The Robin Report - Issue 9 - October 2011 by The Robin Report

anni1 yea ver r issu sar y e!

Issue Nine 2011

www.TheRobinReport.com $10

with Mike Ullman

CEO of JC Penney

Looking Back, Looking Ahead: To say that major changes are afoot at JC Penney would be an understatement. In June, the company announced that Ron Johnson, head of retail at Apple, would take over the helm of the $20 billion retailer when CEO Mike Ullman retires continued page 3 at year-end.

A CASE FOR EUTHANASIA?

The Gap on Life Support By Robin Lewis

I don’t care how much cash the Gap is sitting on or how much they generate on a daily basis. Just as Sears keeps pumping blood (cash), through its veins, Gap is, and has been for a long time, staying alive on “life support.” Essentially, the body (the retail business) is dying, but the nearest and dearest relatives (shareholders and the Board) obviously do not want to pull the proverbial “plug.” They all stand around the dying patient, hoping for some kind of miracle recovery, (metaphorically speaking, but bear with me). continued page 16

I N S I DE t h i s i s s u e • Dear Reader ......................... 2 • A CASE FOR EUTHANASIA? The Gap on Life Support........1 Robin Lewis

• Q&A with Mike Ullman…......1 • Reverse Globalization......... 7 Kurt Salmon

• If The Clothes Fit… the topline Grows...............8 Unique Solutions

• Message to Big Beauty.…...10 Dana Wood

• Retailers Jockey to Stay at the Head of the Class For Back-To-School .................12 Cotton Incorporated

• As The Housing Recession Winds Down, Furniture Pureplays Can Benefit from New Analytical Tools ...................................14 Andrew Mantis

•R emember: It’s the Consumer, Stupid! ..……….22 Robin Lewis

• Why Walmart Failed To Crush Conventional Supermarkets ..................... 24 David Merrefield

• A Bedtime Story…...….....…26 Warren Shoulberg

• quotes to remember……...28

Dear Reader... Here we are, on the edge of a maelstrom of global events, geographically, politically, economically, environmentally, socially and culturally, all with potentially far-reaching outcomes. And, while those outcomes may differ by continent, country, and even locality, they will not be isolated, or “ring-fenced,” to use a popular term. The entire world and all of its inhabitants will be touched in one way or another. Such is the “flatness,” the oneness, the absolute interconnectedness – yes, the globalization, of our world. While this is very unsettling (given the types of negative events that are taking place), this may be the trigger point, the time when the collective backs of all humanity are against the proverbial wall, and a time when we should collectively declare that we are not going to “waste a looming apocalypse.” As the outcomes play out in ways both hugely negative and hugely positive, despite the attempted meddling of our current leaders trying to shape them, this will be one of mankind’s most disruptive periods. Therefore, it will drive fundamental transformation, either proactively by design or reactively by default. So, this period will either witness the emergence of a new super class of global leaders, capable of managing and integrating all of the transformations across the world, geographically, politically, economically, environmentally, socially and culturally, or it will be a period of big steps backward. How far back is anybody’s guess. In my opinion, this period of seismic, world changing events will determine the fate of mankind for as far into the future as we can imagine. And what, you might be wondering, does the beginning or ending of the world have to do with the Gap? It’s perfectly analogous. The maelstrom swirling around the Gap has reached epic and gamechanging intensity. CEO Glenn Murphy and his team will either right the ship and find a growth trajectory, and real fast, or watch the business descend into failure.

Under the 20-year watch of CEO Mickey Drexler, its famed and storied prince-of-all-merchant-prices, the Gap had meteoric growth. Then, due to a number of both internal and external events, such as intensifying competition, overexpansion and the brand’s declining cool image, things reached a tipping point. Gap’s ubiquity became antiquity and its “cool” became commodity. So, the Gap realized the negative outcome of its race to ubiquity, even as its leaders tried to shape a positive outcome. What was needed then, just as the world needs now, is the emergence of a new super leader, which Drexler certainly was, through its explosive growth phase. That new super leader has yet to emerge. Mr. Murphy is the second attempt, and the clock is ticking down to midnight. As always, have a good read.

Robin Lewis has over forty years of strategic operating and consulting experience in the retail and related consumer products industries. He has held executive positions at DuPont, VF Corporation, Women’s Wear Daily (WWD), and Goldman Sachs,among others, and has consulted for Kohl’s Department Stores, and dozens of others. In addition to his role as Publisher and CEO of The Robin Report, he is a professor at the Graduate School of Professional Studies at The Fashion Institute of Technology.

Robin Lewis and Michael Dart, in their seminal study of modern US retailing, examine why and how the industry is quickly evolving — and what it will take to be successful in this new world. Critics and industry leaders agree: The New Rules of Retail is a must-read for anyone interested in the industry. Available at Amazon.com in hard cover or Kindle form, and at a bookstore near you, or on our website at www.TheRobinReport.com.

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with Mike Ullman, CEO of JC Penney Looking Back, Looking Ahead:

continued from page 1

We visited Mike at the Penney headquarters in Plano, TX, for a discussion on the many initiatives – Mike calls them attractions – at the new and improved department store retailer, and how the thousand-door-chain fared during the Great Recession.

Q: Before getting to the more general and specific JC Penney business, can you comment on the Ron Johnson hire, what it means and what your plans are during the succession? A: Any CEO’s ultimate desire is to have a strong and capable successor. Whatever you think you accomplished during your tenure is for naught if the next person doesn’t take it to the next level and improve upon it. We’ve had an interest in Ron for over two years, and fortunately early this year when our new investors had the right to designate a third director, we had the collective thought of inviting Ron to be a director of the company. Then once he’s in the board room maybe we close the door and not let him out. In the conversations over the several months we talked with Ron about taking on a more involved role. It’s very exciting. He had a distinguished career at Target as a merchant, where he reinvented the home store with the Michael Graves brand and a number of other initiatives, and then from a blank piece of paper created the most dynamic and successful retail concept of the last decade at Apple. I think he’s excited to get back into a more department store and discretionary spending format, but I think the next 3-4 months are going to be full of getting him up to speed with what we’re doing now so he can define what the next chapter is. Q. I know you’ve put a lot of stuff in place based on your vision when you came here in 2004. What was some of that vision, what were some of the major strategies that you put in place, and how was that direction playing out prior to the financial and economic collapse? A. We’ve built a base of trust and integrity that the company has earned in over 100 years. And terrific people. So the issue was really a matter of trying to define what the next chapter would look like. A turnaround is not a strategy. It implies something needs to be fixed. Now that you’ve fixed it, then what? The strategy we defined in the first 6 months I was here was having an emotional connection with the customer. Like a love mark, a neurological connection to put it in your terms. The brand has to have

Issue Nine 2011

meaning, whether it’s Southwest Air, Container Store, or Starbucks. When you say the word, something emotional happens. It can’t just be a logical brand, it has to mean something. The second thing is it has to be an exciting and easy place to come and shop. We had to differentiate from just running the store. Running the store just wasn’t good enough. The third piece was it had to be a great place to work, we wanted people to want to invest their career with us, not just work for us for a day. We have terrific people. We wanted it so that we’d invest in them, they’d invest in us. We also wanted to be in the top quartile of financial performance. Those four things were pretty simplistic, and everyone could remember them, and it kind of started from there. We got up to almost 10% operating profit in the next two years after that. Fundamentally there were 2 big ideas that underlied those strategies. One was to be the preferred place to shop, getting chosen over other alternatives. We wanted to attract a younger customer where we were under-indexed, the 18-35-year old. People also have choices of where to work, and if we couldn’t attract the people we wanted, we wouldn’t be able to execute the exciting initiatives. The attractions – Sephora, Mango, Aldo, People Stylewatch, Liz Claiborne – all new business initiatives we have since launched - would be tied to the emotional connection, more spending per existing customers, and the younger demographic. We were already doing business with half the families in America, so we wanted to get more business from them, create more additional visits, get them to do cross shopping once they’re there. We also made a huge investment in our private brands to turn them from labels into brands. Q: So these four macro strategies that you put in place were faring well, then comes the recession. Can you give us the scenario of how JC Penney and your strategies fared during the downturn? With revenues of about $20 billion in 2006, they dropped to about $17.5 billion in 2009, which then led to your annual investors meeting in April of 2010 where you laid out your 5-year plan, targeting revenues of $23 billion by 2014. Can you give us an update on the status of that plan?

