WSL From the Edge
from WSL Strategic Retail
by Wendy Liebmann and Candace Corlett

Mass vs. Class No More (July, 2004)

For the last decade ( at least…), we've talked here, and in our How America Shops studies, of a new shopping democracy. A world where educated, experienced and demanding shoppers do not hesitate to swing back and forth between mass and prestige brands, retailers, and services, as their pocketbooks, their knowledge, their expectations and their aspirations dictate.

The degree to which this happens has reached new heights, fueled by retailers who have finally come to understand the magnitude of the opportunity. Here are a few recent examples:

Nuvo International Laser Clinics offer dermatological treatments once reserved for the affluent, including laser hair removal, Botox and collagen injections, and chemical peels, to middle-income women and men in storefront clinics in US malls. Boots, the leading UK chemist and beauty company, is testing a selection of its best selling brands, including Boots #7 and Botanics, in fullservice beauty departments in select CVS drug and Target stores. Saks Department Store Group (SDSG), which includes Parisian, Proffitt's and Younkers department stores, offers an "Incredible Value" program that looks a lot like an upscale version of Old Navy's "Item of the Week."

Topshop, the UK specialty chain that offers "cheap chic" fashion right off the runways to English High Street shoppers, last month launched Topshop To Go. It's a cross between having a personal shopper and a Tupperware party. Call the hotline, tell them your fashion tastes, and they'll deliver to your home or office. If you're having a party, tell them how many people are coming and a Topshop To Go SUV (Mercedes no less) will arrive at your door with fashion goodies ready for the wearing.

The learning here is pretty clear. The days of exclusive mass or exclusive prestige shopping experiences or sensibilities are long gone. If ever there was a case in point, it was at the trunk show for the introduction of the new Isaac Mizrahi couture line designed exclusively for Bergdorf Goodman. Amidst all the sheered mink, cashmere, alpaca and lace, amidst all the impeccably designed and very expensive clothes, models also wore Isaac Mizrahi for Target T-shirts, sweaters, jodhpurs … Hold that thought.

Pets - An Unparalleled Retail Opportunity (May, 2004)

One of the most interesting facts to emerge from our 2004 How America Shops® Macro Trends study is that the Pet category was the most dynamic category we studied. "Dynamic" meaning that, compared to a year ago, shoppers said they were spending more for pet supplies than for any of 12 Leading Indicator Categories studied, including food, clothing, beauty care, prescriptions, fashion accessories, cards, computers, etc.

On a measure we call "net change" (the difference between those who are spending more and those who are spending less), pet supplies out-rated all other categories by at least 10% points. Pets were +27, Food +17, Hair Care +10, Prescriptions +9, Clothing +6, Greeting Cards +1. Younger consumers (18-34) and those with the highest incomes ($100K+) are shopping fools when it comes to their pets, +38 and +41, respectively.

It's no wonder furniture retailer IKEA recently devoted four pages of its 100-page summer catalogue to pets. Not only four pages, but also four pages at the front of the catalogue. "Scratch here. The latest IKEA design collection is for some of the cuddliest members of your family ­ your cats!" What followed were bowls (for as little as 25 cents), mouse-shaped cushions ($4.99) and a wicker platform bed ($49.99). Dogs were included to - soft toys (shaped like a cat), paw cloths, hooks to keep things out of puppy's way (shaped like the tail end of a dog), Frisbees, baskets, etc.

No surprise that pet web sites are growing at an awesome rate. There's here-kittykitty.com, fatcatinc.com, parkavenuepaws.com just to mention a few.

Beyond the typical PETsMART and PETCO, supercenters and supermarkets that sell pet products, new pet specialty stores and new pet brands now pop up with regularity all over the country. A year ago at the Global Shop conference in Chicago, we met a lady whom had a store in Wisconsin called The Dog Spot, a boutique and café (for dogs only). Her title, by the way, was Top Dog. (Who said dog owners don't have a sense of humor?) Recently, a new brand of designer pet accessories was launched called Cats Rule, in over 300+ specialty stores in the US and in Harrods in London. One of the hottest items at Coach stores over the last few years is a pet collar at $40+.

