It has been an element of faith that the days of print advertising were ending and we’d all be making our advertising and promotion buys online. I still expect print to be in a long term decline, but I just read a pretty persuasive article that talks about the decline of online advertising and the reasons for it.
The Wall Street Journal had an article this morning on how many locations certain department stores needed to close if they wanted to get their sales per square foot back to 2006 levels. While they may not (mostly) be the retailers we (hopefully) expect to sell to, the discussion of the dynamics leading to the closings that have already occurred and the possible need for more is interesting.
“Sales at the nation’s department stores averaged $165 a square foot last year, a 24% drop since 2006, according to company disclosures and Green Street estimates. Over the same period, the stores reduced their physical footprint by 7% in aggregate.”
The article notes, to nobody’s surprise, that internet sales are partly responsible for all the store closing to dates. But we’ve got the spokesperson for JC Penney saying that when they close, especially in a smaller market, internet sales go down.
Will the first person who figures out exactly how exactly how brick and mortar and online influence each other please let me know?
I’m pretty sure that even without the internet, there would be ongoing store closings, but I’m sure not as extensive as it has been and will continue to be. The impact on malls will also be pronounced.
Before I give you the link, be aware that only the first couple of the lines will be available on the page. You have to copy the headline into your search window, do a search, and click on the first result that comes up. Then the whole article will be visible. No idea why that works.
Moss-Adams Capital is the mergers and acquisitions, capital raising, strategic advising arm of Moss-Adams LLC, which does accounting, wealth management and taxes. As you may be aware, they’ve been pretty active in our industry, whatever industry we’re now in. For some time, they’ve published a report that provides information on which deals have been recently completed at what prices. I’ve always reviewed it, but never highlighted it.
Now, it seems that they’ve expanded that report to include some good information on the size of and trends in the online market. This is definitely worth your time as it’s pretty short and includes some ideas and data you may find interesting. Thought provoking? Call to action? Downright scary?
Some of the ideas, hopefully, won’t be new to you, but it’s succinct enough that I bet it find its way into some of your planning and strategy discussions.
As we all struggle to figure just what the hell “omnichannel” means and what, exactly, we need to do about it, I’ve seen some companies find themselves in an uncomfortable defensive position. What I mean by that is that they spend a bunch of money on their online presence but the additional gross profit they generate doesn’t cover those costs.
Moss-Adams notes that online (including mobile) sales accounted for 7.3% of total U.S. retail sales in 2015 and two thirds of total retail sales growth that year. Obviously, if your brick and mortar sales should be down 7.3% but you’re up 7.3% in online sales but have all the additional costs associated with online (depending on the comparative gross margins) you’re in a bad place.
This, essentially, is why your engagement with the omni channel has to be the place where the whole is greater than the sum of its parts. You have to be online, but spending money to cannibalize your brick and mortar sales is completely defensive and maybe destructive.
Here’s the link to their report.
Meanwhile, I came across a chart with some information on the evolution of the teen retail market between 2003 and 2014. I imagine you’ll want to think about what it means. Though maybe it doesn’t have any deep meaning and is just good information. I got it from a free publication I get five days a week called The Daily Shot.
Just for fun, let’s say you’re a brand that has some product at The Sports Authority (TSA) on consignment. When TSA filed for bankruptcy, your finance and credit people probably high fived each other out of the sheer joy of knowing that they could expect to be paid for that product when it was sold or at least get the product back- which would not be the case if you had sold the product to TSA and made yourself an unsecured creditor.
Uh, well, maybe not.
Sports Executive Weekly as well as the Wall Street Journal and other publications are reporting that TSA is suing a bunch of its suppliers who have consignment product at TSA. TSA wants to be able to keep the product and I guess the money from selling the product. Apparently, there are 160 suppliers who have consigned product to TSA (Doesn’t anybody just sell product to retailers anymore?) and we’re talking about $85 million of merchandise.
The bankruptcy judge has told TSA that they have to return the consigned goods to the consigning brand if requested and pay them the money they already owe vendors for consigned product that’s been sold. Apparently there have been a number of such requests. But TSA, which has until April 28th to come up with a buyer or another form or reorganization that will let it survive, doesn’t want to do that because they need these brands and their products, not to mention the cash, to continue operating.
