Management Consulting/retail management

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Question
Soft goods specialty retailers are on a quest to grow, with the high-growth ``stars’’ working to maintain momentum by rolling out successful concepts nationally while investing in new concepts that offer long-term promise. The less stellar performers are reinvigorating tired concepts and strengthening margins via better inventory and promotion management. A saturated marketplace will motivate more specialists at both ends of the spectrum to seek growth by building a portfolio of concepts focused on ever-finer customer groups. Concepts will vie for more attention by developing and applying deep customer insights to their assortment strategy, the shopping experience, and store brand building and communication.

The Retail Landscape
Many soft goods specialty retailers have seen recent improvements in sales and profits, but for most, the recovery is modest in nature and has done little to negate the pervasive price pressure on retail margins. The sustainability of the recovery is questionable given poor comparable stores sales performance.

Modest Recovery
Since bottoming out in the first part of this decade, sales have steadily improved in both the apparel and accessories specialty store and shoe specialty store channels. Yet, growth remains modest compared to the late 1990s.

…2…

  The long-term sales outlook for apparel and accessories specialty stores is stronger than for shoe stores. Apparel stores are forecast to grow in the 4 to 5 percent range annually through 2008, while shoe stores are forecast to grow mostly around 1 percent a year over the same time period. Much of the sale improvement has gone straight to the bottom line for apparel and accessories specialty stores. Though still well below its performance in the late 1990s, the sector has improved another important measure of profitability, return on net worth.
  In contrast, the very modest sales improvement among shoe specialty stores has not translated to improved financial performance, with the average net profit margin for publicly held shoe retailers declining. The financial struggles facing the shoe store channel are evident in the closing of individual stores and entire divisions by some of the channel’s leading players.
  Pervasive price pressure has contributed to the commoditization of apparel and footwear, particularly basic styles that are easily sourced and widely distributed. Commoditization has also been propelled by the growth of Wal-Mart (www.walmart.com) and Target (www.farget.com), both of  which offer wide assortments of basic and fashion-focused soft goods at sharp price points that appeal to a broad swath of consumers. This has increased the pressure on many retailer margins as their increasingly undifferentiated assortment goes head to head with price-driven retailer margins as their increasingly undifferentiated assortment goes head to head with price-driven retailers off the mall.
  While apparel price deflation has made it challenging for soft goods specialists, many have proven worthy of the challenge. The availability of cheaper products allowed many of these specialists to improve inventory turns, resulting in a slight increase in their return on inventory ratio since  1998. This improvement reflects a focus by many apparel specialty store
…3…

retailers on a combination of better markdown strategies, improved inventory management, and introduction of higher-margin fashion items.

A Challenging Environment
Soft goods specialty retailers face a crowded marketplace that is steadily becoming even more competitive. Most shoe specialty stores are faring far worse than the apparel specialists in the competitive wars. Off-mall retailers, including discount department stores/super centers and Kohl’s (www.kohls.com), are capturing apparel and shoe share of preference at expense of mall-based retailers, including specialty stores. Consumer preference for purchasing apparel is strongest at discount stores/super centers.
  The upward trend for discounters contrasts with a decline in spending preference for clothing at apparel specialty stores, value department stores, and traditional / upscale department stores in the same time period. For shoe purchasing, shoe stores are actually gaining spending preference, although the price-driven discount store/super center channel is as well. Shoe, discount, and apparel specialty stores are capturing shoe spending preference from value and traditional department stores, particularly Sears (www.sears.com) and Dillard’s (www.dillards.com), as well as Payless (www.payless.com).
  The upward trend for discounters contrasts with a decline in spending preference for clothing at apparel specialty stores, value department stores, and traditional / upscale department stores in the same time period. For shoe purchasing, shoe stores are actually gaining spending preference, although the price-driven discount store/super center channel is as well. Shoe, discount, and apparel specialty stores are capturing shoe spending preference from value and tradition al department stores, particularly Sears (www.sears.com) and Dillard’s (www.dillards.com), as well as Payless (www.payless.com).
…4…

  Although department stores have suffered the most at the hands of off-mall retailer growth, many are reinventing themselves. Key elements of the department store reinvention include a stronger, more exclusive, and more differentiated brand and style assortment supported by upgraded, easier-to-shop stores. Thus, department stores now contribute to more competitive intensity in the apparel and footwear playing filed, particularly for upscale customers. The profile of monthly shoppers at traditional/upscale department stores is similar to that of monthly shoppers at apparel specialty stores in terms of higher income and education levels – although apparel store customers skew younger.
  Competitive battles are also escalating due to the entry of a number of foreign specialty store retailers to the marketplace. Though most of the new foreign players operate only a handful of U.S. stores at this point in time, several intend to ramp up their store openings after establishing an initial base of stores.
  Some suppliers are also branching out to target new customers with new specialty store chains to attain growth in the face of modest prospects at department stores. Polo Ralph Lauren (www.polo.com) is launching Rugby, a new brand and chain of stores targeting college-aged consumers. Oshkosh B’Gosh (www.oshoshbgosh.com) is testing a family lifestyle store targeting men and women.
  A final factor contributing to heightened competitive pressure is the expansion of full-price specialty store chain s by several soft goods suppliers. A number of catalog retailers that are fairly new to retailing are also rapidly building store chains. Although the track record of most soft goods suppliers has been spotty when it comes to operating successful full-price retail stores – and several are closing unsuccessful concepts – it is clear that most of the majors view full-price retail as another avenue for growth that most be pursued as a consequence of overall retail maturity.
…5…

Suppliers with the most substantial full-price store base include Jones Apparel Group (primarily shoe stores, www.jny.com), Liz Claiborne (primarily via Mexx in Europe and Canada, www.liz.com), and Polo Ralph Lauren. The two soft goods catalog retailers relatively new to full-price retailing that are most actively building their store chain are Coldwater Creek (www.cp;dwatercreek.com) and J. Jill (www.jjill.com).
  Growing diversity is making it more difficult for many specialists to adequately address the needs and expectations of all of their target customers – a critical requirement for success in the specialty store arena. Diversity is also propelling more retailers to tailor assortments and adjust merchandising tactics on an individual store basis. Previously, many only altered the offer to reflect regional seasonal variations and market size differences.
  Apparel and footwear are steadily capturing less of the consumer’s total spending, This is in part due to a shift in consumer spending priorities toward necessities (home, health, and transportation), as well as toward new everyday ``luxuries’’ such as eating out and entertainment – which including products such as consumer electronics. sporting goods and toys, and the cost of fees/admission to sporting events, concerts, movies, clubs, and other types of events.
  Consumers are increasingly willing to cross channels to shop a growing number of retailers – from mass to class – for apparel. They are more apt to trade down on staple wardrobe elements while trading up on aspirational, ego-intensive purchase and shopping experiences. Thus, value retailers play an even more important role in supplying the core of consumers wardrobes – from basics like undergarments to wardrobe fashion ``staples’’ such as causal pants, casual shirts, and everyday sweaters. Likewise, a number of soft goods specialty retailers and

…6…

department stores are taking steps to tap into the shopper’s trade-up mindset by upgrading store environments, focusing on stronger aspirational store brand images, and introducing more higher-end and ``affordable luxury’’ products and labels to the assortment.

