Thursday, December 27, 2007

Facing Seasonal Slump, Retailers Ramp, Up Post Holiday Promo Strategies

By Amanda Ferrante, Assistant Editor

The good news from the recently wrapped holiday season, was that retailers were very creative and pushed a lot of the right buttons to drive cross channel sales. The bad news is the efforts still fell short was and most results still fell short of modest sales projections, and retailers are still pushing hard to drive results during the last days of December.

Retailers were like little children waiting for Santa this year, lying out discount cookies for hungry shoppers to come in and make their last-minute purchases. And as talk of procrastination danced in retailers’ heads, the cycle became clear- shoppers are still waiting to get the best deals, and retailers are still slashing prices to bring consumers in.

Between extended hours and discounted prices, retailers went above and beyond to bring in shoppers during the peak holiday season. During the final weekend before Christmas, Macy’s kept eight of its stores, including its flagship in New York, open all-night from Friday through Christmas Eve.

Though its audience is generally in bed early, Toys ‘R’ Us kept its doors open until midnight. JC Penney had its “Ultimate Christmas Sale,” the Friday and Saturday before Christmas, offering a 60% discount on apparel, cosmetics, and jewelry. The department store had doorbuster specials Friday from 4 p.m. to midnight and Saturday from 6 a.m. to noon. Target’s “red-hot deals” emphasize electronics like digital cameras, portable gaming systems, the iPhone and iPod, and the must-have game, Guitar Hero.

Despite in-store shopping taking a hit, online shopping continued its climb this year. According to comScore, From Nov. 1 to Dec. 21, American consumers spent more than $26 billion on retail items online, a gain of 19% over the same period last year. The gain is attributed partly to free shipping offers and holiday discounts.

Though the holiday shopping season did not make as much an impact as hoped, retailers are making an earnest attempt to maximize the last days of the year. Though many online retailers offer free shipping during the holidays, it’s been extended in effort to entice customers.

Red Envelope, an online and catalog gift retailer, partnered with MasterCard to offer free 2-Day shopping when customers use their MasterCard for a purchase greater than $50.
Both and LL Bean are offering free shipping with no minimum purchase, and, an online shoe retailer, offers free overnight shipping. Barnes & Noble offers free shipping on orders of $25 or more through the remainder of the year.

In addition to the shipping enticement, sales and promotions are prominent at this time, giving retailers a “second chance” to make their efforts worth it. A sample of some of the post-season strategies include:

Holiday and Post-Holiday Sales
• Aeropostale offered 50% off several days before Christmas and $5 graphic tees the day after Christmas.
• Circuit City’s Red Dot Markdown sale offers up to 60% on computers and accessories- saving up to $200 in laptops. Their Internet-only deal has all iPods on sale.
• Nordstrom shoppers can earn twice the rewards points using their Nordstrom credit card during December 26-28
• Old Navy’s “Wish it, Win it” Instant Giveaway offers shoppers a chance to win everything on a wish list they create, plus a $10,000 grand prize drawing.
• Bloomingdales is taking 50% off, including sale & value items until January 1.
• Williams-Sonoma will unveil a new line of natural cleaning products called “Pure and Green.”
• Victoria Secret shoppers who buy one bra can get a second half off for the two days after Christmas. The popular lingerie company recently debuted a limited-edition fragrance, “More Pink Please.”
• LL Bean offers a $10 gift card with a $50 purchase
• Best Buy’s “Very Merry Two-Day Sale” offers free items with select purchases, like a free starter kit with the purchase of a select camcorder.
• Target is offering 10% off to shoppers who open up a REDcard credit account.

Monday, November 19, 2007

Retailers Getting Head Start On Black Friday

By Amanda Ferrante, Assistant Editor

With Black Friday just days away, retailers are thinking outside the gift box this holiday season, using new methods to shoppers started early. JC Penney is helping shoppers rise and shine by opening their doors for the traditional holiday kickoff at 4 a.m. and offering wake-up calls to consumers on Black Friday.

