Will Story help Macy’s launch an exciting new chapter?

Macy’s just launched Story concept shops in 36 stores across the United States. The new “narrative-driven retail experience” occupies about 1,500 square feet in most stores. The move comes less than a year after Macy’s acquired the Story brand and made its founder, Rachel Shechtman, its brand experience officer. This is the latest step in Macy’s attempts to become more relevant and remarkable after years of declining market share and lackluster profitability.

Similar to the original Story boutique that opened in Manhattan’s Chelsea neighborhood in 2011 , Story at Macy’s will focus on one merchandising theme at a time, and completely change every few months. The first installation is called “Color” and features some 400 curated products from brands like MAC Cosmetics, Crayola, and Levi’s Kids, as well as dozens of other small business partners. More than 300 color-themed community events are planned to help customer activation. In a press release Jeff Gennette, Macy’s, Inc. chairman and chief executive officer, commented that “the discovery-led, narrative experience of Story gives new customers a fresh reason to visit our stores and gives the current Macy’s customer even more reason to come back again and again throughout the year.” 

In a Forbes post last year after the Story acquisition was announced I expressed two fundamental concerns about the new partnership. One was whether Shechtman and team were going have the room to truly innovate and to do so quickly. My fear was that Macy’s historically go-slow culture might stifle the necessary creativity and decisiveness. The fact that Story at Macy’s is a fully realized and well-executed concept that was brought to life in less than a year is encouraging. Credit should be given to Gennette for his willingness to experiment aggressively.

The second was less a concern, but more of a cautionary warning. Even if Story proved to be successful in its initial roll-out and gets scaled to most of the chain, it seems obvious that it will barely move the dial on financial performance or, more importantly, do much by itself to accelerate Macy’s move out of what I call the boring middle. Yet, as every journey must start with the first step, it is potentially an important piece of a broader renaissance that necessarily will take a lot of time and considerable investment.

A visit to the Story shop at Macy’s in Dallas’ Northpark Mall over the weekend reveals both the opportunity and the challenges. Story’s visuals are eye-catching and easily seen from the other side of the vast store, which is situated in one of America’s most productive malls. The merchandise presentation is eclectic and fun, albeit seemingly a bit random. Two associates stand ready to help, though I am the only potential customer on a Saturday afternoon. There are a lot of interesting impulse and gift items, but it’s hard to understand a cohesive value proposition that will drive meaningful incremental traffic given the frequently changing theme.

Story at Macy's features more than 400 products.

Most striking to this observer is how out of place Story seems—and how it calls attention to much of what is decidedly mediocre at a much better than average (in my experience) Macy’s location. Story’s bold design stands in stark contract to the rather stark and neutral visuals of adjacent departments. Most apparel and accessory sections throughout the store are swimming in a sea of sameness: rack after rack and tables stacked high with mostly uninspiring fashion, virtually every one topped with a promotional sign offering 25% to 50% off. While Story’s layout is relatively cozy and invites exploration and discovery, the rest of Macy’s main floor looks like just about every other moderate department store in just about every city I have been to in recent years, e.g. sprawling and unmemorable.

After visiting Story I was reminded of a time, many moons ago, when as a young management consultant getting paid far more than I was worth, I splurged on some large and rather expensive stereo speakers (note to Millennials: that was a thing at one point). As soon as I had my bright and shiny new toys wired to my old equipment, I quickly realized that what I already owned paled in comparison. It wasn’t long before I felt compelled to upgrade the whole damn system.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Is Canada Goose luxury retail’s next highflier?

Canada Goose, the high-end performance outerwear brand, just announced plans to open 6 new stores. The new locations—one each in Milan, Paris and Minnesota’s Mall of America, along with three in Canada—will bring the fast growing luxury retailer’s store count to 17 spanning three continents.

