Retail

Blake Nordstrom: Gone too soon, but his impact on retail will long be remembered

I met Blake Nordstrom, co-president of the namesake retailer, only one time, and it was way back in 2005. I was an executive at Neiman Marcus, and many of us on the senior leadership team were attending the grand opening of our new store at the Shops of La Cantera in San Antonio, Texas. About an hour or so after opening our doors and greeting customers, we decided to check out the new Nordstrom, which had also just opened that morning.

Strolling past the specialty shops that were a bridge to our more accessibly priced competitor, who should be coming toward us but the Brothers Nordstrom? It turned out they were on a similar mission. I honestly don’t remember much about what was said, but I remember the feeling: warmth, congeniality and mutual respect. As we parted, Burt Tansky, our CEO, said something along the lines of “that is one great family.”

More than a decade later, well into my new career as a consultant, speaker and writer, I was interviewed by the Seattle Times for a piece about Nordstrom. My comments, both on background and ultimately in the story, highlighted my strong admiration for the brand and its leadership. The day of publication, I got an email from Blake saying how much he appreciated my kind words. While it was a very small gesture, no doubt aided by an assistant, it still meant a lot to me. I have told this story to several people who knew Blake personally, and they all basically say the same thing: “Oh, yeah, that’s just the kind of guy he is.”

As I reflect on Blake’s death on Wednesday at 58, I am reminded that in business—and I suppose in our culture more broadly—we often focus intensely on what is achieved (record growth, improved profit margins, number of followers, awards, etc.) and much less on how it is done. And it is hard to understate what Nordstrom, the retailer, has achieved during a time of tremendous change and disruption. Given Nordstrom’s leadership structure, it is hard to say precisely what Blake was responsible for, but it is not difficult to highlight some of the major accomplishments during his tenure.

1. A memorable experience. For the most part, the department store sector is boring, characterized by me-too assortments, lookalike environments, rampant promotions and uninspiring customer service. While others swim in a sea of sameness, Nordstrom has remained remarkable by keeping its stores current; remaining committed to personal sales attention; curating interesting, fresh and highly relevant assortments; and resisting the temptation to put just about everything on sale all the time.

2. Digital leadership. Nearly two decades ago, the company saw the potential of digital commerce, not only as a transaction but also as a key driver of its brick-and-mortar business, and invested well ahead of the curve. Today, Nordstrom has among the highest e-commerce penetration of any traditional retailer (over 30%) and is one of the few whose growth in online sales is actually accretive to earnings.

3. Harmonized shopping. Nordstrom was one of a handful of retailers that understood early on that the customer is the channel and it’s all just commerce. Accordingly, the company committed to being channel agnostic and began investing in creating a truly seamless experience across channels many years ahead of its competition.

4. Innovation. Unlike virtually every other retailer that has been around even half as long, Nordstrom has been on the leading edge of just about every major trend in retail. It pioneered upscale off-price retail. It invested early and heavily behind its e-commerce business. It has been willing to experiment early and often with social, mobile, personalization and new modes of shopping (Trunk Club). It was among the first to open an innovation lab, and in a sign of its commitment to radical experimentation, the company shut it down and moved on when it was no longer delivering the desired results.

5. Smart diversification. Nordstrom has leveraged its core with new stores in Canada and New York City. It has invested aggressively behind its faster-growing Nordstrom Rack division and acquired HauteLook to enhance its capabilities. Now it is piloting its new merchandise-free, service-centric concept called Local as a way to extend customer reach and better meet customers where they are.

6. Solid, profitable growth. At a time when many other mall-based retailers are closing hundreds of locations and struggling to stay afloat, Nordstrom has defied both the retail apocalypse narrative and the multi-decade secular decline of department stores, managing to grow relative market share, sales and profits. That is no small task and one for which I do not believe it gets enough credit.

It probably goes without saying that it is always sad when someone dies—and especially so when it happens at such a young age. I know I am among many in both Blake’s immediate and extended family who are deeply saddened by this news. While we mourn his passing, we can (and should) celebrate not only the “what” of his accomplishments but how he did it: with integrity, passion and kindness. Ultimately, the values Blake Nordstrom embodied and reinforced will be his gift and his legacy.

As Maya Angelou reminds us, “people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

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.  

Next week I’ll be in NYC attending the NRF “Big Show” and participating in various related events, including a special “fireside chat”. On January 24th I’ll be keynoting the ICSC Nexus Conference. In February I’m headed down under.

Retail

Was 2018 the best holiday shopping season in years? Well, what do you mean by “best”?

