Friday, March 26, 2010

Kenmore Live Studio—Can Sears Resurrect Its Brand?

We just visited a fascinating experiment from Sears called Kenmore Live Studio. Dubbed a “social media factory”, the basic idea is that this will become a physical space to showcase the Kenmore brand. While we’ve been lamenting a lack of creativity, this is certainly a concept that is pioneering a new direction.

Kenmore Live Studio is located on the corner of North and Wells in Chicago. It is a curious place to put the concept, a trade area that is more restaurant and/or art gallery than retail. It will not have the walk-by traffic that one would associate with “pop-up” locations but may be fine for the purposes of a destination draw. The space is designed to be a gallery of sorts for the Kenmore brand, with the focal area being a stage/demonstration area for cooking classes and live events. This content is then edited live and disseminated via Kenmore’s Facebook page… The format just opened with plans to be around for six months. Generally closed during the day, the main interactions will be on evenings and weekends. They have already hosted chefs, a cookie cook-off and a demonstration for organization tips.

This is an intriguing idea—part social media, part pop-up—that explores new ways that brands will begin to interact with customers in the future. Interestingly, nothing is for sale, so the real measure will be in visibility for the Kenmore brand (or, at minimum, new Facebook friends. There are now just 439 of us, so there is tremendous room for growth for a brand that is in tens of millions of American homes).

We did not see the concept in full action though we did drive-by on a weekend night and the huge flat screen TV does draw interest from the streets. You can also watch the space live on Facebook and measure crowd appeal. The success will obviously lie in content programming—a quick look today reveals no “scheduled” events, only past ones, and this kind of medium needs constant attention.

To the bigger picture, we wonder about the mother brand, Sears, and its future. While it seems to clearly be losing the brick and mortar war in the Sears format (year upon year upon year of comp store declines is our real indicator, not how much profitability can be wrung from the box…), they do seem to be doing a lot of things right in the e-commerce space. The web site and sales continue to grow; they remain leaders in creating site to store solutions with ideas like My Gofer and do seem to be very aggressive with social media, mobile apps and the like. Much of this may be window dressing if the core stores can’t turn around but slowly, perhaps, the image of Sears is beginning to change.

Kenmore Live Studio is another compelling glimpse into a multi-channel future.

Tuesday, March 16, 2010

Martin & Osa--RIP

This week, American Eagle Outfitters officially pulled the plug on their ambitious Martin & Osa concept. This will mean the closing of 28 locations and the end to yet another experiment by a specialty retailer to target an older demographic. Abercrombie & Fitch had already pulled the plug on their upscale and older Ruehl experiment.

With our recent blog on the closing of Fashionology, we seem to be spending more time writing obits than we do celebrating the opening of new ideas. This is surely a sign of the times: the optimism inherent in these brand extensions simply doesn’t exist today. Both Reuhl and Martin & Osa suffered from a combination of bad timing as well as a struggle in truly finding their identity.

Straight out, we were big fans of Martin & Osa (even typing this blog has me in M&O fashion). We loved the lifestyle approach, particularly evident in the early stores where music, books and eclectic merchandise also accompanied the fashion. There was the wonderful back stories of the intrepid adventurers (yes, they were real folks) that anchored the men’s and women’s collections. The store design was visually stunning and cool and had some awesome dressing rooms!

Ah, but what about the product? It seemed maddeningly hit or miss. But, of course, this was highly dependent on which customer it was being designed for. The price points and styles jumped all over the map, which led to some great (for the shopper) markdowns but undoubtedly hurt the bottom line. In fact, they announced over $40 million in losses on the 28 stores which led to the inevitable plug pulling. We loved some of their fashion but it was never entirely clear as to what precisely Martin & Osa’s role would be (it seemed to want to play somewhere in the Banana Republic/J. Crew genre but never had those concept’s clarity). The clothing was casual but didn’t really transition to the workplace. It was conservatively styled but lacked some flair to make it the right choice for a night out. And, while we knew of several men who owned pieces, the women’s side (which, of course, is always more important) never seemed to connect on quite the same level.

But, we found ourselves rooting hard for the concept to find its legs. It has great imagination—it failed to back that up with product that matched the ambition. We look forward to a day when we can glowingly write about new ideas that are trying to break through the clutter. In the meantime, we suspect there are a few more of these unfortunate obits still on the way.

Wednesday, March 3, 2010

Location, Location, Brand

Walgreens’ recent acquisition of Duane Reade and Ahold USA’s purchase of the venerable Ukrop’s chain has put us in a reflective mood. First, these and some other recent acquisitions (Tops acquiring P&C Food) or attempted acquisitions (Albertsons announced offer for Bashas; Simon’s offer for General Growth) suggest that we might be beginning to see some real M&A activity after a fairly prolonged drought brought upon the freezing of capital markets. However, most of the acquisitions would be classified as “strategic” buys, retailers buying retailers, which suggest that the private equity guys still remain largely on the sidelines.

The notion of a “strategic” buy is really at the heart of what we’re musing about. On the surface, both acquisitions are simple enough to understand. They are real estate motivated—Walgreens getting access to 250 or so coveted locations in the densest market in the US and Ahold, through its Martin’s division, extending its store base in Virginia. However, acquisitions are rarely “simple”, as culture, format uniqueness and long ingrained shopping habits play a large role. In both of these cases, giant chains are taking over relatively small companies so the assumption is that the smaller companies will be quickly absorbed into the bigger firms’ brands and cultural folds.

As we dig further into the details, both begin to get interesting. Shortly after acquiring Ukrop’s, an announcement was made that the Martin’s name would become the main banner. This makes a world of sense from a synergy standpoint but also erases one of the most venerable names in food retailing off the map, not to mention an institution in their hometown of Richmond. Right or wrong, this is not a slam dunk decision but easily understood. Shortly thereafter, the first and highly unlikely culture test came into play—hereafter known as the great Girl Scout cookie incident. Seems that Ukrop’s has a long-standing tradition of allowing local charitable institutions to sell outside their stores--Ahold does not and banned the practice. The publicity that ensued (mostly negative for Ahold) is almost comical in scale but highly illustrative of the dangers of messing with culture. The much bigger deal ahead is that Ukrop’s, due to religious beliefs, never sold beer and wine and closed their store on Sundays. Again, Ahold is making a simple decision to reverse those sales killing decisions this Spring and it should theoretically yield almost an instant 20% sales gain. But, as the Girl Scout flop shows, messing with a brand is serious business.

The dust has yet to settle on Walgreens/Duane Reade. Again, on the surface, the locations Walgreens will secure are almost priceless and will allow for penetration in the New York City market that would be impossible to duplicate. A few short years ago, the Duane Reade brand (and stores) was in critical condition. Famously cluttered and with indifferent service, it was a brand New Yorkers loved to hate. But, the current management team has done a remarkable job of making over the chain. A new logo, stunning new store design, new private brand programs, an emphasis on higher end beauty and a re-dedication to customer service woke up Duane Reade (and was probably a significant contributor to the $1 billion + purchase price). So, now what? It would be an easy decision to turn these stores into Walgreens and gain instant synergy. Or, does Walgreens choose to let Duane Reade remain independent and perhaps be the template for urban stores? Whatever the decision, Caveat Emptor (let the buyer beware)—there is more to a Brand than meets the eye.