While Rent the Runway, Stitch Fix, Glossier and other so-called digitally native fashion brands generate the most press, in many respects Canada Goose is outpacing them. In recent years the company has been growing revenues more than 30% annually as it increases wholesale distribution and dramatically grows its direct-to-consumer (DTC) business (online and through owned-stores). Most impressive—and standing in stark contrast to the vast majority of current and hoped for “unicorns”—is that Canada Goose makes money. A lot of money. In the most recent quarter the Toronto-based company reported operating margins in excess of 30%, results which are likely to only improve as the company generates more scale economics and DTC becomes a greater portion of total sales.

Canada Goose is a great illustration of a retailer delivering on being “memorable,” which is No. 7 in what I call my 8 Essentials of Remarkable Retail.  Memorable brands create magic at the intersection of powerful customer relevancy and a truly wow experience. Like many of the best luxury brands, Canada Goose has an interesting and authentic origin story. But the real magic happens through their unique, highly differentiated product design combined with how the product is delivered in person. Canada Goose stores are far from boring. Their stores tell a compelling story, brought to life through beautiful imagery, dramatic product presentation and outstanding customer service.

While many retailers talk about being “experiential,” much of what passes for interesting is often gimmicky.  Canada Goose’s “Cold Rooms” are anything but that. These innovative dressing rooms  are essentially walk-in freezers where customers can try on the company’s products in simulated weather conditions. So not only are they creating a remarkable experience in the most literal sense, they are delivering something intensely customer relevant and useful. Unsurprisingly, conversion rates have spiked in stores that have added Cold Rooms.

On a recent trip to Manhattan, I was a bit surprised to see a significant percentage of folks hustling to their midtown offices sporting all manner of outwear with the Canada Goose logo. While this highly unscientific market research should be taken with a grain of salt, it does underscore both the appeal and the risks inherent in Canada Goose’s future. Clearly there are vast numbers of additional potential store locations. Moncler, probably the brand most analogous to Canada Goose, has nearly 300 worldwide. And robust growth in e-commerce is a lay up as the brand gains more distribution. It’s also pretty easy to imagine significant upside from product extensions. At face value it would seem that robust sales and earnings growth are likely for many years to come.

While Canada Goose delivers well-designed products that work, it is also a highly logo driven and, some would say, an over-priced fashion brand. Right now, in certain cities, it’s become the outerwear “badge brand.” But we shouldn’t forget that over the years the retail industry has seen plenty of brands that ascend to great heights on their “it” status, only to crater when the cool kids and fashionistas move on the next new thing. Unfortunately, as far as I know, no one has built a reliable model to readily predict which high-flying brands will crash back to earth when trends change versus which will achieve and sustain true iconic status.

While I certainly lack the gift of prophecy, I like Canada Goose’s odds of becoming one of the great global luxury brands over the next decade. People buy the story before they buy the product and Canada Goose’s is compelling and memorable: an authentic history, products that deliver, great customer service and a wow experience. And, at least so far, they have executed in a nearly flawless manner.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Despite defying the ‘retail apocalypse,’ At Home reportedly puts itself up for sale

Amid all the doom and gloom about physical retail, there are quite a few unsung stories of robust growth and solid profitability. At Home Group, the Plano, Texas-based chain of home decor superstores, is one of them. Despite the brand’s relative success, reports emerged late last week that because of poor stock performance the company was exploring sale options. Once again, it seems no good deed goes unpunished.

While the company has started to experience some headwinds, it is hard to understate what has been accomplished . Under the leadership of CEO Lee Bird, At Home has carved out a well-differentiated and remarkable position in the massive, highly fragmented home furnishings business. In just over five years, the company re-branded from Garden Ridge, did a complete merchandising and store format overall and grew from 68 stores to 180—with another dozen or so to open by year’s end. At Home’s operating margins are higher than industry averages, and it is among a handful of retailers to deliver positive comparable store growth every quarter for the past five years. Apparently it did not get the retail apocalypse memo.