with Mike Ullman, CEO of JCPenney

“ The attractions – Sephora, Mango, Aldo, People Stylewatch, Liz Claiborne – all new business initiatives we have since launched - would be tied to the emotional connection, more spending per existing customers, and the younger demographic.” A. Quarterly earnings were about $5 per share before the recession, and our aspiration is to get back there, which requires rebuilding the volume base in a very difficult economic climate. Our customers tend to have a job – both spouses have a job – they’re typically more urban, more ethnic, but have moderate income, so they need and expect sharp price points. They’re impacted by inflationary costs, if they had equity in their home it’s probably at risk, but have little exposure to the stock market. The sentiment for that consumer turned decidedly negative. Our average price point is $15. It’s not exactly investment dressing. Our customer needs to put the wardrobe together for $300 - $400 for a season. Mixing the fashion, the most desirable merchandise, with the basics that they’re used to is obviously the opportunity for us. Add to that the fact that our catalog business which had been at one point over $4 billion, was dwindling, so we really had to manage out of that volume. Much of our online success had been catalog customers who entered their catalog orders online. In the online business, we had to change the engine of the locomotive while it was running from a diesel to a turbine. We had a very conservative customer who was ordering online, but the 27 million who were buying our merchandise in the store were not shopping online with us because the merchandise wasn’t the same. Much of the change in the business over the last several years has been painstakingly detailed and more or less a construction project during a time when the customer didn’t have much forgiveness. It’s a relatively easy thing to run a business, but it’s harder to transform one, particularly during a typhoon. Those are not excuses, those are just the circumstances in which we find ourselves. The good news is that the growth initiatives that we identified are all ahead by double digits – Liz Claiborne, Sephora, Spring by Aldo, etc. MNG by Mango has done well in terms of the customer acceptance. We just launched the new collection in 500 stores at the separate MNG product and

pricing. We’re the only department store to have fast fashion. It takes a long time to build attractions, because they’re not just brands, they’re a feeling. Sephora, for example, brought in a younger customer. How do we get her to cross-shop? We need design-driven brands. We’ve hired 200 designers in the past 5 years to build design-driven brands. When I was at LVMH, we had a CEO for each brand. St. John’s Bay and Arizona are over $1 billion now, and rank in the top 10 of all brands in their category. They have legitimacy because the customer knows what they are. Q: On more tactical and short-term matters, as the issue of inflating costs becomes a reality in the second half of the year, do you believe unit volume of non-essentials will drop, and if so, will that result in a corresponding wave of promotional activity to shed excess inventory? A. W ell, we tried to get ahead of it. We did a lot of sheltering of costs for the first half of the year. It’s accurate to say that a lot of us have had to absorb some amount of cost increases for the back half. We’ve been able to mitigate some of that by keeping prices sharp in the opening price points, but increasing a bit in the better and best price points. Customers are going to have to recognize that they’re going to have to make choices. They may shop at the opening price points, but some of the best selling merchandise is the fashion merchandise. Interestingly enough, Sephora is the best-selling category in the store. We compete vigorously for everybody – with Macy’s, with Target in classifications. We compete with Kohl’s – they’re off mall, more value-oriented. It’s an open plank. There’s no barrier to entry in our business. Q: Finally, on the issue of pricing and the Internet, how does a retailer stick to a pricing strategy in a world of technologically instantaneous price comparisons, in some cases resulting in bartering? Does this accelerate your pursuit of exclusive brands? And what percent of your business might exclusive or private brands one day reach? A. O ver 50% of merchandise in our store is non-pricecompetitive, because no one else has it. If you’re in the commodity business, like selling big screen TVs, you run the greater risk of being the museum, and then the customer shops price elsewhere. Pricing between the store and the internet do not have to be exact. They’ll forgive you if there’s a one-day sale where an item is a little cheaper on sale in the store vs. the internet. The higher the price, the higher the likelihood that they’ll wait, so it gives us incentive to run a temporary promotion. A third of what’s on the internet is at a different price that it is in the store. About 10% of what we offer online is not available in the stores.

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Q: Regarding the Internet, mobile and social media, how would you rank JC Penney among your competitors in terms of “best practices”? And, what are some specific initiatives that you believe are resonating with that consumer segment? Do you have “site to store” initiatives? And, if so, is it a meaningful traffic builder? A. I would give our IT group high marks. Several years ago we were the 6th best technology company overall, not just in retail. We were early to understand the internet had to converge with mobile technology. About 6 years ago, we put in a quarter-billion-dollar investment so that every POS device is dot-com available. Our sales associates had the tools to reach additional sizes for our customers in the store, so that we can satisfy the customer from the store. There are multiple layers of this. Second layer was to use it as a selling tool. Third is to allow the customers to access it with a mobile device. Fourth, social media played into this because people are now connected with their friends, so they can recommend JCP to a friend for something. Starbucks, where I’m on the Board, uses social media to spread the word to connect customers or get them to spread the word on social media. They started to amplify, use the viral aspect of email or Facebook to get the word out. We went from 12,000 fans to 1 million fans in six months. We held our board meeting at Facebook that year, just so I could show our board how fast the world is chang-

Issue Nine 2011

ing. The customer is so over yesterday. If you think you’ve gotten something cornered, it’s only a matter of time. They want something different, new and exciting. One thing that makes Sephora so successful is it’s always changing. There’s no fixed product, it’s the hottest, latest stuff that’s working. That’s where traditional department stores have been stuck in the island mentality, the gift-with-purchase mentality of beauty. 17% of their market share has gone to Sephora, because the customer has voted on what she wants. Q: Do you envision the possibility of a growth brands division rolling out specialty stores with your private brands as nameplates (ie. Arizona, etc.)? A. When I was at Macy’s, we had Aeropostale as a private brand. We had a slightly different philosophy about private brand then, we used it for price points, and we forced the amount of private brand that the buyer had to buy, so they didn’t have to compete. A better way is to treat the private brand as a real brand rather than a weak sister. Private brands had a higher sales increase and much higher gross profit than non-private brands. Arizona has a lifestyle aesthetic, it could work, but it’s a question of allocation of capital. In German department stores, Levi’s are 90 Euros. We could do Arizona jeans in Europe at 17 Euros. We now have 10 Foundry Big and Tall stores, and the customer has been responding very well.

which

with Mike Ullman, CEO of JCPenney

Q: W hat strategy scenario for JC Penney or other department stores might lead to the acquisition of existing branded retail specialty chains like Talbot’s, Ann Taylor, Soma or Children’s Place for example (assuming available of course)? Can you envision other specialty retail brands, such as those just mentioned and others someday leasing space and essentially running their own boutiques within JC Penney? A. I was at LVMH when we bought a lot of brands, whether in retail or pure luxury. Most of M&A doesn’t work out. 80% of acquisitions turn out to not meet expectation. In a discretionary income recession, the best opportunity is in comp store sales growth. Right now is not the time to go out and acquire new trouble. We are a way for Mango to access half the customers in the US, with 500 stores, saving them the $60-$80 per square foot that it would have cost them to open stores. Their challenge was to get to the price point we need. We don’t lease space except to optical and photography. Q: Are you where you want to be yet with the Ralph Lauren designed American Living brand? If not, what are the issues and how are you dealing with them? A. American Living, if you keep in mind that our customer didn’t really have access to that aesthetic in our store, didn’t have Chaps or Polo. We learned a lot, because we introduced a premium price point during a recession. Some categories have done well, like dresses, which are up double-digits. It’s in our top 10 brands now, though. Q: Does JC Penney have a “localization”- type program? And, generally, what is the process? A. We have a slightly different view than some of our competitors. Our planning and allocation process allows us to localize every store no matter where it is, by size, ethnicity, color, weather, etc. So we work with integrated teams that have a buyer, private brand manager, and representation from store planning, marketing, and supply chain, which allows us to localize assortments. We can do centrally what used to be done locally. We have a quarter of a million items in each store, so it’s really important. Q: What is your current global footprint and what’s next for global expansion, given the difficulty with translating the department store model there? A. Well, the department store is a collection of brands, a destination due to the pricing and branding that you have. There are very few examples of success internationally. Galeries Lafayette failed in NYC, because it wasn’t different

enough from what was there. Harrod’s might work, though. Generally, department stores should be uniquely local. There used to be 65, now there are 6. They need to be more different. We think there is great opportunity for department stores. Our challenge is with a legacy of 1,000 stores, ranging from 19,000 to 300,000 sq ft. in size. We need consistency so there’s a reliable offering. We’re in the best regional malls, so that’s a big advantage. The small store format for urban markets, like in Manhattan, has done very well. That store is up by double digits, and it’s across the street from the

“ Our challenge is to train the next generation of thinkers to figure out how they’re going to conceive of what people are going to spend money on.” world’s largest department store. The combination of a unique shopping experience and speed of checkout, etc., is a winning combination. Our customer is taking the brunt of a tough economic environment. Q: Finally, a big picture economic question. Given your directorship of the Federal Reserve Board of Dallas, can you give an opinion on how this economy will play out over the next year? A. B efore the recession, the consumer was spending too much. It was an unsustainable level, based on free availability of credit, using your home to leverage spending on things that last a year or less, which doesn’t make a lot of sense. Now you’ve got baby boomers getting older, and younger customers using digital as much as going into a store. The lower income customer has to focus on the basics. The country is suffering from a jobless recovery. Companies have been using technology to avoid rehiring the people who were let go or to reduce hours of employees. These things are not going to change very soon. Our challenge is to train the next generation of thinkers to figure out how they’re going to conceive of what people are going to spend money on. They’re not going to be middle managers. That’s over. A big part of what people spend their money on is what they want, not need. So, I guess this is as good as it gets for a while, until we find some new engine of growth. We’re in a digital world, where we expect things to happen overnight. But the real estate market isn’t going to recover overnight. We don’t want to be a service economy. We need to be producing something.

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Reverse Globalization:

The New Dollars and Sense of Near-Sourcing

Near-sourcing, or producing products closer to where they are ultimately sold, is growing in popularity. As more companies bring production closer to home, they’re putting a new twist on globalization, or in some cases, reversing it altogether. Kurt Salmon retail strategist Vinod Rangarajan discusses this increasingly popular trend and how retailers can make the most of it.

Q: What’s driving the increase in near-sourcing?

A: Several factors, the first being supply chain inflation. The cost of producing products in China has been steadily rising as labor rates increase. So the response of many retailers was to move to other Asian and Southeast Asian nations, like Bangladesh and Thailand. But transportation costs are also rising, spurred by higher oil prices. This drove

Issue Nine 2011

Best Practices from Kurt Salmon

“ Never before has a well-run supply chain been so integral to delivering on the brand promise.” some U.S.-based retailers to look for locations closer to home, like Central and South America.

Q: So what’s the best way to go about developing a near-sourced supply chain?

Q: But there’s also a customer experience element to nearsourcing, right?

