Thursday, September 27, 2012

Our blog has moved!

We invite you to visit our blog's new home at  There you will find our most recent blog on City Target, as well as old favorites from this site.  Check out our new website too while you're at it!

Tuesday, June 26, 2012

JCP: The Bloom Already off the Rose?

Back in February, we wrote about the beginnings of the transformation at JCP. it included Fair and Square pricing and the transformation of the stores into town squares with dynamic brand shops. We applauded the effort but also had a number of caveats about how historically hard pricing transformation has been in retail and how underwhelmed we were with the initial creative execution: unclear messaging in-store and in some media outlets.
Fast forward a few months and what we eagerly awaited is now (somewhat) public. Quarterly comp store sales were down an astonishing 18%. The company blamed poor results on the difficulty of transitioning the price strategy (no surprise there) and the poor communication of the messaging (told you so...).
However, we also know that any chance of this turnaround working cannot be measured in quarters--it will take a minimum of 12 months to work through pricing issues and even longer to effectively create meaningful physical and merchandising changes within the stores. So, what does JCP do? Trying to effect these changes while a public company is enormously difficult. JCP's management had significant support at the onset and the stock price was around $42 when we wrote our first blog. Today, it is at half that level.
They acknowledged some communication mistakes and suggested we will see a clearer explanation of the pricing policies (words like sale may re-appear). And in a bit of a stunner, Michael Francis, the President who was brought on from Target to oversee merchandising and marketing, resigned. If anyone reasonably expected a quick turnaround, they really don't understand large scale retail very well.
JCP has aggressively recruited a world class roster of retail talent who will no doubt introduce significant innovation within the brand. The transformation will take time...while clearly WAY too early to judge, it is clear that they are racing the clock, Wall Street confidence and consumer expectations while they attempt to overhaul the brand.

Friday, April 20, 2012

Best Buy: The Official Death of Biggest?

Back in 2004, McMillanDoolittle published its landmark book on retail strategy, Winning at Retail. The book describes in great detail the EST model of retailing, which essentially argues that retailers must meaningfully differentiate in at least one area that is critical to the customer. The theory was actually developed far earlier, in the mid-90's, based on empirical studies of successful and non-successful retailers. Our EST's that form the foundation of the model are Cheapest (winning on price), Quickest (winning on location and convenience), Hottest (winning on assortment relevance), Easiest (winning on service and solutions) and Biggest (winning on assortment). While we have internally challenged the model (and had others challenge us back), conceded that it is possible to win with more than one EST, and adapted the model to different industries (slightly different drivers for a services model), it offered an easy to understand and surprisingly solid model of understanding what it takes to win in the retail world: own something in the consumer's mind and build your business practices around delivering that EST.

Unquestionably, the retail world has changed since 2004. The biggest driver of change is the emergence and continued growth of e-commerce. When we were writing Winning at Retail, as an example,'s sales were around $5 billion; in 2011, they topped $48 billion and they remain one of the fastest growing companies. E-commerce, while still just around 7% of total retail sales today (and growing at a faster clip than brick and mortar retail), was just under 2% in 2004. The real impact of e-commerce comes in breaking down that general e-commerce number and begin to look at the impact category by category.

Which brings us to Best Buy, subject of countless articles and analysis over the past few weeks. Best Buy has announced a series of store closures as well as the resignation of the CEO. Their struggles have led to speculation that Best Buy might end up with the same fate of some of its historical competitors, companies like Circuit City, Silo, Highland, Fretter, etc...whose name litter the retail graveyards.

While we are not predicting Best Buy's demise (and this is still a $50 billion company--still bigger than Amazon), we do know that their business model requires radical reinvention, and fast. Best Buy's premise of biggest assortments within a physical retail space simply doesn't resonate with customers in the same manner anymore. This core EST principle built around assortment is almost impossible to sustain in a retail setting with the Internet offering nearly infinite selection at the click of a mouse. Other Biggest retailers in our historical model (Borders, Blockbuster, Circuit City) have suffered similar dire results.

