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The Top Five Retail Stories of 2013

JCPenney tops the list

The Top Five Retail Stories of 2013NEW YORK - There was no through line at retail in 2013, even within channel segments - where some retailers made steady gains while their rivals floundered.
     Wealthy consumers were spending freely; everybody else remained fairly cautious, and the Consumer Confidence Index bounced around, picking up steam in the early part of the year only to plunge in the fall.
     While there was a lot of new brand activity in textiles on the supplier side this year, there weren't many big brand rollouts at retail, with the exception of JCPenney.

JCPenney: The Transformation Fizzles
Where to start? So much happened at JCPenney during 2013 that any incident in itself could be deemed a top story.
The year started with a bang - and not in a good way - as the company announced it had lost $5 billion in sales the previous fiscal year, its net loss for the period just shy of $1 billion. The red ink continued to pour, with sales plummeting another 16% in the first quarter. In April, the board announced that visionary ceo Ron Johnson was out and his predecessor, Mike Ullman, was back at the helm. Shortly thereafter, JC Penney posted a video to YouTube, apologizing to its customers for having alienated them.
     The biggest miss of the year, of course, was the rollout of the transformed home department. Johnson had planned a series of boutiques anchored by a 20,000-square-foot Martha Stewart store. Macy's lawsuit, which asserted its exclusives with Stewart for bedding, bath and kitchen products, scrambled that scenario. The department, originally slated to open in March, did not materialize until June. In terms of merchandising layout, it was dazzling; in terms of sales, it was a flop. The new set actually performed worse than the format it replaced.
     In the end, the initiatives set in motion by Johnson did not manage to lure the younger shoppers he sought and drove away the older, budget-conscious consumers who made up JCPenney's core. Much of his strategy is being dismantled. Sales and coupons are back. Focus is returning to opening price points, basic goods and legacy private label brands. Heaps of the contemporary merchandise Johnson added to the assortment, especially in home, are being marked down and cleared out.

Happy ChicHappy Chic by Jonathan Adler was one of the shop in shops rolled out in JCPenney’s new initiative in 2013.

     Another home department makeover is in the works and is to be completed by spring 2014.
     The larger question for JCPenney now is liquidity, with several Wall Street analysts predicting bankruptcy and a pared down store base. As the new leadership strips away Johnson's work, it cannot simply return to the style of business that preceded him - because that wasn't going well either.

Macy's Victorious
     It's not just that Macy's lawsuit against Martha Stewart Living Omnimedia's deal with JCPenney managed to effectively scuttle the crux of the latter's home makeover. Macy's outpaced its rivals by leagues in 2013.
     Where competitors came limping into the New Year, Macy's sailed in with gusto. It had just logged a solid fourth quarter, and its 4.9% fiscal year sales gain exceeded expectations, with online sales for the year jumping nearly 50%. Macy's first quarter profits climbed 20%, and while the second quarter was essentially flat, net earnings ballooned 22% in the third quarter.
     Unique among its peers, Macy's formulated a plan to 2012 to charge hard after Millennial shoppers. The effort began in apparel, with the launch of 13 brands as well as mstylelab stores for the younger cohort (ages 13-22) and Impulse departments for the older segment (ages 19-30). But it's also paying dividends in home, where the company uses its website to offer more expansive bedding assortments that are contemporary and print-driven. And in mid-November, Macy's in partnership with Clear Channel launched mstyleradio, a digital radio station targeting the demographic.
     Intertwined with Millennial outreach is an aggressive omni channel push. It took a new step forward last week when Macy's unveiled a trial program in New York and San Francisco through which a customer's iPhone begins spitting out ads and discount offers the moment she steps into its store. Elsewhere in mobile commerce, Macy's has launched a mobile-enhanced online store, a stand-alone mobile app and new visual recognition software that will allow users to purchase items from Macy's Star Gifts assortment by scanning a catalog, magazine or outdoor billboard.The Top Five Retail Stories of 2013
     And to conclude where we began, Macy's completely gummed up JCPenney's Martha Stewart plans.

