Seizing the Re-Merchandising Moment
Posted on Mar 18, 2010 by Ted HurlbutI was speaking yesterday with an independent retailer who was coming off a challenging 2009, but who was cautiously optimistic about 2010. There was one thing that was concerning him, however.
Out of necessity, he had drawn down his inventory in 2009. He was now looking at a store with significantly less merchandise, with racks and fixtures that were a lot lighter than they’d ever been. He recognized that he wasn’t going to be able to quickly rebuild his inventory to its previous level, and frankly, he wasn’t sure he should anyway. Still he was concerned about how his customers were reacting. Was he going out of business, they wanted to know.
This is not an atypical concern right now. Many independent retailers have had a similar experience over the last couple of years and are asking themselves similar questions.
Opportunity is the mother of invention. For many independent retailers, rebuilding inventories to previous levels would not be smart. Most of them would concede that they once carried more than they really needed, and have learned that they’d rather have the cash in the bank. This moment, then, represents an opportunity to re-merchandise the store, and create fresh presentations that wouldn’t have been possible when inventories were more significant.
Independent retailers need to seize the moment.
When I’ve work with clients on right-sizing their inventories, re-merchandising is almost always part of the process. Assortments need to be adjusted and space re-allocated. Still, while recognizing they were carrying too much, owners are understandably concerned that sales might suffer. From my experience, however, sales almost always go up.
Where stores once were stuffed with 12 or 15 pounds in a 10 pound bag, now they only have 8 or 9 pounds. Now, there’s elbow room. Now, the merchandise has room to breathe.
It’s not just about shorter arms on four-ways and shorter peghooks on slat-wall. Now there’s an opportunity to widen out aisles a bit and create better sight lines and impact. Now there’s room to turn garments face out and create more dramatic presentations. Now there’s the ability to create vignettes. Now, there’s room to space things out and create greater impact for every line or program. Presentations become much more powerful.
Re-merchandising in this way dramatically increases the visual appeal of your assortments, thus increasing the impulse quotient. Customers stop and linger more, they’re drawn to things they never would have noticed before. And that leads directly to a bump in sales.
There are many virtues to leaner inventories. Inventory turnover increases, creating a better balance between cash and inventory. Cash flow improves. Assortments remain fresher, with a higher percentage of new merchandise on the floor. And finally, leaner, more focused inventories lead to greater sales. This moment, then, is an opportunity for independent retailers to move their stores forward in a way that’s prudent in the short term, and will set them up for sustainable success over the long term.
Add Comment (0)A New Frugality
Posted on Mar 17, 2010 by Ted HurlbutThis week Booz & Company released the results of a new survey of 2,000 consumers that found that a “new frugality” is “becoming entrenched”. In the article describing the findings, there were a number of statements that caught my eye:
“A new frugality, characterized by a strong value consciousness that dictates trade-offs in price, brand, and convenience, has become the dominant mind-set among consumers in the United States.”
“Even as a slow recovery is under way, it is becoming clear that consumers are not going to step up to store counters with pre-recession alacrity. Marketers and retailers that wait for them to do so are taking a major risk with the futures of their companies.”
“As consumer demand returns, it will likely center on a different mix of price points, brands and private labels, and retail formats than prior to the recession.”
“Retailers… should be changing their product assortments, pricing strategies, advertising, and promotions. Companies that do this well will find the winds far more favorable, and they will prosper first and most in the new value-driven marketing environment.”
“Frugal behaviors, such as reducing or deferring consumption, trading down to lower price points, purchasing “private label” brands, and shopping at discount outlets, are hardening into habits.”
This confirms what many independent retailers have learned. Recovery doesn’t necessarily mean a snap-back in business. Assortments and price points have had to be adjusted as inventory levels have been brought down. The tried and true ways of reaching customers and driving sales are no longer effective. The customers have changed.
I spoke today at a gathering of independent retailers. My message was pretty straight forward: it may take 2-3 years for sales to fully bounce back to previous levels, with little margin for error businesses must be managed very skillfully, and they must return to the one-customer-at-a-time mindset which helped them build their businesses originally.
As the article concluded:
“Waiting out a return to the pre-recession, premium-driven consumer mind-set is not a viable strategy.”
It Takes More Than Exclusive Lines
Posted on Mar 04, 2010 by Ted HurlbutIn a Reuter’s piece that appeared earlier this week, J.C. Penney CEO Myron Ullman said, “Department stores must keep ramping up exclusive lines of clothing and accessories if they are to win market share from rivals and thrive in the still sluggish U.S. consumer spending environment.”
He then went on to say, “There are too many department stores that are the same. If everything is the same, then it's where you get the better parking spot.”
It’s a great way of putting it. If every store is the same, it all comes down to convenience, and, by the way, price. Which is why retailers from Penney’s to Macy’s are chasing exclusive lines.
Ullman went on to tell Reuters that, “more exclusives will help Penney brush back the competition and boost the bottom line given their higher profit margins compared with widely available brands.”
Not necessarily. It takes more than exclusive lines.
Department stores and every other apparel retailer have been offering customers a “sea of sameness” for several years now. The problem hasn’t been the labels in the garments, it’s been the garments themselves. To customers, whose eyes have glazed over, it’s all become just stuff. When’s it going on sale? When’s the next markdown? (It’s more likely that the best way for department stores to protect their margins in the current environment is to manage their inventories very tightly, and avoid markdowns as much as possible, as recent reports suggest.)
The challenge for department stores, and their exclusive designer lines, is how to create distinctiveness without taking the kind of fashion risks that might alienate their broad-based, middle-America target customer. More likely than not, at the end of the day, the fashions will be safe, and all that’s going to be distinctive is the hang-tags.
This is important for independent retailers to understand, especially fashion boutiques. Many have built not just their assortments but their positioning around lines that they carry exclusively in their markets. Over the past year and a half, however, that has been scant protection from the forces rippling through the retail world. Even to these customers it’s come to look like just more stuff.
Differentiation requires real difference. Real difference in the world of independent retailing begins with an entrepreneur’s vision, and the compelling execution of that vision. For fashion boutiques, it might be the unique feel of the store, from funky to chic, or it might be the incredibly personalized service, or the discerning, captivating taste level of the owner or buyer. In this moment in time, however, it’s got to be more than just the labels on the merchandise.
Ted Hurlbut Principal of Hurlbut & Associates Welcome to my Retail Blog. Here is where I empty out my brain of all things retail, and offer my perspective, insights and opinions. Please share your comments so we can keep the discussion lively, interesting and beneficial.