If you are the sort of person who tracks stories on retailers’ holiday sales performance you know a certain ebullience has set in. On the heels of optimistic forecasts by the National Retail Federation and others, Mastercard’s SpendingPulse indicates that retail had the “best” season in six years, with overall sales growing 5.1%. Online shopping alone was up over 19%. So there should be joy throughout the land right? Well, not so fast. Before we declare victory a few things must be kept in mind.

The holiday season isn’t quite over. Mastercard’s survey covers the period between November 1 and December 24. That just simply isn’t the whole picture. For one thing, the week after Christmas is a huge week for retailers. And it is the final week of the year and the beginning of January when most holiday gift cards get redeemed. Similarly a big percentage of holiday returns and exchanges get done during this time. Until this all nets out we simply lack the complete picture.

Your mileage may vary. We should all know the flaw with averages, and when it comes to dissecting retail success the industry is no different. The Mastercard data reveals a wide distribution of outcomes at the category level. Leading the way was apparel, which was up 7.9%, and home improvement, up a whopping 9%. Alas department stores got another lump of coal in their stocking, continuing their string of declines. Electronics and appliances also saw sales drop.

A tale of two cities. While I generally avoid making specific predictions I often get asked to weigh in on anticipated “winners & losers” of the holiday season and my typical, albeit more than a little smart-alecky, answer is always the same: the same brands that have been winning and losing all year. It turns out that retailers that have remarkable and relevant business models going into the season continue to do well. Those that have boring value propositions (or are executing poorly) continue to struggle. So the notion that a strong tide will cause all ships to rise sounds true, but often isn’t. When the dust settles and we dissect the numbers it’s pretty likely that the collapse of the middle will be even more evident.

Yeah, but what about profits? The only thing we know anything about are sales numbers. I hate to break it to you but it is possible to drive sales growth without actually making money. Ask Wayfair. Again, mileage will vary considerably here–and we won’t have more useful information until retailers report their quarterly numbers. Yet a few things should give us pause. First, a few studies–and my own anecdotal experience–suggest the rate of discounting was quite high. Until we see how gross margins come in we won’t know how bright the season was or wasn’t. Second, the continuing shift to e-commerce generally isn’t accretive to margins for most retailers–particularly given the higher rate of returns and growing fulfillment costs. Third, there is a fair amount of expense creep, be that from rising wages, the tariff nonsense or handling the huge jump in BOPIS orders. My best guess is overall retail profits will grow more slowly than overall revenues.

Storm clouds on the horizon? Even if most retailers post a strong fourth quarter there are reasons to temper expectations as we begin 2019. While the most recent stock market gyrations may owe more to the chaotic American political climate, retail investors are definitely tapping their brakes. Moreover, consumer confidence is beginning to wane. And if the partial US government shut down goes on much longer it’s hard to imagine that won’t have a material dampening effect.

So at the risk of being a bit Clinton-esque, to call it the best holiday season, we really have to define what “best” is. We also need to be a bit more patient.

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.  

The week of January 13th I’ll be in NYC attending the NRF “Big Show” and participating in various related events, including a special “fireside chat”. On January 24th I’ll be keynoting the ICSC Nexus Conference. In February I’m headed down under.

Retail

The 3 big problems with omnichannel retail

In early 1999, as a fairly recently minted VP, I found myself at a posh Arizona resort attending Sears annual “strategic leadership team” meeting. At the final session of our retreat then CEO Arthur Martinez made a bold–and as it turns out rather prophetic–statement which went something like this: “the future of Sears will be dictated by our ability to meet our customer’s needs anytime, anywhere, anyway.” A few months later I was appointed Sears’ new Vice President of Multichannel Integration.

Nearly twenty year later, multichannel has morphed into “omnichannel” (thanks Terry) which, in turn, has spawned a cottage industry of related jargon: “cross-channel integration”, “seamless shopping”, “unified commerce” and so on. Today many retailers still justify their investments in all things omnichannel by stating that customers who shop in multiple channels are their best customers. Of course by definition the customers that like a brand the best tend to do everything more. So as much fun as it is to point out confusing correlation with causality the best reason to make these investments is always going to be because customers value them.

As more retailers seem to finally be waking up to the fact that it’s all just commerce and that all this talk about channels is mostly noise, it’s worth taking a hard look at the state of omnichannel retail and some of the oft over-looked–and potentially highly problematic–issues.