Like many leaders in the value-oriented end of the market—think TJ Maxx, Ross, Five Below—At Home differentiates itself through low prices, broad and deep assortments, a “treasure hunt” shopping experience and a low-cost operating model. By playing in a category that is still largely driven by physical stores while having a very high penetration of private-label goods (~70%), it is somewhat insulated from the “Amazon effect.” With comparatively low brand awareness, under-developed digital capabilities and many untapped markets for new stores, there are ample reasons to believe At Home can deliver solid growth for years to come.

Yet Wall Street is clearly worried. After hitting a post-IPO high of nearly $41 last July, the stock has been bouncing around the low 20s for nearly four months. To be sure, the company has seen a deceleration in growth and greater margin pressure and gave lower guidance in its most recent earnings release. The prospects of growing competition and a more significant economic turndown give rise to growing concerns.

It remains an open question whether moderating performance suggests that the At Home model is starting to run out of gas, is the canary in the coal mine for macro-economic jitters or is caught up in the Street’s lack of appreciation for brands that are more physical-store-centric. Regardless, from where I sit, the brand has delivered strong results for several years running, seems to have carved out a compelling value proposition and has plenty of runway left in both its store expansion plans and the opportunity to better digitally enable its business.

At a market capitalization of under $1.5 billion, At Home could be an enticing acquisition target for a number of players. Amazon, Wayfair and TJX all to come to mind, but it could conceivably be of interest to Home Depot, Lowes or Target. A deal to take the company private could also make sense, where it could grow aggressively without having to endure the quarterly earnings pressures of the public market.

Either way, it may take a transaction to put At Home more favorably on investors’ radar screens. But it’s clear from the company’s results that it has won the hearts and wallets of plenty of customers.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Sears tries small stores again and again. Here’s why they’ll fail once again.

Sears, aka “The World’s Slowest Liquidation Sale,” garnered a fair amount of attention recently with the announcement that they would open small stores featuring appliances and other home products called Home & Life. Perhaps having closed hundreds of stores over the past few years, the idea that Sears would “get off the mall” with new, more focused stores is interesting news and perhaps an early sign of resurrection? It’s neither.

Some of us may be old enough to remember that back in the ’90s and early 2000s Sears tried many iterations of exporting its signature home businesses into new formats that held the promise of being more competitive, convenient, customer relevant and sustainable. I’m one of those people. I was directly involved in many of them.

During my tenure—as well as before and after—we opened dozens of Sears Hardware Stores and acquired Orchard Supply Hardware. There were hundreds of so-called Dealer Stores that grew out of the original catalog business. At one point we operated more than 100 outlet stores. We tried various combinations of small-format tools, appliances and mattress stores. My team helped create and launch Sears Grand and The Great Indoors as large format off-the-mall stores where, among other things, Sears home brands were showcased in a more updated and convenient location. We also had the second-largest furniture business in the United States, which we tried to aggressively grow off mall. And, in a juicy bit of irony, those stores were called Homelife.

To varying degrees, and for various and sometimes complicated reasons, all of these efforts failed. While it may be interesting to debate what could have been done to assure better outcomes (spoiler alert: a lot), there are three powerful reasons a reboot of what is by now a very old strategy will almost certainly amount to zilch–plus or minus bupkis.

First, with the benefit of first-hand experience and a heaping spoonful of hindsight, I firmly believe that the one thing that could have saved Sears was to have created our own version of a home improvement warehouse or, even better, to have acquired Home Depot or Lowes at a time when Sears’ valuation would have made that realistic. Based on work we did during my tenure, it became increasingly obvious that the value in two businesses that drove most of Sears’ valuation (home appliances and tools) was migrating to these disruptive formats, and there was little we could do to stop it either with our mall-based format or through our powerful small stores. Without compelling participation in what is now by far the preferred way consumers buy these categories, Sears’ continued share loss—and long march to irrelevancy—was inevitable.

Second, what Sears is trying today is what I often refer to as attempting to be a slightly better version of mediocre.. Sure, some customers might find these more focused and better located stores a step up from the current Sears on-the-mall or online offering, but is that really delivering something truly relevant and remarkable? Of course not.