A: For most retailers, an entirely near-

A: Absolutely. That’s the second

factor. Near-sourcing (also sometimes called near-shoring) allows a retailer to decrease cycle times, making it easier to constantly refresh merchandise. This keeps customers coming back into the store more often because they’re afraid of missing out on a new product. For example, Zara has had a lot of success using near-sourcing in Europe to supply its stores there, and the constant stream of new products means that consumers visit Zara more than four times as often as other retailers. But Zara is far from the only example anymore. Retailers from Target to The Children’s Place are near-sourcing as well. In today’s retail environment, consumers want new products all the time, and retailers have to keep up or risk losing share. Never before has a well-run supply chain been so integral to delivering on the brand promise. And near-shoring also enables retailers to keep less inventory on hand because it can be delivered from the factory more quickly than before. This is a good way to hedge your bets against cautious consumers and economic uncertainty.

sourced supply chain is not going to be a reality – yet. Many of the technical capabilities still lie mainly in China and bringing them into Central or South America would not be cost-effective. For now, start with the basics: Near-shore low-complexity items to save money, but keep high-complexity items in China so the quality doesn’t suffer. For example, let’s say I’m a sportswear retailer. I’d near-shore a pair of running shorts, but not a winter jacket.

Q: Is there any chance production will come even closer to home, say, the United States?

A: Although some industries are

bringing production stateside, for the most part, what’s left of the retail manufacturing infrastructure here hasn’t been updated since the 1950s or ’60s, so it’s not cost-effective to do so. But it’s not entirely out of the question. Boutique brands have launched with local production, and under the right circumstances, one can imagine a scenario in which that would create significant competitive advantage.

Vinod Rangarajan is a retail industry expert with more than 10 years of experience in product development and sourcing. He can be reached at vinod. rangarajan@kurtsalmon.com.

If The Clothes Fit… The Topline Grows

Me-Ality Market Insights from Unique Solutions tm

By Tanya Shaw

Who isn’t turning over every rock these days looking for growth opportunities? Apparel brands, with their almost obsessive focus on style, cost and value, might actually be overlooking one of the most important factors in the purchase equation: Fit. Me-Alitytm 3D body scanners, which will begin rolling out to 300 US shopping centers later this year, have already begun to revolutionize the way consumers shop for apparel. After a 10-second

fully-dressed scan, shoppers receive a customized, personalized shopping guide matching them with the styles and sizes of partner brand products in the mall that will fit them and their budgets. For the consumer, it means more productive and rewarding shopping trips, increasing the likelihood they’ll come back. For retailers, it brings a new and loyal customer base to their stores, increased sales, and fewer returns. But wait, there’s more: In the process of scanning hundreds of thousands of consumers, Me-Ality

FOR RETAILERS, IT BRINGS A NEW AND LOYAL CUSTOMER BASE TO THEIR STORES, INCREASED SALES, AND FEWER RETURNS.

realized it was collecting invaluable consumer data that could be used to help brands do everything from enhance their product development process to launch new businesses. Read on to find out how one company added an inch…and in the process, grew its customer base by double digits. Searching for Growth One way apparel retailers and manufacturers can enhance brand appeal is by taking a closer look at their consumers, and intensifying their focus on sizing and fit. Too often, apparel shoppers are aware of the styles that appeal to their fashion senses but find challenges in identifying their exact fit. Likewise, apparel makers are constantly under pressure to forecast fashion trends with size and fit a main focus. The tech-savvy software now available to retailers to help manage their inventory levels will be even more useful when coupled with powerful information on what could have been sold had the right sizes been in stock.

The Brand X Story Sales at Brand X, an apparel company that prefers to remain anonymous, had hit a plateau, despite the fact that their pricing and styling were competitive. They went on a quest to identify other potential opportunities for growth. Specifically, the product development team looked into ways to conduct a sizing survey to determine how they were fitting their core customer group – women between the ages of 18 and 25. As a participating brand in the launch of the Me-Ality size matching service, they decided to explore if there was any way they could tap into some of the rich customer profiles MeAlity was capturing with its scanning kiosks.

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Me-Ality Market Insights Me-Ality offers executives a level of consumer intelligence never before available. When Brand X management contacted the company, Me-Ality made them aware of its suite of aggregate data reports that deliver insights into body types based on a database of over 300,000 body scans. Me-Ality was able to segment the data for Brand X to focus on 20,000 profiles from the brand’s target customer base. And by comparing those profiles with the measurements from their apparel, Me-Ality was able to generate reports, like the one shown below, that gave Brand X detailed assessments of their overall brand fit, and identified specific areas of opportunity to alter their designs to better meet the market’s profile.

Opportunity Found One of the reports, which examined the target population within one market, revealed that across many sizing segments, the brand was doing a very good job of fitting its target population. However, in 4 key size segments, there was significant lost opportunity. For example, in a size 29 inch, XYZ was fitting 19 percent of the market in the female 18 to 25 year old age category. Utilizing Me-Ality’s data of body types from that particular age group, Brand X determined that it would fit an additional 12 percent of the market if it were to minimally increase the hip measurement of a 29 inch

waist style by just one inch. If the brand were to modify its fit slightly in all 4 sizing categories, they would fit a larger percentage of the population and increase potential revenues significantly.

Me-Alitytm Matching Service

Subsequently, the brand modified its grading/pattern to recover a larger percentage of the market it had previously missed. By incorporating the one inch hip increase into their denim styles Brand X was able to directly increase revenue opportunities and provide an excellent fit to an average of almost 33% percent of their core consumer in the identified 4 size categories. This represents an over 10% potential sales increase in the selected categories.

The Me-Ality 3D body scan-

Brand X management was so intrigued by the intelligence they garnered for missed sizing opportunities that they decided to tap Me-Ality for information pertaining to missed opportunity sizing at retail stores nationwide.

receives a targeted shopping

ning kiosk gives shoppers at the mall a free 10 second fully-clothed body scan. The information is then used to help them find products that will fit and flatter their body, in their style. The consumer

guide with the right size recommended by brand, along with where to

As founder and President of Unique Solutions Design Ltd., Tanya Shaw has spent her career providing strategic solutions to many aspects of “individuality” and “fit.” Her technically savvy nature and sharp business acumen have resulted in the development of numerous products and applications that provide both resolutions and revolutions related to body measurement and body data.

compares brand sizing ratios with actual scanned customers within a demogrphic

purchase it in the mall. For apparel retailers and brands, ME-Ality™: • Brings qualified customers into the store, ready to buy • Introduces customers to new brands they have never tried before • Encourages people to try on apparel – which is the most important step to making a sale. For apparel manufacturing, marketing, retail, merchandising and product development executives, Me-Ality™ provides aggregate data containing essential intelligence that can help refine operations and add value to: • Product development • Line extensions • Manufacturing and assortment planning • Better understanding of location specific/regional demographics for retail operations.

Issue Nine 2011

Beauty

Message to Big Pick A Lane and Stick With It

By Dana Wood

In the mid-1990s, when Lancôme had l’audacité to nudge long-time spokesmodel Isabella Rossellini out the back door after a 14-year run because she refused to share the limelight with Spanish stunner Inés Sastre, I wasn’t one of the many beauty editors (or women, for that matter) who got all rant-y and rave-y about it. The way I saw it – which is allegedly the way the French beauty behemoth saw it, too – Rossellini had enjoyed a fabulous stint, one that millions of model-actor hyphenates would’ve killed for. So why not let the young whippersnapper Sastre pop up in an ad every now and then? Why feel threatened? And, more importantly, why throw the baby out with the rose-scented bath water? Cut to 2011, and the Lancôme spokesmodel roster looks like the front row at the Oscars. There’s Kate Winslet! And Julia Roberts! Wait - is that Penelope Cruz I spy in a Trésor ad? Why, yes! Yes it is.

Do I identify with Porizkova? No. For starters, she’s a foot taller than I am, with darker hair. But in all the years she represented the brand, I never once thought to myself: “I don’t look like Paulina, therefore this Lauder perfume, won’t work for me. The wallet stays shut.” Not once. Even way back then, I understood the concept of aspiration. Of lives that were far, far more glamorous than my own. And guess what? I really liked that. It fed into the fantasy that maybe, some day, I could get there too. And in the meantime, slathering on that miracle crème, or spritzing on that perfume, might make the journey more delicious. That’s why I’m dumbfounded as to why a brand that has the excellent fortune to land a star of Winslet’s or Cruz’s caliber doesn’t just utterly go for it, and lock her in for every last bit of advertising and promotional collateral. In other words: Pick a lane, and stick with it.

And that’s in addition to Harry Potter cutie Emma Watson, who will be featured in upcoming ads for Trésor flanker Midnight Rose. Not to mention a bench that includes Sastre, catwalk superstar Daria Werbowy, and Elettra Weidemann, who is, in a strange twist of irony, Rossellini’s daughter. Not that Lancôme has the market cornered on massive spokesmodel stables. Estée Lauder’s roster is gigantic, as are those of mass brands L’Oréal Paris, Maybelline and Garnier. The lockstep 21st century beauty marketing-think is this: No one woman represents every aspect of a given brand. And if we fully commit to just one face, we run the risk of alienating anyyone who feels that a particular mode, or celebrity, doesn’t speak for her. I can wrap my mind around this rationale. But I don’t like it. In fact, I now pine for the bygone Rossellini era, or the days when I could count on seeing Paulina Porizkova traipsing through every single Lauder ad, for every single Lauder product.

