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Levy: retailers, suppliers are out of touch

If American retailing is bumping along a stretch of rocky road, many of it's problems are of it's own making, and "retailers and their suppliers are out of touch with the marketplace of today," said Walter Levy, a managing director and retail at Kurt Salmon Associates.

The performance gap continues to widen between department stores and mass merchants, said Levy, and a key reason may be the continued reliance of department stores upon fashion as a core group of aging customers finds fashion increasingly irrelevant. "Department stores are still selling fashion, but that's less and less important to an older, more affluent population of shoppers, whose lifestyle is changing. Taste and comfort is the prism through which the older consumer views life, no longer fashion. Consumers are more focused on the end use than the brand."

And in a piece of good news for a beleaguered home goods industry, Levy noted, "Home is where the business has been, not in apparel. But where are merchants still putting their emphasis?"

At the same time, said Levy, some of the standby national brands are becoming less relevant, while upscale proprietary brands, like that from architect/designer Michael Graves, are providing a big lift to Target. "National brands have over-played their hand and smothered retailers with their products," Levy said.

"The proprietary, private brand is becoming increasingly important. Think of Michael Graves or Phillipe Starck at Target, appealing to an upscale consumer. This is what Bloomingdale's used to do. Target is a present-day Bloomingdale's, trading in icons like Michael Graves."

American retailers, said Levy, "are still merchandising-driven rather than marketing-driven. Think of environmentalism. It's a big issue in many American homes, especially in the kitchen. But who's marketing to an environmentally conscious consumer? Nostalgia has been big for years. The most popular cars in the nation are all nostalgic designs, like the Volkswagen Beetle or the Mini-Cooper. Where do you see that in stores? Merchants aren't strategic; they don't look to see what consumers are doing — they're more supplier-oriented than customer-oriented."

And critically, said Levy, while consumers are putting fresh emphasis on value, stores are still putting the emphasis on sales. "Value has a new definition — 'more for less' rather than 'on sale for less.' Where the consumer is concerned, there's a real focus on value. But look what happens on the retail floor. Two weeks after Sears introduced Covington, it was on sale for 25 percent off. Everybody talks about thinking outside of the box, but so few can do it."

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