Here is an article from the Washington Post, that smart retail CEO’s need to consider very carefully.

Prices Fall To Match A New Frugality
Retailers Respond To Shopping Habits Forged in Recession

By Ylan Q. Mui
Washington Post Staff Writer
Tuesday, May 12, 2009

The nation’s retailers have begun to embrace the new cost-conscious consumer, developing products they can sell at lower prices without driving themselves out of business in the post-splurge era.

Starbucks dropped the price of a medium iced coffee last week to just under $2. American Eagle cut out the ribbon from the inside waistband of its khakis and lowered the cost. Pottery Barn launched a new “Comfort Collection” sofa that starts at $999.99, which is $300 less than the “Basic Collection” sofa. Even Rock & Republic, whose trendy denim has graced the backsides of celebrities such as Victoria Beckham, recently unveiled a line of recessionista jeans selling for $128, a 29 percent reduction.

Retailers have absorbed the lessons of a ruinous holiday season. Caught with shelves full of unsold merchandise, they slashed prices to draw in shoppers. But the strategy was unsustainable: It decimated profits and resulted in massive layoffs, killing off a number of chains, including Circuit City. Serving recession-era shoppers, retailers realized, would require a long-term strategy featuring lower prices.

“What we have is retailers reacting to a very low-appetite consumer and a consumer that has been now taught to wait,”

The new consumer has curtailed spending and increased savings to 10-year highs. Smaller houses are newly coveted, bringing the average size of a new home down in 2008 for the first time in 35 years, according to the National Association of Home Builders. Fancy dinners out have been scaled back, prompting restaurants to reconfigure their menus. (Clyde’s created a cheaper entree by offering one crabcake instead of two last month.) A recent survey by Boston Consulting Group found that 48 percent of consumers said they traded down on products last year, an increase from 41 percent in 2007. The number of shoppers trading up fell by six percentage points.

Retailers reassess their prices and their assortment of products every season. But this year, they are being particularly conservative. They are less willing to take risks on trendy, unproven merchandise and are stocking tried-and-true customer favorites. They have been reducing inventories; import cargo fell to the lowest level in seven years in February, according to an industry trade group. Many are putting more emphasis on lowering prices on the cheapest version of their products.

Consumer prices fell on a year-over-year basis in March for the first time in more than half a century, driven primarily by plummeting energy and transportation prices. Apparel and food prices increased during that period but fell on a monthly basis. Some economists have worried that falling prices could result in deflation, but Hemant Sangwan, a consultant with IHS Global Insight, said he doesn’t think that is a danger in the retail sector. He considered the price cuts more of a marketing strategy to win over reluctant shoppers.

“Prices, especially in the retail sector, are very easy to change,” Sangwan said. “As soon as the nature of consumers will change, prices will respond in the same way.”

Some price reductions have come from stripping out fancy details for which retailers once charged a premium. Production costs have also dropped, allowing sellers to pass on the savings. Retailers are streamlining supply chains and creating new merchandise with cheaper components and lower prices. In some cases, they are sacrificing profits and hoping to make up the difference in volume.

Gretchen Hitchner sent back the $400 cocktail dresses she ordered from a vendor in favor of stocking up on a more versatile minidress that sells for $98 at her Bethesda boutique, Ginger. She cut her purchases for the fall by roughly 20 percent and is trying to offer more clothing for less than $200.

“You take a chance every season with every style,” she said. “It’s a whole different story this year.”

Starbucks chief executive Howard Schultz said the company is tweaking pricing on its coffees after closing hundreds of stores over the past year. “Grande” iced coffee began selling for $1.95 last week, down from $2.25 in the Washington area. The company is also lowering prices on popular beverages such as tall lattes in some markets, though it is also raising the price of larger, more complex drinks.

“Consumers want to feel good about every hard-earned dollar they spend, and we certainly understand that,” Schultz told analysts.

Profit at the accessories manufacturer Coach fell 29 percent to $115 million, during the most recent quarter, compared with the previous year. The company responded by repricing its merchandise 10 to 15 percent lower and offering more styles for less than $300. Next fiscal year, it plans for nearly half of the merchandise in its stores to cost $200 to $300, compared with 30 percent selling in that range this year.

J. Crew, meantime, now sells a new, more basic version of its popular ballet flat for $98. The cheapest ballet flat previously cost $118. This fall, the retailer plans to lower the price of its entry-level jeans by about $20 from $92.50.