Even the ASPCA is becoming more aggressive in its marketing and retailing. In its most recent "Learning to Care Catalog" it featured an extensive collection of educational materials, books, videos, and teaching programs.

What does it say about American shoppers that pets have become their passion? Beyond food, beyond clothes - it's that in these unsettling times people want something to care for, to cuddle, to reassure them. It is a huge opportunity not to be missed. Whether you are in the business or not, consider putting a puppy or puss in your advertising. (Makes you realize how smart Target Stores is to have Spot.)

Publishing & a Paradigm Shift (March, 2004)

With the launch earlier this month of Bloomingdale's magazine, B, and the announcement that Wal-Mart would introduce its own magazine (to be published by Time Inc.), the consumer magazine industry faces yet another round of challenges.

Over the last five years in The Edge, we have talked about critical issues facing the publishing industry and the need for some breakthrough thinking. In some ways, this is a case study of what's happening to many industries.

So, for those of you who are not in the magazine business and are about to move to the next article, hold that thought -- because the issues facing the publishing business face all of us. Like so many other businesses today, the competitive environment and consumers have changed dramatically. This is not only about increased competition coming from traditional sources, but also from new sources. It's also about consumers who have very different expectations for how they choose to receive the product.

While all this was going on, younger consumers (and later their parents) began to use the Internet as a source of news and information. It's not that teens don't read magazines ­ certainly the circulation of many teen publications such as TeenPeople and the newest, Teen Vogue, would tell you they do. But magazines are no longer their only source for what's news.

Amidst all this, there exists a system of sales distribution that no longer reflects retailers' demands for cost efficiency. What other category do you know of where 50% sell-thru is the norm each month?

With all that said, this is not a category that is outmoded. Clearly the right product, with the right message, is still enticing to many. It can be inspirational like Oprah, or smart and informational like Glamour, or a shopping savior like Lucky, or filled with real life solutions like Real Simple or aspirational ones like Architectural Digest.

Each magazine not only generates sales for each copy but, as any magazine publisher worth their weight will tell you, magazines have the ability to generate sales of other products, those that are advertised or written about in the pages.

But the fact of the matter is that the paradigm has shifted. When competitive lines blur, when consumers find other sources for their needs, when new generations value the product differently, and when retailers find it difficult to deal with the product, you know the business model is seriously challenged.

If that's not challenge enough, think about this: In today's shopping world, consumers are making different purchasing choices -- not only between brands within a category ("Mmmm, will I buy Gourmet or Cooking Light?") But rather choices across categories ("Will I buy gourmet coffee or Gourmet magazine?").

The Bumpy Ride @ Retail (January, 2004)

If ever there was a bumpy ride at retail it was this past holiday season, from the early high the day after Thanksgiving to the depths of mid- December to the run for the posts the week immediately before and the week immediately after Christmas.

Retailers really needed their wits (and their intestinal fortitude) about them. There was much to learn from this past season... beyond the need for endurance training. The final results said a lot about the nature of the economic recovery in this country. For the most part, luxury retailers did better than discounters, evidence that higher income consumers are feeling more confident about their economic lot. And that's good news.

But even more revealing is the fact that lower income shoppers ­ the bulk of American households ­ are still very concerned about what 2004 will bring. Thus, they were much more cautious about when, where and how much to spend over the season. When mighty Wal-Mart ends the season with sales results at the low end of its projections, you know how the average shopper is feeling.

That's been clear to us for some time, as we talk to shoppers monthly in How America Shops ...Everyday, and in our soon-to-be published biannual How America Shops Macro Trends 2004.

While women and men shoppers are feeling somewhat better about the state of the economy, they are very circumspect, very vigilant about what lies ahead. Their spending is discriminating ­ they will spend only in certain retail channels, at certain retailers and for select categories. That was evident over the holidays ­ where luxury department stores did well (Nordstrom, Neiman Marcus, Saks Fifth Avenue), mid-level did not (May Co., Kohl's, Sears). Some specialty stores did well (PacSun, Best Buy, Bath & Body Works), others did not (GAP, Abercrombie & Fitch).

The difference between those that did well and those that did not? Innovation, quality, value and credibility defined the winners.