Third, even if these formats were able to gain some meaningful traction, Sears has little capacity to scale and has fallen so far below critical mass in many aspects of what is key to winning in today’s environment (marketing, sourcing and supply chain, most notably) that any positive momentum will be immaterial to any hoped for turnaround.

I, like so many other people, truly wish there were a better outcome for Sears. But as time goes on it seems increasingly obvious that the train left the station on those possibilities many, many years ago.

Today, sadly, all this thrashing is just lipstick on the pig. Dead brand walking.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

Go big or go home: Restoration Hardware’s radical approach is paying off

Restoration Hardware’s stock has been under pressure despite since last week’s earnings report. Whether this is because of Wall Street’s tendency to not let any good deed go unpunished or perhaps because the company tried to tamp down future growth assumptions is anyone’s guess. But I continue to be impressed by the home furnishing chain’s progress.

A few years ago, I happened to be speaking at the same conference as Gary Friedman, the CEO of Restoration Hardware. In his talk, Gary outlined his vision for building radically re-designed new and dramatically larger stores under the label RH Gallery. The new flagships would be beautifully decorated, with dramatic spaces and vignettes. They would feature signature restaurants, rooftop bars, extensive interior design services and more. As he shared visuals with the audience and gave a sense of the massive size of the new concept, I tried to do some math on the potential cost of this bold new strategy. Yikes, I thought.

For context, it is important to bear in mind that, only a few years earlier, Restoration Hardware was seen as a likely candidate for the retail graveyard. But after managing to dodge the grim reaper, the company accelerated the shift of its product strategy to be more expensive and fashionable. It also abandoned the increasingly incongruous “Restoration Hardware” name and moved away from a promotional model to one that is membership-based.

But most notably, when the majority of retailers were closing stores in droves—and trying to make the ones they were keeping smaller—here was a guy deciding to go bigger and badder. As I listened to Friedman’s vision unfold, I found myself going back and forth between thinking that he was brilliant and thinking that he might well be out of his mind.

Based on RH’s earnings report last Friday, in which Friedman writes one of the best investor letters I’ve read in some time, the strategy seems to be paying off. The company reported record sales, earnings and margins and 7% comparable store sales growth and achieved what it believes is an “industry-leading ROIC of 27.8%.” Not bad.

For retailers to fight and win in the age of Amazon and digital disruption, many things are becoming table-stakes, like harmonizing the customer experience across channels and using data and insights to personalize marketing. To avoid what I call the “collapse of the middle,” brands must eschew the sea of sameness that is pervasive in so many sectors. So one of the reasons I love the RH story—and now include the RH Gallery in most of my keynotes—is that it is a great case study of what I call the Eight Essentials of Remarkable Retail, most notably the last two: Memorable and Radical. 

To be meaningfully “memorable,” brands must be unique, intensely customer-relevant, authentic and amplify the wow, all in a way that is economically feasible and scalable. The RH galleries do all of this extremely well and give the target customers a compelling reason to make RH a “must-visit” store (or website). The experience is not only immersive, distinctive and fun; it delivers strong utility for the customer.

The Eighth Essential of Remarkable Retail is “radical.” Being radical is the willingness to adopt a culture of experimentation, to accept that a slightly better version of mediocre won’t command the customer’s attention and that it is actually riskier to maintain the status quo than to forge out into bold new directions. Of course, there is no guarantee that being radically innovative will work, but as Seth Godin reminds us, “if failure is not an option, then neither is success.”

It certainly is an open and valid question of how much future growth is possible through these big and bold new stores. Clearly, this is not a strategy that will support hundreds of locations. So time will tell how much more runway there might be. Apparently, the market remains dubious.

Regardless, from where I sit, leadership should be commended for taking a brand that was stuck in the boring middle and, in rather little time, turning it into one of the most interesting and remarkable stories in retail.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.