Thursday, March 22, 2012 | Edited by Daniel Moores
||Size Matters in Retail -- But Just What Size?
Supercenters, Super Targets, Big Ks Are Taking a Backseat to Smaller Formats
Winn-Dixie's response was swift when Walmart announced in 2004 that it was bringing Supercenters to Cincinnati. The company closed its 21 local Thriftway supermarkets rather than wait for their inevitable demise courtesy of the Walton clan.
For most of the past five decades, bigger was indeed better for the big-box stores. Over the past 20 years, Walmart Supercenters, Super Targets and Big Ks sprang up across America, and none was better at big than Walmart. It devoured farms, fields and entire supermarket chains to build the megastores, which often assumed leading market shares -- sometimes in as little as a year.
But, more recently, something happened as Walmart began saturating even more markets with its Supercenters. The model stopped working so well. And small has suddenly become beautiful -- or at least a lot more alluring -- for Walmart and other retailers. The big-box epoch may be winding down.
This year, Target will open a series of smaller-format, supermarket-size City Targets in an effort to expand into urban centers such as San Francisco, Seattle and New York.
Kohl's expansion plan has switched primarily to stores in the 60,000-square-foot range, down substantially from the 90,000 square feet typical in the past. Thirty of the 40 locations Kohl's opened last year were small-format, and "substantially, all (20 new) 2012 stores will be small," Chief Financial Officer Wesley McDonald said on a February earnings call.
Walmart, though continuing to build Supercenters, is also shifting its focus to smaller stores.
Last year, in an expansion of 9.6 million square feet, the retail giant added 119 Supercenters via new construction or remodeling smaller stores in the U.S., but only 27 small-format stores.
Walmart plans an expansion of 14 million to 15 million square feet this year, but that growth could come largely from 80 to 100 new small-format stores, mainly supermarket-size Neighborhood Markets, Walmart U.S. CEO Bill Simon said in a February earnings call.
"Supercenters remain the best format to capture market share," Mr. Simon said. "And we remain committed to growing through new Supercenters, as well as smaller formats."
But the reality is that Supercenters have stopped carrying their own massive weight, at least on the top line. In its fiscal fourth quarter, ended Jan. 31, Walmart U.S. had same-store sales growth of 1.5% -- less than grocery inflation of 4% -- and smaller stores helped sluggish overall comps.
"The Neighborhood Market format continues to deliver above-industry results, with approximately a 5% comp during the fourth quarter and positive traffic throughout the year," Mr. Simon said.
Translation: Smaller locations' same-store sales growth was more than three times Walmart U.S.'s overall figure. They also had positive traffic for the entire year, vs. only the fourth quarter for Walmart U.S.
Part of the story is product mix. Neighborhood Markets, mostly with food sales, benefited from food-price inflation. They also have little exposure to categories (such as apparel and electronics) that have been declining for Walmart. For example, same-store electronics sales had been dragged down by deflation rather than boosted by inflation.
But there are structural reasons that Walmart and others are moving away from megacenters and other large-format stores, according to Leon Nicholas, director of retail insights for Kantar Retail.
"The supercenter certainly is not the format of the future," Mr. Nicholas said. "Part of that is demographics, because you've got smaller families now with Generation Y who are more likely to live in urban areas and have more options to choose from. They can save time by shopping at smaller formats."
E-commerce is another major driver of megastores' decline.
"Online enables me to capture not only those long-tail kinds of stock-keeping items -- items I buy infrequently and the store doesn't need to have -- but also those replenishment items, like diapers," Mr. Nicholas said.
Besides stepping up its number of supermarket-size stores, Walmart is experimenting with smaller formats, including a 3,500-square-foot Walmart on Campus with a pharmacy and a basic assortment of food and personal-care items, in Fayetteville, Ark., near its Bentonville headquarters.
It is testing a somewhat larger alternative, Walmart Express, in 15 stores in Arkansas, North Carolina and Chicagoland. These stores carry a fairly wide range of food and household items, including such things as outdoor garbage cans, in a space 10,000 square feet to 15,000 square feet bigger than most dollar stores but less than a third the size of supermarkets.
Getting the assortment right in small stores may be a trial-and-error experience. "Trying to cram everything from a big box into a small box is not the way to go," Mr. Nicholas said. "It's a different shopping-trip mission, so it takes a different assortment."
