Holiday Sales · Marketing · Retail

With Cyber Monday behind us, the real holiday shopping season begins

As I wrote last week, the noise around Black Friday and Cyber Monday is mostly a bunch of hype. Both days represent a relatively small percentage of total holiday sales, and are even less important when you consider their contributions to profits given the amount of discounting that occurs. Moreover, there is little evidence that a “good” Black Friday and/or Cyber Monday has anything to do with whether a particular retailer will have a successful quarter or not. It also turns out that many folks take advantage of the past week’s hot deals to buy for themselves, not for Christmas or Hanukkah gifts.

The fact is the overwhelming majority of holiday season revenue for virtually every retailer will occur over the next four weeks, not during the past few days. And, if history is any indication, there will be at least two shopping days ahead that will comfortably exceed Black Friday’s sales numbers. We can also expect that the weekend of December 15 will surpass Cyber Monday’s volume.

We should also not get overly excited by the year-over-year online shopping growth numbers. Merely extrapolating the trend would suggest that e-commerce would grow somewhere in the vicinity of 15%-17%, and that’s exactly what happened. To be sure, the overall shift away from physical store shopping is profound, but nothing unexpected is happening, at least thus far, when it comes to this particular holiday season.

Now that we’ve moved beyond the two hype-iest days of the retail year, let’s bear in mind that there are still 23 shopping days left between now and Christmas and a lot can still happen. We should also remember that the week after Christmas is very important, where big volumes are posted, gift cards are redeemed, returns are processed and the trajectory for seasonal clearance starts to be set.

The good news seems to be that many retailers’ report that their inventories are in solid shape in light of conservative buying patterns. While this suggests deals might not be quite as sharp for consumers as past holidays, the industry might actually have a chance to realize decent gross margins. Of course, some sectors–I’m looking at you department stores!–are in a fierce battle for market share. Several chains, including Sears and Bon-Ton Stores, are facing existential crises, where a bad quarter could lead to their liquidation (or, minimally, additional massive store closings). In these situations we should expect promotional intensity to remain high.

But for now everyone just take a deep breath. Mentally place the stories about Black Friday and Cyber Monday in the “interesting, but not very illuminating” section of your brain and strap in. This next week will likely be the calm before the storm and then things will really start to ramp up. And, for sure, far more will be revealed in the weeks ahead then we learned this past long weekend.

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

For information on speaking gigs please go here.

e-commerce · Holiday Sales · Retail

Hype-y holidays: ‘Black Friday’ and other nonsense

Brace yourself. The media hype around Black Friday and Cyber Monday is now at a fevered pitch. Don’t fall prey to the nonsense.

But you can rest assured that as we emerge from a tryptophan-induced haze Friday morning and turn on just about any news outlet you will witness some hapless reporter standing in a mall–or outside a (insert well-known national retailer name here)–opining about whether various “indicators” (number of people in line at store opening, whether shoppers are carrying full shopping bags and so on) bode well for retailers’ fortunes. Alas, Black Friday has always been far more media trap than sign o’ the times. There are several reasons for this.

Black Friday is not the biggest shopping day of the year.

The Saturday before Christmas and the day after are often the highest volume. In fact, if recent history is any indication, several days right before Christmas will likely rival Black Friday’s sales numbers. So while it’s an important day, it’s hardly a huge contributor to overall holiday season sales.

Black Friday revenues are on the decline.

As online shopping continues to grow, the relative share of total holiday sales done in stores on Black Friday is decreasing markedly. A recent survey suggests another down year. With some stores opening on Thanksgiving Day–and more and more Black Friday deals breaking early–revenues are being spread out over more days, rather than concentrated on the traditional “holiday” of massive consumption. Our friends at Amazon even launched their deals 50 days early this year.

For consumers, it’s mostly a con.

Study after study shows that, with few exceptions (mostly the heavily promoted, limited quantity “doorbusters”), the deals just aren’t that good. In fact, prices tend to be better in December or during traditional clearance periods.

The customer experience is terrible.

With overflowing parking lots, teeming throngs, long checkout lines and, in some cases, a need to camp out hours before the doors open to have a chance of scoring an actual great deal, shopping on Black Friday is the ultimate soul-crushing hassle. Apparently, some people thrive on this sort of thing. I hope they get the help they need. Oh, and many of the deals are recycled anyway.

Black Friday success (or failure) is meaningless.

With all the attention Black Friday gets you might think that a given retailer’s performance would be highly correlated with how its overall season will turn out. You’d be wrong. Over the years, many folks have tried to determine this correlation and haven’t found it. One study even found a somewhat negative relationship. So move along. Nothing to see here.

What about profits? 