When looking at the challenges of Best Buy, it is difficult to know where to begin:
  • The digitization of core products (CD's, DVD's) which can be bought or streamed via the web. These products historically drove traffic to the retail stores where customers could then purchase bigger ticket products...
  • It is now incredibly easy to price compare on-line. For considered purchase items (TV's, computers) customers are going to take the time to compare (and more times than not, beat the prices of a physical store)
  • And while service is important, the drive towards simplification (see the iPad) makes more and more products "plug and play". While service offers like Geek Squad are brilliant, there may (in theory) be less geeks needed if products become easier and more intuitive to use.
We can criticize the quality of the service and other operational issues but the simple point for Best Buy now becomes: the stores are too big and they don't have enough stuff to fill them with. Ancillary categories (musical instruments, fitness equipment, office products) have been introduced but they are not enough to profitably move the needle. And, they can join the long line of retailers who think it would be a good idea to sub-let space.

So? Best Buy is opening Mobile stores more in line with consumer needs and smaller and more efficient to operate. E-commerce sales are growing but still represent less than 6% of total company sales. While that's a nice $3 billion business, 22% of electronics are now sold on-line. Best Buy is way, way behind where they need to be.

What's the fix? Clearly there's not an easy answer. Grow small stores, grow e-commerce but most of all, find a clear reason for the big box retail stores to exist. If Biggest is no longer valid, what is the new EST position that Best Buy can occupy?

Monday, March 5, 2012

Wondering About Wonder!

It comes to us as no wonder (pun intended) that Deerfield, IL children’s behemoth, Wonder!, has shuttered its doors after only three short months. Mothers have discovered ways to become more efficient and are cult-like devotees to sites like, and for all of their baby needs. The rising popularity of daily deal and member-only sites has also chipped away at brick-and-mortar store sales. As the entire population becomes more tech savvy, it begs the question as to whether or not there is room in the retail landscape for large category killers which can take hours to navigate when customers can simply click and have it delivered the very next day.

Wonder! did have a uniquely curated assortment of the best in everything from strollers to organic baby shampoo and an impressive team of retail minds behind it, yet it seemed to be plagued by its sheer size even before it opened. We originally visited during its opening week and were shocked to observe how few families were present on a nice Sunday afternoon. While it is a given that it would take hundreds of people to make the store seem full, it was incredibly sparse with only a child running by us every now and then. Also sparse were the corners of the store which were left empty as an early indicator of financial trouble to fill the warehouse-size space. By chance we visited again the Friday before Wonder! announced it was closing and noticed a few changes. Most notably, were the yellow sale tags offering 50% off dotting the store and massed out merchandise to fill the empty spaces. This is a strategy to make the space seem fuller, yet it is just more of the same item.

The team at Wonder! seems optimistic about reopening the store once it works out its balance sheet and merchandise availability difficulties. We at McMillan Doolittle would recommend that they be overly cautious and assess the relevance of a store of this size in such a fragmented retail world.

Wednesday, February 29, 2012

Jason Wu

As loyal Target customers, the launch of Jason Wu at Target had been highlighted on our calendars for months with us anxiously anticipating its arrival. Still on a high from the fabulous pieces from the Missoni for Target collection, we arrived on February 5th at 6:50am for the 8am store opening. Needless to say, we were not the only ones with this idea. With an hour and 10 minutes still remaining until the doors opened, there was already a line of 15 people – and not all women! Both men in front of and behind us were in line sans wives in hopes of scoring the perfect Valentine’s Day gift. While waiting in line, we overheard many women mapping out which pieces that they were going after first after studying look books online. At about 7:45am a Target security guard on a Segway addressed the crowd of 150+ eager Jason Wu fans with a message about safety. Like a grade school teacher, he asked us to walk not run and be nice mature adults. This little pep talk did little to curb fashionistas at the front of the line who did their best speed walk/run to women’s apparel when the doors finally opened.

