US Retail Store Closings-A Good Death

 US Retail Store Closings-A Good Death

Original Publication Date: 7/22/2018-Picture from 1/5/2017

 

 

Almost daily reports of retail store closings, bankruptcies, and shopping malls becoming ghosts of times past is being greeted with alarm or deep concern for the fate of brick and mortar. Ecommerce, and especially Amazon, is almost always blamed.

 

It is true and logical that the growth of ecommerce has siphoned sales from traditional retail; further, the growth of mobile shopping makes it even easier to buy without the trip. 20% of ecommerce sales today are estimated to originate from mobile devices. Ecommerce is a gift of technology.

 

That being said, below I will take the position that 1. Ecommerce is only a small part of the reason for the shuttering of thousands of stores and closing of malls; that 2. There were too many malls in the first place and the shakeup is a good and warranted culling of the herd which will be healthy for traditional retail in the long run; and that 3. Some of the stores that have closed entirely either lost their relevance or failed to compete in a changing world-ecommerce is the catalyst for this, not the reason.

 

Let’s look at a partial list of the casualties:

1.     Traditional department stores- Macy’s, Sears, Kmart, JC Penney- closing stores by the hundreds if not thousands before we are done.

2.     Specialty Stores- Limited, Wet Seal, Aeropostale, Radio Shack (truthfully, I thought they were gone a while ago). They either failed to update or change with the times, to offer an attractive and competitive product to their customers, or just lost their Mojo

3.     Brands sinking into the sunset- Ralph Lauren just closed their flagship store on 5^th Avenue in New York. Why? As the fast fashion specialty chains seek more and more locations in good urban locations, Ralph Lauren closes. Can only be the brand has lost its mojo. At one time it was a status symbol to wear a Polo polo; now, it makes you look almost embarrassingly antiquated.

 

At the same time, fast fashion retailers like Inditex/Zara and Fast Retailing/Uniqlo are both closing and opening stores. They are all closing stores in malls where the anchor store and the mall itself is failing, and opening in urban areas where the traffic and relevance is enhanced and their success depends entirely on their product. During the first quarter of 2017, Inditex opened 71 new stores in 31 markets giving them a total of 7,085 stores for all brands.

 

Please make a note above of the 31 markets. Sad to say that the retail brands that are becoming ubiquitous in US traditional retail are not American brands: Inditex-Spain; Uniqlo-Japan; H&M-Germany; Aldi- Germany; Primark-UK. What they have in common is a comprehensive knowledge of global retailing and the ability to customize their offerings to many markets. No monolithic product arrogance here. This has been the failure of many a traditional retailer- for example, Marks & Spencer recently closed all their stores in China after many years (wait-China? The fastest growing economy in the world?). The main reason is that their product was not managed to suit the market (just my opinion, but it also looked dated and sometimes just plain ugly). I am sure you would have found most or all of it in their stores in UK. That doesn’t work in global retailing-while some product is relevant to multiple markets, most or all of it will never be.

 

But what about shopping malls? Once an anchor store in a mall closes, that mall’s days are probably numbered.  And why are so many shopping malls becoming ghosts or discount centers? Certainly all three reasons given above related to the store or product are part of the story, but the main part of the story is that there are too many shopping malls in the first place.

 

Between 1970 and 2015, the number of shopping malls grew twice as fast as the population. Now the US finds itself with 23.5 square feet of GLA (Gross Leasable Area) per capita! This means you can go into any shopping mall, carve out a 20’x20’ space, and claim it as your share of US Mall Retailing.  And so could the rest of our 321million population.

 

How did this happen? Can’t prove it, but my answer is that the growth of more and more shopping malls, double what was needed based on the population was based on Gordon Gecko’s virtue-Greed. This was a real estate boom and hugely profitable, with no concern or control over the overabundance and concentration of stores. IF a new mall opened, everyone had to be in there, even if it was a stone’s throw from another shopping area with exactly or virtually the same offerings.