Customers don’t care about channels

During my nearly 30 years in retail I’ve heard my colleagues talk about the catalog channel, the e-commerce channel, the store channel, the mobile channel, the home shopping channel and on and on. Maybe this was an interesting distinction a decade ago. But for many years now, for just about every category, for just about every customer, the distinction between channels has been evaporating. We no longer go online, we live online. Some sort of smart device is a nearly constant companion in many customers’ journeys, with the result being that we can go back in forth between a digital channel and a physical channel in an instant. Digital drives brick & mortar and vice versa. The problem for far too many retailers is that they still are stuck in their channel-centric thinking and their organizations, metrics, systems and incentives still reflect that. Embrace the blur. Silos belong on farms.

It’s not about ‘all’. It’s about relevant and remarkable where it truly matters.

At one level, being everywhere the customer is sounds like a good strategy. Except far too many retailers took the “omni” to the extreme, and in the quest to be everywhere they mostly ended up being nowhere. Meeting the consumer where she is AND actually being good at all of it is neither easy nor inexpensive. While the industry still lacks a consistent working and useful definition of what “omnichannel” really means it seems obvious that many brands embarked on a “get me some of that omnichannel stuff” and spread themselves way too thin. As we should all know by now, trying to be everything everywhere for everybody is a fool’s errand . It is far better–for both customers and investors–to instead focus on delivering a harmonized experience; by which I mean focusing on eliminating the discordant notes and amplifying the wow in the customer journeys for those customers that have the greatest current and future value. Without this, we risk diffusing our efforts and falling further and further behind those that have a laser focus on being relevant and remarkable where it actually makes a difference.

The omnichannel migration dilemma

Retailers that do a superb job of focusing their omnichannel investments strategically can still face the harsh reality that creating a harmonious shopping experience is often terribly expensive. And for those that are playing competitive catchup, many millions can be spent only to even the playing field, not create a meaningful advantage or generate clear ROI. And even if a brand can stomach the heavy capital costs, the marginal economics of e-commerce are often worse than brick & mortar, primarily owing to high customer acquisition costs and/or skyrocketing fulfillment expenses. The situation is often made worse by aggressive (some would say irrational, uneconomic or even predatory) product and delivery pricing on the part of brands that value hyper-growth over profits. So as e-commerce continues to grow 3-5 times faster than physical store sales, even the best omnichannel retailers may see margin erosion.

For consumers just about all of this is good news. Prices are better, choices continue to expand and shopping is ever more convenient. For brands, it’s never been more important to understand consumer behavior, embrace the blur and to take a laser-like approach to executing a strategy that is harmonious and intensely customer relevant and remarkable. Otherwise omnichannel can easily be far more a problem than an opportunity.

Recently, brands like Walmart and Target have been applauded for upping their e-commerce and “omnichannel” games and for taking on Amazon more aggressively. From a customer relevance standpoint this is all good. Whether investors will like the outcome is another matter entirely.

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.  

Later this month I’ll be in NYC attending the NRF “Big Show” and participating in various related events. On January 24th I’ll be keynoting the ICSC Nexus Conference.


Retail

My top ten Forbes posts of 2018

As is my tradition, I start the year with a quick look back at the posts that got the most engagement in my role as a retail contributor for Forbes. Shockingly, none of the top ten were about Sears.

So here, in order of popularity, is the top ten.

  1. It’s just about time for full on panic at JC Penney
  2. Physical retail isn’t dead. Boring retail is.
  3. The ticking time bomb of e-commerce returns
  4. JC Penney goes back to the future. But it’s likely too little, too late
  5. Apparently these brands did not get the ‘retail apocalypse’ memo
  6. A baker’s dozen of provocative retail predictions for 2018
  7. Retail 2018: Now comes the real reckoning
  8. Is IHOb a big nothing burger?
  9. E-commerce may be ‘only’ 10% of retail, but that doesn’t tell the whole story
  10. Wayfair, StichFix and e-commerce’s scaling problem.

And some of you are old enough to get this reference because this list goes to 11

Nordstrom and retail’s growing urgency to re-think performance metrics

Best wishes to everybody for a safe, productive and purpose-filled New Year.

Death in the middle · Embrace the blur · Retail

My 13 ‘provocative’ retail predictions for 2018: So how’d I do?

‘Tis the season for annual retail predictions and, fear not dear reader, I will be sharing mine early in the New Year. Yet amidst all the prognostication nary a modern day Nostradamus gets fact checked on how well-honed their gift of prophecy actually turns out to be. I don’t want to be that guy.

So here’s a mostly objective–and decidedly self-indulgent–assessment of my Baker’s Dozen Of Provocative Retail Predictions For 2018.