While we’ll have to wait to see how Black Friday and Cyber Monday turn out, we can be fairly certain that it won’t be particularly profitable. This year’s retail industry exercise in group-think will have the predictable effect of compressing product margins and driving up operating costs all in the name of defending market share.

Of course with many retailers running scared or even fearful of their continued existence, few have the discipline to approach the season with any kind of restraint, promotional or otherwise.

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

For information on speaking gigs please go here.

Amplify · Being Remarkable · Customer Growth Strategy · Holiday Sales · Luxury · Omni-channel · Retail

My top ten posts of 2015

As has become a tradition, I present my most popular blog posts from this year.

  1.  Bleak Friday
  2.  Learning to surf
  3.  I see dead marketers
  4.  Omni-channel myths, distortions and, yeah, that’s just silly
  5.  What if omni-channel is too expensive?
  6.  An end to omni-channel?
  7.  It’s later than you think
  8.  Luxury retail’s big stall
  9.  Sears: The world’s slowest liquidation sale (redux)
  10.  The fault in our stores

And here are a few more that didn’t quite make the cut, but that I’m rather proud of….

  1. Retail’s new front door
  2. No new stores ever!
  3. A dim signal amidst the noise
  4. Everywhere and nowhere
  5. I fought the math and the math won

As I wrap up my sixth year writing this blog I am so grateful for your attention, support and feedback.

Best wishes for a safe, happy and prosperous New Year!

Being Remarkable · Customer Experience · Customer Growth Strategy · Frictionless commerce · Holiday Sales · Omni-channel · Winning on Experience

Omni-channel’s migration dilemma: Holiday edition

Last year I wrote a post about what I called retail’s “omni-channel migration dilemma” wherein I observed that while the deployment of so-called omni-channel strategies–i.e. making it easier for consumers to shop anytime, anywhere, anyway–improves the customer experience immensely, the outcomes for most retailers were, thus far, not quite so wonderful.

At the heart of this argument were three core points:

  • With few exceptions, omni-channel retailers’ total revenues remain essentially flat, meaning that robust growth online is mostly cannabilizing brick & mortar sales;
  • In many cases, the profitability of e-commerce is actually worse than a physical store sale. This is particularly true for lower transaction value players like Walmart and Target.
  • In their quest to become “all things omni-channel”, retailers are investing enormous sums–and in some cases–getting distracted from arguably higher value-added activities.

You don’t have to be a math whiz to understand that spending a lot of money to end up–if you’re lucky–with basically the same total revenue at a lower margin is not exactly a genius strategy. But this is where we find Macy’s and many other retailers right now.

The omni-channel frenzy around the holiday shopping season only shines a harsher light on the issue. By launching sales earlier and earlier, by pushing deep discount events like Cyber Monday and by offering free shipping pretty much throughout the season, the tilt toward online sales is exacerbated and margins continue to shrink. Consumers win through great deals. And retailers lose, as overall sales are likely to go absolutely nowhere.

Now some have argued that omni-channel is ruining retail. They are wrong. They’re wrong not only because it is pointless to fight reality, but also because efforts that are fundamentally rooted in the desire to improve the customer experience are rarely misguided. The key is not to confuse necessary with sufficient, nor “the what” with “the how.”

So we should not get distracted by analysts who try to extrapolate one or two days of sales as part of some trend.

And we should bear in mind that online sales for most omni-channel retailers remain far less than 10% of their total business. So even healthy e-commerce growth is not likely to offset seemingly small declines in physical stores sales. You don’t have to trust me on this. Do the math.

But mostly we should remember that the story is not about all things omni-channel, nor what happens on Black Friday, Cyber Monday or the few weeks that comprise the holiday shopping season.

It IS about which retailers are breaking through the sea of sameness with remarkable product AND a remarkable experience. It is about which retailers are eliminating friction for the consumers that matter the most in the places that matter most. It is about which retailers are eschewing one-size-fits-all strategies in favor of a “treat different customers differently” philosophy. It is about retailers that know where to focus and how to properly sequence their omni-channel initiatives, not blindly chase everything some consultant has pitched them.

Clearly, the future of omni-channel will not be evenly distributed.

Don’t be blinded by the hype.

Branding · Holiday Sales · Retail · Uncategorized

I love the way you lie

Whether you stumbled upon Richard Chang’s excellent article “Outlets may not be the bargain you think“–or happen to remember my post from 3 years ago entitled “Faux clearance: Do outlet customers really care”–you may already know that the vast majority of merchandise sold through outlet and off-price channels is made specifically for those stores. Moreover, most of the purported discounts are entirely made up.