Looking Forward
Polarizing Playing Field
Although the soft goods specialty store channels is far more fragmented than most other retail channels, it will continue to slowly consolidate as big companies grow bigger, ``adding more banners to their portfolio. However, the nature of specialty retailing will also ensure the continual entry of new, smaller, usually more flexible niche players able to exploit market gaps not being addressed by the majors. Only 37 percent to total U.S. Soft goods channel sales are by the top 15 retailers. This reflects a large number of independent retailers and the presence of smaller firms that operate on a regional of multi-regional basis.
  Growth at the ends of the size spectrum will cause the soft foods channel to remain polarized into the very big versus the very small retailers. Those in the middle will continue to be squeezed by the efficiencies and resources of the big retailers and by the flexibility and customer intimacy of smaller retailers and retail chains.
  Firms with strong sales growth tend to fall into one of three camps – hot, high-growth youth retailers like Pacific Sunwear (www.pacsun.com), Urban Outfitters (www.urbanoutfitters.com), Hot Topic (www.hottopic.com), and Aero-postale (www.aeropostale.com), mature but re-invigorated multi-brand mega-specialists like Gap Inc. (www.gapinc.com) and Limited Brands (www.limitedbrands.com); and Chico’s (www.chicos.com), which stands alone within the channel as a result of carving out a very well-defined niche targeting an underserved baby boomer woman.
…7…

  The strong performance of these retailers indicates that most will be in a position to further propel performance improvements via continued investments in technology and processes that enable them to reduce costs, more effectively allocate and manage inventory, and more strategically manage price and promotional activity. These retailers will also be better positioned than their peers to focus on increasing share of wallet among their highest-prospect customers.
  The soft goods specialty store channel will also continue to polarize with respect to new store-opening opportunities, with an expanding number of ``tapped-our’’ retail concepts unable to grow by opening more U.S. stores. With little international experience (or bad experiences in the past), most tapped-out retailers are unlikely to move rapidly or successfully into global apparel retailing, except for opening stores in Canada. Instead, they will focus on growing sales in current concepts by getting more share of wallet from existing customers through a combination of a more well-defined and relevant market position and extending their assortment into new products, brands, and services for the target customer.
  Despite overall channel maturity, there are several soft goods specialty store retailers with substantial room to grow, particularly those that have only begun rapid store expansion within recent years. Strong sales growth reflects both a rapid pace of new store openings and, for players such as Chico’s and Pacific Sunwear, equally impressive store-to-store sales growth.
  Some soft goods specialists that operate a large base of stores and that have struggled will continue to weed out unprofitable, low-prospect stores from their portfolio. In a few cases, retailer will divest or close entire chains to focus resources on higher-profit, higher-growth concepts. This trend has been under way for years, by firms such as Payless, Gap Inc.,
…8…

Limited Brands Inc., Wilsons Leather (www.wisonsleather.com), Charming Shopper (www.charmingshoppes.com), Brown Shoe (www.brownshoe.com), and Mother’s Work (www.motherswork.com).
  
Repositioning for Relevancy
The recent economic downturn has made many retailers loath to invest in major repositioning initiatives. However, as slaes gain some momentum and corporate purse strings sales gain some momentum and corporate purse strings loosen a bit, more aging soft goods specialty stores will undergo a facelift. For some, this will involve a long overdue
re-assessment of the target customer. Perhaps the highest-profile repositioning has been Gap (www.gap.com), Old Navy (www.oldnavy.com), and Banana Republic (www.bananarepublic.com), and Banana Republic (www.banarepublic.com) chains.
  Banana Republic has added more trend-driven fashions to better distinguish it from Gap Stores. This includes a stronger emphasis on color, more feminine styles, and clothes for social occasions, as well as its standard work-appropriate assortment. Old Navy is more firmly positioned as a value-focused store for the entire family, with more emphasis on serving the needs of each member of the family. The retailer has increased assortment segmentation based on customer group. The chain also has new fixtures that increase selling capacity. Gap has been repositioned as the classic specialty store for a range of fashion ``basics’’ for casual occasions, supplemented by more ``occasion-oriented’’. merchandise for weekends, the workplace, and stepping out. Underperforming Gap stores have been closed, and stores have stricter inventory controls to increase productivity and reduce markdowns. Gap is reinvesting in marketing, including developing a more consistent message across all media.
  
…9…

  In line with size-related trends in the overall population, more specialty retailers will expand their standard size range to include larger sizes, as well as petite/small sizes. Some may spin special-size concepts off as their own store banners, but most will choose to simply extend the size range within the existing banners by adding new sizes or by increasing the breadth of assortment within existing special size lines. Ann Taylor (www.anntaylor.com) plans an overall focus on petites as one of its growth strategies. Plans include extending the product offering to all categories and more styles, creating a store environment that makes petites a preferred destination, and boosting marketing to generate awareness. The firm has rolled out petite adjacencies in current stores (including some with separate entrances).
  To capture more sales from customers already in the store, a growing number of soft goods specialty store retailers will extend their assortments to include products that provide additional style perspectives and meet the needs of additional wearing occasions. Express (www.expressfashion.com) strengthened its wear-to-work appeal with the Express Design Studio line of clothing being rolled out to all stores. The line is designed by a New York-based team and focuses on fitted pants, tailored jackets, and key pieces that ``add sexy sophistication’’ and allow the line to move from the ``work-place to the weekend.’’ The men’s line also includes suits sold as separates, dress shirts, and ties.
  Abercrombie & Fitch (www.abercrombie.com) is repositioning its brand to be less aggressively sexual in its marketing to customers and to include higher price points and fewer promotions. As part of this strategy, the retailer has a new higher price point collection called Ezra Fitch. The collection includes products such as $118 to $148 jeans and cashmere crew necks at $178.

…10…

  While the factors having the most influence on trying a new brand or store are the styling and price, followed by the influence of friends and family, monthly specialty store shoppers are far more likely than all shoppers to be influenced to try a brand or shop a store based on fashion magazines and celebrity culture. They are also far more willing than all shoppers to say that wearing  designer brands has a positive impact on their self-esteem and self-confidence.
  As part of their approach to new customers, most specialist will choose to first move up the age spectrum with the intention of leveraging the knowledge they have about their customers as they ``outgrow’’ the existing concept and enter a new life stage. Where this opportunity has already been tapped out, they will be forced to focus on concepts targeting an entirely new style, lifestyle, or occasion of use.

Driving Growth through Strategic Investments
More specialty store retailers will invest in initiatives that allow them to not just attain competitive differentiation but to also drive profitable top-line growth via higher purchase conversion levels, more multiple-item transactions, and increased destination store status with targeted customers. Key areas of investment will include new technologies and high-value services, as well as alternative marketing and promotional venues.
  New technologies are becoming more mainstream and less cost-prohibitive, a trend that will motivate more specialty store retailers to invest in technological solutions that ensure that the right products are on the selling floor in the right quantities at the right time and price. Technology will also be used to provide more alternative shopping and purchasing options for customers (beyond just online selling). It will also be used to better track the flow of customer traffic in the store on a real-time basis in order to design stores that have higher sell-through levels   
…11…

And staff stores in line with customer needs.
  Many specialty store retailers will focus on improving their service programs and associate-customer interaction as a way to build top-of-mind status with target customers. In some cases, this will involve more personal shopping services and stronger customer ``client ling.’’ In others, it will involve creatively responding to the service and shopping experience needs of the best customers in ways that are more meaningful to the customer.
  Talbots (www.talbots.com) has experimented with a variation on its popular Appointment Shopping service with a service called Wardrobe Express. The service targets busy, time-pressed customers with highly efficient shopping appointments by providing a pre-selected assortment of garments for the customer in the dressing room at the prescribed time – along with a light snack for lunchtime shoppers. During the visit, the store associate completes a ``ward robing sheet’’ including what was tried on and possible coordinates. Using credit card information that is on file, the associate then completes the purchase after the shopper has left the store and arranges for pickup or delivery.
Questions
1.   What can an independent retailer learn from this case?
2.   What are the positive implications of this case with respect to the use of leased departments in department stores?
3.   How can a mid-priced apparel store become a destination retailer?
4.   How is Gap Inc. utilizing the principles of the wheel of retailing through its Gap, Old Navy, and Banana Republic divisions?
5.   How can high-priced apparel specialty stores successfully compete against full-line discount stores?
6.   What role should the Internet play for apparel retailers?
7.   Can an apparel retailer prosper in the future if it does not engage in multi-channel retailing? Explain your answer.