“We do know for sure that there is an enormous price sensitivity out there,” chief executive Millard S. Drexler said in a recent conference call with analysts. “We’re just being real conservative now.”

The most successful retailers in the industry are constantly reinventing themselves to stay one step ahead of the competition, according to the STORES Top 100 Retailers ranking.

The report, which is an annual snapshot of the retail industry, ranks companies by revenue and groups them on one chart regardless of the segment or segments in which they operate. STORES is the monthly magazine of the National Retail Federation.

“It’s not enough anymore for retailers to carry the same merchandise as their competition,” says Susan Reda, executive editor of STORES. “From their own brand of food to an exclusive line of tools, today’s retailers will get ahead by differentiating their merchandise and offering products that consumers cannot find anywhere else.”

Arkansas-based Wal-Mart again tops the list as the nation’s largest retailer with 2006 sales of $348.65 billion, an 11.7 percent increase over the previous year. In fact, Wal-Mart’s 2006 revenues were greater than those of the next five largest U.S. retailers combined. According to the article, Wal-Mart has remained successful by introducing a line of organic options and focusing on ways to conserve energy and materials.

Home Depot and Kroger retained their second and third spots, respectively, though both companies saw their share of struggles in 2006. Home Depot, which managed to see an impressive gain of 11.4 percent in revenues in 2006 despite the departure of its CEO Robert Nardelli, has been striving to change its corporate culture and maintain strong sales in the face of a current housing slump. Kroger, whose sales rose 9.2 percent to $66.11 billion, remains the subject of takeover talk, though company executives deny the company has any interest in such a deal.

Costco, which advanced a notch to the number four slot, is also pushing the envelope by increasing its private label offerings with a new line of food conceptualized by Martha Stewart. Costco’s sales increased 13.6 percent in 2006 to $60.15 billion. Mass merchants Target (#5) and Sears (#6) are both attempting to differentiate themselves but are moving in different directions.

Target, which advanced a spot in the ranking with a sales increase of 13.1 percent to $59.49 billion, will continue to add more private label food items in its stores. Sears, which dropped two spots despite a 7.9 percent sales increase to $53.01 billion, will be rolling out its Craftsman tools and Kenmore appliances to more Kmart locations this year.

Drug stores are also represented in the top ten retail companies. Walgreen, which rose one spot to number seven, is aggressively adding free-standing store locations and focusing on front-end merchandise. CVS, a new entry to the top ten this year at number nine, acquired Caremark Rx and has promised to “transform the way pharmacy services are delivered.”

Other companies in the top ten include Lowe’s, which dropped one spot to number eight, and Safeway, which retained its spot at number ten.

“SAP is a proud sponsor of this year’s STORES’ Top 100 list and recognizes how important growth and innovation are to the retail industry,” says Jim Mattecheck, senior vice president and general manager, Retail, SAP America Inc. “Successful companies continuously find ways to offer a differentiated shopping experience that inspires customers to shop with that retailer again and again. SAP has a proven track record of helping retailers achieve their goals. In fact, more than 4,300 retailers worldwide are SAP customers.”

The most noticeable change to this year’s Top 100 is the inclusion of restaurant companies. The ranking, based on corporate revenues rather than system-wide sales, added six restaurants to the list this year including: McDonald’s (#16), Yum! Brands (#35), Starbucks (#42), Darden Restaurants (#53), Brinker International (#73), and Outback Steakhouse (#80).

“Consumers have changed, but their needs have not,” says Susan Reda, executive editor of STORES magazine. “Americans still have to put dinner on the table every night, but now they are looking to restaurants to fill a larger portion of that need rather than relying exclusively on traditional supermarkets. Successful restaurants understand how to cater to today’s consumers, and there are some ideas they’re trying that traditional retailers may want to borrow.”

Well, Consumers do have to live in the real world, don’t they?

US in ‘retail deep freeze,’ survey shows.

The majority of U.S. consumers do not think the worst of the U.S. economic crisis is behind them and plans to spend on luxury items remain low, a new survey showed Tuesday.

Only 34.3% of consumers surveyed by America’s Research Group said they think the worst of the crisis has passed, while 52% said they did not think the worst was over yet.

“The consumer still feels that they are in the bottom of this pit and they are by no means getting out of it,” said Britt Beemer, founder of America’s Research Group, which polls consumers on spending behavior.

In a series of questions asked for Reuters, Beemer’s group also found that consumers are still much more focused on price when buying food than a year ago and that almost one third used their tax refunds to pay down debt.

