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Brian Kelly

  • Posted on: 04/24/2019

    Kohl’s goes all-in on Amazon returns

    It beats a gym. What retailer isn't anguishing over the downturn in traffic? No one -- all are freaking. Therefore, this is brilliant. Any lost traffic is somewhat replaced by these folks moving in their stores. And, as Kohl's rationalizes its assortment and selling space requirements, this is a great use of the freed space, whatever Amazon's lease obligations are. Now, can Kohl's convert the traffic? Is the Kohl's selling model relevant to that traffic? Therein lies the rub. Or as we like to say, "retail ain't for sissies!"
  • Posted on: 03/20/2019

    Is the success of Ahrendts’ Apple store more fiction than fact?

    I had such high hopes for Ms. Ahrendts. At the time she was hired, a video of Burberry and digital was trending and she was pitch perfect. Apple is not Burberry. Despite the trappings of luxury, Apple makes its money selling phones. And those require service, having sold many millions of phones resulted in a torrent of folks into stores not set up for the masses. As a result, store phone sales suffered and so did Apple retail. Johnson got Apple from A to B. Ahrendts didn't get it from B to C. Just like Johnson at JCP, Ahrendts at Apple wasn't a good fit. Maybe they are both geniuses, but retail reality closed in. As we like to say, "retail ain't for sissies."
  • Posted on: 03/01/2019

    What will going separate ways mean for Gap and Old Navy?

    What took them so long?
  • Posted on: 02/19/2019

    Where did Payless go wrong?

    Sears, Gap and Payless all failed because their selling model was not regularly adjusted to meet the demands of a changing shopper. What we are watching is the accumulation of irrelevance around the selling model: product, price, service, place and communications. Across the range of engagement, Payless did not provide a reason to shop.
  • Posted on: 02/08/2019

    Are legacy retailers on the right track or heading off the tracks?

    Retailers are compensated based upon performance versus a year ago. Everyone in the organization gets paid based upon last year. No one is incented to do anything meaningfully different. The organizational inertia carries it to failure. Look at the list of failed retailers in the past two years. They kept trying to beat last year by doing what they did the prior year. Investors make money based upon last year. So there isn't change. How to return shareholder value with an out of date business model? Whether you buy Johnson's performance at J.C. Penney, he did see a future and knew J.C. Penney wasn't going to make it. He made drastic changes that now Soltau is considering. Cutting appliances was easy, there was no "legacy" in it. But made to measure window treatments? That's what knee-capped Johnson. Internally, they resisted. Mall anchors are doomed. Reducing the store count to one-tenth is a start. But what investor will tolerate that topline loss? Business leaders know what to do. Shopko was in a perfect place, but the selling model was woefully inappropriate for the changes in rural economies. Sun Capital couldn't tolerate a new selling model, it was better for shareholders to shut it down.
  • Posted on: 02/08/2019

    J.C. Penney dumps appliances

    J.C. Penney's challenge is that it is no longer relevant to enough people. Its legacy is no longer relevant Like Sears, its legacy is what is killing it. The shopper for the legacy no longer exists. J.C. Penney can not clone onto a promise that's out of date and out of touch. J.C. Penney must start with a deep understanding of with whom it wants to do business. How do they live? How do they outfit their life? Then create a selling model that will surprise and delight them. We know it is not 200,000 square feet in a regional mall. We know its not a sea of racks with goods assorted based upon history. Folks in the early stages of home and family formation live a very different life and their solutions to life problems are different from what J.C. Penney knows. Ms. Soltau must understand that and set a new course.
  • Posted on: 02/06/2019

    What will Angela Ahrendts’ departure mean for Apple’s retail business?

