Consumers responding to new, old retail virtues
January 12, 2010,
New York -- While acknowledging that 2009 was yet another year when pricing was the dominant strategic challenge in retail, panelists at the Financo Annual Merchandising Industry Chief Executives Event last evening trumpeted the virtues of product design and brand integrity.
But panelists were unanimous in insisting that quality, creativity and integrity in product design is the chief difference-maker in today’s retail environment, which while tough is not unique in the historical span of the marketplace. Indeed, several panelists said consumers are enthusiastically rewarding those companies that hew to the tried and true practices of merchants from days gone by.
“There’s no race to get there,” said Mickey Drexler, chairman and ceo, J. Crew Group. “For me the race is to maintain the integrity of your products.” Drexler recalled coming across retailing icon Stanley Marcus one morning “personally on the phone with a woman in Lynchburg, Virginia,” getting first hand consumer feedback. “He ran a store.”
“You’ve got to touch and feel and know what’s going on,” agreed Solomon Lew, chairman of Australian multi-format softlines retailer Just Group, who called his method “MBWA: management by walking around.”
The back-to-basics approach was also evident in the entertainment-driven end of the retail spectrum. “Products, storytelling and service,” said James Fielding, president, Disney Stores, were the watchwords in the repositioning of the company’s 350 stores. Along with value, he said, products had to project “newness, quality.”
“Quality has become more important than ever,” stated Sir Philip Green, principal of U.K.-based Arcadia Group of Brands, which includes the Topshop and Topman chains. While noting that the market has “forced us to be more efficient,” he stressed that efficiency is “not just cost-cutting. We need great people in our business,” from designers to operations. Focusing on quality, Green said, pays off. “Great product doesn’t lie. The customer will tell you.”
One of the ways customers are talking back, said Betsy McLaughlin, ceo of teen fashion merchant Hot Topic, is through the array of social networking media. “The idea of being connected” to the brand and to brand-linked special events is crucial to building loyalty with younger consumers, she said. In addition, “getting their opinion” on styles and trends is a vital function of social media such as Twitter, Facebook and MySpace.
Offering a similar perspective from the vantage point of a major supplier, Bruce Rockowitz, President, Li & Fung Ltd., said while pricing discussions have increased among all his company’s customers, there are still factors that trump price. He said of his Japanese merchants, for example, “They care about relationship. The relationship is more important than the best price.”
That formula plays all the way through vendor to retailer to consumer, said Lew. “It’s all about the offer, the integrity of the brand, the quality, the visual.” He admitted this was not an iconoclast point of view: “It’s old-fashioned retail.”
The panel was in general agreement that online merchandising is both a blessing and a curse. On the plus side, the internet helps excite the shopper and can drive incremental business. On the negative side, the constant, global price war for identical and similar products adds to both retailers’ and suppliers’ competitive headaches.
Additionally, it is not clear that non-store sales are all gravy. “The P&L on our internet business is inflated,” said Green. “We service it out of our brick and mortar business.”
Still, McLaughlin expressed great satisfaction with the ability of her chains’ online presence to create additional sales and strengthen their competitive edge. She pointed to tie-ins with music and movie celebrities that provide a third leg of Hot Topic’s merchandising tripod -- and revealed how brick and mortar can combine with the internet for a sum that is greater than the parts.
Citing three web-and-store reasons for a very good 2009 at Hot Topic, McLaughlin pointed to:
1. Product. Social media can help make a fashion product especially desirable, so trendy that young consumers “have to have it now - not in three days” and so they head to the malls.
2. Pricing. She lauded Aeropostale for creating a “feeding frenzy” this holiday season with $5 T-shirts that also generated “people driven to the mall.”
3. Experience connected with shopping. Realizing that “the place to hang out for young people is the internet,” and not the mall, she said that these consumers have nevertheless shown they will hit the stores when a well-tuned experience is prepared there, and promoted online.
At the Financo event, Betsy McLaughlin, ceo of Hot Topic, Gilbert Harrison, chairman of Financo, and James Fielding, president, Disney Stores.
Attending from the global supplier were (l to r) president LF USA Rick Darling, president Li & Fung president Bruce Rockowitz, and coo LF USA Ron Ventricelli.
Flanked by Financo president and ceo Bill Susman, l, and chairman Gil Harrison, r, are panelists Fielding, McLaughlin, Lew, Rockowitz, Drexler and Green.
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