Once the crowds were let in at increments of 100, it was as if the rule book had been thrown out the window. Within seconds the racks were clean with clothing strewn on the floor, leaving only the larger sizes as remnants of what took months of planning and collaborating to create. I was stealth enough to grab the three pieces that I had my heart set on and quickly made my way to the fitting rooms. To say that the pieces were a disappointment would be an understatement. The cute fluffy yellow shirt that I saw online looked more Big Bird than a chic top made by an “it” designer. The adorable stripped pale pink and navy dress that I couldn’t wait to see in person was so poorly constructed and matronly. I had a third piece that I didn’t even bother trying on since I was so disappointed in the quality and styling. When I left the dressing room, it seemed that everyone else had the same reaction as I did. The fitting room attendants had their hands full hanging up the rejects to send back to the floor. This made the entire experience even more frustrating – waking up at 6am on a Sunday when I could have come in by 9am and seen the entire collection since so little was actually being brought to the register. To make the bus trip to Target not a total waste, I picked up solid black and white tank tops and nail polish. Needless to say, I would have much rather picked up these basics at a more reasonable hour on Sunday.

After making the trek back home, I proceeded to call my Mom and girlfriends to tell them to stay in bed and wait for the next designer collaboration. We can only hope that the Shops at Target will deliver and stay true to the upscale stores that they are trying to emulate.

Monday, February 6, 2012

JC Penney's Dramatic Transformation Begins

If you pay any attention at all to the retail scene, it would have been hard to miss the news of JCP's announced transformation. It has garnered significant buzz with its new management team led by Ron Johnson, Apple store's former retail guru and a star-studded cast recruited from Target and others.
The transformation has three main components:
--A "simplified" everyday low price strategy with a few twists, called fair and square
--A new logo (above)
--Planned dramatic changes to the retail environment, with 80-100 well defined shops within shops and a Town Square component

While it will take a fairly long time to create dramatic change within the stores, the new marketing strategy can be seen now, in circulars as well as TV spots...
From the very basic standpoint of marketing, it is already working. We flipped through the JCP Sunday circular, which is the first time we can say that in quite some time. The ads, highly reminiscent of Target in style, begin to demonstrate the new pricing strategy's three elements:
--Simplified everyday prices, all ending in $ price point ($16, $20, etc)--In Red
--A monthly price, which is presumably a savings from the everyday price--In White
--Mark down prices (Best Prices) which will be in store the 1st and 3rd Friday in February--In Blue
The first time through, this seems extremely confusing. It was difficult to understand what a "February" price really is and the everyday prices are difficult to gauge without clear comparisons (most of the promoted items are private label). And, of course, we don't know how great the mark down deals will be (how many, how deep, etc...). The circular format itself is clean and refreshing and a definite breath of fresh air.
In the extraordinarily annoying TV commercial(don't say you weren't warned):, customers rebel against the craziness of multiple pricing strategies, markdowns and clearances. Note: there are much better versions that play off the same theme elsewhere on YouTube.

Simplification of retail pricing in much of the department store channel is desperately needed but has also been historically difficult to achieve for those who have gone down the path before.

Of course, the real test will be the experience once customers get to the store--the transformation in JCP's 1100 stores will be a longer and more expensive process. It will also be an eagerly awaited test to see if simplification can be extended to stores as complex as JC Penney.

We admire the boldness of vision and no doubt JC Penney will be monopolizing retail headlines for some time as their initiatives play out.

As we have always remarked, the great thing about retail is its immediacy: JCP's stock had a very nice run up after the announced new strategy. We'll know fairly quickly if customers beat a similar path to their doors.