 

So don’t blame ecommerce for closing these stores- say Thank You. The economy will be better off for this adjustment, and hopefully those displaced will get new jobs downtown.

 

What about ecommerce? It must be eating so many sales that it is directly causing the retail failures, right? Especially Amazon, right? Wrong. First, if someone is buying clothing on Amazon rather than at Wet Seal (maybe not the same someone), is that Amazon’s fault or Wet Seal’s? You know the answer.

 

But, in general, while ecommerce is growing strongly and steadily, it is not growing as massively as we generally imagine, nor is it yet making enough of a dent in traditional retail so as to cause economic disruption. Here are the facts, courtesy of the US Department of Commerce : In the first quarter of 2017, Ecommerce total sales were $105.7 billion, a growth rate of  4.1% from the 4^th quarter of 2016. Traditional retail sales were $1,250 billion and increased 1% from the previous quarter (a much more mature sector). So the share of total retail for ecommerce is still only 8.5% of adjusted total. Or, conversely, traditional retail still holds 91.5% share of market.

 

Now here’s the most amazing part. Everyone has a web site these days, but of the $105.7 billion, Amazon’s first quarter 2017 (global) sales were reported at $35.71 billion. Revenue grew from $29.1 billion the previous year. If not for Amazon, ecommerce share of market would be truly wimpy. So ecommerce is not growing handily-Amazon is. So Amazon is the main reason ecommerce is growing so rapidly, but it is not  the main reason traditional retailers are closing stores.

 

Retail spending continues to grow steadily. A growing portion is going to dining, entertaining, and resort areas. Apparel is either not growing or declining. So what does that tell you? It tells me clothes just aren’t interesting enough.

 

As far as I know, nobody is complaining that there are not enough Macy’s or Sears or Kmarts to go to now. This is because-there are still plenty-if not too many-of them left.

 

I would suggest to these retailers that they start thinking about their store presentation, merchandise assortments, and general relevance to what the public wants (this starts with buyers who are merchants and can find this relevance-not with spreadsheet keepers).

 

There are about 1250 shopping malls in the US, predicted to shrink to 900. Given the fact that there seem to be twice as many as needed, this culling of the herd is not a sign of apocalypse, but a needed adjustment-a good death.

“The Man in the White Suit” 2020- Why Large apparel companies only talk about Sustainability

 

“The Man in the White Suit” 2020- Why Large apparel companies only talk about Sustainability

 

 

The Man in the White Suit is a 1951 British film starring Sir Alec Guinness. The story is about an eccentric genius who works for a textile mill, and, while there, surreptitiously invents a polymer that, when woven, will produce a fabric that is indestructible, stain repellent, wrinkle and tear free. In other words, the perfect fabric.

After being fired from one company, Sidney Stratton schmoozes that company’s competitor into hiring him. While there, he perfects his polymer and the result in fabric is as advertised.

Never mind that it is slightly radioactive:-/

When the textile community gets wind of this development, they quickly realize that this fabric will destroy their business; the union workers have the same reaction. Together, they try to get Stratton to sign a deal giving them the rights to the process, which they will suppress.

After a wild chase, we are left to find out that the fabric is unstable, but the last scene implies that Stratton has figured out the problem.

 

I love this movie because I feel it is an allegory for our current situation with Sustainability. The large apparel companies could very easily achieve 90% sustainability through eliminating plastic and synthetics in garment, packaging and packing. For example, in our Lotus & Michael- The Art of Shirts line, we eliminated 95% of non-sustainable elements by losing the plastic bags, using mother of pearl buttons, shipping to us and to consumer only using paper packing. Only two small elements, the plastic clip at center back and the butterfly under the collar, remain as yet unsolved. But they will be.

