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Brian Kelly

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  • 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!"
  • Posted on: 07/20/2018

    Costco, Sam’s Club and the great Polish hot dog controversy

    Those Polish sausages were very salty. But my opinion really doesn't matter! I'd ask the folks who cue up for lunch/snack to tell me what should be on the menu. They had a Usinger's brat with kraut that was tasty. That's gone too -- might be a local thing. Costco switched out Johnsonville Brats for their private label brand. That's on the store side of the business, not the snack bar. We expect turnover in their assortment. I think the same goes for the snack counter. Sam's is grasping at anything. Having a tube steak on the way out doesn't net out with the assortment in the store. My experience is Costco has Sam's by a long shot.
  • Posted on: 07/13/2018

    Ellison shaking things up at Lowe’s

    The first Peter Principle isn't "we reach our level of incompetence," rather it is "we do what we know." To replicate Home Depot won't work, it already exists. Ellison has to create meaningful differentiation in the category to succeed. That means reinvent. At J.C. Penney he added elements of Home Depot and hoped for the best. It didn't happen. There was a fundamental difference between Home Depot and Lowe's five years ago. Home Depot specialized in behind-the-wall projects while Lowe's went in front of the wall. Targets were different: Home Depot was heavy construction DIYer; Lowe's was heavy decor DIYer. Since then, those differences are some what modified. So Ellison's challenge is even greater. He needs Frank Blake's wisdom that allowed Home Depot to rebuild the airplane while it flew. What Ellison learned at J.C. Penney: "retail ain't for sissies!"
  • Posted on: 05/22/2018

    Ellison leaves Penney, further fueling doubts

    Mass department store retail is not relevant. Johnson knew it. Too much space, therefore inventory for the demand to be profitable. Millennials delaying life stages and choosing different life styles. Ellison, operator, was miscast or under supported (vision) which was proved by some of categories added to fill space. Yes, JCP is in trouble. Big trouble -- it's too big. None of the mall anchors are looking good outside of 100 malls and JCP has 10X that. It is years behind efforts in place by its competition: Sears, Macy's, L&T, BonTon. Whether it be liquidation, severe portfolio adjustment or selling model makeover. And there is no balance sheet help with all the debt taken on by Ullman to fix Johnson's efforts. Sorry, retail ain't for sissies!
  • Posted on: 05/21/2018

    Will greater transparency drive a digital targeting backlash?

    First, it's not the apps that target. Its the advertiser who buys the audience the app promises it can deliver. As most journalists don't buy advertising, they do not understand how this works. CA, Parscale (as agents) or any app did what it was supposed to do. It was the brand that bought the distribution to send its message that it targeted. Second, ads have always been targeted in some way. Of course in the past, the granularity was limited. However if one bought "Guns and Ammo" they hopefully didn't reach many readers of "Vogue." Business section ads didn't run in the Arts/Entertainment section. And they typically didn't want them, it was waste. Too much waste, and brands fired the agent. While CA converts to a new identity, it's targeting principles are well established in all agencies. Both major and minor, Parscale was a small shop in Austin before it hit the big time with Trump's POTUS campaign. I think the backlash comes from ads that are too intrusive or especially irrelevant. And this is in the eyes of the "beholder." IAB, ANA, AAAA all want a better user experience and they are working on delivering that. On the other side, ad fraud, bots and other delivery issues are driving waste and brands are rebelling against that. Brands want a better user experience too, otherwise they will spend ad dollars differently. The addiction to digital media is established. Facebook sale sales went up and not down following upon the Election 2016 kerfuffle. Mobile use continues to increase. Algorithms will be refined. There will still be waste and annoyed users.
  • Posted on: 05/03/2018

    Macy’s latest acquisition is all about STORYtelling

    What Macy's, Inc did to regional department chains was to make them fit the Macy's, Inc store portfolio -- as Macy's the mid-tier store. Regionally, those stores were much more than mid-tier; they were both Bloomies and Macy's. Take away Bloomies, and Macy's selling model is meh. Macy's, Inc was buying doors for the perceived efficiencies of a national Macy's selling model. It's just not relevant nationally. The acquisition of Story is different. In this case, Macy's wants the selling model of Story to influence Macy's. It's cultural versus real estate. And therefore it is much more difficult. Which might make one wonder, "Where did another stale brand acquire a "hot" specialty brand for equity transfer and succeed?" Sears bought Lands' End. Charming Shoppes bought Lane Bryant. What are your examples? In most cases, this doesn't work because the owner of the master brand does not really understand its customer, therefore the equity is never relevantly transferred to the selling model. Why we like to say, "retail ain't for sissies!"
  • Posted on: 03/13/2018

    Will return bans burn retailers that impose them?

    Tracking returns is a good idea. Retail theft is a huge problem. Thieves need to understand returns will be tracked. While at Eddie Bauer, returns were manageable and considered a cost of the selling model. An overwhelming majority of customers do not abuse the return policy. Consumer recourse is an essential aspect of the brand promise. Especially true nowadays with trust in doubt. Retailers need to allow shoppers choice on many levels. When at Sears, the Craftsman brand was tarnished when return policy was changed. Internally, folks were trying to offset losses from broken tools acquired at garage sales being returned. Should have been viewed as a cost and built into the model. L.L.Bean has its first outsider as CEO. I think the recent decision to alter the return policy is a mistake. Even Leon Leonwood Bean would say, "Retail ain't for sissies!"
  • Posted on: 02/20/2018

    Amazon gives Prime members another reason to shop at Whole Foods

    This is a proprietary credit card promotion. Another thread of Amazon's tangled woven web. Amazon is borrowing from the old Sears benefit bundle. Once upon a time there weren't bank cards, but there was the Sears charge. With it, those of challenged credit worthiness were able to outfit a family or a home or both. Are Whole Foods prices just 5% above the local competition? Nope. But for those Prime members who aren't shopping at Whole Foods, maybe they'll give it a try. Or for those Prime members who don't hold an Amazon card, maybe the deal at WF will motivate them to get a card. Which is really what Amazon and Visa want.
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