Answer
Question:   Soft goods specialty retailers are on a quest to grow, with the high-growth ``stars’’ working to maintain momentum by rolling out successful concepts nationally while investing in new concepts that offer long-term promise. The less stellar performers are reinvigorating tired concepts and strengthening margins via better inventory and promotion management. A saturated marketplace will motivate more specialists at both ends of the spectrum to seek growth by building a portfolio of concepts focused on ever-finer customer groups. Concepts will vie for more attention by developing and applying deep customer insights to their assortment strategy, the shopping experience, and store brand building and communication.

The Retail Landscape
Many soft goods specialty retailers have seen recent improvements in sales and profits, but for most, the recovery is modest in nature and has done little to negate the pervasive price pressure on retail margins. The sustainability of the recovery is questionable given poor comparable stores sales performance.

Modest Recovery
Since bottoming out in the first part of this decade, sales have steadily improved in both the apparel and accessories specialty store and shoe specialty store channels. Yet, growth remains modest compared to the late 1990s.

…2…

The long-term sales outlook for apparel and accessories specialty stores is stronger than for shoe stores. Apparel stores are forecast to grow in the 4 to 5 percent range annually through 2008, while shoe stores are forecast to grow mostly around 1 percent a year over the same time period. Much of the sale improvement has gone straight to the bottom line for apparel and accessories specialty stores. Though still well below its performance in the late 1990s, the sector has improved another important measure of profitability, return on net worth.
In contrast, the very modest sales improvement among shoe specialty stores has not translated to improved financial performance, with the average net profit margin for publicly held shoe retailers declining. The financial struggles facing the shoe store channel are evident in the closing of individual stores and entire divisions by some of the channel’s leading players.
Pervasive price pressure has contributed to the commoditization of apparel and footwear, particularly basic styles that are easily sourced and widely distributed. Commoditization has also been propelled by the growth of Wal-Mart (www.walmart.com) and Target (www.farget.com), both of  which offer wide assortments of basic and fashion-focused soft goods at sharp price points that appeal to a broad swath of consumers. This has increased the pressure on many retailer margins as their increasingly undifferentiated assortment goes head to head with price-driven retailer margins as their increasingly undifferentiated assortment goes head to head with price-driven retailers off the mall.
While apparel price deflation has made it challenging for soft goods specialists, many have proven worthy of the challenge. The availability of cheaper products allowed many of these specialists to improve inventory turns, resulting in a slight increase in their return on inventory ratio since  1998. This improvement reflects a focus by many apparel specialty store
…3…

retailers on a combination of better markdown strategies, improved inventory management, and introduction of higher-margin fashion items.

A Challenging Environment
Soft goods specialty retailers face a crowded marketplace that is steadily becoming even more competitive. Most shoe specialty stores are faring far worse than the apparel specialists in the competitive wars. Off-mall retailers, including discount department stores/super centers and Kohl’s (www.kohls.com), are capturing apparel and shoe share of preference at expense of mall-based retailers, including specialty stores. Consumer preference for purchasing apparel is strongest at discount stores/super centers.
The upward trend for discounters contrasts with a decline in spending preference for clothing at apparel specialty stores, value department stores, and traditional / upscale department stores in the same time period. For shoe purchasing, shoe stores are actually gaining spending preference, although the price-driven discount store/super center channel is as well. Shoe, discount, and apparel specialty stores are capturing shoe spending preference from value and traditional department stores, particularly Sears (www.sears.com) and Dillard’s (www.dillards.com), as well as Payless (www.payless.com).
The upward trend for discounters contrasts with a decline in spending preference for clothing at apparel specialty stores, value department stores, and traditional / upscale department stores in the same time period. For shoe purchasing, shoe stores are actually gaining spending preference, although the price-driven discount store/super center channel is as well. Shoe, discount, and apparel specialty stores are capturing shoe spending preference from value and tradition al department stores, particularly Sears (www.sears.com) and Dillard’s (www.dillards.com), as well as Payless (www.payless.com).
…4…

Although department stores have suffered the most at the hands of off-mall retailer growth, many are reinventing themselves. Key elements of the department store reinvention include a stronger, more exclusive, and more differentiated brand and style assortment supported by upgraded, easier-to-shop stores. Thus, department stores now contribute to more competitive intensity in the apparel and footwear playing filed, particularly for upscale customers. The profile of monthly shoppers at traditional/upscale department stores is similar to that of monthly shoppers at apparel specialty stores in terms of higher income and education levels – although apparel store customers skew younger.
Competitive battles are also escalating due to the entry of a number of foreign specialty store retailers to the marketplace. Though most of the new foreign players operate only a handful of U.S. stores at this point in time, several intend to ramp up their store openings after establishing an initial base of stores.
Some suppliers are also branching out to target new customers with new specialty store chains to attain growth in the face of modest prospects at department stores. Polo Ralph Lauren (www.polo.com) is launching Rugby, a new brand and chain of stores targeting college-aged consumers. Oshkosh B’Gosh (www.oshoshbgosh.com) is testing a family lifestyle store targeting men and women.
A final factor contributing to heightened competitive pressure is the expansion of full-price specialty store chain s by several soft goods suppliers. A number of catalog retailers that are fairly new to retailing are also rapidly building store chains. Although the track record of most soft goods suppliers has been spotty when it comes to operating successful full-price retail stores – and several are closing unsuccessful concepts – it is clear that most of the majors view full-price retail as another avenue for growth that most be pursued as a consequence of overall retail maturity.
…5…

Suppliers with the most substantial full-price store base include Jones Apparel Group (primarily shoe stores, www.jny.com), Liz Claiborne (primarily via Mexx in Europe and Canada, www.liz.com), and Polo Ralph Lauren. The two soft goods catalog retailers relatively new to full-price retailing that are most actively building their store chain are Coldwater Creek (www.cp;dwatercreek.com) and J. Jill (www.jjill.com).
Growing diversity is making it more difficult for many specialists to adequately address the needs and expectations of all of their target customers – a critical requirement for success in the specialty store arena. Diversity is also propelling more retailers to tailor assortments and adjust merchandising tactics on an individual store basis. Previously, many only altered the offer to reflect regional seasonal variations and market size differences.
Apparel and footwear are steadily capturing less of the consumer’s total spending, This is in part due to a shift in consumer spending priorities toward necessities (home, health, and transportation), as well as toward new everyday ``luxuries’’ such as eating out and entertainment – which including products such as consumer electronics. sporting goods and toys, and the cost of fees/admission to sporting events, concerts, movies, clubs, and other types of events.
Consumers are increasingly willing to cross channels to shop a growing number of retailers – from mass to class – for apparel. They are more apt to trade down on staple wardrobe elements while trading up on aspirational, ego-intensive purchase and shopping experiences. Thus, value retailers play an even more important role in supplying the core of consumers wardrobes – from basics like undergarments to wardrobe fashion ``staples’’ such as causal pants, casual shirts, and everyday sweaters. Likewise, a number of soft goods specialty retailers and

…6…

department stores are taking steps to tap into the shopper’s trade-up mindset by upgrading store environments, focusing on stronger aspirational store brand images, and introducing more higher-end and ``affordable luxury’’ products and labels to the assortment.