 

Most important, our fabric and garments are designed and built to last. Solid shirts made from yarn dye instead of piece dye, fine and strong fabrics, artisanal construction will make for a shirt that will last a long time, still looking great. Your average piece dye solid shirt starts fading and deteriorating the first time you wash it. Result: Disposable Clothing. It is this that results in something like 500 million tons of clothing in landfills each year and it is this that we are determined to reduce dramatically. Other small companies like ours have taken a similar stand.

 

Do the large apparel companies really want to improve their packaging and their garments to reduce disposability and make their lifespan longer? My answer is no. Why?

 

Reason #1- It will cost more. Thus raising their retail prices or, heaven forbid, lowering their margins (this does not have to be the case over the longer term). Their value proposition does NOT depend on their quality and longevity; it depends on their price.

 

Reason # 2- They will sell a lot less units. Even if they can get a higher price, they will be constrained by the discount-happy world of retail. So, if the consumer does not have to replace their garments as often, their sales will go down.

 

Reason #3- Quality is not in their DNA. To make this change would require a. A change of attitude by top management b. hiring/firing/retraining of personnel to fulfill the new mission.

 

Reason #4- They would have to reorganize their supply chain. New suppliers, new mills, new accessories vendors, testing, etc. would be absolutely essential to succeeding in the world of quality. Again, cost.

 

So the result is that Management, while maybe not consciously undermining Sustainability, is bound by cost rather than product. In most cases the product fits into the cost profile rather than the cost fitting into the product profile. This is the main business philosophy change that would have to be made.

 

I believe that the above reasoning prevents Management from Implementing or even Proposing the changes that would be necessary to achieve a 90%+ sustainable product. And I see no scenario under which that would change.

 

Sustainability bye bye? Well, no, here’s the vision: Us small companies that have committed to this from the getgo will grow as the customer demands sustainability as a prerequisite to purchase. The big companies will fail to evolve and will go the way of the dinosaurs.

 

Evolution is a part of life in business, and his process has already started and will accelerate. Customers will drive it from here. What I know after decades in the fashion business is that radical changes can happen much faster than you expect them to.

 

Think small, buy small. Wear Sustainable. That’s our mantra.

 

 

 

 

 

 

Tony by Lotus Zhang

 

Tony by Lotus Zhang

(original post: https://www.lotusmoongate.com/2020/08/tony.html) 

On our way home from market this morning, I rolled my cart and passed a woman with her dog. My husband walked after me, but he stopped and exchanged a few words with her. I immediately realized that she was walking Tony’s dog.

When my husband caught up with me, I asked him how is Tony. He lowered his voice and said:”Tony is dead.” I was shocked.

 

We have lived in this neighborhood for about 3years, Tony is one of our few acquaintances. We met him on the street, started from saying “Good morning” to each other then gradually sometimes we had longer conversations, such as meatball recipe, Yankee, the local news of our neighborhood. He was a man in his seventies, of medium height, a little fat, always wore a woven fisherman hat and a brown leather jacket, with a cane in his hand. He told us his family was from Sicily, but he was born in Brooklyn and spoke with a very thick Brooklyn accent. He must have been retired because we could see him wandering on the streets very often; And he lived alone, with a little dog.

 

He always reminded me of the old-fashioned New Yorkers, open minded, easy to make friends, and very picky on certain types of things. Sometimes when he saw me from another side of the street, he would take off his hat and call “Hi” to me. He told my husband that he always thought I was from Singapore. Every time after an important Yankees game, if my husband happened to meet him on the street, he would chat with my husband for a very long time by standing on the street and completely ignored that we might be in a hurry to go.  

 

I still can remember when we saw him the last time: It was in March before the shutdown of NewYork city by Covid-19. We met one early morning on the street; he looked very weak. He stopped by and told us that he didn’t feel very well and he considered he must have caught cold. After hearing this, my husband bounced back immediately. He told him to find a doctor without hesitation then took my hand and hurried away. I looked back once, Tony was still standing there and looking at us in a confused way. I felt very guilty for running away from him, and we even didn’t say goodbye.