I can’t be the only woman in America without a clear read on L’Oréal Paris anymore because, in a single night of prime-time television, I’m seeing J Lo for EverSleek, Gwen Stefani for Infallible Le Rouge and Beyoncé for Féria. And if I happen to have a stack of magazines on my lap while I’m watching (as I often do), I’ll be flipping through images of Evangeline Lilly for Sublime Mousse, Diane Keaton for Age Perfect and Eva Longoria for whatever it is she’s cheerfully shilling for. I forget at this point. Who wouldn’t? In my humble opinion, asking beauty junkies to connect the dots between so very many different products and franchises, and the stars and personalities who represent them, is a bridge too far. Or maybe the marketing whizzes behind these alliances are just hoping that if they put enough options out there, surely something will resonate. Right? A smart industry-watcher I know calls this approach “spaghetti marketing – throw a bunch of stuff against the wall and see what sticks.” And, as she points out, it isn’t only the beauty biz that’s deploying this frenetic plan of attack. Geico, for example, has filled its ranks with cavemen and “the Pierce Brosnan look-alike” alongside that cute little lime-green gecko.

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“I n my humble opinion, asking

Beauty

junkies to connect the

dots between so very many different products and franchises, and the stars and personalities who represent them, is a bridge too far.” Another non-cosmetics case in point: Capital One, which is asking those club-wielding medieval heathens to share screen time with the zippy and erudite Alec Baldwin. But back to the beauty biz. I just don’t think “the spaghetti thing” is working. A single glamorous creature should represent a brand. And I couldn’t help reading the tea leaves a bit when, in early September, L’Oréal chief Jean Paul Agon announced that he’d ordered a “review” of the company’s estimated $8 billion global media spend. Clearly, ROI is an issue. Compounding the problem is that some of the biggest celebrities now have both fashion and beauty contracts. Winslet, for instance, is everywhere in a current St. John campaign. So that means the one or two products she’s attached to for Lancôme really get lost in the shuffle. And if the Lancôme print advertising budget gets whacked, as it surely will once the results of this sinister-sounding “review” come in, it could be curtains for Kate.

in the world. (If Sarah Doukas, who discovered Kate Moss, is available, nab her.) Then sign a woman who is both breathtaking and multi-cultural in her appeal. This woman – and she should be a woman, not a girl – will be a completely new face, with absolutely zero backstory and marketing baggage. And then lock her in but good. No fashion contracts, no pricey watches, no Champagne, no anything else allowed. Then really go for it, and build an entire world around this woman. Pick a lane, and stick with it. Dana Wood has served as Beauty Director for both W and Cookie magazines, has written for numerous national publications including Glamour, InStyle, Harper’sBazaar and Self, and spent several years in the Luxury Products division of L’Oreal as Assistant Vice President, Strategic Development. Her first book, Momover: The New Mom’s Guide to Getting It Back Together, was published in 2010 by Adams Media.

Here’s what Big Beauty needs to do: Siphon a hefty chunk of the money being used to sign big-gun celebrities for one or two products and use it to hire the best talent scouts

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Retailers Jockey to Stay at the Head of the Class For Back-To-School By Emily Thompson

How did apparel retailers fare in the just-ended Back-To-School season? Although as of this writing the final quarterly grades have not yet been posted, the handwriting on the blackboard indicates that retailers were really put to the test. The weak economy and higher raw materials costs have had an impact on everything from what they bought to when and where they bought it.

Consumers Shopping Closer To Need Retailers started the push very early this year. To woo skittish consumers to the registers for BTS, the second largest retail push after Holiday, retailers began promoting it earlier than ever this year, in some cases even before the previous school year had ended. This retail strategy, though, did not jibe with consumer behavior. While data from the Cotton Incorporated Lifestyle MonitorTM Survey reveal that 89% of parents planned to make back-to-school purchases before the first day of school, most consumers actually waited until the last minute;

the National Retail Federation reported that more than 40% of shoppers said they planned to begin shopping three weeks to one month before school started, up from 33% last year. Many shoppers, particularly those in the Northeast, wait until the cool weather arrives in October to bolster that wardrobe with jeans, long sleeves and sweaters.

Non-Discretionary Purchases Drive Shopping “Consumers are being cautionary with their dollars,” said Kim Kitchings, Senior Director, Corporate Strategy & Program Metrics, Cotton Incorporated. “With cautionary spending comes enhanced expectations; when they do buy something, they expect it to last.” Consumers may have warily held off on shopping, but for most, those BTS purchases were absolutely necessary. Almost three-fourths (74%) of consumers with children living in their households said they planned to purchase new children’s apparel this fall, according to Monitor data. Among those, more than half (54%) said their child’s clothing simply does not fit, down from 63% in 2010, while 13% said their child’s clothing is worn out. Another 13% cited the timely sales, compared to the 6% who said so last year, and only 11% bowed to their child’s wishes for new, trendy clothing, down from 16% in 2010.

Consumer Facts from Cotton Inc. Lifestyle Monitortm

Waning Confidence Meets Higher Prices Most in the industry had predicted a relatively flat increase for backto-school this year, and were not surprised with the preliminary results. Edgy consumers, suffering from declining levels of economic optimism, played a game of wait-and-see, forcing retailers into tight spots. Just a third (34%) said they are very or somewhat optimistic about the U.S. economy a low not seen since 2008 - and less than half (47%) said they are very or somewhat optimistic about their own personal financial situation, according to Monitor data. “Without a doubt, that trickles down into their personal financial situation, and makes consumers apprehensive about opening their wallets,” Kitchings says. Monitor data support this; among those who planned to buy for the 2011/2012 school year, 69% said they were concerned that apparel prices would be higher this year than last, and 78% were concerned that rising gasoline and food prices would limit their BTS budgets this year.

Channel Surfing Not surprisingly, economic concerns had an impact on where consumers were spending their hard-earned money. Among those planning to buy clothing for their children this fall, a whopping 80% said they would shop for most of that clothing at mass merchants, up from 62% in 2010. Other channels, like chain stores and off-price stores, saw increases as well. Fifty-six percent of consumers planned to shop at chain stores in 2011, up from 50% in 2010, while 31% said they would turn to off-price retailers this year, up from 23% last year.

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“We’ve seen a shift in shopping channels, and that’s due to price points,” said Kitchings. “Off-price retailers have done a great job in expanding their inventory, offering a better assortment at good prices. Also, if you look at a company like Kohl’s, which offers a mix of products and brands, 93% of their stores are either freestanding or in strip malls. This offers convenience to busy parents who can easily get in and out, buy for their whole family at one store, and avoid a mall setting.” That channel shift, though, has not carried over to e-commerce, which remains a secondary resource for these shoppers. “Many consumers making BTS purchases use the Internet for informational purposes,” Kitchings says. “And while some e-tailers have eliminated shipping charges, it’s not enough to sway this group, whose concerns about e-commerce range from clothing quality to shipping time and the security of using one’s credit or debit card online.”

Sticking With The Basics With necessity still driving most purchases, parents planning for backto-school were sticking with durable classics that will withstand the wear and tear of a school year. Nearly 80% said they are likely to purchase shirts/tops for their children this fall, followed by jeans (78%), socks (71%), pants (65%), outerwear (53%), sweaters (51%) and sleepwear (48%), according to Monitor data, and in most cases these numbers remain consistent year over year. “Although denim hasn’t been as strong as last year, it’s still a cornerstone of young people’s wardrobes and one of the main items parents plan to buy their children for the fall; it’s iconic, it’s what the kids wear, and it’s durable,” said Kitchings. “It accounts for a larger share of purchases among 13-24 year olds compared to other age

Issue Nine 2011

groups, especially during this particular time period.” Retailers have responded to this uptick in demand by allotting more floor space to jeans (14.2% compared to 12.7% at other times during the year), offering a greater assortment and better prices. Retail Monitor data show that the average retail price for denim jeans was $35.63 in the third quarter, yet averaged $37.59 in other quarters. Part of this price difference is due to the fact that a greater share of jeans is priced on sale at this time (64.7% in the third quarter, compared to 53.4% all other times during the year), which in turn encourages consumers to respond with their wallets. Monitor data reveal that 47% of consumers ages 18-24 purchase denim jeans in the third quarter, compared to an average of 37% in other quarters.

For Consumers, Cotton is King Comfortable, durable pieces like denim and tees also tend to be cotton-rich, and despite a still shaky economy, consumers are willing to pay more for them. More than half (53%) of consumers with children in the household said they are willing to pay more for natural fibers like cotton, and that percentage holds steady among younger consumers ages 13-24 (51%) as well. Kitchings said that when asked about rising prices at retail, consumers still responded with a desire for cotton. “Our data show that consumers with

kids in the home say they are willing to pay approximately 26% more for jeans and 31% more for cotton t-shirts. And consumers ages 13-24 say they’re willing to pay 23% more for jeans and 35% more for cotton t-shirts. Of course, there will be reverse economies of scale here: consumers may purchase two t-shirts instead of three.” Ultimately, as Kitchings noted, consumers are creatures of habit. “They have certain expectations for their jeans and t-shirts, and expectations for laundering and care and how long those items will last. These expectations, of course, are heightened in today’s economy, which is why we see this return to quality and longevity – and fabrics like cotton that can last.” Heightened consumer expectations, of course, present a challenge for brands and retailers, who have to pull out all the stops so shoppers will complete their purchases. As Kitchings points out, “Unless children have outgrown their clothes, it’s not a necessity – which makes it all the more important for retailers to have fashions that are on target and priced well. In an economy like this, there’s no room for error.” Emily Thompson is the Associate Director, Editorial at Cotton Incorporated, the research and marketing company representing upland cotton. For more information on the Lifestyle MonitorTM Survey, please contact her at ethompson@cottoninc.com

As The Housing Recession Winds Down, Furniture Pureplays Can Benefit from New Analytical Tools By Andrew Mantis

Despite the sluggishness of the so-called recovery, industry experts are predicting a pickup in the housing market early next year. This will have broad implications for retailers of furniture, furnishings, and other home items. How retailers can prepare for this opportunity is a favorite topic for the data collectors and analysts at MasterCard Advisors, the merchant services arm of MasterCard. Here are some ways in which furniture retailers, whoâ&#x20AC;&#x2122;ve gotten pummeled in this recession, can capitalize when the upswing occurs.