The Battle for Holiday Shoppers Begins (October, 2003)

The battle began for the hearts and minds of holiday shoppers on October 9. If the Columbus Day sales at department stores are any indication, this may be one of the most aggressively promotional and early holiday seasons in recent memory. (Christopher Columbus may yet be named the patron saint of Christmas shopping.)

Department stores were fast and furious with their Columbus Day offers. The promotional theme was consistent whether at Bloomingdale's, Macy's, Saks Fifth Avenue, Lord & Taylor or JC Penney: graduated discounts geared to the amount spent. The more you spent the greater the discount.

Sounds simple but often not. The most transparent offer was at Bloomingdale's. Spend $100 on a single purchase, get $25 off at the register. For the others, you needed a scorecard. At Lord & Taylor, if you spent $500 you received a $25 L&T gift card; spend $1,000 get a $50 gift card, and so it went. The gift card "is yours right away." But the promotion was only available on designer and bridge fashion.

If you shopped at Saks Fifth Avenue, the offer was more lucrative and available on a broader range of merchandise. Follow the bouncing ball: spend $250-$499, get $50 off; spend $500-$999, get $75 off, up to $3,000+ and get $450 off.

The fact is, Columbus Day or not, sales at some department stores are at fever pitch. JC Penney for one. Depending on the day or the week, you can get $10 off a $50 purchase with more work or less work. One week, the discount was instant at the register with a coupon (even without one). The following week you received a $10 gift card with a $50 purchase, but couldn't spend it until the following week. Is your head spinning? So what does all this say?

First, it seems the same retail marketing person designed promotions for all department stores. Not much retail brand differentiation here. Not to mention the temptation for shoppers to cherry-pick the best deal.

Second, the more complicated the deal, the more "*" in the offer, the more frustrated shoppers became. Once they saw that small type paragraph at the bottom of the offer, hackles started to rise and frustrations set in. Not a good mood to put shoppers in so early in the season.

Third, it's no wonder that so many shoppers flock to that retailer that offers "everyday low prices." It's easy: there is no small print, and what you see is usually what you get. And last, smart shoppers with lots of time on their hands will make a killing this season. That is, if there's anything worth buying out there - but that's another story. Let the games begin.

Back-to-School ­ A View to the Future (September, 2003)

And so it begins - that heart-stopping race from Back-to-School to Christmas when retailers hope to push, pull, even drag their profits into the black. Already the signs are pretty clear (sort of). It will be a Catch-22 season if ever there was one.

On the one hand, there's uncertainty about the economy and the geo-political situation, on the other there's the "nothing new to buy" situation. And on the other - after a very wet or very hot, or very hot and wet summer, consumers are ready, willing and able to consider shopping for fall -- sort of, a little, maybe. You get the picture.

The impact of economic and political issues is pretty self-evident. According to 1,100 consumers around the country who we interviewed in our How America Shops® Everyday "The PULSE", (July 15 issue) most are cutting back shopping at all major retail channels compared to six months ago.

The only places consumers said they were shopping significantly more were dollar stores (such as Family Dollar and Dollar General) and mass merchandisers (such as Wal-Mart and Target). The biggest losers were specialty stores (of any kind ­ including clothing and beauty), department stores and catalogs. But even drug stores and supermarkets were not immune.

However, this is not only about shopping at places that offer lower prices, it's also about trading down to lower priced brands. Fifteen percent to 25% of consumers said they had switched to lower priced brands or generics in the last six months.

The categories where most of the switching was taking place? Over-the-counter medications, clothing and household cleansers. Beauty care products and cookies weren't far behind.

If low prices or great values are not embedded in your marketing message the chances of getting more customers in the door are slim and none. But again, that's only half the message. The "nothing new to buy" issue is also giving consumers reason to sit on their wallets.

Retailing from the Edge (August, 2003)

Consumers Loosen Purse Strings: But Where?

In tough economic times shoppers form new habits. Retailers pull out their best creativity to insure a place on the shopper's list, but not all of them make it. As consumers begin opening their wallets, which retail outlets will win, place or show in the race for the consumer dollars?

The PULSE survey reports:

The powerhouse of retail spending, women, are holding back much more than men. The retail winners and losers in tough economic times are predictable: those that focus on price first. What retail needs to reconcile is the magnitude of shoppers who are.