 

Since then, I have always expected to meet him again. I wanted to apologize for our inappropriate behavior. Every time when I passed his apartment building, I looked into the hall and wished to see him. A few times we recognized his little dog was walked by a woman (perhaps a dog walker) on the street, but he had never shown up again. Until one day, we thought maybe we could ask that woman about him.

 

After the outbreak of coronavirus, people started to talk about new normal. I really never think there will be any difference to my husband and me. Our life is simple, everyday just work, cook, and shop occasionally. We have a lot of plans for the future, and we think everything will be back the same as before, sooner or later. But now we know something will never be as it was: Tony has gone forever. There’s no more old man to chat with us on the street, and in his current world maybe he isn’t that lonely. How many people in our lives have disappeared or will disappear without bidding a farewell, just like Tony, like the fallen leaves swept away by the wind.

 

Life is delicate, we eagerly explore for the security of eternity but nobody ever can find it. So how to move forward? I guess the only thing we can do is embrace the world, accept the way it is, each time let’s love and cry as hard as possible. The moment won’t last, but our emotion can.

8/8/2020

Why Are Retail CEOs Failing? A Simple Explanation

Why are Retail CEOs Failing? A Simple Explanation.

 

Recently I read a very thought-provoking post by Tom Ott in LinkedIn (read the full post here) which was entitled, “Leadership in Retail.” The post ends with the following statement:

 

“Leaders give clear direction to their teams on a way forward. They are about their people as individuals. And finally they put the team’s happiness & welfare before their own, understanding in the long haul it will pay multiples.”

 

As a Mantra for Leadership, in my view this is 100% spot on. But, it seems to me that this is a formula for ALL leaders, not just in retail.

 

There is no doubt that retail leaders are failing, and therefore retail stores and enterprises are also failing. So, it got me thinking, what specific attributes can we isolate for retail leadership that may apply and define success and failure in that world? So below are my top line thoughts (I absolutely believe the subject deserves more discussion than a short article-hmm, do I feel another book coming?- but this is a starter).

 

Kirk Palmer Associates took a stab at it (read the full article here) in a piece called “Digital CEOs Rising: Hiring the Modern Retail CEO.” In the article they listed 5 attributes that they felt lead to Retail leadership Success:

1.     Digital Fluency

2.     Focus on Customer Experience- A Customer Orientation which the article says will “Amazon- Proof” their business- why? Because Jeff Bezos is not just customer oriented, he is customer obsessed.

3.     Inclusive Mindset

4.     Entrepreneurial + Corporate Experience- Sure, why not? But how well does this define a leader? Experience is not an attribute.

5.     Non- Traditional Tenure- Recommends Marketing and Digital Executives.

 

So here’s my take on it: First, the above is too generic to clearly define retail success. It is, again, a group of attributes that could define a Bank CEO. So, what can we learn about RETAIL success, maybe from those who have succeeded now?

 

Another article in RIS News (read the full article here) is entitled, “Best Retail CEOS 2019”  in which they list seven examples based on business success AND Employee Approval. Now, we are getting closer to learning something about RETAIL success.

 

Some of their choices were:

Hubert Joly, Best Buy- Created differentiation for the brand that it had lost. Employee approval-97%

Craig Jelinek, Costco- Raised in the Costco system since 1984, he built the Costco and Kirkland brand with superior merchandising and value pricing. Employees love the benefits, Approval 95%

Dan Bane, Trader Joe’s- Two Buck Chuck and a superior product differentiation PLUS value image that stands alone, even though TJ’s is owned by the huge German firm, Aldi. Maybe the happiest employees I know- Approval 91%

Mark G. Parker, Nike- Innovation and Digital Transformation, creating a fetching consumer experience, building since 1979. Approval 91%

 

My additions to that list are:

 Doug McMillon, Walmart. Finally, Walmart looks like a person because it is led by a person.