Consumer Insights From MasterCard Advisors

While sluggishness in the housing market and changes in the retail environment are leaving furniture merchants feeling besieged, one development is showing great promise as a powerful tool for remaining competitive. The increased use of cards and electronic payment has led to an explosion in the amount of data now available that that can be analyzed to better understand consumer preferences. A recent study by MasterCard Worldwide showed that the data warehouses at the cutting edge of this development are managing over 100 terabytes of information, and are seeing those numbers grow by 20 billion transactions, every year.

A spectrum of ways to analyze big data New forms of data analysis can be helpful at every level, from a broad macroeconomic view to in-store insights. Most furniture merchants have an intuitive understanding that their business is linked to home sales. Now, though, analysis of transaction data can quantify the connection between the housing market and furniture results (both sales and price level). This has allowed retailers to plan their stock needs more accurately than ever before. With the right experience and analytic tools, this kind of transaction data can be examined to provide insights across a range of levels, from broad sector-wide trends to the regional market to consumer segmentation, at a level of accuracy and speed that was previously unimaginable. Insights drawn from transaction data can work on a local level. A merchant who wants to explore possible store locations can use it to get a granular picture of both the consumer profile and spending behavior of the population by zip code, as well as current furniture sales in the overall region â&#x20AC;&#x201C; information that is invaluable for decisionmaking. And for an existing store, a broad data set can be used to benchmark performance against the results of a local competitive set.

What kinds of questions can transaction analytics answer? In the case of one chain, big data analysis helped measure the extent to which two of its stores were cannibalizing

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each other’s sales. A study of the customer zip codes showed that rather than going to the store near their homes, many people were patronizing the location nearer their places of work, and were visiting the store either during lunch or on their way home. This information led the chain to adjust their marketing and stocking strategies accordingly. Some of the most exciting work now being done involves understanding and building predictive models for customer behavior. An analysis of the channel and shopping preferences of different customer segments can drive efficient and effective targeted marketing strategies to bring likely customers to the store or website. Once there, knowledge of that customer’s profile will suggest directions for upor cross-selling. Merchants already know that major life events are triggers – a move, for example, or a new child, or a home renovation. Current research is identifying the spending patterns that would indicate when such an event has just happened – or even better, is likely to happen. Imagine what kind of marketing strategy you could build around that kind of information – and information is power.

Why make the shift to data-analysis driven marketing? These new marketing solutions are particularly important for the retail furniture industry. In the best of times, the furniture industry faces challenges that most other retail sectors don’t. Stores have to be large, so merchants are both saddled with substantial real estate costs, and generally find themselves in “destination stores,” away from the malls where they can pick up passers-by. Further, furniture may be one of the most infrequent purchases people make, which means that retailers cannot depend on repeat business – even a satisfied customer may not be back for years. And these are far from the best of times. Furniture stores face are under pressure from a several directions. First, of course, is the economy. Not only is furniture a major investment for most people, but, unlike cars or appliances or electronics it rarely breaks down, wears out, or becomes obsolete, so in times of economic uncertainty it is a purchase that can be postponed. Second, the competition has intensified. Increasingly, large multi-category stores are carrying furniture. While they may not have the selection or the range of the furniture-only retailer, they do have the advantages

Issue Nine 2011

of a regular stream of customers and a level of insulation from economic fluctuations. A second competitive front is opening on the internet, with the growth of online furniture stores. These businesses do not need to carry either the real estate burden or the inventory of brickand-mortar stores. Finally, the growth of online shopping is linked to important shifts in consumer behavior as well. Shoppers may not be wandering through the malls, but they are navigating a variety of social networking sites and daily deal messages as well as the Internet. Savvy merchants are making use of all of those tools in their marketing strategies. Additionally, they’re putting up interactive websites that allow customers to see how a piece would look with different finishes and fabrics, and even place it in a photo of their room to see how it would work. These are some of the reasons why detailed understanding of the economy, the marketplace, and the consumer is so important these days. Furniture has never been an easy market, and it’s not about to get any easier. But while the business may not be getting any easier, using analytics in near real-time drawn from transaction data can help make it a lot more profitable. About the Author: Andrew Mantis is Group Head Information Serices Merchants at MasterCard Advisors. He can be reached atAndrew_Mantis@mastercard.com

A CASE FOR EUTHANASIA? The Gap on Life Support

continued from page 1

Here’s what a long, slow death looks like. CEO Glenn Murphy was hired to resuscitate the business in 2007 following five years of revenue losses and a disoriented Gap brand that was flailing for relevancy during the reign of CEO Paul Pressler, who was hired in 2002. Pressler had also been charged with reversing the declining business, which had begun to suffer during the last two years of the twenty-year reign

experts over the past decade, if the Gap brand dies, the entire enterprise comes unglued. Well, rather than slapping an oxygen mask on the walking dead, would we (the industry) be better off allowing Schumpeter’s theory of “creative destruction” to take hold, and simply help accelerate the demise of companies that arguably are diminishing in

The Gap had become the brand of all brands for consumers of all ages. And then, suddenly, it wasn’t. of the prince-of-all-merchant-princes, Millard “Mickey” Drexler. Drexler was responsible for Gap Inc.’s meteoric and now storied sales growth from around $480 million, when he arrived in 1983 as President, to almost $14 billion in 2000, an amazing 2,400 percent increase. Unable to right the ship when it started to sink, Drexler retired in 2002. So, Mr. Murphy, the former head of Canadian drug chain Shoppers Drug Market Corp., and a Canadian bookstore chain prior to that, is now (sticking with the metaphor) Dr. Murphy, the chief plastic surgeon operating on a patient dying of internal and external hemorrhaging. Since picking up his scalpel in 2007, he’s tried procedure after procedure, seeking one that will work, as the patient continues to hemorrhage, suffering through four years of de-clining sales.

value more than creating it? After all, in an over-stored, over-stuffed world, huge dying businesses such as Sears and the Gap simply lower “all ships” by taking cash away from both the healthier, growing businesses and the emerging entrepreneurial businesses. By the way, during Paul Pressler’s disastrous tenure, Wall Street had in fact nicknamed him “dead man walking.” I have not heard that

moniker transferred to Mr. Murphy. Not yet, anyway. In other words, should we legalize some form of retail euthanasia? Or, is the Gap’s team of “physicians” working on a credible miracle cure? And, indeed, is it the right team? I am obviously using the “euthanasia” reference as an exaggeration to make what I believe to be a very important point, that over-capacity continues, and it weakens pure free market competition, because the losers continue to get propped up in one way or another. Well, one shareholder isn’t waiting around for those answers. Recently, Gap’s second largest institutional shareholder, Alliance Bernstein, pulled its “plug,” unloading about 23 million shares. Ironically, as speculation mounted about who bought the shares, Edward “Eddie” Lampert’s name came up, mainly because he’s developed a trademark act of shrinking his way to riches. Makes sense, since Eddie (founder and CEO of Sears Holdings Inc. and his own ESL hedge fund) already owned

The Gap brand is the heart of the dying patient, its 1,100 North American stores having lost a third of their sales - almost $2 billion - since 2004, twothirds of the $2.9 billion drop in total Gap Inc. sales during the same period. And, as has been said by many retail

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35 million shares or 5.8% of outstanding Gap Inc. shares as of February, 2011. Another fund in which Lampert is listed as a key executive, RBS Partners, increased its stake in Gap to 30-plus million shares, which makes it Gap’s largest institutional shareholder. Oh boy -- an epiphany! Eddie himself may be the euthanasia process I’m suggesting. Just copy the toxic combination of drugs he’s been injecting in Sears (see prior articles in The Robin Report), and bye-bye Gap, following the direction of one of its earliest ad campaigns: “fall in to the Gap,” only this gap will be an abyss it cannot get out of. Or, maybe Eddie sees an “end game abracadabra” miracle cure for the Gap. More on this possibility later.

The Anatomy of Gap’s Rise and Decline From a little shop in San Francisco opened with $63,000 in 1969 by Donald and Doris Fisher, and first year sales of about $2 million, primarily in Levi’s jeans and LP records, Gap Inc., including its namesake Gap brand, Banana Republic, Old Navy, Piperlime and Athleta, reached almost $15 billion in sales by 2011, with about 3,200 stores worldwide (about 2,500 in the US), and approximately 135,000 employees. It was only recently surpassed by Spain-based Inditex (owner of Zara) as the world’s largest apparel retailer. Stop here, and it sounds like a colossal success story. However, as we are all well aware, and as the numbers so vividly show, Gap Inc., though it rose like a rocket in its growth phase, is now descending a slippery slope, further greased by a global economic mess. The descent of this iconic brand phenomenon ironically began during the last two years’ tenure of Mickey

Issue Nine 2011

Drexler, the architect of its meteoric growth. Comp store sales dropped 5% in 2000, their first decline since 1989, and then a whopping 13% in 2001, with the Gap brand down 12%. What went wrong?