  1. Spending more in dollar stores, regardless of household income;
  2. Cutting back their spending in what was the retail success story of the 1990s - specialty stores.

Retail Channels Where Shoppers are Spending More or Less:

The demographic segments are detailed in the table. http://www.visibilitypr.com/pdfs/pulse_7-15-03.pdf

In the June 15, 2003 PULSE, 51% of shoppers reported doing less browsing and more real shopping, an improvement in their attitude from fall, 2002. The big BUT is that shopper reticence is about more than the economy. The buying binge of the 1990s has left consumers overstuffed. Whatever your category, you must help shoppers justify the purchase.

Making Choises Amid Brand Clutter

With 44 percent of consumers actively doing something to simplify life (THE PULSE 3/31/03) how do they react to the vast choices presented when they go to try something new? THE PULSE polled eleven categories from cars to soup to find out.

The PULSE survey reports:

  • Fear of long term commitment and costly mistakes makes it toughest to choose a new cell phone plan or a car; and computers are polarized as the toughest category for most, but easy for others.
  • 20 percent to 30 percent of health and beauty product category users say it is very difficult tochoose something new.
  • The least difficult: cereal and soup.

Core Target Audiences are More Confused
Women, who are the major purchasers in personal care categories, report significantly more difficulty choosing something new. Shoppers 55-plus report the most difficulty choosing something new in categories that they use heavily: OTC medications, skin care and oral care products, and cereal and soup.

How to Choose, Many Don't?
How much risk will shoppers take to try something new and how does it effect your business? It depends on your business. In hard goods, less than 10 percent will take a risk; almost half of puzzled shoppers will delay their purchase of a car or computer. In health and beauty products less than a third will take a risk, most simply stay with what they know rather than try something new. Cereal is the only category where close to half of shoppers, 43 percent, will risk trying something new.

The Key to Baby Boomers

What a relief! Finally, an industry that has found the key to appealing to those untouched, untapped, but very willing to spend, aging baby boomers. It's the home appliance industry. What companies such as Sub-Zero and General Electric have discovered is that the key to appealing to this audience is to tap into their unrealized dreams. Recent advertising by these two companies features a happy couple fulfilling their dreams in a fabulous state-of-the-art kitchen. And that's the key: no need to make your brand geriatric. Instead, present it as a fantasy fulfilled.

Summer is Here and Wellness is in the Retail Mix (July, 2003)

Wellness is moving way beyond the traditional doctor's office, drug store and health club. The holistic, whole body approach is growing. Two examples, the Beyond Day Spa, at Hackensack University Medical Center, in New Jersey, and the Longevity Lounge, in New York City.

The Beyond Day Spa was originally founded as a respite for medical staff at the hospital. Now it attracts non-medical clients with a full range of services that blend the more typical spa offerings, such as facials, manicures, pedicures, and massages with treatments such as Botox, laser, dermabrasion, and collagen therapy -- all supervised by experienced medical staff. You can have your annual physical at the medical center then head into the spa for a little sense of well-being.

The Longevity Lounge also combines traditional medical treatments with well-being therapies. Doctors provide services and advice on nutrition, osteopathy, hormone therapy, cellulite treatment, and skin treatments including the increasingly ubiquitous Botox and collagen treatments.

For those who think they are not in the wellness business, there's plenty of opportunities. It's growing, it's dynamic, it's holistic. It's about exercise equipment and clothing; medical devices, vitamins, nutritional supplements and food substitutes; books, DVDs, videos, beauty products, services, and treatments ...

Let your imagination run wild. You too could ride the wave.

Consumers Regain Confidence, but Spending is Still Tight ... (June, 2003)

Consumer confidence was expressing itself through a decline in window shopping and an increase in real shopping. By May, 2003 only a third of shoppers were browsing more and shopping less, compared to nearly half, 49 percent, last fall. A slight up-tick in retail sales results in May supported our PULSE shoppers' reports that they are cautiously resuming spending.