Looking Forward
Polarizing Playing Field
Although the soft goods specialty store channels is far more fragmented than most other retail channels, it will continue to slowly consolidate as big companies grow bigger, ``adding more banners to their portfolio. However, the nature of specialty retailing will also ensure the continual entry of new, smaller, usually more flexible niche players able to exploit market gaps not being addressed by the majors. Only 37 percent to total U.S. Soft goods channel sales are by the top 15 retailers. This reflects a large number of independent retailers and the presence of smaller firms that operate on a regional of multi-regional basis.
Growth at the ends of the size spectrum will cause the soft foods channel to remain polarized into the very big versus the very small retailers. Those in the middle will continue to be squeezed by the efficiencies and resources of the big retailers and by the flexibility and customer intimacy of smaller retailers and retail chains.
Firms with strong sales growth tend to fall into one of three camps – hot, high-growth youth retailers like Pacific Sunwear (www.pacsun.com), Urban Outfitters (www.urbanoutfitters.com), Hot Topic (www.hottopic.com), and Aero-postale (www.aeropostale.com), mature but re-invigorated multi-brand mega-specialists like Gap Inc. (www.gapinc.com) and Limited Brands (www.limitedbrands.com); and Chico’s (www.chicos.com), which stands alone within the channel as a result of carving out a very well-defined niche targeting an underserved baby boomer woman.
…7…

The strong performance of these retailers indicates that most will be in a position to further propel performance improvements via continued investments in technology and processes that enable them to reduce costs, more effectively allocate and manage inventory, and more strategically manage price and promotional activity. These retailers will also be better positioned than their peers to focus on increasing share of wallet among their highest-prospect customers.
The soft goods specialty store channel will also continue to polarize with respect to new store-opening opportunities, with an expanding number of ``tapped-our’’ retail concepts unable to grow by opening more U.S. stores. With little international experience (or bad experiences in the past), most tapped-out retailers are unlikely to move rapidly or successfully into global apparel retailing, except for opening stores in Canada. Instead, they will focus on growing sales in current concepts by getting more share of wallet from existing customers through a combination of a more well-defined and relevant market position and extending their assortment into new products, brands, and services for the target customer.
Despite overall channel maturity, there are several soft goods specialty store retailers with substantial room to grow, particularly those that have only begun rapid store expansion within recent years. Strong sales growth reflects both a rapid pace of new store openings and, for players such as Chico’s and Pacific Sunwear, equally impressive store-to-store sales growth.
Some soft goods specialists that operate a large base of stores and that have struggled will continue to weed out unprofitable, low-prospect stores from their portfolio. In a few cases, retailer will divest or close entire chains to focus resources on higher-profit, higher-growth concepts. This trend has been under way for years, by firms such as Payless, Gap Inc.,
…8…

Limited Brands Inc., Wilsons Leather (www.wisonsleather.com), Charming Shopper (www.charmingshoppes.com), Brown Shoe (www.brownshoe.com), and Mother’s Work (www.motherswork.com).

Repositioning for Relevancy
The recent economic downturn has made many retailers loath to invest in major repositioning initiatives. However, as slaes gain some momentum and corporate purse strings sales gain some momentum and corporate purse strings loosen a bit, more aging soft goods specialty stores will undergo a facelift. For some, this will involve a long overdue
re-assessment of the target customer. Perhaps the highest-profile repositioning has been Gap (www.gap.com), Old Navy (www.oldnavy.com), and Banana Republic (www.bananarepublic.com), and Banana Republic (www.banarepublic.com) chains.
Banana Republic has added more trend-driven fashions to better distinguish it from Gap Stores. This includes a stronger emphasis on color, more feminine styles, and clothes for social occasions, as well as its standard work-appropriate assortment. Old Navy is more firmly positioned as a value-focused store for the entire family, with more emphasis on serving the needs of each member of the family. The retailer has increased assortment segmentation based on customer group. The chain also has new fixtures that increase selling capacity. Gap has been repositioned as the classic specialty store for a range of fashion ``basics’’ for casual occasions, supplemented by more ``occasion-oriented’’. merchandise for weekends, the workplace, and stepping out. Underperforming Gap stores have been closed, and stores have stricter inventory controls to increase productivity and reduce markdowns. Gap is reinvesting in marketing, including developing a more consistent message across all media.

…9…

In line with size-related trends in the overall population, more specialty retailers will expand their standard size range to include larger sizes, as well as petite/small sizes. Some may spin special-size concepts off as their own store banners, but most will choose to simply extend the size range within the existing banners by adding new sizes or by increasing the breadth of assortment within existing special size lines. Ann Taylor (www.anntaylor.com) plans an overall focus on petites as one of its growth strategies. Plans include extending the product offering to all categories and more styles, creating a store environment that makes petites a preferred destination, and boosting marketing to generate awareness. The firm has rolled out petite adjacencies in current stores (including some with separate entrances).
To capture more sales from customers already in the store, a growing number of soft goods specialty store retailers will extend their assortments to include products that provide additional style perspectives and meet the needs of additional wearing occasions. Express (www.expressfashion.com) strengthened its wear-to-work appeal with the Express Design Studio line of clothing being rolled out to all stores. The line is designed by a New York-based team and focuses on fitted pants, tailored jackets, and key pieces that ``add sexy sophistication’’ and allow the line to move from the ``work-place to the weekend.’’ The men’s line also includes suits sold as separates, dress shirts, and ties.
Abercrombie & Fitch (www.abercrombie.com) is repositioning its brand to be less aggressively sexual in its marketing to customers and to include higher price points and fewer promotions. As part of this strategy, the retailer has a new higher price point collection called Ezra Fitch. The collection includes products such as $118 to $148 jeans and cashmere crew necks at $178.

…10…

While the factors having the most influence on trying a new brand or store are the styling and price, followed by the influence of friends and family, monthly specialty store shoppers are far more likely than all shoppers to be influenced to try a brand or shop a store based on fashion magazines and celebrity culture. They are also far more willing than all shoppers to say that wearing  designer brands has a positive impact on their self-esteem and self-confidence.
As part of their approach to new customers, most specialist will choose to first move up the age spectrum with the intention of leveraging the knowledge they have about their customers as they ``outgrow’’ the existing concept and enter a new life stage. Where this opportunity has already been tapped out, they will be forced to focus on concepts targeting an entirely new style, lifestyle, or occasion of use.

Driving Growth through Strategic Investments
More specialty store retailers will invest in initiatives that allow them to not just attain competitive differentiation but to also drive profitable top-line growth via higher purchase conversion levels, more multiple-item transactions, and increased destination store status with targeted customers. Key areas of investment will include new technologies and high-value services, as well as alternative marketing and promotional venues.
New technologies are becoming more mainstream and less cost-prohibitive, a trend that will motivate more specialty store retailers to invest in technological solutions that ensure that the right products are on the selling floor in the right quantities at the right time and price. Technology will also be used to provide more alternative shopping and purchasing options for customers (beyond just online selling). It will also be used to better track the flow of customer traffic in the store on a real-time basis in order to design stores that have higher sell-through levels   
…11…

And staff stores in line with customer needs.
Many specialty store retailers will focus on improving their service programs and associate-customer interaction as a way to build top-of-mind status with target customers. In some cases, this will involve more personal shopping services and stronger customer ``client ling.’’ In others, it will involve creatively responding to the service and shopping experience needs of the best customers in ways that are more meaningful to the customer.
Talbots (www.talbots.com) has experimented with a variation on its popular Appointment Shopping service with a service called Wardrobe Express. The service targets busy, time-pressed customers with highly efficient shopping appointments by providing a pre-selected assortment of garments for the customer in the dressing room at the prescribed time – along with a light snack for lunchtime shoppers. During the visit, the store associate completes a ``ward robing sheet’’ including what was tried on and possible coordinates. Using credit card information that is on file, the associate then completes the purchase after the shopper has left the store and arranges for pickup or delivery.
Questions

=====================
1. What can an independent retailer learn from this case?