Only 24.8% of the 1,000 consumers who responded said they are more likely to make a luxury purchase of at least $500 than they were three months ago. Just two years ago, 30% would have answered yes to that question, Beemer said.

The number of consumers who say they are likely to make a luxury purchase is close to the roughly 23% who said they would make such a purchase in the aftermath of the Sept. 11, 2001 attacks, Beemer said.

“I’m really convinced that there is no discretionary spending going on right now. The only spending is replacement spending,” he said.

Retail ‘deep freeze’

Beemer also said the avoidance of luxury spending might last longer than it did in 2001, as other research he has conducted showed consumers think they will need to wait until after the 2010 income tax filing season to feel better about their finances.

“I think America’s in this retail deep freeze,” Beemer said. “I think we’re going to see it go on for months and months and months.”

When it comes to buying food, 74.2% said price is a bigger factor when making a purchase than a year ago.

Meanwhile, only 24.2% of consumers said they feel they have extra cash in their paychecks due to the U.S. government stimulus package, while 73.7 % said they did not.

The stimulus package includes a tax credit that will be paid to many workers in the form of less withholding tax taken out of paychecks, though at $400 annually for single workers, that amounts to only $7.69 a week.

The survey was conducted May 1 through May 3.

So, now you need to rethink how you get inside the mind of customers and your markets.

Change within retail does not happen by accident, according to retailers speaking at the World Class Ideas that Transformed Retailing session at the World Retail Congress in Barcelona.

Paul Charron, former president of fashion brand Liz Claiborne, said that if change is to be effected, the chief executive needs to be capable of “listening and learning.” He added: “I pretty much ignore detractors. One of the key roles of the CEO is to bring people up when they’re down and to put them down when they’re up, because when you start believing your own BS, it’s time to exit stage left.”

Bernie Brookes, chief executive of Australian department store retailer Myers, said that enabling change in retail organisations is like “changing the engines on a jumbo jet while it’s flying.” Brookes related how Myers has put in place a programme that has proved instrumental in improving the company’s fortunes with measures including creating in-store “heroes”, rewarding some of the retailer’s “best individuals”, as well as sending DVDs to stores outlining company news that could be viewed by staff when time permitted.

Stewart Mcphail, chief executive at Middle Eastern retail group Fawaz Alhokair, seemed to capture the mood when he said that retail change could not be viewed in isolation and that it should remain an integral part of what a retailer does from day to day.

Like Charron, however, he warned that chief executives charged with making this happen have to be sensitive to the differing requirements of the many disparate individuals found within retail organisations. “There has to be trust from all of those involved,” he said.

Retailers need to wake up:  Maybe Mr. Traub earns too much money to really “GET IT”

22% of Americans owe more on their homes than they are worth!

Mr. Traub needs some reality therapy!  Your customers just got a lot poorer, that is the reality, now..

What are you going to do about it?  Do you know what retailers gained last month?  Do you really really know why?

Retailers need to work harder to persuade shoppers to start spending again in what is the most difficult time in the sector’s history. That was the message from famed former Bloomingdale’s president and CEO Marvin Traub at the World Retail Congress today.

Traub, who is credited with turning Bloomingdale’s into a world leading retailer in his 40 year career with the US department store, told the congress that “we live in an atmosphere of ongoing pessimism”, which meant that “our customer is turned off”.

“There has been a transformational shift in consumer sentiment as consumers re-evaluate how and why they spend,” he said, adding “our industry is consumed by the fear and guilt which have gripped shoppers”.

Describing today’s market conditions as “the most difficult and challenging time our industry has ever faced”, Traub said that retailers need to reach out to shoppers by working harder to ensure the products and experiences they offer do more to persuade them to get back into the mindset of spending.

“There is a changed attitude to consumer spending,” he said. “Our job is to create a more positive attitude for consumers and for our stores. We live in a world of exponential change and retailers need to react.”

He said that too often the customer service in stores is poor, which leads to low levels of conversion of store visits to sales. “When I visit stores I am frequently concerned by how poorly some staff interact with customers.”

Traub warned that the luxury market, on which his success with Bloomingdale’s was built, needs a fundamental rethink. “In recent years prices of luxury goods have grown to levels which are unsustainable,” he warned.

He pointed to Matthew Williamson’s tie-up with H&M as an example of how luxury brands could develop more affordable secondary ranges that are accessible to more shoppers.

“At all price points, today more than ever, retailers will need a value proposition,” he said.