  1. Physical retail isn’t dead. Boring retail is. This phrase later turned into a Forbes piece, which became my most popular post of the year. And the phrase itself started to catch on, sometimes with attribution, sometimes not (thanks Nike!). Regardless, as 2018 unfolded it seemed increasingly obvious that the retail apocalypse narrative was bogus. Sales in brick & mortar stores are up solidly this year, thousands of stores have opened, digitally-native brands like Warby Parker and Casper are accelerating the pace of their physical presence and Target, Walmart, Best Buy and many other largely brick & mortar-centric retailers have delivered strong results.
  2. Consolidation accelerates. Precise comparisons on mergers & acquisition activity and store closings are not yet available, but by any measure the pace of merger & acquisition activity was brisk. Macy’s, Target, Amazon, Nordstrom, Albertson’s, Kroger and Walmart were among the large players that scooped up one or more earlier stage, largely tech-driven companies. As growth stalls among mature brands, we’re seeing deals like Kors acquisition of Versace take center stage. The vast over-storing of US retail is also moving closer to equilibrium as thousands of surplus real estate shutters or gets repurposed.
  3. Honey, I shrunk the store. As predicted, 2018 brought a lot more activity here. Target, Ikea and Sam’s Club, among others, got more serious about opening scaled down versions of their big stores to squeeze into urban centers. Nordstrom announced that it would expand its totally re-imagined, service-centric “micro-concept” called Local. Less interesting–and potentially more perilous–were efforts on the part of over-spaced (i.e. under-customer relevant) retailers to sub-lease parts of their stores in a vain hope to shrink to prosperity.
  4. The difference between buying and shopping takes center stage. In my view, this trend becomes more obvious by the day, particularly as e-commerce keeps gaining share of “buying” (i.e. a more mission-focused customer journey where price, speed and convenience are especially valued), yet generally struggles with “shopping” (i.e. more discovery-based and tactile journeys where a more immersive experience is desired and face-to-face sales help may be important). Strategically this may have moved to center stage for more retailers (see Amazon’s moves into physical below), but there still is a general lack of understanding and appreciation here.
  5. Amazon doubles down on brick & mortar. Amazon hasn’t gone quite as far as I expected here (yet), but in addition to making some big changes within Whole Foods (their biggest physical store bet thus far) they introduced the Amazon 4 Star concept, expanded Amazon Books and Amazon GO (while hinting at thousands more to come) and continued to experiment with other expressions of Amazon in the physical realm, like their partnership with Kohl’s.
  6. Private brands and monobrands shine. The biggest acceleration came from Amazon, as they are on their way to a stable of more than 100 private brands. Traditional retailers continued to accelerate their own brands and/or largely exclusive offerings as an antidote to Amazon. Digitally-native vertical brands continued to shine, announcing plans to open more than 800 new stores. And Nike, among other manufacturers making a big push into direct-to-consumer, debuted their amazing new NYC flagship and Nike Live.
  7. Digital and analog learn to dance. Legacy brands (think Walmart, Target, Best Buy) that finally learned to embrace the blur and deliver a more harmonized (my, ahem, superior term for what most call “omnichannel”) experience across channels demonstrated great success. Brands that were already pretty good at it (Nordstrom, Sephora) continued to perform well. The upstart digitally native vertical brands continue to kill it, as they don’t care about channels, they care about the customer and use both digital and analog tools to deliver a remarkable retail experience. It appears finally that brand are starting to accept that digital help physical and vice versa.
  8. The great bifurcation widens. And it’s death in the middle. Well positioned retailers at either end of the price/value spectrum continue to grow sales and open stores. Brands stuck in the boring middle are getting killed. This year hundreds of stores that continue to swim in a seas of sameness have shuttered. Sears filed for bankruptcy. JC Penney finds itself in very serious trouble. It’s time to pick a lane.
  9. Omnichannel is dead. Digital-first, harmonized retail rules. This is an expansion of #7 above. The smart retailers are realizing that it’s not about being everywhere, it’s about showing up in remarkable and relevant ways where it really matters in the customer journey and eliminating the discordant notes and amplifying the ‘wow’. I did make a mistake in anchoring this prediction on being “digital-first”–which I have since corrected in my keynotes and in my forthcoming book. While leveraging digital technology to enhance the customer experience can be hugely important in many cases, it’s clear that not all customer journeys start in a digital channel and that digital is not always better.
  10. Pure plays say “buh-bye.” Name a profitable brand of any size that started online and has yet to open brick & mortar stores. Yeah, there are a few, but there numbers are dwindling rapidly. In fact, brands like Warby Parker that once thought they could scale without physical stores are now opening dozens and seeing most of their growth come from their stores. Brands like Everlane that said they’d never open stores are now doing so. Brands like Wayfair are struggling to figure out how to get returns and customer acquisition costs down to remotely profitable levels without a physical presence. And don’t even get me started on Blue Apron. The era of pure-play is, for all intents and purposes, over.
  11. The returns problem is ready for its close up. Arguably, this area got even more attention than predicted. Earlier this year I revisited the issue I first referred to as the industry’s “ticking time bomb” in 2017. Multiple media outlets featured stories on how the growth of e-commerce is leading to very unfortunate outcomes within many online dominant retailers, including Amazon. In response, we are seeing more venture capital funded companies like Good Returns and ReturnRunners getting funded to scale their solutions to retailers.
  12. “Cool” technology underwhelmsDid you buy much on Alexa this year, use a “magic mirror” or experience a store through VR? Yeah, I didn’t think so. Voice commerce will be a big thing some day. Artificial intelligence and machine learning will go from basic applications and ways to eliminate costs to truly delivering a more remarkable and personalized experience. And stores will become far more immersive through the application of advanced technology. Just not this year.
  13. The search for scarcity and the quest for remarkable ramps up. Consumers have access to just about anything they want from anywhere in the world just about anytime they want it. What was scarce a decade ago–price comparisons, product reviews, product access, speedy and affordable home delivery–is now virtually ubiquitous. Yet boring and mediocre retail still abounds. What’s scarce are truly customer relevant and remarkable experiences. You used to be able to get away with being good enough. Today, not so much. The retailers that continue to struggle often find themselves stuck in the middle, trying to cost cut their way to prosperity, hoping to win a race to the bottom. Good luck with that.