Clear Vision
To connect to a core customer group, one of the characteristics a retail company must have is a clear vision. What the company is offering, who their target market is and the value of the product or service to the customer must be clear.
Value
A retail business that sells products or services that appeal to customers' needs has the ability to stand up against competition. Physical facilities, pricing, products and customer service differentiate a busy retail store from an unnoticed one.
Functional
Price, convenience and store experience are functional characteristics that make up a strong retail brand.
Concept
A retail business aims to conceive an idea and deliver consistency, profitability and integrity from concept to execution.
traits that most of them currently share:
1. They are localising. They practice localisation of both their physical formats and merchandise assortments.
2. They don't equate hiring more people with better service. One of the biggest hoodwinks in modern retail is when a retailer tries to con the public that service will improve because it increased the number of salespeople.
3. They are investing heavily in e-commerce and also in stores – but more strategically and selectively in the latter than they did in the past
4. They are closely integrating their online and offline sales channels to present customers with a seamless shopping experience.
5. They are leveraging social media for direct sales. Facebook, for example, is becoming a powerful new sales channel for major retailers.
6. Private label merchandise accounts for a high and often increasing proportion of sales. This protects margins and offers a natural differentiator in a world where brands have become ubiquitous and, to many, boring.
7. They don't suffer from psychic geographic barriers. International growth is a given and can be accomplished even before domestic saturation has occurred, whether by direct store operation, licensing or franchising.
8. They deliver an exciting in-store experience..
9. They employ people who believe in what they are selling.
10. Whatever they promise, they deliver, or make themselves accountable if they don’t.
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Characteristics
The followings are some of the essential characteristics of a retailer:
•   He is regarded as the last link in the chain of distribution.
•   He purchases goods in large quantities from the wholesaler and sell in small quantity to the consumer.
•   He deals in general products or a variety of merchandise.
•   He develops personal contact with the consumer.
•   He aims at providing maximum satisfaction to the consumer.
•   He has a limited sphere in the market.
Functions
Retailers perform a number of functions. These are:
•   The retailer buys a variety of products from the wholesaler or a number of wholesalers. He thus performs two functions like buying of goods and assembling of goods.
•   The retailer performs storing function by stocking the goods for a consumer.
•   He develops personal contact with the consumers and gives them goods on credit.
•   He bears the risks in connection with Physical Spoilage of goods and fall in price. Besides he bears risks on account of fire, theft, deterioration in the quality and spoilage of goods.
•   He resorts to standardization and grading of goods in such a way that these are accepted  by the customers.
•   He makes arrangement for delivery of goods and supply valuable market information to both wholesaler and the consumer.
Service of a Retailer
A retailer provides a number of services to the customer and to the wholesaler.
To Customers:
1.   He provides ready stock of goods and as such he sells and quantity of goods desired by the customers.
2.   He keeps a large variety of goods produced by different producers and thereby ensures a wide variety of choice to the customers.
3.   He relives the consumers of maintaining large quantity of goods for future period because he himself holds large stock of goods.
4.   He develops personal relationship with the customers by giving them credit.
5.   he provides free-home delivery service to the customers.
6.   He informs the new product to the customers.
7.   he makes arrangement for replacement of goods when he receive complaints.
To Wholesaler:
1.   He gives valuable market information with regard to taste, fashion and demand for the goods to the wholesaler.
2.   The retailer maintains direct contact with the customers and so he relieves the wholesaler with regard to maintenance of direct contact.
3.   He  helps the wholesaler in getting their goods distributed to the consumer.
4.   He is regarded as an important link between the wholesaler and the consumer.
5.   He creates demand for the products by displaying the goods to the consumers
Online Retailing
Payments
PCI Compliance
Point-of-Purchase / POP
POS
Retail Customer Experience Summit
RFID Technology
Self-Checkout
Social Media
Specialty Stores
Store Design & Layout
Supermarkets & Grocery Stores
Technology
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The holy grail of strategy for any firm, but especially retailers, is to create a concept that is so different and compelling that it renders competitors irrelevant — and then to implement that concept in such a way that core customers are bonded and the competitors find it hard to copy or react.

Innovative offerings from a variety of industries have attempted to create niches that were protected from competition. Brands such L.L. Bean, REI, Walmart, The Body Shop, Muji, Tokyo Hands, IKEA, Zara, H&M, Enterprise Rent-A-Car, Best Buy Geek Squad, Whole Foods Market, Subway (its low fat menu), Apple, Zappo's and dozens of others have been able to maintain a distinctive offering that attracts an extremely loyal customer base.

How? Are there any common characteristics that these brands share? Although each is different with respect to strategy and context, it is possible to observe some factors that are associated with successful new retail concepts. Not all are always present but there are cases in which the absence of even one can be fatal. The resulting eight guidelines are meant to be provocative.

They have a clear vision
Firms with successful new retailing concepts tend to have a strong vision that connects to a core customer group. There is clarity around the offering, the identity of the target group, and the value proposition. All the brands noted above certainly have this quality. Enterprise-Rent-A-Car, for example, focused on the need to support the car repair industry with rental cars, which implies outlets spread throughout a city rather than having an airport focus, a system tied to insurance companies and repair shops, and an ability to deliver cars to users. Tokyo Hands is a one-stop store for the hands-on customer who wants the stimulation of a puzzle, a wood working product, or a decorating challenge.

There is a theory in marketing that if you connect with a core segment, as long as it is of reasonable size, you will tend to have not only a sales base but a clear message and a set of nodes that can communicate and advocate for your concept. A clear vision makes that connection.

They evolve the offering
Most successful new retail concepts evolve over time, especially during the early days. They do not arrive out-of-the-box but benefit from changes which can be refinements or major changes in the vision. IKEA, Zappos.com, Best Buy, L.L. Bean, Whole Foods Market all started small in scope and ambition and expanded the vision as they got traction and found things that worked. IKEA discovered outsourcing assembly to customers when an employee had to remove the legs for a table to get it in a car. Zappo's changed from assortment to service as the key value proposition. Best Buy’s policy of serving customer rather than selling components was implemented over time. Pret-A-Manger, the enormously successful U.K. sandwich chain, refined the concept over five years when it was still a single storefront.

Retailers have a unique ability to experiment, try out many concepts with modest investments, and wait until one hits. The Limited tried out many concepts within an existing store and created chains such as Bath and Body Works and Structure out of those that showed promise. With different locations, experiments are doable not only to refine the concept but to tweak it, keeping it fresh and ahead of competition.

They execute
The main reason that new retailing concepts fail may be execution. The successful ones have been able to execute. That means they have been able to deliver the value proposition consistently and profitably.

The fast fashion pioneers, Zara and H&M, developed systems to conceive, create, make, and deliver products on a real time basis. Whole Foods Markets has the ability to source and handle organic foods. IKEA has footprints, a presentation system, and a customer-assembly offering they can deliver behind that would be almost impossible to duplicate. Excellence in execution means that needed resources in the form of people and capital have been accessed and that capabilities and process have been put in place. The result is formidable barriers to competitors.

They develop a strong culture and set of values
In part because retail execution involves service and unique offerings, it is hard to maintain excellence over time. It is too easy to see the offering decline or become fuzzy. The successful new retail concepts are almost always accompanied by extraordinarily strong culture and values that provide energy and direction in the early years and support the vision and its execution as the business matures.

Zappos.com has been guided by ten values which include delivering "Wow" service, being a bit weird and acting humble. Best Buy’s Geek squad is about fun, humor and taking the stress out of dealing with computers and entertainment systems. A vision-driven organizational culture has enormous power to make the strategy succeed. Because the culture involves values, programs and leadership, it is hard to copy.

They deliver emotional and self-expressive benefits
Most of these successful new retail concepts have gone beyond functional benefits to deliver emotional or self-expressive benefits. Muji, one of Japan’s top four retailing brands, is the no-brand brand and is all about simplicity, natural, moderation, humility, calmness and self-restraint. Muji is anti-glitz and delivers self-expressive benefit to those that are beyond buying badge brands and have the right values about sustainability. Whole Foods Market is a way to express a love of food using natural and organic ingredients.