With few exceptions, much of the product sold through “regular” channels–department stores, specialty stores, e-commerce–is sold at a discount, and often a substantial one. Open today’s newspaper, or go on-line, and you will see tons of product discounted 20-50%. If you are a Joseph A. Bank customer you can often get a “Buy 1, Get 2 Free” deal. Take advantage of an additional savings coupon, or use your store credit card at many retailers, and you’re likely to reap at least another 10% discount.

While, arguably, we have seen an uptick in promotional intensity in recent years, the notion of marking something up to be able to then claim big savings has been a core component of most brands’ playbooks for at least as long as I’ve been in retail–and that’s over 20 years. For many retailers, the concept of “regular” price is purely fictional.

An essential part of Ron Johnson’s attempt at transforming JC Penney was the concept of every day, “fair and square” pricing. Surely–his left brain must have told him–customers would understand that $40 every day is better than $60 some days and $40 only on the days we happened to be running a sale. No more smoke and mirrors! No more waiting for a sale! No more wasted costs on advertising and store expenses to manage this expensive con job!

Well, we all know how that turned out.

My hope is that brands will be far more transparent in their pricing and discounting strategy. But barring legislative action, my experience tells me that holding my breath for this wish will only turn my face blue.

Whether it’s out of customer ignorance or some weird twist in evolutionary biology, the reality is we’re all part of a grand delusion.

We love the way you lie. And more, apparently, is better.

 

Holiday Sales

Black Friday: Bright, shiny object edition

This Friday, as we emerge from our tryptophan induced haze, many of us will head to the mall seeking “door busters” and all manner of supposed fantastic bargains. Others will stay home to be met by breathless live shots from these same malls as reporters provide color commentary on this annual frenzy of conspicuous consumption. Industry pundits will pontificate as they are wont to do. Joy will spread throughout the land.

No matter that most Black Friday deals aren’t, in fact, deals.

No matter that the growth in internet shopping–and increasingly earlier launches of holiday promotions–continue to shift sales away from Black Friday.

No matter that, as Seth Godin nails in his recent post, Black Friday is more media trap, than consumer bonanza.

No matter that compelling evidence shows that Black Friday performance is largely irrelevant to predicting seasonal success.

For some consumers, a very limited budget–or a desire for certain highly scarce items–make aspects of the Black Friday slog worthwhile. Others simply go for the experience and aren’t kidding themselves that the savings justify the hassle and time investment.

But the sad reality is that many consumers who will hit the stores in a couple of days are simply misinformed. They have fallen prey to the mythology we continue to spin.

Given the dynamics of the retail industry and the media, I have no illusions that any of this will end any time soon. But none of us have to live in the denial of reality if we so choose.

Choose wisely.

And Hype-y Holidays!

 

 

 

Fashion · Holiday Sales · Innovation · Leadership · Luxury

Neiman Marcus & Target: A glorious failure

“Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.”

–  Samuel Beckett

If you pay attention to this sort of thing, you know that several months back Neiman Marcus and Target made a big splash when they announced a partnership to jointly market a limited collection of fashion items for the holidays. This announcement was followed by a lot of PR hoopla and a high-profile television and social media advertising campaign.

And guess what? It was a bust.

The product offering failed to generate the sales frenzy that past designer collaborations from Tar-zhay have, and the merchandise has been marked down 50 – 70%. The media are now out with their post-mortem bashings, many taking the “I knew it was a bad idea all along” route.

Having previously led strategy and corporate marketing at Neiman Marcus for several years, I’ve gotten plenty of questions about my take on the strategy and its execution (NOTE: full disclosure, I remain a Neiman’s investor). Frankly, I think much of the criticism misses the mark entirely.

Clearly, a lot of the execution was messed up. Prices were generally too high, designer brands were extended too broadly and some of the product was just plain goofy: a $50 Rag & Bone boys’ sweater? That was never a good idea.

Big picture, however, the concept was fundamentally good for both Target and Neiman’s. Target is well-known for enhancing its fashion cred with such partnerships; so for them, this was a no-brainer. If they made any money on it, all the better. But the real value is in brand enhancement.

For Neiman Marcus, the strategic value may be less obvious but, in essence, their foray into “mass-tige” is no different from Karl Lagerfeld or Jimmy Choo doing their special offerings at H&M. The goal is to generate buzz and expose their brands to a demographic that they need to cultivate for the long-term. Forging a longer-term and/or more broad partnership would be dumb. But experiments, such as what was tried here, can be shrewd moves indeed.

