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August 2010
LOOKING FOR PROFITS!
 Between the considerable impact of the recession on consumer spending
and the aggressive pricing policies promoted by Internet merchants,
there has been an indisputable assault on retail profits. For brick and
mortar retailers few categories of merchandise have escaped the
consequences of this discount trend. This is leaving retailers with
real challenges to the bottom line.
With fewer customers coming into their stores coupled with smaller
individual transactions, how can retailers generate the profits needed
to sustain their businesses? The obvious answer (and what I've been
preaching for months): Reduce operating costs and pare inventories down
to levels that more accurately reflect today's sales levels.
Cost cutting and reduced inventories have in fact helped some reatilers
generate profits. In recent weeks many of the nation's publicly held
retail organizations reported their latest profit numbers and they
appear to be pretty good. Unfortunately, the sales numbers remain
quite anemic. With poor sales numbers threatening the back-to-school
season, a growing number of apparel and school supply retailers hope to
create traffic by resorting to aggressive price reductions.
It looks to me like the only winners in this scenario are the shoppers.
Retailers continue to give customers self-defeating lessons in
shopping. If consumers wait long enough they will eventually be able to
get what they want at extraordinarily low prices. While pricing certainly is
among the three or four important considerations that has changed
appreciably in the last two years, in every consumer survey taken
lately, low prices are now the driving force in consumer buying
decisions.
So what's the answer to this problem? Can this obsession with low
prices that both retailers and shoppers have be mitigated and
downplayed? Yes, but it won't be easy and it won't happen overnight.
One way is for retailers to go back to the beginning and look at the
strategy that helped them build their businesses in the first place.
When Steve Jobs began to build the Apple store business he was (and
still is) obsessive about offering innovative merchandise that
customers would fall in love with and want to own. When Mickey Drexler
took over as CEO of J. Crew, he, too, was obsessed with offering really
cool, highly desirable apparel that people really want to own‹apparel
that would not be sold at the lowest price but at a price representing
real value.
In my most recent blog posting I wrote about Trader Joe's. This
extraordinary food retailer truly defines value, fun, and an amazing
shopping experience without holding "sales" or great markdowns to get
customers in its stores.
If you are having problems with profitability that is being driven by
aggressive pricing and discounts, I strongly encourage you to
reevaluate what you are doing and explore a new strategy and direction
for your business.
SHOULD AMERICA HAVE A VALUE ADDED TAX?
As the Congress keeps on grappling with our massive national debt, the
discussion has turned once again to imposing a Value Added Tax onto the
U.S. economy. Such a tax has long been common in European countries and
has usually been the reason for little or slow growth in their
economies. A recent study by the National Retail Federation found that
consumers don't want a substantial new Value Added Tax, and such a tax
would result in a cutback in spending.
THE GROWING INFLUENCE OF SMART PHONES!
A number of businesses including Bling Nation and eBay's PayPal
division are introducing products that allow people to make purchases
in stores, restaurants, and coffee shops via their mobile phones. This
can all be done without the use of a credit card, debit card, or cash.
It also appears some major companies, including Apple, AT&T, and
Verizon Wireless will soon be offering similar services.
NEIGHBORHOOD TOY STORE DAY!
The American Specialty Toy Retailing Association (ASTRA) launched a new
national Neighborhood Toy Store Day program to be held annually on the
second Saturday in November. The inaugural event, at which ASTRA will
announce the 22 winners of its 2010 Best Toys for Kids awards, will be
held Saturday, Nov. 13, 2010. For more information go to ASTRA's web
site at www.astratoy.org.
NEW STORES AT THE CRYSTALS IN LAS VEGAS!
Crystals, the new extreme luxury shopping center in Las Vegas, is
beginning to fill all of that space with new tenants. New stores
expected to open this fall include Donna Karan, Stella McCartney, Yves
Saint Lauren, Prada, Gucci, Harry Winston, Emilio Pucci, and
Balenciaga. The good news? Luxury retailing has seen something of a
rebound in recent months. Unfortunately Las Vegas retailing was
hammered by the recession with its luxury retailers among the
hardest hit.
Until next month...
Tom Peters, one of the world's most respected, best-known
business gurus and best-selling author, named Retail Superstars, Best Business Book
of 2009.
There are thousands of business books published every year, So
for him to recognize a book on retail as the best book of the
year is great for the retail industry. It is an incredible honor
to receive this kind of recognition from Mr. Peters.
We encourage you to pass this publication along to
your associates and colleagues. If all or any portion of this
newsletter is reproduced in another publication, attribution
should read as follows: Copyright 2010. Reprinted with
permission from George Whalin's Retail Management E-Letter. To occasionally reprint portions of this newsletter one time, no
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please contact us at 800-766-1908 or info@whalinonretail.com.
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