They address a real unmet need
Developing a new concept is hard enough with wind at your back. Many of the new retain concepts benefited from a market force often based on a visible and meaningful unmet need. There was an opportunity. The Geek Squad and the Apple Store captured the unmet need to avoid the frustration of installing, using and maintaining computer and entertainment systems. Tokyo Hands addressed the need for a do-it-yourself segment to have a one-stop store that supports that desire.

Many firms saw a trend emerge after they had gotten traction and were poised to grow. Whole Foods Market saw a growing interest in organic and natural foods when they were established and it was late for others to climb on the bandwagon from a brand and capabilities view. Muji benefited from an interest in sustainability and a withdrawal by some from the glitz of designer brands.

They scale
A successful retail concept needs to scale. Expanding the footprint is difficult because it is costly, because it can involve adapting to a business with added complexity, and because a good concept is visible and others can run with it in different geographies. Several, such as Whole Foods Market, have scaled by buying like-minded companies with local strength. Others, such a Subway, have used a franchising model. Most have used a combination of cash flow streams and external financing to expand. In any case, there has to be a proven model to scale.

They integrate social and environmental programs into the brand
It is remarkable how many of the successful new concepts incorporate social or environmental programs into their offering. They, of course, have the advantage of creating a brand rather than adapting an established brand and thus can credibly build this dimension into it. Whole Foods and Muji have broken through with visible substance and are seen as sharing the values, interests, and even the lifestyles of an important customer segment. Muji is all about environmental sensitivity in their offerings and, in addition, they developed a set of three large campgrounds that allow people to enjoy nature that is undisturbed. Best Buy’s "Greener Together" program implements their programs around recycling and sustainability. The tagline "Whole Foods, Whole People, Whole Planet" reflects the many programs at Whole Foods Market such as using farmed seafood standards, wind power for an energy source, and reusable grocery bags.

Many of these factors, while not unique to retailing, have a higher incidence in this category. Few other categories have as many opportunities to test, learn and evolve as retail. Further, retailers have so many variables with which to work, including location, ambiance, selection, visible policies and customer interaction.

David Aaker is vice-chairman of the global consultancy Prophet and Professor Emeritus of Marketing Strategy at the Haas School of Business, UC Berkeley. He is the author of "BRAND RELEVANCE: Making Competitors Irrelevant," and has based his research on dozens of case studies. (Photo by That Other Paper.)



The following are seven critical traits many successful retailers possess.
Have Passion. You’ve got to have passion in large doses and you must be able to pass it on to your staff members. Leaders must have enough passion to overcome business difficulties and enough to feed it to others. The staff will go to the ends of the earth to please a leader with passion because passion motivates. Customers and staff know when an owner lacks passion—they feel it in the store.
Be a good decision maker. Good retailers get input from others, especially from those they respect, who will often disagree and challenge their concepts. Don’t hesitate too long. Fashion retail is ever-changing and change requires good decisions. If you are not making hard decisions you are not likely changing. This economy leaves little room for indecision or complacency.
Communicate the vision of the business. A leader must have a clear vision and communicate that vision to his or her team often and with clarity. What do you stand for and what space do you fill in the marketplace? If a retailer can’t define that clearly, he runs the risk of getting lost in the retail sauce. Worse yet the staff will be lost right along with the owner. One warning: don’t claim that your vision is providing the best service unless you can define what the best is and how it’s better than others.
Be a good teacher. Teach your team each and every day. Ongoing education is essential in every business. Be sure you teach others and arm them with the knowledge and confidence to do the right things and things right. Once you show them the way, don’t micro-manage them. Don’t criticize what others do unless you are sure you have taught them the correct way.
Don’t assume you see your business with clarity. It’s difficult, if not impossible, to be objective looking at your business from the inside. It‘s best if the leader lets others judge the strengths and weaknesses of the business. Owners and other insiders have a blurred vision. Get input from people you respect who know the business well. Store housekeeping, merchandise display, inventory mix and customer service can’t be judged by those executing the tasks.
A good retailer must possess sound character. Honesty and integrity are essential in all businesses, including specialty apparel retail. Customer loyalty is tied more to a store‘s character than the merchandise presented.
Be a risk taker. The retail apparel business demands change season after season, year after year. Fashions change all the time. Consumers’ buying habits change and the media consumers turn to for information have changed. Retailers must try new things all the time. New lines, new media, new methods of communication should be tested before they become mainstream. Good leaders are at the forefront of new concepts and that requires risk. As they say: no risk, no reward.
Don’t feel bad if you lack some of these traits. Get busy and build on top of your strengths and shore up your weaknesses. You can become one of those successful retailers who possess the seven attributes of a successful retailer.

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2. What are the positive implications of this case with respect to the use of leased departments in department stores?
First off - you will pay a rental for the space used - this is normally by the square footage however, some companies want apercentage of the business - This would need to be fully investigated before taking on this type of facility.
However, you will have a building supplied normally the utilities like heat light water etc are in the rental agreement in someway.
You have the maintenance of the department covered, a guaranteed passing trade as customers will be in the store generally anyway.
If you are in a niche' market the department store will help to look after you as well to keep customers coming in.

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3. How can a mid-priced apparel store become a destination retailer?
How can a mid-priced apparel store become a destination retailer?


CONSIDERATIONS IN PLANNING A RETAIL STRATEGY MIX
A retailer may be categorized by its strategy mix, the firm’s particular combination
of store location, operating procedures, goods/services offered, pricing tactics,
store atmosphere and customer services, and promotional methods.
Store location refers to the use of a store or nonstore format, placement in a
geographic area, and the kind of site (such as a shopping center). Operating procedures
include the kinds of personnel employed, management style, store hours,
and other factors. The goods/services offered may encompass several product
categories or just one; and quality may be low, medium, or high. Pricing refers to
a retailer’s use of prestige pricing (creating a quality image), competitive pricing
(setting prices at the level of rivals), or penetration pricing (underpricing other
retailers). Store atmosphere and customer services are reflected by the physical
facilities and personal attention provided, return policies, delivery, and other factors.
Promotion involves activities in such areas as advertising, displays, personal
selling, and sales promotion. By combining these elements, a retailer can develop
a unique strategy.
To flourish today, a retailer should strive to be dominant in some way. The
firm may then reach destination retailer status—whereby consumers view the
company as distinctive enough to become loyal to it and go out of their way to
shop there. We tend to link “dominant” with “large.” Yet, both small and large
retailers can dominate in their own way. As follows, there are many ways to be a
destination retailer, and combining two or more approaches can yield even greater
appeal for a given retailer:
● Be price-oriented and cost-efficient to attract price-sensitive shoppers.
● Be upscale to attract full-service, status-conscious consumers.
● Be convenient to attract those wanting shopping ease, nearby locations, or
long hours.
● Offer a dominant assortment in the product lines carried to appeal to consumers
interested in variety and in-store shopping comparisons.
● Offer superior customer service to attract those frustrated by the decline in
retail service.
● Be innovative or exclusive and provide a unique way of operating (such as
kiosks at airports) or carry products/brands not stocked by others to reach
people who are innovators or bored.
Before looking at specific strategy mixes, let us look at three concepts that
help explain the use of these mixes: the wheel of retailing, scrambled merchandising,
and the retail life cycle—as well as the ways in which retail strategies are
evolving.
The wheel of retailing is grounded on four principles: (1) There are many
price-sensitive shoppers who will trade customer services, wide selections, and
convenient locations for lower prices. (2) Price-sensitive shoppers are often not
loyal and will switch to retailers with lower prices. However, prestige-sensitive
customers like shopping at retailers with high-end strategies. (3) New institutions
are frequently able to have lower operating costs than existing institutions. (4) As
retailers move up the wheel, they typically do so to increase sales, broaden the target
market, and improve their image.
For example, when traditional department store prices became too high for
many consumers, the growth of the full-line discount store (led by Wal-Mart) was
the result.3 The full-line discount store stressed low prices because of such costcutting
techniques as having a small sales force, situating in lower-rent store locations,
using inexpensive fixtures, emphasizing high stock turnover, and accepting
only cash or check payments for goods. Then, as full-line discount stores prospered,
they typically sought to move up a little along the wheel. This meant
enlarging the sales force, improving locations, upgrading fixtures, carrying a
greater selection of merchandise, and accepting credit. These improvements led to
higher costs, which led to somewhat higher prices. The wheel of retailing again
came into play as newer discounters, such as off-price chains, factory outlets, and
permanent flea markets, expanded to satisfy the needs of the most price-conscious
consumer. More recently, we have witnessed the birth of discount Web retailers,
some of which have very low costs because they do not have “bricks-and-mortar”
facilities.
As indicated in Figure 5-1, the wheel of retailing reveals three basic strategic
positions: low end, medium, and high end. The medium strategy may have some
difficulties if retailers in this position are not perceived as distinctive: “With specialty
stores siphoning customers from above and discounters siphoning from below,
J.C. Penney and Sears are stuck in the very skinny middle.”4 Figure 5-2 shows the
opposing alternatives in considering a strategy mix.
The wheel of retailing suggests that established firms should be wary in
adding services or converting a strategy from low end to high end. Because priceconscious
shoppers are not usually loyal, they are apt to switch to lower-priced
firms. Furthermore, retailers may then eliminate the competitive advantages that
Low-End Strategy
Low rental location—side street
No services or services charged at
additional fee (or services may be
limited to credit and returns)
Spartan fixtures and displays
Simple retail personnel organization
Price emphasis in promotion
Self-service or high sales per store
personnel ratio
Crowded store interior
Most merchandise visible

