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July 2007

Do we have a free marketplace or not?

On June 28, the U.S. Supreme Court ended a 96-year-old ban on establishing minimum pricing for merchandise. While we know this particular ban has long been ignored and circumvented by some, the Court's ruling gives manufacturers another weapon by which to control their products in the marketplace.

The case involved Leegin Creative Leather Products, the makers of Brighton handbags and accessories, and Kay's Kloset, a small retail store in Texas owned by Kay and Phil Smith. The Smiths sued Leegin claiming that because they had been selling Brighton merchandise at discounted prices, Leegan no longer would sell to them. The lower courts ruled in favor of the Smiths assessing a $3.6 million judgment against Leegin. The Supreme Court overruled the lower court's decision.

M.A.P (Minimum Advertised Pricing) has been the standard in many retail segments for quite some time. To control retailer's advertised and selling prices, manufacturers have long used as leverage such methods as tightly controlled distribution, subtle and not-so-subtle threats of non-fulfillment of orders, and promises of the newest products as soon as available. The result generally has been higher prices for product categories/brands such as consumer electronics, luggage, golf clubs, cosmetics, shoes, designer apparel, furniture, and jewelry.

Retailers and manufacturers often enjoy better margins from this kind of price control, but consumers pay more. It also stymies competition from smaller, less powerful retailers and manufacturers.

The bigger question is whether this ruling is good for the retail business? As a strong believer in free markets, I'm troubled when manufacturers (or retailers) are able to exert too much control over the marketplace.

Wal-Mart virtually dictates the terms and conditions its suppliers must follow to do business with them. While most suppliers want to do business with a company that buys in such large quantities, it is tough to lose so much control.

On the other side, there's Stihl, a manufacturer of chain saws and other equipment, that by choice no longer does business with Home Depot and Lowe's, the nation's two largest hardware and equipment retailers. Instead they sell only to independent retailers. This decision stems from the excessive demands made by large national retailers to sell at a price they choose rather than that recommended by Stihl.

If I were a betting man, I'd wager this issue will come up before the Supreme Court again. Retailers and consumers are not going to be happy with the long-term impact this ruling will have in our free marketplace.

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Competition in the Home Furnishings Business!

Across the country, fierce competition for customer attention and dollars is the norm in virtually every segment of retailing. But there may not be a more competitive retail segment than home furnishings. Here in Southern California, from Santa Barbara to the Mexican border, there are dozens of formidable competitors selling everything from bedroom and living room furniture to accessories. The number of multiple-location retailers just selling bedding is staggering. The Southern Florida/Miami area is a hot-bed of home furnishings competition as well with such retailers as City Furniture and El Dorado Furniture leading the way.

Texas, ranking third in the nation for the number of home furnishings stores, also is becoming a major battleground in the home furnishings war. With larger cities like Dallas, San Antonio, Austin, and Houston, Texas supports stores representing the best-known national chains. But the battle for Houston's home furnishing customers may turn out to be the most fiercely contested of all.

For years, the major players in Houston have been Fingers Furniture with six locations, Star Furniture with seven locations, RoomStore with six locations, and Gallery Furniture with its high-volume single store. Also in Houston are The Mattress Firm with 20 stores, a large Ikea store, the usual department stores, and a contingent of smaller independents.

While there has been moderate growth in the number of stores serving the Houston marketplace in recent years, the competitive environment has been fairly stable. That's all about to change. In the next few weeks, Fingers Furniture is expected to begin opening the first of a dozen Ashley Furniture HomeStores. And just this week Rooms To Go, the nation's second largest furniture chain, announced it will be opening four stores in the Houston area early next year. In Dallas, Rooms To Go operates six main stores, two clearance stores, and four Kids & Teens stores. Speculation is they very well could be planning to open the same number of locations in the Houston area as well.

Some of the smaller local home furnishing retailers certainly will be negatively impacted by this increased competition. As economically healthy as the marketplace is, it will be interesting to watch as the big retailers fight the battle for the attention and dollars of Houston customers.

WHAT'S HAPPENING AT SEARS?

After another quarter of declining sales, Sears management is asking investors and critics to be patient. Same-store sales for the first quarter were off 3.4 percent, after being down 6.1 percent for the last fiscal year. Two years after Sears and K-mart merged, sales continue to decline and the stores are more ragged looking and poorly merchandised than ever. It looks to me as though Chairman Edward Lampert has a death wish for this once-great company. The decision to stop investing in store improvements unfortunately has negatively impacted the hundreds of shopping centers and adjacent retailers where Sears and K-Mart stores are located.

LOSING A GREAT RETAILER!