So, Get into war mode, and prepare to dig deep, Who is your market?  What are consumers thinking?  WHERE ARE THEY HEADED?

Yes, I do have ways to find out!  DO YOU?

ARE YOU MORE LIKE DETROIT THAN YOU ARE PREPARED TO ADMIT?

You must gain RELEVANT clarity, what is it that really drives sales in your stores, restaurants etc?  If you really knew, you would not be reading this!

Retail Winners get to know customers on an intimate basis.

Cut through the noise

Increasing Retail Sales Now – More Customers More Often Buying More

Executives ask one question on an almost weekly basis: “How can I differentiate my company in the marketplace?” My reply to every president, chief executive officer, or vice-president of marketing is always the same: “Why do you want to be different?” We are swimming in an overabundance of products and services. “Different” is no longer a differentiator.

What is? Creating a RELEVANT brand, offering and relationship with your customers and market.

What world do you live in as a retail executive?  Do you really understand your customer and the pressures of the marketplace?

Consumers are changing like quicksilver now.  They are far less brand loyal, they search for deals and value, they prioritize what they need differen

Consumers seek meaning and a brand they can trust. They are busy at work on Web 2.0 platforms creating ways to cut through the noise in search of products and services that resonate with integrity and transparency; in a word, authenticity. That quest for authenticity is a call to action for any company intending to be relevant in the 21st century.

Step Back and Consider Your Brand

As the marketplace has shifted, so too must your brand offering and service contract. A single, beautifully designed product offering and service contract is nothing, if it is no longer RELEVANT TO BUYERS IT IS AN OPPORTUNITY WAITING FOR a company that will take the time to understand three things: the deep-seated desires of its customers, its own DNA, and the sweet spot where the two overlap.

What is the right approach for innovative companies to take? First, take a step back before introducing just another product. Decide who is your true tribe and what makes the most sense for those customers and your company at a particular time. Push the pause button, dig deeper, and reconsider what it would take to make your customers truly love who you are as a brand.

Back in 2001, Umpqua, a regional bank in Oregon founded to provide loggers and farmers a banking alternative, approached Ziba, my design company, to help redefine the banking experience. Instead of getting to work designing right away, we had to discover what banking meant to Umpqua’s customers. What were their attitudes about banking in general? How did community banks like Umpqua, with its 65 branches, fit into that picture? How did large commercial banks fit into that same picture? With the convenience of online banking and ATMs, what would motivate customers to go into a bank in the first place?

Customers Crave Personal Service – RELEVANCE 101

Next, Umpqua had to understand its own culture. What did Umpqua believe in? What was it good at? What did it stand for? What could it stand for?

After researching these questions thoroughly, Umpqua found its customers were craving intimacy. They were tired of the impersonal service they received from regular banks and suspicious of financial institutions in general. While other banks were competing with a convenience strategy centered around the Internet and ATMs, Umpqua identified an opportunity to provide customers with a “slow banking” experience that was both inspirational and encouraging. This translated into comfort and personal service—a hotel/retail metaphor with a modern-craftsman aesthetic.

The result was a flagship store in Portland’s Pearl District that delivered an unprecedented banking experience tailored to the specific needs of Umpqua’s customers and the unique expression of Umpqua’s DNA. It also happened to make Umpqua a lot of money. The first week the store was open in April, 2003, it generated $1 million in deposits. Nine months into the first year, the new store had a record $50 million in deposits. Since then, Umpqua has rolled out stores based on this template in other cities in Oregon, and created a smaller version for smaller neighborhoods.

Starbucks Recovers from Disaster – RELEVANCE 101

Customers will forgive brands with which they feel an authentic bond. Starbucks (SBUX) is the story du jour of a company whose strategy went from grassroots to gimmicky somewhere between the original handful of stores in 1982 and the more than 15,000 in 43 countries today. By its own admission, the company lost sight of who it was and what their customers wanted.

However, CEO ’s process of recovery from this potential brand disaster is what makes this story so compelling. Schultz chose the path of integrity: He publicly admitted Starbucks’ role in its own decline and invited others to participate in the company’s recovery. Transparency is a requirement for companies striving for authenticity. And, from his public admissions all the way to the launch of the social networking site mystarbucksidea.com—which invites customers to submit store improvement ideas—Schultz has embraced this concept in spades.

Now, instead of the media focusing on the dilution of the brand, the press and the blogosphere report on how Starbucks rediscovered its DNA. While the future remains to be seen, my bet is on it recovering gracefully.