The wake-up call strategy is just one of the new campaigns tapping into mobile marketing, as Nordstrom and Wal-Mart are offering shoppers who sign up text messages with discounts and special sales.

While Black Friday traditionally kicked off with the arrival of the weekly circular, retailers are also using email marketing to get a head start on the holiday rush. Circuit City sent out an email on Monday with the headline “Thanksgiving Countdown—Get Black Friday Deals Now.” Other retailers like Kohl's are sending e-mail alerts on upcoming sales, offering web visitors to 10% off their next purchase for signing up.

The push to drive business during this key week is a growing imperative as recent research shows an increase in people planning to shop the day after Thanksgiving. A poll from Maritz Research found that 37%of respondents plan to shop on the day Black Friday, vs. 34% last year. While the survey found that the majority of consumers were planning to spend an average of 10% less overall this holiday season, those who plan to shop on Black Friday say they will spend $790 overall on their holiday purchases, compared to $637 for all shoppers combined.

Just like the doorbuster shoppers they hope to attract, retailers got an early start this year with campaigns beginning in mid-October, led by Wal-Mart, which launched its "sneak peak" deals to those who signed up beforehand more than a month before Thanksgiving.

Yet despite the advance notice retailers were giving customers, Black Friday web sites once again leaked the news early with circulars and coupons appearing weeks before the big day. While retailers have publicly battled against these sites, they have been quietly supported by some merchants. Jon Vincent, founder of, says big name retailers began emailing him back in August “to start the line of communication."

Looking beyond Black Friday, cross-channel retailers are also readying for Cyber Monday. According to the Research 2005 eHoliday Mood Study, 77% of online retailers said that their sales had increased substantially on the Monday after Thanksgiving in 2004. This year, NRF’s web site will feature 500 retailers throughout the holiday season.

Wednesday, October 3, 2007

90 Second Warning For Retailers

Four in 10 customers are prepared to wait a mere 90 seconds to buy goods in-store, according to recent research released by IP solutions provider Mitel. The research, based on a sample of 2,353 consumers in the UK, also found that nearly half (48%) of customers kept waiting in-store will leave the shop without buying anything and will go to a competitor.

Customers proved to be even less tolerant when they are left waiting on hold when they call a retailer with a question. Only 34% said they would stay on the phone for an average of 90 seconds. The biggest frustration for curstomers when calling a retailer, according to the data, is not knowing where they are in the queue (80%), while 74% cited being directed to a foreign call center and 68% cited the cost of the call.

Nearly two-thirds of consumers surveyed said they believe retailers need to make call centers more user-friendly and 42% think making more information online will improve customer service.

Lisa Dolphin, retail specialist at Mitel, said, "While retailers recognize the importance of the in-store customer experience and invest in displays, lighting and other mood enhancements, the telephone experience is often overlooked. With the emergence of IP communications there is no excuse for customers to be kept waiting in call queues indefinitely or worrying about the cost of the call."

Monday, August 6, 2007

Foot Locker May Be Perfect
Fit For A Potential Buyer

By Andrew Gaffney

There hasn’t been a lot of good news coming the headquarters at Foot Locker lately. The specialty athletic retailer recently notified analysts that they would post a second quarter loss, driven by significant inventory markdowns. Comp store sales are expected to drop between 7 and 8% for the period. On top of that, Foot Locker doubled the number of unprofitable stores to be shuttered this year to 250.

Foot Locker appears to be dress up its financial ledger for a potential buyer. The company recently announced that it retained Lehman Bros. to explore “strategic alternatives.”

Despite the slumping sales at Foot Locker, a few of the changes to point some silver linings for a potential buyer, including:

  • The new executive suite looks strong, after a recent reshuffle. Keith Daly, current president/CEO of Foot Locker Europe, taking over the U.S. operation is a great move. Daly is one of the best merchants and will get the chain back in front of trends.
  • The partnership with Nike on the planned House of Hoops stores could be the first fresh offering from Foot Locker in over a decade. This partnership is also significant because Foot Locker has had some fairly public feuds with Nike in the past, so the fact that two companies are working together on the Hoops concept can only be healthy for both.
  • Outside of the U.S., Foot Locker is still doing fairly well. While they are closing unprofitable stores here in the U.S. they are planning to add up 30 new locations in Europe in 2008. Dick Johnson, another strong executive within the company, will be taking the reins in Europe from Daly so international growth should still be strong.