2018 clearly brought more and different levels of disruption. 2019 is likely to bring more of the same, despite what I suspect will be some moderation in store closings. But that’s a different post.

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.  

A really bad time to be boring · Store closings

Dead brand walking: Sears is going out with a bang

In the weird irony that is often part of retail (and life in general), Sears Holdings recently announced its first quarter of comparable sales growth in many years—and I believe only its second or third since I left the retailer in 2003! It turns out that the liquidations sales being held in the many Sears and Kmart locations that were closing during the quarter finally brought out customers in droves. Better late than never, I suppose.

Of course, the world’s slowest liquidation sale is not yet over, but it’s hard to take this dead cat bounce as a positive indication of anything substantive.

Last week also brought two other pieces of Sears news. In a classic “you broke it, maybe you want to own it” moment, the hedge fund led by Sears Chairman Eddie Lampert offered to buy the nearly dead retailer. In a statement that seems certain to guarantee Lampert’s fast track admission to the reality distortion field Hall of Fame was this gem: “Sears is an iconic fixture in American retail and we continue to believe in the company’s immense potential to evolve and operate profitably as a going concern with a new capitalization and organizational structure.” In related news, I set fire to a big pile of cash.

The other big story was that Sears cancelled the auction designed to improve upon Service.com’s $60 million “stalking horse” offer when the effort failed to generate a single additional bid. The lack of interest in this once sizable and profitable unit (which was valued at many hundreds of millions of dollars during my Sears tenure) is yet another sign of how far Sears has fallen during the past decade and how little residual value the market sees in many of its pieces.

It may turn out that Lampert and his investors will do reasonably well when all is said and done in the sad saga of Sears’ demise. I’m not smart enough to figure out exactly how all the financial engineering and picking at Sears carcass will ultimately benefit them. But two things are clear: First, during his nearly 15 years at the helm of the bad marriage that is Sears and Kmart, Lampert has never once articulated a compelling and remarkable strategy to guide the retailer. Instead, we’ve had an endless parade of nonsensical tactics, relentless cost cutting and seemingly self-interested asset stripping. In return the company has sustained well over a decade of precipitous market share declines and massive operating losses. In fact, despite operating in one of the best quarters in recent U.S. history, despite closing hundreds of “bad” locations and despite taking an axe to other operating costs, Sears still managed to lose nearly $1 billion on barely over $2.7 billion in revenue this quarter.

Second, the notion that anything can be done to save Sears in a way that remotely resembles its once iconic status is absurd, particularly as Lampert holds on to the idea that the brand can shrink its way to prosperity. Sears has never fundamentally had a cost problem. It has, for at least 20 years, had a huge customer relevance and remarkability problem. Closing more stores and shrinking and/or leasing out the ones that remain may temper losses, but it will never do anything to address the core issue which, simply stated, is having enough customers that want to buy the stuff they sell.