Which brings me to my last point. What gratifies me the most is that Neiman’s actually tried something bold and, arguably, counter-intuitive. Neiman Marcus’ last CEO–and my former boss–Burt Tansky was a brilliant merchant and remains a luxury and fashion industry icon–and rightly so. But he was hardly a risk-taker and fundamentally not wired to say ‘yes’ to strategic innovation. Kudos to Karen Katz and her team for being willing to push the envelope.

It’s so very easy to label something a failure after the fact and to castigate management for its ineptitude. The far easier path for leaders of course is to never try. You rarely get criticized for the things you didn’t do.

It’s a terrible strategy to eliminate the possibility of failure. Great companies and great leaders are not characterized by an absence of failure.

Without trying, there is no growth. Without failure, there is no learning. The key is to fail better.

So was the Neiman Marcus and Target partnership a failure? In the immediate-term, definitely. But the overall grade from where I sit is “Incomplete.”

If the lesson Neiman Marcus takes away from this project–and it is a project, not a strategy–is to pull back on innovation, to stop experimenting, than it will be a huge waste of time and resources. If it strengthens their resolve, if they apply their learning to improve the process of innovation, than it will be the most glorious of failures.

Being Remarkable · Brand Marketing · Holiday Sales · Personalization · Retail

Massively easy. Precisely wrong.

Most of the year turn on the TV, open your Inbox, wade through the Sunday paper and just about all you see are advertisements filled with store-wide sales and category-wide coupons and double points this and double points that.

During this Holiday season it’s even worse. More advertising. Promotions layered on top of promotions. Door busters. Early opening specials. And on and on.

It’s the retail industry’s equivalent of carpet bombing.

Why focus on best fit consumer segments? Why worry about reinforcing–or at least not denigrating–your brand positioning? Why fret about profitability? Let God–or the Finance department–sort it out after the fact.

The typical defense of this approach is that it works.

Really? Show me the data.

If your definition of “works” is market share, rather than building progressively deeper relationships with valuable customers, I will grant you that. If it’s about revenue, instead of profitability, okay you win.

But the real reason is that it is easy.

Developing actionable customer segmentation methods, building a permission asset, testing your way into progressively deeper personalization and increasingly differentiated and relevant value propositions takes time, involves risk and requires a financial investment.

Relying on mass, undifferentiated marketing is taking the easy way out. And for many, it will be the shortest way out of relevance and, ultimately, out of business.

Holiday Sales · Retail

Black Friday, Cyber Monday and the din of irrelevant analysis

During the past week–unless you were blissfully disconnected from all sources of media–you were likely inundated with news articles, tweets, posts and endless TV stories about Americans as weapons of massive consumption.

Reporters and pundits alike pontificated about the significance of earlier and earlier store openings, the relentless quest for the best “door busters”, the incredible growth of on-line shopping and the startling (to some at least) emergence of mobile apps.

Casting aside the glaring irony that after spending a few hours (allegedly) being grateful for all that we have, we quickly pivot and decide that, after further review, we don’t have nearly enough, much of what the media shares about the significance of our shopping habits during the past week is highly misleading.

Consider a few facts. First, historically there has been poor correlation between retailers’ performance during the Thanksgiving weekend and their overall performance for the quarter. In fact, there is growing evidence that there is an inverse correlation. Second, for most brands, Black Friday and Cyber Monday represent a small percentage of total sales for the holidays. Third, with Thanksgiving coming early this year, holiday sales are going to be more back-loaded than usual. Fourth, as more brands launch promotions prior to Black Friday, consumers spread their sales over more days, making any single event less important. Fifth, sales aren’t profits. Giving product away, and driving an abnormal amount of business to one or two days, wreaks havoc on profitability.

For those of you who breathlessly conclude that a given retailer “won” because of big increases on a given day or that Cyber Monday was a huge success because of a double-digit sales gain please realize the jury is still out.

A quick anecdote: when I was at Neiman Marcus we kept sweetening the deal on our thrice yearly InCircle Rewards promotion. Every time we added a new element our comp stores sales went up nicely, and it appeared that the incremental cost of the promotion was more than covered by the extra gross margin dollars we gained during the multi-day event.

Then a member of my analytics team wondered if anyone had looked at the possibility that as we made the deal better and better perhaps we were driving sales that would have occurred anyway (at a higher margin) into those sales days. Great question. So we did the analysis.

Lo and behold a comparative analysis that included a week before and after the event showed clearly that there was no appreciable increase in total sales. There was a change however. Our profits got worse.

The lesson is clear and compelling. Concluding that a sales event was a success without a more complete picture of how consumer behavior was changed over a longer period of time AND without including a profitability analysis is irrelevant.

I can hope that the media will pull back on disseminating useless information or that they will at least provide more helpful context. Not very likely, I know.

But there is one thing I can do. I can pay less attention.

And so can you.