Competition, Ubiquity, Momentum Complexity and the Consumer Like silent “Pac Men,” competition grew up all around Gap and began to chomp away at all three of its brands. So, even while Gap Inc., along with the entire apparel specialty retail sector, realized explosive growth during the 1990s, primarily taking huge chunks of market share from department stores, the specialty brands were also fiercely competing among themselves. In fact, the rate of growth for dollars spent on teen apparel grew at an incredible 14% per year from the late 1990s through to the Great Recession. And many of them, like A&F, American Eagle Outfitters, Zumiez and others, were hitting their stride right in Gap’s sweet spot. Even so, following Old Navy’s repositioning in 1994, the Gap troika of brands was leading the specialty store pack through the latter half of the 1990s. In 1997, Old Navy hit

a billion dollars in sales and Gap Inc. grew to $6.5 billion, followed by $9 billion in 1998. And, they were opening stores at the rate of one per day. The Gap had become the brand of all brands for consumers of all ages. And then, suddenly,it wasn’t. Somewhere in the blur of skyrocketing growth, opening 731 new stores in 2000 and hitting sales of $13.6 billion, Mickey Drexler and his brands lost their “cool.” And, they began to lose their customers – both in the over-30 and younger segments - in droves. Indeed, Drexler would later admit in a Goldman Sachs retail conference that he had lost focus. Under the pressure of continuing to trump Gap’s rapid fire growth quarter on quarter, he got caught up in the momentum and the growing complexities of scale. He said that as a result, he was distracted from his typical role of keeping his finger on the consumer’s pulse. Too many layers of management and the growing bureaucracy took him too far away from those areas of the business that touched the customer, such as styling, presentation, communications, advertising, service, environment and image. In short, he lost control over the product, the experience, and thus the “soul” of the three brands and their ironclad connections with their consumers.

A CASE FOR EUTHANASIA? The Gap on Life Support

Additionally, as competitors began to ape and outdo the casual fashion that was its signature, Gap redirected its merchandising strategy toward trendier looks, edging away from its core competency. Trendy, alas, does not always equal cool. So two major problems were beginning to emerge, both equally deleterious to the brand’s powerful connection with consumers. First, the rapid growth and store openings made the brand ubiquitous, and ubiquity is “antiquity,” the antithesis of cool to the Gap’s core consumers — the young. Second, Gap’s expanding merchandise lines for its various brand extensions, (GapKids, Gap Body, babyGap, etc.) were blurring what the original core brand stood for. And while Drexler was caught in the Gap’s growth maelstrom, he was helpless to prevent the simultaneous declines of Banana Republic and Old Navy. Old Navy lost its consumer connection as “cheap chic” and Banana Republic went from work attire to expensive dressy, the wrong positioning for the brand. As it all started to come apart at the dawning of the new Millennium, the Gap experienced its first two years of declining sales, and Drexler began to close stores and cut costs as he struggled to right the brand and

reconnect with consumers. He departed in 2002, as the brands and the business began their descent.

Enter Paul Pressler From the “Magic Kingdom” So, just as founder Donald Fisher had tapped Mickey Drexler in 1983 to revive the company, he hired Paul Pressler as CEO in the fall of 2002. Pressler, a veteran of fifteen years at the Walt Disney Company as head of the Parks and Resorts Division, had earlier been president of the Disney Store chain. Pressler’s strengths were supposedly in the areas of operations and supply chain, essentially a numbers guy who knew little of the nuances of fashion. Apparently Fisher and the board believed he was their man of the hour, to restore discipline and stability and to reverse the Gap’s downward trajectory. It’s likely Fisher and the board believed Drexler’s merchandising genius was exactly what was needed to take the business to its current level, but that a more operational and business oriented leader was necessary to take it to the next.

continued

customer research program (vs. Drexler’s sheer intuitive magic), introducing strategic planning and a new advertising campaign, and beginning to streamline operations and cut costs. From a timing point of view, he also had the benefit of the final apparel line designed under Drexler’s watch, just before he left. And, as it hit the stores it ended up doing very well. So, sales as well as earnings of all three brands rose during Pressler’s first year. This all certainly sounded good at the time, more “left brain” focus, and the introduction of some classic business disciplines. No more “flying by the seat of the pants.” But the rush to failure was not to be denied.

Or maybe they thought that some pixie dust had rubbed off on Pressler while at the Magic Kingdom, enough so to perform some magic on Gap’s travails. As it would turn out, Mary Poppins probably made more of an impression on him. You know, sort of tidying everything up in the operations, “….. with a spoonful of sugar…”, etc. I can’t get that song out of my head.

All of the strategizing, researching, operational improvements, and cost cutting in the world, alone, will not create style or an emotionally compelling brand. Just as Mickey Drexler’s “right brain” focus might have benefitted from a strong business and operational partner, Pressler’s left-brain orientation definitely needed a strong merchant. Furthermore, even in those areas of his supposed expertise, many of his initiatives showed his lack of understanding of the apparel business. For example, in an effort to cut costs and increase speed to market, he directed the merchants to use the same fabric source across all three brands. Each brand of course, has its own positioning, design, cost/ price relationships, color needs, etc. It also meant that each brand’s designer would be constrained from quickly responding to a new trend. This program failed.

Anyway, off to the races Pressler went. Focusing first on what he supposedly knew best, Pressler made major organizational changes, bringing in key executives he had worked with at Disney, instituting an expansive

Another cost-cutting initiative was to move the production of prototype samples from New York’s garment district to their many suppliers in Asia. So, designers created patterns, sent them to Asia, got samples back, made

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As one very close observer said of Murphy: "…to my knowledge, the major internal meetings held by him were all about the operations, the numbers, seldom about brand strategy.” So now, as the Gap’s business was about to fall into a more accelerated decline, following a brief uptick in sales in 200304, the brand would be led into its descent by inexperience at best and what would turn out to be a total lack of merchandising skills at worst.

changes and then sent them back to be remade. The increase in time and effort, and reduction in flexibility and responsiveness, more than offset any cost reductions. There were many other examples of Pressler’s lack of experience and total disconnect from the creative, product and brand side of the business. But perhaps his most critically damaging move came in 2004 when he transferred the then head of the Gap brand to lead Forth & Towne, Pressler’s new brand initiative targeting over-35 women (which after millions of dollars invested and 19 test stores opened, failed three years later). Pressler placed himself as interim head of the Gap brand until he found a replacement.

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Compounding the choice of himself to head up the Gap brand, and leading to the nickname bestowed upon him by Wall Street as “dead man walking,” Pressler, under increasing pressure, appointed a former colleague from Disney whom he had hired to head up the Gap Outlet, to now lead the Gap. To make a long story short, the new appointee lacked any meaningful experience in either apparel or retailing to relate to the now $5 billion, very troubled Gap brand. The brand’s relevance, positioning, image, consumer base and business were continuing to unravel at an accelerated pace. Between June 2004 and December 2006 (eight months before Pressler would be replaced), comparative store sales declined in every month but three. Paul Pressler and the Gap Inc. board mutually agreed on his stepping down from his position, which he did in January of 2007. And, does it surprise anyone that the Gap Inc.’s publicly stated qualifications for its next CEO at the time read: “…with deep retailing and merchandising experience, ideally

in apparel, and who understands the creative process”?

From the Magic Kingdom to Canadian Drug Stores One has to wonder about the search firm assigned to this task. Donald Fisher’s son Robert was appointed interim CEO upon Pressler’s departure in January, 2007, and in July, 2007, Gap announced that Glenn Murphy, previously CEO of Shoppers Drug Mart in Canada, was to be the new CEO of Gap Inc. Hello? Am I missing something? Yes, drug stores are retailers and yes, they do carry merchandise, although not apparel, except maybe basic underwear and socks. And, I’m not sure of the types of “creative processes” there are in drug stores, maybe signage or advertising or who knows what? Furthermore, there is no industry that even comes close to being as intensely competitive, fast moving and deathly cyclical as apparel retailing in the United States, to say nothing of my favorite mantra – “share wars” in an over-stored world. I scratched my head then. Of course, four years hence, Gap Inc., primarily the Gap brand, still does not have a compass. And the head scratching really started even before the Murphy announcement. In February, 2007, Bob Fisher appointed Marka Hansen, then a

A CASE FOR EUTHANASIA? The Gap on Life Support

And, if that was, in fact, his assumption, it’s too bad it took him four years to learn otherwise. Murphy fired Hansen in February 2011, replacing her with Art Peck, prior president of Gap’s outlet Stores, and before that, 20 years at the Boston Consulting Group. Robinson was ousted in May, 2011, replaced by Pam Wallack, executive vice president of the new Gap Global Creative Center in New York, who would oversee the design and other functions.

20-year industry veteran who headed the Banana Republic brand, to become President of the Gap brand. Although this move did not confuse me, the real whopper was the announcement in May, 2007, that big name designer Patrick Robinson would become head designer for the Gap brand. Since Murphy inherited that decision upon his arrival two months later, and because he was entering a different retail industry and a fashion and apparel sector he had virtually no experience in, and because he probably had little understanding of what a designer does or even who Patrick Robinson was, Murphy focused on what he understood best, operations, supply chain, cost efficiencies, and productivity. After all, why should Murphy not assume that the organization changes made prior to his arrival, essentially replacing key staffers of Paul Pressler, would be to place high quality management in those areas of the business where he had less experience?

As an aside, but a really, really big one, Art Peck, in a blog he wrote as Gap’s new president, said of himself that if one Googled him, “…you won’t find much.” And, among other things, said, “That’s right. I’m not a merchant.” And, Pam Wallack was plucked out of her creative director job for Gap’s kids and adult clothing to be president of Gap Global Creative Center? Again, am I missing something? Or, is this Glenn Murphy’s “Hail Mary” pass? The new president of the Gap is not a merchant, and what is it that they most in the world need? Go figure.