On Saturday, June 9, Marion Halfacre passed away at just 58 years old. You may not know of this extraordinary retailer unless you are involved in the jewelry industry. In 1979, Marion and Lula Halfacre bought a small store in Newport Beach, California. Traditional Jewelers, having moved and expanded over the years, is now one of the nation's best independent jewelry stores. On top of building a highly successful business, Marion Halfacre served as president of the California Jewelers Association, was on the board of directors of Jewelers of America, and served on the JCK Show advisory board. He was truly a good guy and died way too young.

DOWN TO THE WIRE...

• Recently JC Penney announced the opening of 250 new stores by 2011 with 80 percent of them to be in off-mall locations.
  
• If your customer base includes teenagers and young adults, newspapers are likely a waste of your advertising dollars. In a new study, just 16 percent of young adults between 18 and 30 and 9 percent of teenagers said they read a newspaper every day.
  
• Co-founders Kip Tindell and Garrett Boone have sold controlling interest in The Container Store to Leonard Green & Partners, a private equity firm. Congratulations to these two extraordinary merchants for their amazing success and for taking the opportunity to cash in on their hard work.
  
• Congratulations to Miami's El Dorado Furniture on its 40th Anniversary.
  
• Sports apparel maker Under Armour announced the opening of its first store this fall.
  
• And Oprah announced the opening of a store in Chicago later this year
  

ONE FINAL THOUGHT!

On occasion we are all confronted with something that either surprises us, delights us, or makes us think. Last week while waiting for my flight in the new American Airlines terminal in Dallas, a large group of returning American soldiers entered the glass-walled walkway above the terminal's main floor. As the soldiers entered this hallway, several hundred people waiting for their flights stood up, clapped their hands, and cheered.

It was one of the most moving events I've experienced in a very long time. It made me proud to be an American. It also made me sad to think about how poorly we treated the soldiers returning from Vietnam. Hopefully we've learned that these brave men and women deserve our total support regardless of the politics involved in going to war.

Until next month...

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Into the Future: Powerful Trends Shaping the Future of Retailing

Understanding retail and consumer trends gives retailers the tools they need to prepare for the future. It gives them an upper hand to make sure they are in the right place at the right time with the right merchandise. Success doesn't come by chance.You have to make it happen. And in the retail industry, it means satisfying the wants and needs of consumers. But what they want today is not necessarily what they'll want tomorrow. With an awareness of marketplace and consumer trends, retailers can plan for tomorrow before it's too late.

After extensive research, George Whalin has compiled his findings and put together an energetic, enlightening, and entertaining keynote presentation entitled "Into the Future: Powerful Trends Shaping the Future of Retailing." Some of the trends are real eye-openers, some are even shocking. All of them give retailers the insight needed to attack the future and win!

Time is of the essence. Put this on the agenda of your next convention, conference, trade show, or expo.

For details on this and other convention and trade show topics, go to our web site or call 800-766-1908.

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Seminars and Training Programs for Managers and Associates

Delivering performance-enhancing speeches and seminars for retailers since 1987, George jam-packs his presentations with practical, real-world information. His seminars for managers and associates teach store management skills, customer service improvement, and sales techniques. If you want to improve store productivity and profitability in 2007, we encourage you to call George Whalin. Don't wait, his calendar fills up quickly.

Topics for managers' meetings and corporate conferences:
(Click on a topic for details)

Great Store Managers Make Great Stores!

How to Find an Eagle in a Flock of Turkeys! Finding, Hiring, and Keeping the BEST Retail Employees

Customer Focused Selling

Every Customer Every Day!

For more information go to our web site or call 800-766-1908.

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Resources for Retailers

George Whalin's book RETAIL SUCCESS! is now in its ninth printing. A number of consumer products manufacturers have purchased the book for their retailer customers. Retailers have provided copies for their managers who regularly refer to portions of the book in their managers' meetings. And managers are referring to the book in their daily store meetings. If you haven't purchased a copy yet, what are you waiting for? For multiple copies, call us for volume pricing. For individual copies, there are also some very good deals to be had at amazon.

Go to our web site today where you'll find several other books in addition to RETAIL SUCCESS that George recommends. Check it out often, he keeps adding to the list.

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If you have an opinion or thoughts about any of the topics posted, I invite you to comment at retailerblog.com It's easy to do. And if you have a topic you would like to see addressed on the blog, send me an e-mail at george@whalinonretail.com.

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In addition to speeches and seminars, George also consults with retailers helping them improve the operation of their businesses. His consulting services include helping retailers with strategic planning issues, marketplace positioning, merchandising and store layouts, developing results-driven marketing and advertising programs, personnel management, and improving store performance. If you need solid, practical, proven insights and ideas to grow and improve your business, call us toll-free at (800) 766-1908.

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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 2007. Reprinted with permission from George Whalin's Retail Management E-Letter. To occasionally reprint portions of this newsletter one time, no express permission is required. To reprint in more than one venue or multiple articles, please contact us at 800-766-1908 or info@whalinonretail.com.

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