Friday, December 19, 2008

Blurry Assortments – Convenient or Confusing?

I was in Bed, Bath & Beyond this weekend to pick up a new shower curtain liner for the kids’ bathroom. It had been a while since I’d been in the store. At first, everything looked familiar, but as I rounded the first corner, I had an eerie feeling that I had somehow ended up in the wrong store.

There were shelves full of…toothpaste, toothbrushes, shampoo, conditioners, hair care products. In other words, it looked like I was in the drugstore. What’s going on?

Earlier this year, we did research with homeowners to find out where they go to buy products across a whole bunch of home improvement, repair and care categories – from plumbing supplies to paint to live plants to home cleaning supplies. We found that Lowe’s appeals most across more categories than hardware stores or Home Depot and saw that these types of stores do well in several categories of “consumables”. Like Bed Bath & Beyond, they use these faster turning and impulse categories to get people in the store more often, and also use these items to increase the average ticket.

Clearly, BBB and stores like it are looking for ways to be useful for more occasions than the rare times we are shopping for linens or furnishings for bedrooms, bathrooms or kitchens. BBB's move into home cleaning products was probably an attempt at increasing shopper frequency. Based on this last visit, I’d guess the move flopped since that department is now shoved in a corner and dramatically smaller than it used to be.

So, we have BBB, Lowe’s, Home Depot and Ace Hardware stores (and probably others!) offering and adding consumables typically found at drug and grocery stores. Meanwhile drugstores like Walgreens and CVS continue to offer and add small appliances and other small durable goods often found at home stores. Best Buy just started selling iPhones and Wal-Mart is rumored to start later this month. Wal-mart already offers a broader assortment than any of the stores I’ve mentioned. More category killers are running into the Wal-mart juggernaut.

All this got me thinking about how retailers should approach extending into new product categories and about who has done it well.

To extend into new product categories effectively, a retailer has to address unmet or under-met needs of current customers with products and services they can credibly offer to meet those needs. Amazon and Zappos come to mind as interesting examples. Both started out selling a single category of merchandise – Amazon started with books and Zappos started out selling shoes. What they really sold was a great customer experience. This platform has allowed both online retailers to move into new categories. Amazon now rivals Wal-mart for assortment breadth. And Zappos has moved into clothing, handbags and accessories.

For the offline world, I have to think harder. Stay tuned for my POV. Which store-based retailer do you think has extended into new product categories well?

Monday, December 15, 2008

Tapping Into the DIY Zeitgeist

One way homeowners are saving money is by doing more themselves. Whether it’s making improvements inside and outside their homes or fixing the things that are broken or don’t work right, it looks like many people are (re)discovering their handiness.

That said, many of us don’t feel very handy – we didn’t learn when we were growing up, and many of us have convinced ourselves that we’re too busy to do it, even if we had the skills.

The SF Chronicle recently reported that “buying hardware doesn’t have to be hard.” Bay Area Consumers' Checkbook magazine and asked thousands of local consumers to rate their hardware-store experience. Checkbook then did an exhaustive price survey of 170 area stores, both independents and chains.

Their results confirmed what we have seen in our own research with homeowners consistently all year, and as recently as last week:
  • Independents are best for advice - for people like me who don’t know what we’re doing or what we need to in order to accomplish it.
  • Big box stores are best for variety both within and across categories of merchandise
  • Independents can be competitive on price, but you have to work harder to make it pencil out – either buying enough to qualify for a discount or use their card or be in their program
People like the idea of supporting their local stores and appreciate the fact that their local, independent hardware store has folks working there who can answer questions and who know their stuff. Now that cheap is chic, the independents are having a particularly tough time. Stores like Ace Hardware and True Value are seen as less competitive on variety and on price, and fall lower down on customer’s list of places to go to get what they need.

The advice and help they offer may not be enough to make the independent store the first stop for most home improvement or repair shopping trips, but they are the only real advantage these stores offer as the economy has cratered. The growing popularity of doing-it-yourself may provide a ray of hope for independents, as events like the Maker Faires and sites like gain traction.