Martha Stewart Searches for a New Merchandising Path
     Once upon a time, it was so simple. Martha Stewart-branded home furnishings for the mass market were exclusive to Kmart - and they did a killer business, generating roughly $1 billion in annual retail sales. Kmart's royalty and minimums obligation for 2004 was $47.5 million.
     Martha Stewart Living Omnimedia's merchandising division now runs on niche agreements with Macy's, JCPenney, Home Depot, Staples, PetSmart, Michael and Jo-Ann Fabric & Craft as well as products under the Emeril Lagasse brand. MSLO's merchandising revenues for the first nine months for 2013 were $14.2 million.
     Moreover, the JCPenney deal that was announced in December 2011 was supposed to have gone some distance toward providing a big chunk of change to Omnimedia. In addition to the Martha Stewart shop-in-shop that was to have been the primary hub of Penney's remodeled home department, Penney was to create a full-on Martha Stewart ecommerce business. That piece of it never got off the ground thanks to Macy's lawsuit against the deal. Penney's original contract with MSLO called for the retailer to contribute $200 million; the recently renegotiated agreement pared back the vig to $50 million over four and a half years.
     Macy's suit certainly kept Stewart's name off significant categories of merchandise at its rival, but you'd be hard-pressed to find anyone who doesn't believe Macy's isn't going to slow-walk its own Martha commitment out the door as soon as contractually possible. At Penney, where Stewart merchandise had its strongest showing in the window department, who knows?
     As MSLO pursues new merchandising ventures, including international growth, its does so in a media space where its brand presence has contracted. During the glory days of its Kmart run, Stewart's empire spanned two magazines (Martha Stewart Living and Martha Stewart Weddings), a television show that ran six times a week on four major networks, a weekly segment on CBS This Morning, a daily television program on the Food Network, and a radio program that aired five days a week on 270 stations - not to mention book publishing and a catalog and ecommerce operation pitched toward better goods.

Langdon beddingLangdon bedding, part of RL 624-count sateen open stock line, represents the step-up solid color program in the Ralph Lauren rollout.

     Stewart clearly broke the mold in the 1990s by establishing herself as the preeminent arbiter of tasteful living. In a more fragmented and volatile climate for media and retail, it's possible no one can pull it off again.

Ralph Lauren Resets Home
The first big-name game-changer in home upended the equation again this past fall. Some 30 years after Ralph Lauren set the bar for a designer label crossover from apparel, the label's repositioning is shaking up department store assortments and creating opportunities for other brands to fill the space.
     The company eliminated the Lauren label in soft home, which had been resident everywhere from Macy's to Marshall's, and in the process largely ditched opening point solid color sheet and towel programs. Ralph Lauren Home has been repositioned as a better price point, department store brand - a move that curtails volume but presumably boosts profitability and underscores the overall label's more refined status.
     Two core solid color sheet programs are sold open stock, with retail on a queen sheet at $79 for the 464-count percale and at $99 for the 624-count sateen. Retails on full/queen duvets and comforters range around $250. Solid color bath towels are tagged at $22.
     How RL accounts work around the changes will become clearer when spring 2014 merchandise arrives at stores. Macy's is expected to expand its house brands, while smaller department store companies are sorting through other national brand offerings.
     As a barometer of where big designer programs are headed in home, this is probably a one-off. For most others, "diffusion" or sub-branding remains a key strategy to broaden brand reach and capture more dollars. So once again, Ralph is being uniquely...Ralph.

Amazon is Coming for Your The Top Five Retail Stories of 2013Market Share
     How it took anyone in the home business so long to recognize the competitive threat posed by Amazon is baffling. The king of etailing is a Top 20 retailer of home textiles, ranking No. 17 on HTT's Retailing Giants report with an estimated $320 million in 2012 sales.
     Amazon generates more revenue from home textiles than Sears. It does twice as much business in the category as Bloomingdale's. It does three times more business than West Elm.
     Yet it took holiday 2012 to wake up many of Amazon's rivals in the bricks based retail world. As 2013 dawned, location analytics firm Placed produced a report identifying the retailers most vulnerable to show rooming - having a consumer shopping product in a physical store but ultimately placing an order for a similar product on Amazon. At the top of the list: Bed Bath & Beyond. Also in the top 10: Sears, Kohl's, Target, Costco and JCPenney.
     It's hard to know what kind of impact that had on any individual merchant's online plans, but a lot of retailers in 2013 began directing big capital expenditures toward beefing up their ecommerce, mobile commercial and omni channel selling strategies.
     Bed Bath & Beyond, Target and Macy's all put the pedal to the metal. Companies that had managed, incredibly, to get by without ecommerce swung into action. Among them were TJMaxx (an effort confined to apparel and related accessories thus far), Belk and Stein Mart. Retailers that already had solid penetration in ecommerce are working to boost it, including the Williams-Sonoma brands and Value Vision (Shop NBC, now rebranding as Shop HQ).
     Last week, as several top retailers were setting their stores to kick off Black Friday sales on Thanksgiving Thursday, Amazon had already unleashed its holiday fusillade by offering new deals every 10 minutes beginning Nov. 24 - four days ahead of Thanksgiving. Amazon is moving so fast on so many fronts - especially those involving media content- that it announced 20 initiatives just in November alone.
     Anybody who thinks Amazon isn't out to dominate the retail world is kidding themselves.

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