The PULSE survey reports:

Most PULSE categories are seeing a 5 to 10 point decline in the percentage of shoppers who are cutting back spending, but there are still categories where 50 percent or more of shoppers are cutting back - music, specialty coffee and take out foods. Magazines and clothing are still high, with 49 percent and 45 percent of shoppers cutting back.

The safest categories to be in during this economic turmoil are: OTC medications, 20 percent cutting back, cell phone service, 21 percent, premium cable TV, 28 percent, and being a teenager, where only 28 percent of parents are reducing their teen's allowance.

A real concern for every category is women, who close their wallets during economic uncertainty much more than men.

The most stable consumer group in tough economic times? Shoppers over 55 .

Consumers Regain Confidence, but Fear Lingers ... (May, 2003)

In November 2002, we reported consumers' fears about job security, war, terrorism and the economy. Now, six months later, The PULSE survey reports: GOOD NEWS and BAD NEWS - THE FEAR LINGERS.

44 percent of consumers remain optimistic that their household's financial situation will improve over the next year, the same level of optimism expressed in November 2002. However, significantly fewer consumers, 22 percent, feel their financial situation has actually improved in the past year. This represents a significant decline from last fall, when 45 percent felt their financial situation had improved during the year.

Feeling Better about Shopping

With the uncertainties of war behind them, it appears that some people are ready to resume spending. Last fall 49 percent said they were browsing more and buying less. Now the window shoppers are down to 35 percent, a significant decline. In addition, most consumers are no longer putting off major purchases. Only 27 percent say they are postponing major purchases, down from 40 percent last fall. BUT . . .15 percent are still worried about losing their job, the same as last November.

What it Means for Business

Consumers have apparently settled into a new financial reality, one of reduced expectations. Only 22 percent feel their financial situation has improved, but most are ready to go shopping. This is the ying and yang of the new shopper mentality . . . they don't feel financially secure, but they are confident enough to consider spending again, a little. The opportunities are to provide shoppers with product, services and experiences that reflect this new reality. Give them permission to buy, make purchases acceptable, affordable and reasonable.

How America Shops Everyday PULSE Report is based on a national Internet survey of 1,161 consumers conducted May 5, 2003.

Beauty, Beauty Everywhere Yet Not a Drop ... (April, 2003)

What is going on in the mass beauty business? On the one hand, manufacturers are back in the innovation groove, offering lots of new and innovative products. On the other, retailers with but few exceptions continue to present beauty in exactly the same way they have for the last decade.

There has certainly been no shortage of innovation in most mass beauty categories. Shiny, shiny lips have revitalized the lip category thanks to Maybelline, Neutrogena and Revlon. Sally Hansen continues to take the nail category to new heights (Chromes is just one of many examples). L'Oréal constantly pushes mascara and hair color innovation -- most recently with the launch of Couleur Experte. And Procter & Gamble has given skin care a boost with Olay Total Effects. And that's just some ...

That said, where's the innovation in the retail environments in which these products are sold? What retailers seem to have forgotten is that beauty is at once both a consumable commodity and a fashion item -- all about excitement and innovation and titillation - which is why the environment is so critical to the beauty shopper's experience. Unfortunately today, most mass retailers focus on making the experience convenient, while other retailers innovate, and innovate aggressively.

Intimate Brands continues to redefine its beauty presentation in all its formats, from Bath & Body works to Victoria's Secret Beauty to its latest skin care and beauty concept, Aura Science. A wander down any suburban mall will reveal beauty in all its guises from MAC to Aveda, from L'Occitane to a new and improved Crabtree & Evelyn. A trip to Minnesota will show you Kowalski's Market with an Aveda store and spa right in the middle of the supermarket. These are but a few.

Once upon a time when consumers only shopped one channel for their beauty products, offering them a good selection of affordable brands and products in a convenient, clean environment was acceptable. But not today when beauty shoppers willingly shop everywhere and anywhere for beauty - from the corner drug store to the salon to the specialty store and department store, to the kiosk in the mall, from the mass merchandiser to the dollar store.

Today, no amount of product innovation will compensate for a mundane, uninspired beauty environment. Certainly not if retailers want beauty shoppoers to do more than pick up an item while waiting for their prescription.