Maker Faire ( is a two-day, family-friendly event that celebrates the Do-It-Yourself (DIY) mindset that is put on by O’Reilly Publishing, owner of Make Magazine. Over 65,000 people attended the Bay Area Maker Faire this year and the magazine has fans around the world, with a paid circulation of 100,000; its Web site gets 2.5 million visitors each month. The publisher held a second Faire in Austin, Tex., in October this year. Here’s what the NY Times reported was one attendee's take on the event’s appeal: “Things like Maker Faire give people hope. Creativity is the best expression of humanity.” ( is an online marketplace for buying & selling all things handmade. According to Quantcast, traffic at Etsy was at an all-time high of almost 2.5 million unique visitors/month in November. Looks like giving homemade is “in” this holiday, even if it’s not made in our own homes!

Seems like the independents might be find a lifeline by connecting the dots here.

Friday, December 5, 2008

The Ways Consumers Are Shopping Smarter

Coupons have always seemed like a hassle to me. I’ve never been organized enough to keep track of them. In this digital age, it seems like coupons should be stored electronically on my card or my record at the stores I shop, so the savings happen automatically instead of my having to keep track of another piece of paper.

With the economy the way it is, I may be learning a new skill. Stuart Elliott’s story in the Dec. 5 issue of the NY Times proclaims the humble coupon as this season’s must-have. The story quotes Lance Saunders EVP and head of account planning at Campbell Mithun in Minneapolis, an agency owned by the Interpublic Group of Companies “Thrift is the new normal…There’s no stigma to getting anything on discount. Instead, there’s a sense of pride.”

In research with homeowners this week, we asked what they are doing to save money these days. Nearly everyone said they are paying attention to the coupons they get in the mail, find online or in newspaper inserts. In fact, more than ads, it’s the coupons they are remembering and using.

Our findings are consistent with data from the Coupon Council of the Promotion Marketing Association. Up until two years ago, coupon penetration had declined steadily since 1992. In 2006 it increased to 86% of the population saying they used coupons and it went up again in 2007 to 89%. Preliminary results for this year indicate a jump to 94% penetration!

Our findings are bad news for those who make their living from traditional advertising. Seems TV, radio and print ads are not getting through the noise of the season and the economic gloom and doom.

According to our research, here's what consumers say they are doing more than ever to save money:
  1. Doing it themselves
  2. Deferring it
  3. Comparison shopping for the best deal
  4. Relying on coupons
  5. Scouring the internet
Most of the people we talked to get coupons even if they’re not in a store’s loyalty program. They get them in the mail, the newspaper, email, or go online and print them out. They seem to manage the paper flow just fine. I'm still hoping a digital form will catch on. What about you? Are you clipping coupons yet?

Thursday, December 4, 2008

Malls Giving Way to New Formats

The tough economy has been well-documented. Still, it’s stunning to see the number of mall retailers that have disappeared this year alone. Gone are: Sharper Image, Fortunoff, Linens ‘N Things, Boscov’s, Steve & Barry’s, Mervyn’s, Circuit City, Shoe Pavilion, CompUSA and Goody’s.

According to an Oct. 6 report in the Wall Street Journal the vacancy rate at malls in the top 76 U.S. markets rose to 6.6% in the third quarter, up from 6.3% in the previous quarter, and its highest level since late 2001. Strip malls and family and lifestyle centers are also vulnerable to changing consumer preferences. Their vacancy rate climbed to 8.4% in the third quarter from 8.1% in the second quarter. That marks the highest rate since 1994, and these numbers are surely going to increase as the worst holiday season in a generation plays out.

The whole idea of the shopping mall may be losing relevance as consumers seek out greater shopping accessibility, more merchandise uniqueness, local sourcing and other priorities. The NYTimes reported on Nov. 11 that the nation’s second-largest mall owner disclosed that it might default on some of its debt obligations. General Growth’s most prominent mall holdings include Water Tower Place in Chicago and the Fashion Show mall in Las Vegas.