I am certain that over the coming months there will more stories of asset sales, store closings and largely random new program offerings designed to return Sears to its former glory. It’s all just noise, far more like the like gasps of a dying man than a glimmer of hope for any form of resurrection.

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.  

Holiday Sales · Retail

Forget Black Friday and Cyber Monday — For most retailers, it’s really about December sales

By now hopefully folks are beginning to accept that Black Friday and Cyber Monday are mostly media events—some would say “media traps”—that actually reveal next to nothing about how the holiday season will ultimately turn out. Moreover, aside from the generally hard to get “door busters,” the best deals are often found over the next several weeks, not on the two days that generate the most hype, er, I mean, attention.

As many journalists and analysts continue to point out, as (crafty? greedy? desperate?) retailers chase market share, more and more promotions that were once exclusive to Black Friday now break days, or even weeks, before Americans shift from one form of massive consumption to another. If my inbox is any indication, many sales were not only extended over the weekend but well beyond the rather unfortunately named Cyber Monday. And the hits just keep on coming.

If we were really honest, a trait historians tell us was once valued in regular citizens and national leaders alike, overall industry and any given retailer’s performance has little to do with the two days that get all the press and almost everything to do with the month of December.

The most obvious reason is that the volume done in the 24 days leading up to the Christmas is massively greater than on either Black Friday or Cyber Monday—not to mention the six days that comprise that entire long weekend. In fact, the typical pattern is that most retailers see an appreciable dip in traffic the week or so after the Thanksgiving weekend and then volume builds to a crescendo the weekend before Christmas—with “Super Saturday,” contrary to rumor, turning out to be the biggest shopping day of the year. For online sales the pattern is a bit different, but the ubiquity of free 2-day shipping guarantees very high volume days in the week before the shipping window closes.

The second, and often neglected, reason is that the week after Christmas is, arguably, even more important than Black Friday and Cyber Monday combined. For most retailers success during what some call “X 13” (signifying volume that sometimes rivals other months of the year) is incredibly important as consumers show up in droves to buy for themselves, often using gift cards they received for Christmas or Hanukkah.

The third factor, which speaks to the criticality of December, comes down to margin. Most of the press coverage on holiday shopping speaks to traffic patterns, sales volume and “record e-commerce days.” (Spoiler alert: With online shopping growing at 15-17% year over year just about every day is going to be a record day. The only news would be if it didn’t happen.) Woefully little space is devoted to whether those increases bear any relationship to profitability.

Since the month of December can easily account for well over 25% of many retailers total volume for the year, simple math tells you it is a big driver of earnings. And because every day we move later into winter products that are geared to the season (“giftable” items most notably, but winter apparel as well) begin to lose their value, retailers get greater insight into whether they are moving these products fast enough. For consumers this means some of the best deals of the season will occur right after Christmas. For retailers, if they are agile enough, this means that as each day passes they have the opportunity to evolve promotions to meet competition, accelerate sell-through rates and try to optimize margin performance. Promotions designed for Black Friday and Cyber Monday are more guesses. Throughout December, they can start to be more finely honed.

As a writer and someone who often gets interviewed by the press for my perspective on shopping trends, I appreciate the click-bait benefits of Black Friday and Cyber Monday stories and related provocative and catchy commentary. But for years my take has been mostly “move along, nothing to see here.”  The real action is in the month of December, and, in particular every day today forward.

But I guess “Black December” isn’t quite as catchy.

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.  

 

Holiday Sales · Retail

Cyber Monday and the world’s easiest retail prediction

There are a lot of things that are hard to know about the future of retail. Predicting that Cyber Monday will set a record is not among them.

One doesn’t need a team of analysts, the latest in machine learning algorithms, IBM Watson or a Ph.D in statistics to come to this conclusion. One just needs to acknowledge that e-commerce has been growing on average about 15% year over year for the last several years.

So while I have not seen a precise breakout, I’m willing to guess that e-commerce set a record just about every day this year–and has done so for many years. It’s been true for the Saturday before Christmas, for Thanksgiving, for Black Friday last year and the year before that and the year before that. And it will be true for this Thursday and next Wednesday. And I’m willing to bet it will be true in 2019 as well.

Whether the specific increase on any given day will vary much from the longer-term trend will largely be a function of the intensity of promotional offers, consumer confidence and the vagaries of weather (which can affect folks’ willingness to go to a store as well as whether seasonal merchandise does unusually well or not). Given this–and without the benefit of any sophisticated tools–my guess is Cyber Monday sales will be up around 20%.  Check in with me tomorrow to see how I did.