High-End Strategy
High rental shopping center or central
business district location
Elaborate services available included in
price, such as:
credit
delivery
alterations
Elaborate fixtures and displays
Elaborate retail personnel organization
No price emphasis in promotion
Product demonstrations, low sales per
store personnel ratio
Spacious store interior
Most merchandise in back room
decorating
gift wrapping
layaway

The Retail Life Cycle
The retail life cycle concept states that retail institutions—like the goods and services
they sell—pass through identifiable life stages: introduction (early growth), growth
(accelerated development), maturity, and decline. The direction and speed of institutional
changes can be interpreted from this concept. Take a look at Figure 5-4. The
Figure 5-4(a) shows the business characteristics of the four stages, and Figure 5-4(b)
indicates the stages in which several mall-based retail formats are now operating.
####################
4. How is Gap Inc. utilizing the principles of the wheel of retailing through its Gap, Old Navy, and Banana Republic divisions?


The wheel of retailing is grounded on four principles: (1) There are many
price-sensitive shoppers who will trade customer services, wide selections, and
convenient locations for lower prices. (2) Price-sensitive shoppers are often not
loyal and will switch to retailers with lower prices. However, prestige-sensitive
customers like shopping at retailers with high-end strategies. (3) New institutions
are frequently able to have lower operating costs than existing institutions. (4) As
retailers move up the wheel, they typically do so to increase sales, broaden the target
market, and improve their image.
For example, when traditional department store prices became too high for
many consumers, the growth of the full-line discount store (led by Wal-Mart) was
the result.3 The full-line discount store stressed low prices because of such costcutting
techniques as having a small sales force, situating in lower-rent store locations,
using inexpensive fixtures, emphasizing high stock turnover, and accepting
only cash or check payments for goods. Then, as full-line discount stores prospered,
they typically sought to move up a little along the wheel. This meant
enlarging the sales force, improving locations, upgrading fixtures, carrying a
greater selection of merchandise, and accepting credit. These improvements led to
higher costs, which led to somewhat higher prices. The wheel of retailing again
came into play as newer discounters, such as off-price chains, factory outlets, and
permanent flea markets, expanded to satisfy the needs of the most price-conscious
consumer. More recently, we have witnessed the birth of discount Web retailers,
some of which have very low costs because they do not have “bricks-and-mortar”
facilities.
As indicated in Figure 5-1, the wheel of retailing reveals three basic strategic
positions: low end, medium, and high end. The medium strategy may have some
difficulties if retailers in this position are not perceived as distinctive: “With specialty
stores siphoning customers from above and discounters siphoning from below,
J.C. Penney and Sears are stuck in the very skinny middle.”4 Figure 5-2 shows the
opposing alternatives in considering a strategy mix.
The wheel of retailing suggests that established firms should be wary in
adding services or converting a strategy from low end to high end. Because priceconscious
shoppers are not usually loyal, they are apt to switch to lower-priced
firms. Furthermore, retailers may then eliminate the competitive advantages that
Low-End Strategy
Low rental location—side street
No services or services charged at
additional fee (or services may be
limited to credit and returns)
Spartan fixtures and displays
Simple retail personnel organization
Price emphasis in promotion
Self-service or high sales per store
personnel ratio
Crowded store interior
Most merchandise visible

High-End Strategy
High rental shopping center or central
business district location
Elaborate services available included in
price, such as:
credit
delivery
alterations
Elaborate fixtures and displays
Elaborate retail personnel organization
No price emphasis in promotion
Product demonstrations, low sales per
store personnel ratio
Spacious store interior
Most merchandise in back room
decorating
gift wrapping
layaway

The Retail Life Cycle
The retail life cycle concept states that retail institutions—like the goods and services
they sell—pass through identifiable life stages: introduction (early growth), growth
(accelerated development), maturity, and decline. The direction and speed of institutional
changes can be interpreted from this concept. Take a look at Figure 5-4. The
Figure 5-4(a) shows the business characteristics of the four stages, and Figure 5-4(b)
indicates the stages in which several mall-based retail formats are now operating.
Let us examine the stages of the retail life cycle as they apply to individual
institutional formats and show specific examples. During the first stage of the
cycle (introduction), there is a strong departure from the strategy mixes of existing
retail institutions. Afirm in this stage significantly alters at least one element of the
strategy mix from that of traditional competitors. Sales and then profits often rise
sharply for the first firms in a category. There are risks that new institutions will
not be accepted by shoppers, and there may be large initial losses due to heavy
investments. At this stage, long-run success is not assured.
One institution in the introduction stage is the online grocery store. How will
the format do?
The online grocery business is littered with failures—notably Webvan,
which raised $1 billion before collapsing in 2001. At New York startup
FreshDirect (www.freshdirect.com), overaggressive marketing and service
problems led to smashed tomatoes and red ink. But a management
shakeup could lead it to profitability. In late 2004, FreshDirect tapped
Dean Furbush as chief executive. Furbush joined as chief operating officer
In the second stage (growth), both sales and profits exhibit rapid growth.
Existing firms expand geographically, and newer companies of the same type
enter. Toward the end of accelerated development, cost pressures (to cover a
larger staff, a more complex inventory system, and extensive controls) may begin
to affect profits.
The interactive electronic video kiosk is an institution in the growth stage.
Today, kiosks sell everything from clothing to magazines to insurance to PCs.
According to Kiosk and Jupiter Media Metrix, U.S. retail sales revenues generated by
kiosks were expected to rise from $370 million in 1996 and $1.1 billion in 2001 to $6.5
billion in 2006. Worldwide, the number of installed kiosks was projected to go from
246,000 in 2001 to 598,000 in 2006.6 This institution is examined further in Chapter 6.
The third stage (maturity) is characterized by slow sales growth for the institutional
type. Though overall sales may continue to go up, that rise is at a much
lower rate than during prior stages. Profit margins may have to be reduced to
stimulate purchases. Maturity is brought on by market saturation caused by the
high number of firms in an institutional format, competition from newer institutions,
changing societal interests, and inadequate management skills to lead
mature or larger firms. Once maturity is reached, the goal is to sustain it as long as
possible and not to fall into decline.
The liquor store, a form of specialty store, is an institution in the maturity
stage; sales are rising, but very slowly as compared to earlier years. From 1992 to
2005, U.S. liquor store sales went up an average of 3 percent annually, which was
far less than the rate for all U.S. retailers. This is due to competition from membership
clubs, mail-order wine retailers, and supermarkets (in states allowing wine or
liquor sales); changing lifestyles and attitudes regarding liquor; the national
21-year-old drinking age requirement; and limits on the nonalcoholic items that
liquor stores are permitted to sell in some locales.
The final stage in the retail life cycle is decline, whereby industrywide sales
and profits for a format fall off, many firms abandon the format, and newer formats
attract consumers previously committed to that retailer type. In some cases,
a decline may be hard or almost impossible to reverse. In others, it may be
avoided or postponed by repositioning the institution.
With the retail catalog showroom, consumers chose items from a catalog,
shopped in a warehouse setting, and wrote up orders. After peaking in the 1980s,
the format declined thereafter, and it vanished in 1998. The leading firms went out
of business. Why? Many other retailers cut costs and prices, so showrooms were
no longer low-price leaders. Catalogs had to be printed far in advance. Many
items were slow-sellers or had low margins. Some consumers found showrooms