Catch a Falling Star The proverbial brand star was indeed falling when Murphy came on board and by 2010, sales of Gap Inc. at about $11.4 billion were back to their 1999 level, with the Gap brand having lost 30% of revenues, or $1.5 billion, since 2004. Murphy has been given credit for achieving operational efficiencies, improving cash flow, closing and downsiz-

continued

ing underperforming stores (particularly Old Navy and Gap), thereby increasing productivity, and for generally stabilizing the business. He has also made good headway internationally, aggressively targeting China, Japan and Italy. And Old Navy, which ironically seems to fly under the radar due to the world’s focus on the Gap brand, is nearly twice the size of Gap. And, while Old Navy lost $1 billion in sales and had 60 months of negative comps between 2003 and 2008, it seems to be turning around. Sales were up in 2009 and 2010 and it looks as though they’ve repositioned the brand’s products and image to recapture the ownership of “fun for the family” they once had. But the flagship is still the Gap, and as stated earlier, if it does not regain its strength and a relevant connection with consumers, and do it quickly, the whole enterprise will be at risk. So, urgency is the name of the game, echoed by a comment made by Murphy in a second quarter analyst and investor webcast: “We’ve been questioning our merchandise model for the last six to nine months.” Another comment: “We need to get better right away in our women’s product. Gap is a redo. We’re trying to transition the Gap brand aesthetic. It got a little too modern for our customers.” And, tactically, they stated the need to focus on women’s tops, a category critical to success in the women’s business. The relative success of Athleta and Piperlime aside, I could say, wake up Glenn, what have you been doing for the last four years? Operations and all the good stuff you did to stabilize the business does not make your brands “cool” again. It is precisely about brand positioning, about strategy and not tactics, and I’m sorry, but this is not the drug store business.

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As one very close observer said of Murphy: “…to my knowledge, the major internal meetings held by him were all about the operations, the numbers, seldom about brand strategy.” At the end of the day, in my opinion, the most critical reason for Mr. Murphy’s inability to turn the business around is that he simply did not fit the literal qualifications that Gap Inc. put forth when searching for a successor to Pressler, looking for someone: “with deep retailing and merchandising experience, ideally in apparel and who understands the creative process.” Had he really understood this business and its success factors, he might have immediately searched for another Mickey Drexler to balance his “left brain” skills. The question now: is it simply too late?

So What’s Next Are we looking at another iconic brand in its death throes, the question I opened this article with? Well, if we want an easy way out, we can accept the bell curve of life phases: birth; growth; maturity; old age; and, death. This would put the Gap brand and probably Old Navy and Banana Republic on the dying end of the curve. One leading industry consultant pointed out the similarities between Sears and the Gap, “both as genuine American icons, though from different eras, both changing the face of retail

Issue Nine 2011

for their respective generations. Now the challenge (for the Gap), with the ever fickle Millennials is not unlike that of Sears and its baby boomer loyalists in their heyday, (since the Sears’ generation is, like it or not, either dead or dying).” Speaking of which, I must come back to my Sears reference at the beginning of this article, and one scenario that might play out for Gap Inc. First, a question: are Eddie Lampert, (founder and CEO of Sears Holdings Inc. and his own ESL hedge fund) and RBS Partners (another fund in which he is listed as a key executive) accumulating stock to acquire Gap Inc., or to have a seat on the Board? If so, does he see an “end game” miracle cure for the Gap that makes the sum of its parts bigger than the whole, just as he seems to be revaluing his assets at Sears? Early speculation was that his fallback exit strategy, if he was unable to turn Sear’s business around, was always the ability to sell off its valuable real estate holdings, as well as the proprietary brands. Accordingly, in Spring of 2008, he took the “whole” of the retail model and “unbundled” it into five autonomous units: operating businesses; support, brands, online and real estate. And, early indications are that Sears is aggressively pursuing an e-commerce strategy that looks a lot like that of Amazon. Sears has securitized many of its brands and is wholesaling them to select retailers (even competitors). They are even proactively leasing space in many current Sears and Kmart locations to the likes of Whole Foods, Forever 21, athletic clubs, golf and gift shops, and others.

As we know, Eddie, viewed himself as a brilliant retailer, maybe even a “merchant prince” when he first aggregated Sears and Kmart, vowing to return them to their iconic positions as quintessential retail brands. Of course, we learned later on that he is simply a brilliant financier, knowing how to create value where there essentially is none: the “abracadabra” strategy. So, maybe Eddie is looking to perform his magic on Gap Inc. Who knows? Another scenario could be the unbundling of the five brands to sell to strategic or financial investors. But, I don’t think Glenn Murphy or the Board, including the Fishers, are even remotely interested in either of these scenarios. They want to revitalize the business and get it headed north on all cylinders. So, Dr. Murphy, make sure you’ve got the right team of physicians, particularly ones who can balance your “left brain” skills. Step up your international and online growth, which you have committed to. Downsize and close enough stores not just for cutting costs, but also to reduce ubiquity which is counter to “cool.” And, get your “right brain” staff to nail a winning design, merchandising, presentation, communication and image strategy for every one of your brands. And, then you will reverse the trajectory of your falling stars. Good luck, as you struggle against time and economic circumstances.

Remember: It’s the Consumer, Stupid! By Robin Lewis

I was questioning my dark view on the economy during a phone conversation the other day with a major retail CEO. I recounted how surprised I was that the words “double dip” or “another recession” was never even hinted about during a recent seminar I had moderated - not from the Goldman Sachs economist who opened the event, not from a Partner at Kurt Salmon, and not from our three panelists: the CEOs of Warnaco Inc. and Iconix; and, the CMO from Gilt Groupe. So, I asked something like, “… am I a total cynic about this economy? Those guys in my seminar talked and acted like, hey, things are okay, slow but, the consumer is still shopping and buying, and they felt the Holiday season was probably going to be fine. Granted, there were no “high fives,”….etc…..so, since I have you on the phone, how is your business?” And, he said something like, “…. It’s okay, the consumer is still spending….. if you watch the news, and hear 24/7 how bad things are around the world and with our economy, you could get real depressed.” (I appreciated he didn’t call out The Robin Report as a part of the depressing news sources). He finished his remarks with something like, “…..we just keep moving forward …. Our business is good….and I think we’ll have a good Holiday…etc.”

Well, I pinched myself and thought, okay, I’m still alive, my brain isn’t dead, but maybe I should step back, take a deep breath and soften my view on the economy – maybe let a little ray of sunshine into my life. Smile and be happy, I thought. And then, whammo!! A Wall Street Journal, October 1, headline: “Americans Tap Savings to Keep Up With Prices: The income of Americans fell for the first time in nearly two years during August, while spending increased a bit.” Back to reality for me. Personal income dropped 0.1% for August from July, with disposable income falling 0.3%. Wages also fell. Nevertheless, spending rose 0.2% -- BUT NOT BY CHOICE.

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The entire increase was due to higher costs, mostly food and energy. So, consumers had to dip into savings just to maintain their standard of living. They saved 4.5% in August, down from 4.7% in July and 5.6% a year earlier. Could one say they are struggling to simply “hang on?” Mark Vitner, an economist with Wells Fargo says, “Consumers are having to pull out all the stops in order to maintain their standard of living.” And, the Economic Cycle Research Institute, a forecasting firm, said that based on its analysis of dozens of indexes, the U.S. economy is falling into another recession. “And there’s nothing that policymakers can do to head it off.” Those are grim words, indeed. However, they are based on some real grim facts. And, my rather grim logic tells me that when consumers peek into the discretionary part of their wallet (much less their savings account), and ask themselves, “….do I really need another pair of jeans or another hand bag to maintain my “standard of living?”…… my logic tells me the answer will ultimately be “no.” It’s simply a question of when that consumers’ logic will emerge. So, reaching into my sunnier side, let’s hope our retailers can enjoy another “okay” Holiday season.

Issue Nine 2011

Why Walmart Failed To Crush Conventional Supermarkets By David Merrefield

a third of the US market. That’s a lot of milk and hamburgers. As a result, during the past decade or so, scores of marginal supermarket chains, independent supermarkets and their wholesalers failed outright or were acquired by larger companies. The most spectacular failure came when the then-largest grocery wholesaler, Fleming Cos., suddenly ceased operation and liquidated. Many surviving retailers downsized and are mere ghosts of their former selves. In that number are A&P, Bi-Lo and Winn-Dixie. Indeed, many predicted that Walmart and no more than 10 of the best-run conventional chains could possibly survive into the long-term future.

Those of us who have followed the foodretailing industry for a while recall well that just a few years ago it was widely predicted that Walmart Stores’ grocery aisles -increasingly burgeoning with low-priced product -- would crush the conventional supermarket business. It seemed like a safe bet at the time. After all, Walmart bestrode the land like a colossus, hurling down gigantic and food-heavy supercenters in virtually every hamlet that had even a fair amount of population within a 50-mile radius. More than that, Walmart was building an unassailable low-price bastion by taking full advantage of the built-in inefficiencies

endemic in the product-acquisition practices of conventional supermarkets. Walmart did that by eschewing manufacturers’ false funds such as promotional money, slotting allowances and brokerage fees. Instead, Walmart demanded and got dead-net pricing from manufacturers. There was no way conventional supermarkets could immediately reverse-engineer their way out of dependence of those “street monies,” so they were stuck with the high-price-point model. Before long, Walmart captured a majority of consumables sales in the nation. Between 2006 and 2010, Walmart’s grocery sales grew from 39% to 54% of its US revenues, reaching a whopping $140 billion, or almost

Not so. There are now at least 75 substantially sized supermarket chains and independent operators, many of which are doing pretty well, according to data published by trade publication Supermarket News. They range from Kroger, the nation’s largest conventional supermarket chain with annual sales of $81.1 billion, down to the smallest, a regional independent with annual sales of $93 million. What happened? Walmart inflicted some wounds on itself, chief among them reducing stockkeeping units of branded goods in favor of a generic-looking private-label range. It also wandered some from its low-price leadership. But the problem is far deeper than those factors: Consumers simply don’t want to shop in supercenters nearly as much as they did before. Consumers are turning elsewhere -particularly to “small-box” stores -- in droves, in fact, as they react to pressures on them concerning time, travel costs, high unemployment, recession and, far from least, because of the aging-population bulge. In short, consumers have lost their ability and appetite for traveling long distances to shop a time-inefficient cavern of a store. The Walmart advantage once fully evident to consumers is melting away.