Tim Cook, Apple- Took over for a legend and led the company to heights itself could probably not have dreamed of (see: 4 for 1 stock split).

 

So, what is my criteria for retail success, and consequently the reason so many have failed recently? What should a retail leader’s leadership and workplace attributes be?

 

#1- They must have the Soul of a Merchant- Even if they did not come up in the merchandising/buying line, we are talking about their soul. The art of finding something the customer wants, and/or some way to convince them to buy that others do not have, because it is RELEVANT to those customers’ lives. Past Heroes (that have fallen on their sword):

 

1.     Mickey Drexler- He made the Gap the go-to casual clothier for most of America. And he did it with keen merchandising. I knew Drexler, and he always believed in Narrow and Deep, the 80-20 rule, and The Next Hot Item. The Gap Pocket T sold more units than perhaps any other single style in history. 1 Tee shirt- many colors. (And it was imitated all over the world).

2.     Mike Jeffries- He turned Abercrombie & Fitch from a staid brand into a Must Have. Reason to get rejected from a college fraternity could be that you didn’t own enough A&F.

Both fell on their sword because, as good as they were, they marched in place too long. Which brings us to attribute #2.

 

#2- Never, ever, be satisfied with what you did yesterday- Obsessively Innovate, and always Evolve. You possess a latent curiosity and a passion for innovation. You are NOT afraid of disruption; you don’t get DISRUPTED, you are inclined to be the DISRUPTOR . What you create in your own house and what you see outside will form your wide MOAT.

 

#3- Embrace what the digital world offers you, but never forget that your customers are PEOPLE. Find the most beautiful intersection of bricks and clicks which will make your customer feel loved, appreciated and interested.

 

#4- Love your employees more than yourself (as Tom said). Don’t take money out of their pockets by taking a bonus you don’t deserve, or obscene amounts of pay when they don’t make more than minimum wage. IF the company makes profit, the CEO should take theirs AFTER everyone else gets a share.

(The difference between 1 and 2 million dollars(or 10 or 20 million) affects the CEO’s life how? And, conversely, how much good could be done for the employees with that money?)

We have a problem, as Mariana Mazzucato says in her book The Value of Everything, between the makers and the takers. TAKING a multimillion-dollar bonus when you just led the company into Chapter 11 is exactly what she is talking about and is an obscene waste of GDP.

#5- Build your successor. And their successor. And so on. A baseball team without a bullpen is sunk. Same with retail. Yes, it is feasible to hire executives from outside, but much better if this is an absolute corporate priority from training onward. Craig Jelinek and Doug McMillon are examples. More important- without someone internally to take the reins, the search begins for someone who is not familiar with the organization, and whose changes may not be relevant- maybe a square peg in a round hole.

 

#6- Obsessive Customer Focus- “Turn fans Into customers and customers into fans” (Fanocracy, David Meerman Scott). Find new and exciting ways to engage and interest them. Find products for your customers, not customers for your products. Watch this video of Jeff Bezos in 1999 and count how many times he says the word “customer.” Voila, Amazon- ‘nuf said.

 

The bottom line truth is that not everyone can lead a retail company effectively. More important, not every CEO possesses all the above attributes, at least not in equal strength. Such Unicorns exist, but they are very rare. Do you know one? Chances are you don’t, but if you do, please share.

 

IF you know where you are strong and where you are not as strong, you will surround yourself with people who can compensate, thus making the whole ship sound and seaworthy.  But, it seems that at least our crop of retail CEOs either didn’t have enough of the above attributes, OR their Ego and Blind Spot (see Ray Dalio Principles) prevented them from seeing and admitting where they needed help. Which leads us to the final criterion:

 

#7- Get over yourself- Ego Kills. Humility is a trait needed by all and possessed by few in the C-Suite.

This is my perspective as a former retailer and leader. Humbly offered…