Department Stores: Now What Else? (February, 2003)

Bloomingdale's move into home stores in Chicago, is but one of a series of new strategies that are finally coming from department store companies. Since 1996, we've bemoaned the fate of department stores based on the consistent messages coming from consumers in our How America Shops® research. Most have struggled desperately to remain relevant to consumers who merely cherry pick the sales and move on.

This past holiday season, shoppers told us (again) that department stores are no longer on the top of their shopping list. In the January 30 How America Shops® PULSE, shoppers, especially those under age 35 and those with incomes over $100,000, told us that they shopped less in department stores compared to 2002.

No surprise if you looked at the numbers.

Well, finally it seems some are taking steps. Federated Stores (parent of both Bloomingdale's and Macy's) is the most aggressive. In addition to the Bloomingdale's concept, it announced the integration of its Rich's and Macy's stores in metro Atlanta starting this month. Twenty-eight stores will be called combined Rich's-Macy's. Under-performing stores (four) will be closed or converted into Bloomingdale's. A first for the market.

None of this is a moment too soon. After all, Macy's and Rich's have been cannibalizing each other for too long.

JC Penney also announced some changes. The company is ending its exclusive agreement with Avon to carry its beComing line of beauty products. A glance at the sales book in a busy Penney store in Dallas showed that the line was performing very poorly ($89 was budgeted for the day). Penney will use the space to expand its growing accessory business. (What Avon will do is a whole other story...) Penney also announced the beginning of an exclusive arrangement with the sexy, mid-priced fashion line Bisou Bisou, which was previously sold in department and specialty stores. Good moves on both counts.

After the abysmal holidays, no doubt more changes are in the offing.

Be My Valentine (January, 2003)

We see Valentine's Day becoming the next Halloween in terms of shopping importance. Shoppers in our fast paced society get bored quickly. By the end of January we have recovered from the holiday push and post holiday sales. Shoppers are ready to spend again and merchants are rising to the occasion with Valentine Gift options for every budget.

Everyone can be the object of affection, kids, co-workers, friends, pets. It's not just about the sweetheart. There are gifts for all. In the luxury market Coach launches an aggressive campaign with choices from the traditional bags to a special collar for the dog. What better way to get to herheart than through her puppy. Mass merchants are well into the act and its hard to beat Target for cutsey lingerie for girls from two to 92.

Victoria Secret does a great job of sexy lingerie, but reaches out to everyone with comfy lounge pants and mini-tees. And anyone can wear a heart on their sleeve, or shirt, including guys, pets, grandma and baby.


Holiday Heartburn: What Does it Really Mean? (January, 2003)

Everyone knows that retailing is a tough business even in good times but the seesaw effect of this past holiday season was enough to cause committed retailers to be committed.

The most obvious learning from this Christmas season; the way American consumers now shop for the holidays has changed fundamentally and dramatically. Consumers now choose to shop early (6 AM on the Friday after Thanksgiving), and very late (not the last few days before Christmas, the week after Christmas). They do so because they know that's when they will get the best deals. They are willing to get up before the crack of dawn to shop the day after Thanksgiving to be the first on line to buy the $99.99 color television, or $79.99 DVD player. They buy gift cards because it's easier, because recipients can choose exactly what they want, and get much more for their dollars after Christmas than before. They shop online not only because it's convenient, but also because they don't have to pay sales tax and, if they are really smart shoppers, they don't have to pay shipping.

In a time when consumers increasingly feel they've seen it all, have it all, or don't want it all, it shouldn't be surprising that they continue to wait for the best deal ­ whenever it suits. Who cares if the gift is under the tree on December 25th or December 28th? The fact of the matter is that's the way consumers shop any other time of the year.Why do retailers think Christmas would be any different?

For the last two seasons, at least, many have found a way to ignore this new reality. We've all heard (or said), "It is the post September 11 effect," or "Shoppers are not spending because war with Iraq is imminent," or "People are concerned about the economy." While all this clearly is relevant, the fact I that consumers have found a new way to shop for the holidays. So, we had all better recognize this in a hurry if we want to live to tell the tale come next holiday season.


Wendy Liebmann is the President of WSL Strategic Retail and Editor of WSL From the Edge. Visit http://www.wslstrategicretail.com for more.

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