In fact, the Economist reported earlier this year that so many malls have died or are dying that a new hobby has appeared: amateur shopping-mall history. Like many esoteric pursuits, this has been facilitated by the internet. Websites such as and collect pictures of weedy car parks and empty food courts and try to explain how once-thriving shopping centers began to spiral downward.

While malls are struggling, retailers like Tiffany’s, Home Depot, and Best Buy among others, have been experimenting with smaller format stores. FAO Schwarz launched stores-within-a-Macy’s store by this Holiday, instead of free-standing stores.

They’re experimenting with other formats, as well. Pop-up retail continues to grow. Victoria’s Secret went on campus to reach students at 23 colleges across the country with its Pink brand. J. Crew signed a 4-month lease on The Liquor Store building in Tribeca in August.

And a new form of pop-up retail has emerged. From Zoom Systems, some call it automated retail, others call it the next generation vending machine. There are nearly 800 Zoom Shops located in airports, malls and retail stores in the US and Japan. Zoom Systems offers retailers added branded distribution in high traffic, attractive locations they couldn’t profitably put a store on. Consumers are exposed to the brand in an attractive setting, and generally buy to fill an immediate need for a specific usage occasion (e.g., a gift, for personal use on an trip).

Currently, iPod, Proactiv Solutions, and Sony are among the brands sold through Zoom Systems. Sharper Image couldn’t make it in its own stores, but this would seem like a way that brand could live on. Brookstone also seems like a candidate.

In addition to established bricks and mortar retailers, the concept seems perfect for manufacturers and direct sellers who don’t have a physical presence. A Zoom Store could be an opportunity for both brand building and a revenue generation for e-tailers like Amazon or and maybe even for Mary Kay, Avon, or Tupperware, though care would have to be taken to avoid alienating the troops.

Seems like a natural to put a Zoom Shop in markets where established brands are considering opening their own distribution. Expect to see more Zoom Shops popping up as brands look for low cost ways to test the waters and build awareness.

Monday, December 1, 2008

How Low Can They Go?

This Thanksgiving, we did things a little differently at our house. Usually, we play late night charades after dinner Thursday and have a round robin tennis tournament on Friday. This year, we were with the other side of the family, and didn’t play any games at all. We spent a lot of time visiting on Thursday, slept late on Friday and went to see Transporter 3 at the mall in LA.

After the show, we stopped in a few stores to take the pulse of Black Friday in LA. Most crowded by far was the Nordstrom Rack. We went in looking for deals on jeans for my teenage daughter – preferably True Religion, though Joe’s Jeans or Lucky Brand would do. No big bargains to be had. On any of them. Even the deals being heavily promoted as bargains were not much different from their every-day-low-price prices. And the styles that were available were definitely not the hip ones.

Despite all the hype about markdowns, we didn’t see it at the Rack on Friday. Much to my daughter’s disappointment, we left with only a few long-sleeve T-shirts in hand and saved our money for another day. As the Sacramento Bee reported last week, "Even with the desperation discounting already, the shoppers who will save the most will do it by waiting until Sunday, December 21, when it reaches its peak," according to Strategic Resource Group, a retail consulting firm in New York.

My takeaway? Retailers are going to have a hard time selling off-trend merchandise this season. Even at a discount, we expect good stuff. So, merchants that took chances on a look or an item may get burned. Gap used to do this a lot, and mark down its way out of the inventory overhang.

Not this year. If it’s off-trend in any category, it’s going to sit on the shelf. People want the wii fit, not a wii wanna be. They want the brands they know and trust to make them feel taken care of, not knock offs which just remind them they're poorer.

This holiday, customers will line up and put up with a lot of hassle for the right goods at the right price. If you don’t have them, they may not buy what you do have…at any price.