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5. How can high-priced apparel specialty stores successfully compete against full-line discount stores?
Specialty retailers won't survive against big box stores unless they get aggressive and smart. Here are five ways to compete on experience instead of price.
Here are five things small retailers can learn from Wonder Works in order to compete on something other than price.
1. Provide Incentive
When you walk into a Wonder Works store, there is typically someone there with a bright smile to greet you and shove a toy in your hands. The stores are small, but there is always room to sample products and interact with others. It's a playground, and kids (and, admittedly, I) love it. As well, Wonder Works regularly holds events, such as outdoor festivals, sidewalk sales, and fundraisers to encourage people to visit.
2. Offer Value
Wonder Works doesn't hide the fact that prices are probably higher. Instead, they create value by providing an experience when you visit. As well, regular patrons are rewarded with frequent specials through e-newsletters and social media. Unlike most small retailers, they put experience ahead of keystone.
3. Differentiate Products
Because large retailers rarely take chances on new products or new developers, specialty stores have the first opportunity to offer exclusive new items. Wonder Works was one of the first stores to offer our Wild Creations' EcoAquarium, and it continues to be one of their best selling products. Now, they are one of the first stores we engage to test new products and ideas.
4. Get Online
Although Wonder Works is still small by comparison, they offer a fantastic toy catalogue and website to support the in-store experience. It should be no secret that online shopping will continue to become a preferred method of shopping, so offering your clients this convenience will be a key to success.
5. Go Social
Wonder Works excels at attracting and, more important, retaining fans, especially on a local level. A playful newsletter, constant updates to their website, and social media channels, and an owner that is ubiquitous in Charleston and throughout the toy industry, assures that customers and fans are engaged constantly. No matter how small your retail company, you need to be engaging your customers through social media.
For any small business, competing with large competitors with vastly greater resources is always daunting. For specialty retail stores, the challenge is ten fold. To succeed, retail business owners need to work hard...plain and simple. Wonder Works' Christine Osborne is one of the hardest working individuals in the toy industry, but if there is one thing you will learn from her and Wonder Works it never seems like work!
Do you have a success story about a small retail business that is beating the odds and succeeding? Please share below!


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6. What role should the Internet play for apparel retailers?


examine e-shopping quality dimensions; explore how e-shopping quality factors influence consumer shopping outcomes (e-shopping satisfaction and e-shopping intention); and test the moderating effects of consumer experiential e-shopping motives on the e-shopping quality – e-shopping outcomes links within the context of online apparel retailing.
Search plays a key role in the apparel shopping process, a new study concludes, determining that 20% of 25 million unique monthly visitors to apparel sites tracked over a year used search in the process. In addition, the study by Yahoo and online market research firm Compete Inc. found search significantly influenced offline shopping, with 78% of those interviewed who purchased apparel offline reporting that online search had influenced their offline purchases.
“We set out to quantify exactly how search impacts consumers` apparel shopping behavior, both in their online as well as their offline purchasing,” says Gregory Saks, senior associate with Compete.
. Compete also conducted a survey of over 400 apparel shoppers who used search, then visited one of the 49 apparel retailer or manufacturer sites tracked, and subsequently purchased offline. Of those who reported that online search had influenced their store visit and purchase, 47% also have purchased apparel online; and they spend 26% more on apparel than those who don’t use search.
Over a 60-day shopping period, apparel searchers also spent more than 30% more time when visiting retail sites than non-search visitors, and they were more likely to engage in site activities such as registering for e-mail or viewing shipping information. Apparel searchers also generated an average online conversion rate of 21%, compared with the 18% average conversion rate generated by non-search users.
The study also determined that consumers use search throughout all phases of the buying cycle. 21% of those surveyed reported using search to find out about new styles and brands, 27% said they used search to seek out sales and deals, and more than 50% used search to find a store address, phone number or web site.
“Search provides retail marketers a way to reach their customers in a comprehensive manner that allows them to effectively tie together their online and offline sales, enhance brand awareness and increase market share.”

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7. Can an apparel retailer prosper in the future if it does not engage in multi-channel retailing? Explain your answer.
BENEFITS  OF  APPAREL  multi-channel retailing

This is largely due to the advent of online stores and mobile technology. Certainly, E-commerce and M-commerce are the latest additions to the multichannel mix and are fresh and interesting avenues for retailers to explore. However, the concept of multichannel existed long before the first online shopping basket or mobile app were twinkles in an excited developer's eye. The simple way of defining a multichannel retailer is that they sell to the public via more than one distribution channel - through mail order catalogues, bricks and mortar stores, online, and via mobile technology; the latter two being the most recent, and currently fastest growing channels.


The key benefit for retailers of being multichannel is that it gives them more opportunities to get their product in front of customers whom they wouldn't have been able to reach with a single channel. This allows them to increase revenues and profitability, which is fundamentally what being in business is all about. Customer loyalty is one of the biggest challenges in today's retail market regardless of whether you're a single or multichannel retailer, therefore the more opportunities you have to get customers engaged with your product, the bigger your advantage. Consumers are now bombarded with so many messages persuading them to buy that, if retailers dont take this seriously, theyre effectively conceding defeat to the opposition.

Integration is one of the primary challenges to multichannel retailers in the eternal battle for customer loyalty. When a customers makes contact with a retailer-whether it be online, via a mobile application, via a catalogue, or in store- it's important that they are treated in the same way; and that the high level of service that a customer receives face-to-face is replicated via other channels. To provide that service, the retailer must have the right product in the right place at the right time. That may be an old retailing cliché, but its absolutely critical. For example, there's no point in having a fancy website that seemingly allows the customer to buy products if the items never turn up. That bad experience wouldn't just put off the customer from visiting the website again, it would probably also deter them from shopping in the retailers stores on the high street, or using their catalogue. So whilst multichannel retailers are able to get to more customers, the chance of getting it wrong is also greater.

Furthermore, retailers must either fully invest in each new opportunity presented, or not enter that route to market at all. For example, if a retailer with two hundred high-street stores suddenly thinks that adding a website is going to increase sales, it may be right, but it will need someone to manage that web site just as it would need a shop manager to manage a 'bricks and mortar' store. A transactional website has got to be seen as an integrated part of the business, and the nuances of that part of the business have to be understood.

It is by no means my intention to deter anyone from considering multichannel retailing. In terms of whether it is the right approach for retailers, I think it certainly is. However it's
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