The Art of the RELEVANT Relationship– RELEVANCE 101

The women’s clothing store Anthropologie is another modern, authentic success story—with a twist. Anthropologie’s retail environment is an artful rendition of a French market that creates a mood of discovery and whimsy. While the merchandise is a unique mix of found objects from around the globe, the store is as close to a genuine French flea market as is the French bread sold at Safeway (SWY). However, customers have been known to spend over an hour in a store and close to $80 a visit.

Anthropologie has made an art of the authentic relationship. The company’s customer is not a roughly sketched demographic. Nor does it expect to sell to everyone with a one-size-fits-all approach. Anthropologie has dug deep into the subtleties and nuances of the psychographic profile of a specific type of thirtysomething married woman. Anthropologie outlets are an extension of her adventurous, bohemian-chic self that doesn’t get much play when she’s juggling a career and kids. Connections like these accounted for growth of 18% in the fourth quarter of 2007 in an overall disappointing quarter for the women’s apparel sector. Not bad for a company that doesn’t advertise.

Let Your Customers Be Themselves– RELEVANCE 101

This is what it means to forge an authentic relationship with your customers. It’s not the kind of relationship that lasts for only one season or that comes on suddenly because your product is cheaper or more beautiful than another’s. It’s the kind of relationship that emerges because you offer something that caters to an essential desire and makes your customers feel they can be themselves. It’s the kind of relationship that allows for mistakes and creates a bond of loyalty. And having established an authentic bond doesn’t mean you can rest on your laurels. People change, trends change, and you must always be willing to reinvent yourself as both your company and your customers evolve.

If you follow this approach, your true tribe will love and reward you for it, then spread the WORD—your business depends on it.

More than anything we help you target what drives revenue, membership and growth.

Here are some of the recent results that my clients have gained with this approach

·         One fitness client increased retention by 15% with some small but critical changes we helped identify – not only the problem, but a simple to implement solution.

·         We recently increased sales by over a million dollars for a mid sized retail chain.

·         We have uncovered 42 million in lost revenue opportunities for a National grocery chain and we are now helping them grab the opportunity.

·         Do you need low cost/ high return strategies for Customer retention and referral growth?

Our clients focus on adding revenues, and we become a measurable, profit centre for them.

My clients want more revenues now, and we are delivering.  

Retailers are in such a dangerous situation.  With unemployment and debt levels at historic highs, do not smoke the “optimism opium” of the mainstream press.

Retailers will continue to FIGHT FOR SURVIVAL INTO 2012. 

Retailers will be battling for wallet/purse and market share in a shrinking US marketplace.

It will be critical to focus on what matters to consumers and customers.

What drives revenue will be the key knowledge.

Fast intelligent, flexible.

Know your market, consumers, customers and changing market conditions like never before.

Here are some interesting leanings for my retail clients:

New, non traditional competitors are sneaking up on you

Consumers will jump ship in an eye blink

The value price brand equation is changing fast – stay on top

Get an intimate read on real time influencers of REVENUE!!!

Service, is only one small part of the equation.

Increasing Sales for Retail  - I NEED MORE SALES NOW

Companies in the Business to Consumer sector are increasingly aware that consumers are less willing to spend, and far more willing to consider alternatives.

The Challenge:

Customer dissatisfaction persists despite multiple studies

Customer satisfaction scores do not reveal the roots of dissatisfaction or the routes to exceeding expectations

Traditional survey vendors fail to provide execution guidance and action plans

Companies need to be in a position to deliver the right services to the right customers

 

Mapping a solution:

Consumer/Employee Experience and relevance survey execution (customer and employee), analysis and recommendations

Deliver employee communication

Brainstorming and mapping solution with executives

Manager training

Real Time survey development and execution with Realtime + Alerts

Quarterly analysis and recommendations of all process

Continuous  Customer Revenue Action survey and proprietary analysis. Including  development, execution, analysis and recommendations

Continuous   Employee survey development, execution, analysis and recommendations

Delivering the Results:

Prioritized clarity and focus for the organization on the issues that matter to Revenue and the customer

What Drives Revenue?   Focus, Measure and Act on Revenue Driving Goals and improvements .

Measurable increase in customer conversion to purchase

Increase in employee Actions that produce REVENUE

Increased sales per visit with key customers through customer action steps reporting

Increased share of total spend for existing customers (more business from existing customers

Increase effective referral from your customer network

Measure, understand and increase successful monetization of all web traffic, resulting in a purchase action (REVENUE)