    From the Vogue Business article, "The iPhone generated 62% of its $266 billion in sales last year. 'In retail, the phone is not our largest category,' says Ahrendts. 'We are actually number one in the company for Mac.'" Seems to me the cost to operate these stores is distorted to revenue. Sounds like the store phone business is underdeveloped. The cost of flagship stores can be amortized across the portfolio, but when there are so many flagship stores, the model isn't relevant to retail revenue even if its blended. Yeah, a channel thing, who gets credit for the sale? Is the HR person now in charge because of pending major restructuring? I had such high hopes for Ahrendts. Like Johnson at J.C. Penney. Or time will tell for Gass. We love futurists and radicals, their visions are so exciting. And in the morning a key goes in a door and it's open for business. Will mass retail reality match the digital dream? Retail ain't for sissies!
  • Posted on: 01/11/2019

    Are department stores seeing the Ghost of Christmas Future in bleak holiday results?

    Stores that underperformed for the 9 weeks of Holiday, did so because they sell the wrong merchandise at the wrong price in the wrong location. These stores face the same challenges that rendered Sears irrelevant. Too much internal pressure to beat last year, forcing merchants and operators to drive the business looking in the rear view mirror. Each year they are less relevant as success gets further and further away. Macy's/JCP are similar. Stores too big, locations less relevant. Remember, Macy's is made up of a bunch of failed local chains. They will both run out of money. Kohl's is different and to me, surprising. Was hoping Gass could leverage her Starbucks secret sauce in some new and relevant way. Alas, the shopper thought differently. And with all that Amazon induced traffic clutching 30% off coupons. With topline this soft, the earnings reports will be ugly. As we like to say, "Retail ain't for sissies!"
  • Posted on: 01/10/2019

    Is it now or never for J.C. Penney?

    We no longer live a departmentalized life. That is why all department store mall anchors are going away. Which is Ms Soltau greatest challenge: the built in traffic of a mall is gone. Soltau has to create demand for brand JCP. That means it starts with the customer, whose life is radically different as are shopping behaviors. The boxes are too big. Appliances? Why not! Well it didn't work. JCP isn't Sears. While they shared customers, the relationship with JCP was different because JCP was more hers than his. The tendency is to keep the sales in hand and not shift assortment away from those customers. Johnson broke with the merchant creed and "right sized" revenues. He also got whacked because he didn't manage the street's expectations. So what does Ms Soltau do? Get Merchant/Operator/Marketing/Finance/Tech all on one page. Hold them accountable to one another and brand frontliners. Put a stake in the ground as the store for "21st century Middle American Families." Craft a story that is relevant. Of course, add all the seamless experience activities. This won't be easy. It starts with getting all associates on board with the new way. Walked Woodfield after the Johnson remodel opened, and the long-term associates trashed it. Brand Frontliners must be onboard while the channels/assortments/value prop are reinvented. Do a deep dive on the shoppers in the best categories: Sephora, home. Find a way to tell a relevant tech story that links to customer data, shopping behavior and REINVENT the Loyalty Program. Segment the store portfolio with shopper data. Downsize all stores and assortments. JCP must thwart Kohl's. Good luck, Ms Soltau. Retail ain't for sissies!
  • Posted on: 01/09/2019

    Is Lowe’s doing it right with its new tagline?

    We do what we know. That's the Peter Principle before you get to "we reach our level of incompetence." Ellison did what he knew at J.C. Penney. Appliances. Holiday decomp: 5.4 percent.Uuh, yeah appliances. Now he is reassembling the Home Depot band at Lowe's. Will he meaningfully differentiate Lowe's and create a relevant selling model? DIY splits between projects behind and in front of the wall. Home Depot owned behind the wall and with it heavy DIY/construction. Lowe's owned in front of the wall and with it light DIY/decor. It worked until Nardelli took his eye off the ball and Home Depot stores got dangerous to shop. Blake came in and refocused on BOTH sides of the wall. Bringing Martha Stewart in was a tactic to become more relevant to lite DIY/women. And he changed the tagline from "You can do it. We can help" to "More Doing. More Saving" Won on assortment and price. Plus brought back tradesmen associates to restore knowledge. While Lowe's lost its way during the mortgage collapse as it struggled to comp. Ellison needs to do a deep dive into the current state of Home DIY and retool his selling model. Price alone won't do it. He has to solve for the DIY divide and do what is right for brand Lowe's. Price won't motivate merchants or operators to innovate.
  • Posted on: 10/31/2018

    Will Goodyear roll over rivals with new Millennial-friendly showroom concept?