So we’ll see. If the lawsuit is successful, I guess these consignors end up as unsecured creditors.
On several occasions, I’ve discussed 3D printing or directed you to some discussion of it. I’m here to do it again. I’ve gotten some feedback that it wasn’t practical or wasn’t going to happen quickly, but as far as I can tell it’s moving forward.
Mattel has announced a $300 3D printer that will allow kids to make toys. Yes, yes, I’m sure it’s limited in what it can do, etc., but it’s better than what was available before and not as good as what will be available tomorrow. And tomorrow’s will be even cheaper of course.
Actually, that’s the title of the article I just finished that I want to pass along to you. It’s about how retailers, and ultimately brands, deal with returns and how much they costs.
That returns are a pain in the ass and cost a lot of money is something we all already know. But some of the numbers in the article- especially for online- indicate that they are way higher than I would have imagined. And they are particularly high for apparel and shoes.
I came across this short article recently talking about the ongoing improvement in store brands and their importance to retailers. Now, it’s not our industry but I thought everything they said applies to us.
I guess the standard explanation for store brands is that they give the retailer some more margin. True, and that margin is increasingly important to the retailer these days. Yet their success suggests that more is going on.
Television was first demonstrated back in the 1920s. But it was really wasn’t until the late 1950s that it took off. I don’t think breakthrough technologies take 30 plus years to make it into the mainstream any more. Maybe it’s better to say that once they reach their tipping point, their adoption accelerates dramatically. Why? Because that they come around no longer surprises us.
3D printing appears to be such a breakthrough. It’s already in use for prototyping, some kinds of customization, and no doubt uses I don’t know anything about. Here’s a link to some things they are being used for. Yup, there are definitely some I didn’t know anything about.
Unfortunately, I didn’t write that just to get your attention. It’s true. You can read all about it in this article.
As you read it, please focus on what it says about Amazon’s goal in having the store. It’s all about gathering and using data, says the author.
Retail today is about getting the right product to the right people at the right place at the right time. There seems to be a consensus around that. It’s also about the omnichannel- letting your customer shop whenever and wherever they want.
Those two aren’t exactly the same thing, though there’s some significant overlap. It’s always been a good idea to get the right product to the right people at the right place and time. In some ways, that’s easier now. In some ways, harder. I guess mostly harder, as what’s “right” changes so much more quickly.
Omnichannel didn’t exist not very long ago- at least not as the sophisticated concept it is now. There was pretty much only brick and mortar.
Taking this approach to the market requires data, the systems to analyze it, flexibility, and logistics. It also takes recognition that customer groups are amorphous, coming and going and changing size and composition very, very quickly. It’s hard to keep up with them.
When you hear brick and mortar focused retailers talk about these issues, they put them in the context of better serving the customer. As the article describes Amazon’s collection and use of data, it feels manipulative. I don’t sense any respect for the customer. To be fair, Amazon didn’t write the article and I imagine they would have phrased it differently. Still, would that attitude be completely surprising in a retailer that wants to sell everything to everybody?
When your target market is everybody, do you have a reason or a need to focus or to know your customer group? I’d say no, and maybe that’s hopeful for retailers who have a more defined market in mind.
While I’m quite sure you should no longer be segmenting your customer group strictly by age, it’s still true that somewhere between a lot to many or even most of them are coming from the so called millennial generation. So what think and how they’re doing matters to us.
For many of them, the Great Recession was a whack on the side of their heads during their formative years. In many ways, they are still dealing with it. My opinion is that are going to have to continue to deal with it for years. They’ve got a hole to climb out of and I don’t see the overall economy improving very much for some years.
Rather than my speaking in generalities, I want to introduce you to Mike (known as Mish for reasons I am not familiar with) Shedlock. Mike is refreshingly straight forward and publishes a blog I subscribe to.
In this post, he gives some very specific information about the circumstances the millennials are dealing with. It’s worth reading and maybe sharing.
