of their designs. (Heck, these people are even willing to show up to a Desigual promotion in just in their underwear to receive 2 free items!) But Desigual recognizes that all shoppers - including those "loyalists" -  want a deal as well. Desigual has made it possible for them to have the best of both worlds in one place.

In most outlet scenarios shoppers are being offered product specifically designed and manufactured for the outlet (82% on average according to NPD analyst Marshall Cohen) - much of the time of a lower quality. As retailers have improved their planning and allocation processes, the amount of excess goods has significantly diminished. Hence, the need to feed the outlet beyond sparse past-season surplus or "irregular" merchandise means custom-making "outlet products". The outlet model certainly expands brand-awareness, but it leaves retailers at risk of cannibalizing their own brand's marketshare, harming their image/value proposition, and the profitability of their "regular" stores. Plus they aren't connecting with their best shoppers. Outlets are one of the few bright spots in today's retail economy, since they give fashion labels access to shoppers who otherwise wouldn't pay for the designer labels, but is splitting the brand up the best approach?
 
We heard a lot of discussion at WRC about "value" and what that means to the shopper. Is it about the shopper's willingness to pay full price or that value now refers to the "experience" and service? Neither is a wrong definition and shouldn't be any less of a concern to them, but the bottom line is that today's shopper will continue to define the value of a brand and what it means to them.

Desigual has a very different strategy when it comes to offering value to its shoppers. They don't have sale racks on the first two levels of the Berlin store. The first floor is designated to women's fashion and accessories - current season and full price. The second floor is children's and men's - also full price and current season. But instead of hiding the "deals" in a stark, dark basement in a disorganized fashion or the location clearly marked, there are prominent signs on both floors directing shoppers up the escalators to the third floor where here they will find a lot of merchandise marked down (sometimes dramatically) that is either last season, overstock or damaged, but unlike many other retailers, the merchandising and display is the same style and quality as the full-price levels.

Does this strategy hurt them or help them? I think it helps and maintains the brand image. After all, I ended up observing the store twice during my stay in Berlin, and both times saw shoppers browsing all three floors picking up merchandise all along the way. And personally, I was not swayed away from the freshest, seasonal merchandise in favor of the discounted offerings on the third floor: though I browsed the outlet level, the clothes I ended up buying were current-season... and full-price.

I had the opportunity again this year to address the International Retail Design Conference on the subject of technology-enabled design two weeks ago in Toronto. Out of the conversations stemming from this presentation, it quickly became apparent that this is a major area of both interest and concern to retailers, as the opportunities to bring the disciplines together are immense... as are the potential challenges.

In that presentation, I explored 5 "Do's and Don'ts" of technology-enabled design:


1. Don't let your competition design your shopping experience.

Designers are used to thinking of the in-store experience as self-contained and in their control. No matter what influences a 21st century shopper may have been under OUTSIDE the store (marketing/advertising, ecommmerce, social media, etc.), once they step into the store, they're free of those influences. That's simply no longer the case, as competitors can (and do) connect with shoppers at the store shelf using tools like Amazon's mobile app. With two touches on their phone, a shopper can go from considering a product in your store... to purchasing it from Amazon, at a lower price and without the overhead of bringing the product to the shelf. This leaves retailers with a simple choice: step up and create a better mobile enabled shopping experience that keeps the shopper engaged with the brand both physically and electronically... or cede half the shopping experience to competitors.


2. Do start thinking of yourself as an experience designer.

The discipline of store design is changed by the addition of the new tools next-generation technology brings to the table. Technology has in the past been relegated to the IT department and design constrained to the in-store experience... and never the twain shall meet. The future of "store design" is taking the shopping experience and expanding the touchpoints beyond the physical elements of the store. Store designers must embrace a future where their "designs" are experience that touch the shopper at home, on the go, and in the store... not just physical elements within the store itself.


3. Don't think technology use is (too) generational.

It's far to easy to dismiss technology as something that only the youngest generation of shoppers embraces, and therefore not relevant to "our target shoppers." The truth is that shoppers of virtually all demographics are rapidly adopting new technologies into their lives, and retailers that dismiss incorporating technology into their store experiences run the risk of being perceived as increasingly irrelevant by ALL their shoppers, not just the young ones. The fastest growing segment of Facebook users, for example, isn't college students: it's women 45-54, and these tech-enabled mid-life women represent a powerful buying segment who are already FAR ahead of most retailers in their use of technology.


4. Remember that 50% of shoppers will be carrying smartphones in 2012.

The window of opportunity for retailers to take a "leading edge" or even "fast follower" role in embracing mobile technology is closing rapidly. Ecommerce players like Amazon and Zappos already have strong mobile strategies in place, and retailers deploying mobile solutions will quickly see the perception of their innovation shift from thought-leader to also-ran. Analyst estimates vary somewhat, but all project a tipping point within two years where the majority of shoppers are carrying and using smartphones. And retailers should keep in mind that on average, the demographics of their shoppers will skew slightly higher than the "average" American... so the percentage of smartphone users amongst their most important shopping segments will likely be even higher.


5. Consider a trip to Japan for inspiration.

While examples abound all over the world of retailers who are "doing it right" with store design, Japan alone has the unique advantage of a very well evolved mobile infrastructure. Near ubiquity (and universal compatibility) of smartphones that can read a single barcode standard, display information, and even allow payment means that shoppers in Japan are simply more used to using their phones in the shopping process than any other single market. From Japanese gardens to convenience stores to public transportation, Japan abounds with cutting edge examples of mobile shopping. The JAPANSHOP expo in March 2011 offers a unique opportunity to see the intersection of technology and design both from the retail industry perspective and examples scattered around in stores.


6. Don't be afraid to take risks; this is the time to experiment.

There is no right or wrong answer to technology-enabled store design, and what will benefit retailers the most right now is the willingness and ability to experiment and make (controlled) mistakes. The bottom line is that there are many new shopping patterns and dynamics emerging, and taking advantage of these new shopping ideas requires trying new things, measuring the results, and deploying those that work. Without both a willingness and ability to learn from those trials, retailers will relegate technology into old paradigms in the store... a fatal mistake that will let their competition leapfrog ahead.

Obviously, this isn't a complete list, but starting here will give retailers - and in particular store designers - a good foundation for begining to bring technology into the store.

The entire presentation, including slides and video, is hosted on our Vimeo channel, and you can view both parts - or an eight-minute shortened version - below.

IRDC 2010: The Do's and Don'ts of Tech Enabled Store Design - Part One

IRDC 2010: The Do's and Don'ts of Tech Enabled Store Design - Part Two

IRDC 2010: The Do's and Don'ts of Tech Enabled Store Design - 8-minute Short Version