    In 1997, Sears Auto Centers embarked on a new selling model, to be the "Starbucks" of tire buying. It was NTB. Its promise was "to not treat you like roadkill." Unfortunately, it didn't work. What we learned is customers care about quality of the work performed (people +product) and the time it takes to get it done (systems+people). Depending upon the location of the store, and the vehicle demography in the trading area, assortment and price were of variable importance. Higher HHI required HP tires, lower HHI required truck tires. In 2000, we began a new customer recourse program for Sears Auto Centers called the "Speed and Expertise Guarantee." Despite a legacy of problematic customer experiences in both tire and battery categories, Sears Auto Centers enjoyed double digit growth for the next two years. The selling model must be focused on multiple factors simultaneously to ensure customer satisfaction, and in the end, it happens at the store level. Properly trained associates with engaged leadership is crucial. Associates are the brand stewards.
  • Posted on: 10/09/2018

    Will foodie culture save the mall?

    No, the food court won't save the mall and it won't hurt it either. Without historic anchor traffic, most food courts take up too much square footage. Empty anchors exacerbate the real estate challenge. Food, entertainment and shopping as a benefit bundle seems the best, most relevant mall solution for trading areas with healthy local economies. Millennials, once in family formation, relocate away from city centers to train line, suburban towns and are living closer to the town center. Small town centers are growing within commuting distance, and local/walking distance restaurants are strong. They are choosing older/smaller residences within stroller distance and avoiding the further away McMansions and the car ride into town. Of course, not to be confused with rural town centers which unfortunately continue to struggle. The malls that serve that trading area will also struggle.
  • Posted on: 10/08/2018

    Will a new private label keep Target’s customers out of Aldi and Dollar General?

    Is this an organizing idea for commodity (aka consumer staples) OPP? Makes sense. I doubt Target will allocate many resources to build it into a powerful identity. Some of these categories are low interest, so shopper household income will be highly variable. Low interest categories don't suggest a special shopping trip. The role seems to be to increase basket size. Will Smartly be as good as Kirkland? Doesn't sound like it. Can Smartly take share from Aldi or Dollar General? Not sure. Depends upon location. Is the economy growing so that Aldi or Dollar General will be abandoned? Or will double whammy of tariffs (increased costs + decreased income) in rural markets protect low end retail? NET NET, this is sound assortment rationalization idea. Not sure of its revenue growth opportunity.
  • Posted on: 08/22/2018

    Target hits a bullseye in Q2

    It took Cornell longer than most expected, and it seems he understands his customer and what Target can do to surprise and delight them. My local store was just reset and it has returned to a logical and easily shopped experience. Departmental adjacencies make more sense and overall selling model is coherent. Silos seem to be dissolving. Victory can only be declared in February. For now, it looks like Target has its TarZhay back.
  • Posted on: 08/13/2018

    J.C. Penney goes after Babies ‘R’ Us customers with new shops

    JCP has announced a shift in target audience to "moms." That is smart, albeit a big "duh." "Moms" is a life stage, THE major shopping life stage as it encompasses family and home formation. Perfect for a "department" store. (Millennials/GenX/Boomers are not relevantly descriptive.) Ellison didn't have a clue. (Good luck at Lowe's, replicating THD, that won't end well either.) This is exactly whom JCP should target as it is primarily: mall based (place) and multi category (product). Target moved on this a few years ago, so strategic overlap and therefore competitive situation is hot. New moms prefer to shop in person when sorting out sizing. Once that is understood, she can replenish in more convenient channels (online/phone). Of course, with Mom's many shopping modes, in store is always an opportunity. JCP needs to go to school on its primary competitors to ensure both assortment and in-store experience exceeds her expectations. Establishing outlet loyalty can provide a halo that might extend to other categories. But all categories must align to this target definition to avoid dissonant department adjacencies which cause a decrease in dwell time. It won't be easy for cash-strapped JCP, and as we like to remind others: "retail ain't for sissies!"
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