Wednesday, August 1, 2007

New Blockbuster CEO Faces Long Line Of Challenges
By John Gaffney, Contributing Editor

Retailing is an active verb. It requires that companies that consider themselves retailers actively generate demand for their products or services. When I look at some of the retailing business models that are under siege these days, I wonder if the ones in danger understand the economics of demand.

Entertainment retailing is one of those retail business models that has taken some knockout blows from new delivery platforms. It’s still staggering. Record stores? All but done. Book stores? Having a tough time. Video stores? Blockbuster, the category leader, has posted losses in 9 of the last 10 years. In the first quarter alone, Blockbuster reported a net loss of $46.6 million, compared with $1.9 million of red ink in the same period last year.

Well, its time to meet the latest combatant stepping up to take on the tag team of Netflix, On Demand, iTunes, Amazon, Tivo and a line of other services. He’s new Blockbuster CEO James Keyes. He is credited with helping turning around 7-Eleven and putting the convenience chain back on a growth track. Wall St. is optimistically hoping he can achieve a similar turnaround with Blockbuster.

During his tenure at 7-Eleven, was credited with using business intelligence to tailor merchandise assortments down to the store level, and ultimately reducing the average footprint to run more efficiently and provide a more convenient shopping experience for their customers.

At first blush that sounds like a solid blueprint for reversing the fortunes at Blockbuster. Any number-cruncher could walk through a Blockbuster store today and point to empty aisles and crowded shelves of inventory that isn’t turning. The problem is, the foundation of the video rental business is built on a “watch what you want, when you want,” philosophy. The appeal of Blockbuster for most consumers over the years has been that you can find one of your old favorites while you are picking up that week’s new release.

If you focus on Netflix as Blockbuster’s biggest nemesis over the past six years, then there is some cause for hope that Keyes can the company around. Blockbuster’s Total Access program has clearly been turning the tides on its online competitor this year. In July, membership at Netflix actually fell for the first time in seven years, after growing at a compound rate of almost 80% per year. Blockbuster’s Total Access membership, on the other hand, has been growing at close to 50%

Putting the two movie rental giants side by side, Netflix had 6.7 million subscribers, compared to close to 3 million for Blockbuster’s multichannel Total Access program. Analysts project that the total online rental market will have more than 20 million members over the next four to six years. Assuming that growth rate is in the ballpark, the big question will be how much share Blockbuster can secure.

Ironically, in a category that has been over-run by digital formats, Blockbuster’s base of almost 5,000 brick and mortar stores has proven to be a competitive advantage. Consumers are clearly voting for the convenient choice of ordering titles online or driving over to the store for immediate gratification. The challenge for Keyes will be to deliver that convenience in a profitable way.

Blockbuster has announced plans to close another 5% of its locations this year and Keyes may be pressured to shutter even more to improve the bottom line. Of course, fewer or even smaller stores could also slow the growth of its Total Access program.

In a recent interview with The New York Times, Keyes was already looking ahead to other delivery formats, such as digital distribution, or “next wave of demand.” However, his real ticket for success will likely be punched by the strategy he builds for the traditional brick and mortar business.

A reasonable strategy, to me, would be to generate all the demand for my core product that I could. If I was running Blockbuster, I would make sure I owned key customer groups and then I’d generate demand from them accordingly. At brick and mortar locations, I would cater to moms, kids, and gamers. In fact, I’d want to own those groups. Leave the art house groupies to Netflix. Blockbuster needs to get back in front of moms and kids with the concept of movies that the family can watch over and over and over.

To an extent that seems to be what’s Keyes is doing. But he may be leaving out the demand gen part. Shrinking the footprint of brick and mortar stores, shrinking the physical inventory could be a big mistake.