Post Script. Had a chance to visit a JCP the other day while on the road. The new pricing policy is in full effect, with every item re-stickered to reflect the new pricing strategy. Some of the everyday pricing seems incredibly sharp--$5 super absorbent bath towels and the like which should certainly grab the customers' attention. They weren't kidding on markdowns either. Blue tagged items took items that were already marked down about 70% and reduced them 20-30% further...
The big miss? Not a scrap of signing explaining the new program to customers, which could have easily been accomplished by replicating the very clear explanations evident in the print ads. And, the intent and purpose of month specials (February specials, in magenta, of course) is not terribly evident in store.

Monday, October 24, 2011

"Made for All" - our visit to the new Fifth Avenue NYC Uniqlo

Japan’s basic apparel category killer store Uniqlo opened its 89,000 square foot (bigger than a football field!) Fifth Avenue/53rd St. location (second of three planned New York City locations) on October 14, 2011. We had the opportunity visit this store during a short 20-hour jaunt to the Big Apple.
By nature of our flight’s arrival time into the city in the late evening, we had the good fortune of experiencing the store during an off period – about half hour before closing. The store was certainly less chaotic at this time during the day – we attempted to go the next evening as well but quickly exited the can-of-sardines environment.

From across the street, the store exudes an Apple Store-esque glass cubic glamour. Fully-functioning elevators are closed off to the public and instead display a mannequin couple, riding up and down in the front windows to the delight of passersby.

It’s easy to forget that you are in a clothing store– with the clean, stark open format, the store has the same look and as Narita airport, complete with three long escalators in the center of the store and a cool, soothing female voice over the loudspeaker welcoming you to Uniqlo and announcing what products are on each floor.

Uniqlo somehow attracted the only happy, helpful, and efficient employees on the island of Manhattan. Two Uniqlo jacket-clad greeters at the entrance welcome customers and offer a large basket – genuinely friendly and not at all pushy. (Note: the staff wins extra kudos for calmly and genuinely willing to spend quite a bit of time helping us dig through a huge pile of Uniqlo’s $9.90 opening special jeans to get our size – seemingly oblivious to the surrounding chaos!)

The store does a beautiful job of “layers” of communication on the merino cotton apparel and the brand’s new “Heat-Tech” line:
Large block letters catch the customer's eye by  indicating what material line the product is from - "100% Extra Fine Merino"

Second board gives information about the premium quality of the merino material.

Smaller sign as you look closer at the product -- indicates the style, and a more detailed description of the style.
Eye-catching hallway draws customer in

Boards on top of product racks educate and encourage shoppers to buy other products from the same line.

The store makes good use of brightly lit floor-to-ceiling LED screens to feature their products as well as Uniqlo brand ambassadors. The screens were not interactive, but this may have been deliberate, as shoppers seemed more intent on stuffing their bags with as much Uniqlo product as possible rather than admiring the surrounding décor.

Several walls are completely paneled with LED screens, giving shoppers styling ideas
The store is somewhat confusing in terms of layout, but there are maps on the walls and the aforementioned loudspeaker message. On the main floor, the layout is maze-like and designed for the quick-paced wanderer. There are specific areas on the mezzanine floor for people to sit, conveniently out of the way of shoppers – genius. 

Seating area for tired shoppers and shoppers' mates, conveniently out of the way.
Uniqlo’s impressive displays are essentially the apparel version of Whole Food’s produce section. The merchandise is neatly stacked, hung, and folded in wall shelving, displaying Uniqlo’s extensive range of color options in each style.

Category killing in basics - like basic t-shirts.

More category killing in basics.

Take one product/material and do it every color!

Checkout is stress-free single-line Whole Foods –style. Interesting to note: when checking out, staff members have a scripted response: “Your total is $X for X# of items.” – perhaps to emphasize how much bang you’re getting for your buck?

Overall, Uniqlo gives off a very clear message that certainly seemed to resonate with consumers – there was no rhyme or reason to the demographic in the store, and the melting pot of people epitomized Uniqlo’s tagline (which is currently plastered all over New York City public transit and billboards) “Made for All”.

It was certainly made for us, that’s for sure. We actually had to purchase another bag to haul back our Uniqlo treasures…