Of course whether I or anyone else is mostly right or mostly wrong means just about nothing. There is no news value in the predictions and there is very little strategic import in the actual outcome. Retailers have already ordered their merchandise for the holiday season. A good chunk of staffing and marketing is already decided upon. For the most part, the retailers with winning digital value propositions will run increases better than the averages and the losers will cede relative share. We knew that going into today and we will know it tomorrow.

So the news is not in whether the industry numbers increased 17% or 27%. The news is not in any given retailer’s decision to offer 2 day free shipping or take their discount up to 25% over last year’s 20%. You don’t have to be a retail savant to decide to give margin away. Anyone can engage in a race to the bottom. The sad fact is you can be a pretty boring retailer and still post a decent sales increase on Cyber Monday if you are desperate enough.

No the real news concerns those retailers that are doing what it takes to be more remarkable day in and day out. That aren’t chasing their tails seducing the promiscuous customer. That aren’t continuing to swim in a sea of sameness where the only thing they can do to move the top-line is to give stuff away.

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.  

Since the article originally appeared the Cyber Monday specific numbers are in. Sales were up 19.3%. How sales and profits will turn out. Well who knows?

 

Holiday Sales · Retail

The mass hysteria we call ‘Black Friday’

I will admit that I have been more than a little Grinch-like about both Black Friday and its unfortunately named cousin “Cyber Monday” for some time. While it’s an exaggeration to say it’s all much ado about nothing, there are a few inconvenient truths about Black Friday that are worth remembering.

It’s not the biggest shopping day of the year. That will be December 22nd. I promise.

The deals are rarely all that good. Certainly many of the so-called “door busters” offer real savings, but bear in mind the best promotions usually have limited quantities and represent a minute percentage of any given brand’s offering. For the rest of the store discounts are typically better as we approach Christmas or, even more so, in the week after.

It’s less and less important every year. As online shopping continues to grow (my guess is an increase of ~ 16% this holiday season) the brick and mortar contribution piece is contracting. More importantly, in the last several years, many retailers offer discounts in advance of the actual day, and then extend those discounts over the weekend. And of course a lot of retailers are now open on Thanksgiving. This all serves to spread out consumer spending over the days before and after the actual Black Friday.

A great Black Friday (or Cyber Monday) is largely meaningless. Despite all the attention and craziness, for most retailers, less than 5% of total November/December sales occur on Black Friday. Given the heavy discounts the contribution to seasonal gross profits is even less.  Studies over the past decade have also shown that Black Friday success has little correlation with overall holiday performance. So move along, nothing to see here.

It’s far more cultural phenomenon, than useful shopping event. Does it make sense for retailers to extend their shopping hours, incur greater hassle and take a margin hit just to drive sales to this one day? Is it rational for so many consumers to get up super early, wait in massive lines and deal with throngs of people to get the exact same stuff you can get ordering from the comfort of your home only to have it show up hassle free at your home or office a couple of days later? No, we do it because we’ve always done it and because of the self-reinforcing media trap.

Isn’t it ironic? On Thursday, in the US at least, most of us are all grateful and thankful and reflective. On Friday, we push through the tryptophan and carb loading hangover and turn into weapons of massive consumption.

Please don’t tell anybody but one of my dirty little secrets is that despite my alleged “retail influencer” status I haven’t stepped inside a retail store or mall on a Black Friday in many years. It’s caused more than a few people to say “what kind of retail analyst are you anyway?”

My answer is always the same: The sane and serene kind.

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.  

I’m honored to have been named one of the top 5 retail voices on LinkedIn.  Thanks to all of you that continue to follow and share my work.

Retail · The 8 Essentials of Remarkable Retail

Nordstrom: No good deeds go unpunished

Nordstrom–not only one of my favorite places to shop but also a brand I regularly feature in my keynotes on remarkable retail–recently reported strong quarterly operating performance and raised its outlook. So, naturally the stock promptly got whacked–and continues to be caught up in the market downdraft. To be sure, a non-recurring $72MM charge related to credit card billing errors does not inspire confidence. But unless this unexpected earnings hit suggests some underlying management issue it indicates nothing about the go-forward health of the business which, from where I sit, looks rather healthy.

It IS a confusing time for shares of most retailers. I’m not talking about JC Penney, Sears or legions of others hopelessly stuck in the boring middle. I’m referring to companies that are not only competitively well positioned but have also recently reported solid sales and earnings. Despite a strong consumer outlook, everyone from Amazon to Walmart to Macy’s to Home Depot to Target seems to be falling out of favor. Some of this is surely part of the broader market correction and lingering tariff concerns. But much of it is more than a bit mystifying.