Walmart and other big-box retailers must determine how to remove selection from stores at the same time as they use them as outposts to deliver a wider range of products online -- something that's in the experimental stage, according to Mr. Nicholas. He also sees potential in the U.S. for an approach that Tesco has tried in South Korean subways, creating virtual store shelves in two-dimensional physical spaces to facilitate mobile orders.
Their huge footprints mean megastores will be around for years, probably decades, "but they're not going to be a source of growth," Mr. Nicholas said. He expects to see an increasing amount of their space converted to service offerings.
While smaller stores are widely viewed as a way for traditional big-box retailers to further penetrate urban markets, they also have possibilities elsewhere.
Walmart appears to be getting decent traffic at such stores in smaller towns in northwest Arkansas, an area already heavy with Supercenters, and in rural towns too small to support the big boxes that are 10 miles to 15 miles away from them.
But don't count out big retail entirely, even in urban areas. One of Target's three Brooklyn stores is among the chain's biggest -- 225,000 square feet on two levels. Target's Harlem store is smaller but, at 174,000 square feet, still of megastore proportions. Even the smaller "City Target" format is twice as big as many supermarkets -- 85,000 to 89,000 square feet in San Francisco and in Portland, Ore., respectively.
A Target spokeswoman said lessons have been learned from New York, where stores have walk-in rather than drive-in traffic and serve a population far denser than a typical suburban Target. They include stocking shelves wider and deeper with smaller sizes of everyday necessities, and making departments such as automotive and outdoor merchandise smaller -- but not necessarily making stores small.
(Source: Advertising Age, 03/19/12)
||Spring Apparel, Candy to Send Easter Sales Past $16 Billion
It seems even high prices at the pump can't keep the Easter Bunny away this year. According to the National Retail Federation's Easter spending survey, conducted by BIGinsight, Americans will shell out an average of $145.28 on everything from apparel and candy to food and decorations this year, up 11 percent from last year. Total spending is expected to reach $16.8 billion.
"Though the price of gas is on everyone's mind, Easter is one of the few holidays some consumers are willing to stretch their budgets, especially because many children look forward to treats and new outfits on Easter morning," said NRF President and CEO Matthew Shay. "Retailers will make sure to offer plenty of promotions on candy, apparel, food and decorations in the coming weeks for eager holiday shoppers."
According to the survey, those celebrating Easter have a hefty appetite for candy and new spring clothes. Nearly half (48.5%) will head to the stores to take advantage of retailers' spring sales on colorful fashions and accessories, with total spending on those items expected to reach $3.0 billion.
Most though, will head straight to the candy aisle (89.3%), shelling out more than $2 billion on traditional favorites such as chocolate eggs and jelly beans. The average person will spend more on these items as well: $26.11 on apparel, up from $21.51 last year, and $20.35 on candy, up from $18.55 last year.
Americans are also set to fork over more on their Easter meals with the average person expected to spend $44.34, up from $40.05 last year for a total of $5.1 billion.
Additionally, consumers will spend an average of $20.57 on gifts for their friends and family, $10.50 on flowers and $9.07 on decorations for their home and office. Half (53.6%) will buy greeting cards, spending an average of $7.04.
Though most people will shop at their local discount store (63.5%), department stores can expect a nice treat this Easter as well. Four in 10 (42.6%) -- and the highest percent in the survey’s history -- will shop at a department store for gifts and other holiday merchandise.
Online retailers will see the biggest jump in traffic this year, however. Nearly two in five (18.7%) will shop online, up from 14.8 percent last year and just 11.1 percent in 2008. Others will shop at specialty stores (25.4%) such as a jeweler, electronic store or florist, or a specialty clothing store (9.7%).
"Beautiful weather conditions coupled with a slight lift in consumer confidence will likely be a boon to the Easter holiday this year as consumers begin to seek out new spring merchandise for their home or garden, and even their wardrobe," said BIGinsight Consumer Insights Director Pam Goodfellow. "It remains to be seen though, if this spending momentum will carry into the coming months with the cost of fueling up on the rise."