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In the future, consumer spending on grocery is likely to continue to drain from Walmart and toward small-box stores, conventional supermarkets and other alternatives, especially if these can keep price points in check. Consumers are finding some relief from mounting pressures on them by turning to small-store alternatives such as Aldi, Save-A-Lot and dollar stores. Aldi and Save-A-Lot are fundamentally food-only stores, while dollar stores such as Dollar General and Family Dollar are broadline retailers that are rapidly increasing their food offerings. They’re also now offering well-designed and high-quality private-label food product. About three-quarters of Dollar General’s sales are in consumables, and Family Dollar isn’t far behind. These small stores offer price points that, surprisingly, are in many instances equal to or slightly below Walmart’s. They are located near large numbers of consumers, often in small strip shopping centers. Those

small-store features combine to allow consumers to save time, travel costs and increased purchasing economy. The stores don’t have everything, but are ideal for fill-in shopping or for single-meal planning. As for conventional supermarkets, they will never again dominate market share as they once did, but they are presenting themselves as attractive alternatives for pantry-filling shopping trips. That owes largely to the fact that, at long last, they have learned how to lower price points so they compare fairly well with Walmart’s. Like survivors of the Middle Age’s black death, supermarkets’ numbers have been whittled, but they’re now a robust lot. In the future, consumer spending on grocery is likely to continue to drain from Walmart and toward small-box

stores, conventional supermarkets and other alternatives, especially if these can keep price points in check. These alternatives can succeed even without matching every Walmart price point dollar-for-dollar. Shoppers will generally tolerate an upside price spread of 8% if they see needed product within arm’s reach. Beyond that, many will decide to look for the product elsewhere. So the ongoing formula for the success ofthe non- Walmart universe is clear: Present product shoppers want in an environment they enjoy and at prices within 8% or better than those of competitors. David Merrefield is principal of DRM Initiatives, Inc., a retailer consulting group. He is the former Vice President and Editor of trade publication Supermarket News. He is based in New York City.

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$50 for 10 issues! Issue Nine 2011

A Bedtime Story By Warren Shoulberg

It was a holiday weekend and just like clockwork, it arrived in my mailbox: The latest circular from Macy’s, advertising a mattress sale. Didn’t matter if it was Columbus Day, Labor Day or St. Swithen’s Day, there was a mattress sale going on at the big store. Has there been a national, religious or cultural holiday in the last 50 years in which there was not a mattress sale? And was that Princess with the pea the last person on earth to actually pay full price for a mattress? There really is no consumer product quite like a mattress. We spend a third of our life – give or take a few late-night indulgences – on a mattress, yet we know very little about what’s actually in the damn thing. It’s one of the more expensive purchases we make, yet most of us don’t have a clue about how to buy one, much less where to go to do so. And with good reason: We don’t get a lot of practice. We get a new car every three to five years. Many of us, at least until recently, moved and bought a new house every decade or so. Even a washing machine only lasts nine or ten years at best. But mattress life spans go on and on and on. Some people can put 20 years on a mattress. Some parents recycle the twin mattress they used as a kid for their kids. Some go from adolescence to Alzheimer’s on the same mattress. It takes a very long time for a mattress to wear out.

But when it does, consumers beware. It’s a retailers’ dream come true. As Sy Syms’ evil twin brother said, “An uneducated consumer is our best customer.” It’s not that retailers are doing anything bad. It’s just the nature of the beast. Consider the mattress: Other than consumer electronics products, it’s the only product out there that’s a total unknown, a sealed bag. You have no idea what’s in there. At least with a DVD player, there are some tech specs you can use to judge products. Mattresses? Coil density just doesn’t cut it. The nomenclature of mattresses seems to have been created by a committee composed of Rube Goldberg, Professor Irwin Corey and every member of the United States Congress. Look at the sizes: Twin, full, queen and king (not to mention California King, as if that state houses a colony of mutant giants). Talk about your mixed metaphors. Twin of who? Full of what? Who you calling a queen? Look at the labels: In what lexicon is “firm” the softest level of product? Is super firm more firm or less firm than extra firm? And then there’s the whole buying experience. When you go to buy a shirt, you can try it on. Towels? You can rub it across your cheek. You can compare the pictures of flat-panel TVs, even if most stores seem to be tuning the pictures to suit their sales quotas. But a mattress? You awkwardly lie down on it for a 30 or 40 seconds. Maybe you get your significant other to do the same on the other side. But you’re really not comfortable getting into the fetal position and dozing off. You can’t prop yourself up and eat take-out Chinese food. There’s no TV at the foot of the bed to watch. And as for that other popular bedtime activity, there’s no way you’re going to get the store to turn down the lights and crank up the Barry White so you can assume the position. All of which gives most retailers the upper end in this particular buying equation, a position they are increasingly unaccustomed to. Most people buy a mattress in one of three places: A mattress specialty chain, like Mattress Firm or Sleepy’s; a furniture store, like Raymour & Flanigan or Rooms To Go; or a department store. The warehouse clubs do sell mattresses, but not in the same numbers they move other products. The internet has not really been a factor in mattress sales, the consumer wanting even those 40 seconds of hands-on product interaction to make their purchasing decision. It’s not a product category the discount stores excel in either.

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It’s big, bulky and has to be delivered, all things mass retailers hate. Some, like Walmart, have tried to sell mattresses over the years with varying degrees of failure. Department stores also hate big, bulky products that have to be delivered but for some reason they continue to be very successful in the mattress business. Which is why the current TV ad campaign Macy’s is running for mattresses is so fascinating. After the usual adspeak about the prices, the selection, the prices, the free frame, the prices, the free takeawayyour-corroded-old-mattress spiel, the prices, the free toaster oven and, oh, did we mention, the prices, the pretty Macy’s lady goes in for the kill: “Macy’s: The store you can trust.” Wow, did she really actually say that? The store you can trust? Wow. The implication is subtle, but brilliant. When you go in to buy a mattress, you have the IQ of a doorknob and you know the store is going to screw you. This is worse than buying a car…much worse. You don’t trust any of these bastards. But wait, Macy’s says you can trust them. Can you trust them telling you that you can trust them? Like any good ad campaign, if you say it often enough, slow enough and loud enough, people will believe anything you say. It does seem to be working. Solid numbers are hard to come by, but Macy’s probably sells more than a half a billion dollars worth of mattresses every year. Not bad for something you can’t giftwrap. Curiously, the Macy’s campaign goes back to the very roots of the modern American department store. When John Wanamaker and his cohorts first created the original department stores, a big part of the merchandising and marketing strategy was that you could be guaranteed you would pay the same price everyone else did. No haggling, no double-dealing, no bastards. Could a store like Macy’s call upon those roots and embrace this whole trust thing throughout the store? Could this be the true savior for the great American department store and make Terry Lundgren the ultimate poster boy for retailing? Can a shopper really trust a retailer? Let me sleep on it and get back to you. Warren Shoulberg is editorial director for several Sandow Media home furnishings business publications and working on his next book, Stupid Business. He bought a new mattress a few years ago…at Macy’s of all places…but he’s still not sure he trusts them.

Issue Nine 2011

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Quotes to remember STEVE JOBS HAD NO PROBLEM UNDERSTANDING THIS: “ Many of life’s failures are people who did not realize how close they were to success when they gave up.” - Thomas Edison NOW HE’S RIGHT UP THERE WITH HIM – LITERALLY AND FIGURATIVELY.

“ Great spirits have always encountered violent opposition from mediocre minds.” - Albert Einstein DR. EINSTEIN, ARE YOU TALKING ABOUT THE SAME SPIRITS I AM? IF SO, THEN I TOO AM A GENIUS. JAY LENO ON OUR SLIP INTO SECOND PLACE: “ A Chinese businessman has just bought a bottle of rare scotch for $200,000. That shows you the difference in our economies right there: Our president’s in the White House basement making his own beer.”

FEELING GUILTY ABOUT ANYTHING? IT’S OKAY! “ A guilty conscience is the mother of invention.” - Carolyn Wells, American writer and poet

AND FINALLY:

AND I MUST BE A SERIAL INVENTOR

CEO, Editorial Director Robin Lewis

“ Being the richest man in the cemetery doesn’t matter to me … Going to bed at night saying we’ve done something wonderful… that’s what matters to me.” - Steven Jobs, 1955-2011

IllustratoRS Jodi Kostelnik, Joey Parlett and Steffi Sauer Contributing Columnists

COO, Editor Judith A. Russell Art Directors Jodi Kostelnik Steffi Sauer

David Merrefield Warren Shoulberg Paco Underhill Dana Wood Advertising sales and rate information advertising@TheRobinReport.com

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Copyright © 2011 Robin Lewis, Inc. All rights reserved. Copying or reproducing, by any means whatsoever, of The Robin Report, or any distribution hereof, in whole or in part, without the express written consent of Robin Lewis, Inc. is strictly prohibited. The Robin Report is published monthly for senior executives in the retail, fashion, beauty, consumer products and related industries. The mission of The Robin Report is to provide new strategic insight into major industry and business events. It is intended to be concise for quick reading, provocative to stimulate thought, and humorous for fun and enjoyment. The opinions expressed herein are not, and should not be construed as investment or other advice. All expressions of opinion are subject to change without notice. To order a print or electronic subscription to The Robin Report, please visit our website at www.TheRobinReport.com.