In Nordstrom’s case, I remain bullish. The company is showing signs of maturity and is hardly immune from the competitive pressures brought on by industry over-building and digital disruption. Barring a wholly new and unexpected major growth initiative, the accessible luxury retailer has few new locations to open and already has a very well developed e-commerce and off-price business. Yet they seem to be executing well on most of my 8 Essentials of Remarkable Retail and that bodes well for the future. Let’s take a closer look.

  1. Digitally-enabled. For more than a decade Nordstrom has not only been building out best-in-class e-commerce capabilities (online sales now account for 30% of total company revenues!), but architecting its customer experience to reflect that the majority of physical stores sales start in a digital channel. Nordstrom complements its already excellent in-store customer service by arming many sales associated with tablets or other mobile devices.
  2. Human-centered. Being “customer-centric” sounds good, but most efforts fall short largely because brands do not actually incorporate empathetic design-thinking into just about everything they do. Nordstrom, like their neighbors up the street, are much closer to customer-obsessed than virtually all of their competition.
  3. Harmonized. This is my reframe of the over-used term “omni-channel.” But unlike the way many retailers have approached all things omni, it’s not about being everywhere, it’s showing up remarkably where it matters. And it’s realizing that customers don’t care about channels and it’s all just commerce. The key is to execute a one brand, many channels strategy where discordant notes in the customer experience are rooted out and the major areas of experiential delight are amplified. Nordstrom scores well on all key dimensions here–and has for some time. Nordstrom was a first mover in deploying buy online pick-up in store (BOPIS) and continues to elevate its capabilities by dedicating (and expanding) in-store service desks, among other points of seamless integration.
  4. Personal. With a newly improved loyalty program, private label credit card business and high e-commerce penetration, Nordstrom has a massive amount of customer data to make everything it does more intensely customer relevant. Its targeted marketing efforts are good and getting better and it has identified implementing “personalization at scale” as a strategic priority. Fine-tuning its one-to-one marketing efforts, introducing more customized products and experiences and further leveraging its personal shopping program represent additional upside opportunities.
  5. Mobile. Recognizing that a smart device is an increasingly common (and important) companion in most customers’s shopping journeys, Nordstrom has been building out its capabilities, including acquiring two leading edge tech companies earlier this year. Its increasingly sophisticated and useful app has helped earn the brand a top ratingin 2018 Gartner L2’s Digital IQ rankings.
  6. Connected. While there are opportunities to participate more actively in the sharing economy, Nordstrom’s overall social game is strong, earning it the leading US department store rating from BrandWatch.
  7. Memorable. While its department store brethren are swimming in a sea of sameness, Nordstrom excels on delivering unique and relevant customer service and product. It continues to strengthen its merchandise game by offering a well-curated range of price points across multiple formats. This offering is increasingly differentiated–either because the brands are exclusive to Nordstrom or are in limited distribution. Nordstrom’s plan to up the penetration of “preferred”, “emerging” and “owned” brands strengthens the brand’s uniqueness and should provide improved margin opportunities.
  8. Radical. Nordstrom is not quite Amazon-like in its commitment to a culture of experimentation and willingness to fail forward, but they have placed some pretty big equity bets in fast-growing brands like HauteLook, Bonobos and Trunk Club (whoops), in addition to being one of the first traditional retailers to launch an innovation lab (since absorbed back into the company). They are constantly trying new things online and in-store. Most interesting are their new Local concepts  Unlike some competitors who are trying smaller format stores mostly by editing out products and/or whole categories, Local is a completely re-conceptualized format emphasizing services and convenience. These stores have the potential to be materially additive to market share on a trade-area by trade-area basis.

As mentioned at the outset, Nordstrom is a comparatively mature brand with limited major growth pathways. But to view the company from the lens that is weighing on most “traditional” retailers does not appreciate the degree to which the company has outstanding real estate (~95% of full-line stores are in “A” malls), one of the few materially profitable and superbly-integrated digital businesses, strong customer loyalty and important differentiators in customer service and merchandise offerings. Moreover, most of its out-sized capital investments (including expansion into Canada and NYC) will soon be behind it.

Nordstrom will never have the upside that Amazon (or even TJX) has. But it is one of the best positioned, well-executed retailers on the planet. I don’t expect that to change any time soon.

Maybe it’s time for a little bit more respect?

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.  

I’m honored to have been named one of the top 5 retail voices on LinkedIn.  Thanks to all of you that continue to follow and share my work.