Now a common shopping tool for millions of Americans, more than half (52.3%) of tablet owners celebrating Easter will use their device to research products and purchase gifts and other merchandise. Specifically, 25.7 percent say they will purchase something and 36.6 percent plan to research products and compare prices. More than one-quarter (26.3%) will look up company and store information, such as store hours and location, and 15.3 percent will use apps to research and purchase products.
Additionally, 43.3 percent of smartphone owners celebrating Easter will use their mobile device to research and/or purchase items.
(Source: National Retail Federation, 03/20/12)
To access the complete survey results, click here.
||Luxury Shopper Surprise: Men Buy Like Women, Vice Versa
High-end spending is on the rise. According to Bain & Co., the demand for luxury goods has grown by double digits since the end of the financial crisis.
However, it's not just the demand that's surprising the experts. Luxury retailers are also seeing an unexpected new shopping trend -- men are shopping like ladies and the women are buying like guys.
It turns out traditional gender roles are no longer trendy when it comes to luxury.
Take Ferrari, for example. Many of the drivers clamoring for keys to the Italian sports car aren't who you might expect.
For many years, women in the North American market made up just 1% of Ferrari's customers, according to Marco Mattiacci, president of Ferrari North America. However, there has been a dramatic gender shift. Now, 10% of Ferrari owners in North America are women. The "feminization" of the Ferrari market in China is even greater -- Ferrari has seen the number of female buyers rise to 30%.
As for proof the luxury market is booming -- the automaker recently saw its limited edition $295,000 Ferrari FF, listed in the 2011 Neiman Marcus Christmas catalogue, sell out in 50 minutes.
The luxury gender twist doesn't stop with cars; men are making some surprising purchases, too.
"Over the last few years I have noticed a lot of people, men, are interested in shoes," shoe designer Christian Louboutin said.
Louboutin says the thrill of owning something beautiful knows no gender boundaries.
"The demand for men's shoes has been growing incredibly fast," he said.
That growing demand is being met by increased supply, with famous designers including Louboutin and Jimmy Choo now designing high-end shoe lines for well-heeled men.
The division of International Business Machines that provides retail analytic services projects men's apparel sales to increase more than 8% in the first quarter of 2012 over last year. This is especially noteworthy since IBM's metrics mark 2011 as the best sales year on record for men's apparel.
High-end American accessory retailer Coach began as a men's business more than 70 years ago. The company is now coming full circle, with men's accessories the brand's biggest growth driver.
Coach Vice President of Men's Merchandising, Greg Unis, told CNBC he believes Coach's men's division will grow from $200 million in 2011 to a billion-dollar business within the next three to five years.
While the majority of the square footage in Coach's flagship New York City store remains devoted to women's bags, shoes and accessories, one of the most trafficked sections is the men's boutique, aesthetically and deliberately set apart.
"Men are becoming more comfortable....We have men coming into the store that got a wallet for a graduation gift 10 years ago and (leaving) with a briefcase. They're trading up into the brand," Unis said.
And don't forget the manbag, no longer an urban myth but a bestseller. Unis says the sling pack for men is a top-seller around the world, and it's been hard to keep them in stock.
"We're learning how big this opportunity is. And when we think we have enough we sell out," he said.
(Source: CNBC.com, 03/19/12)
Daily Sales Tip: When the Prospect Says Yes, Then Does Nothing
This situation occurs in about 1 in 3 sales training sessions I conduct. It's one of my favorite (not really) things to hear from salespeople:
I GOT THE VERBAL!
You got the verbal? You got nothing.
If you're a professional salesperson, you probably already know this. If you're new or struggling, here's the tip:
IT'S NOTHING UNTIL IT'S SOMETHING.
Deals go bad. Prospects lie. Things change. All of these events can change the VERBAL in a New York minute. So what should you do?
1. Watch what they do, forget what they say. If someone gives you a VERBAL, take it at face value and keep your own emotions and expectations in check.
2. Drive the process. Once the VERBAL comes, it's your job to drive to an end. Share the crystal clear steps: i.e., Thanks, Joe. Here is a document that outlines specifically what happens next.
3. Stay mentally behind the deal. Everyone around you will want to "get excited." Not you. You stay even-keeled. You get excited when the money hits your checking account.
Last but not least. No matter who asks, never again say: I GOT THE VERBAL.
Source: Bryan Neale, sales trainer/consultant