The Robin Report - Issue #7-2012 - October 2012 by The Robin Report

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I N S I D E t h is iss u e • DEAR READER ........................ 2 By Robin Lewis • innovation ............................ 3 By Robin Lewis

• Q/A With Ed Schlossberg, Founder & Principal of ESI Design .........6 By Robin Lewis

• innovation in Home Products: ................ 8 By Warren Shoulberg

• How Do You Give People What They Want? .............10 By Emily Thompson

•M usings on Business (not) as Usual ...................12 By Jill Butler

• JC PENNEY: Department Specialty Store? Mall Within a Mall?... Whatever! ..........................13 By Robin Lewis

• shopifying: when less is more ............14 By Grace Ehlers

• Measure Once, buy Twice ....…...................17 By Judith Richardson

• the new Age of Discovery .............…….18 By Toni Yacobian

• Lululemon: A Cult, a Phenomenon or Just a Great Brand ...................20 By Jane Singer

• Multichannel Breakthrough ..................22 By Andrew Mantis

• The Back Page ............…....24

Dear Reader Unprecedented global disruption and change is occurring as I write this note, and will continue as it leads to both destruction and creation along its path. The changes will affect every aspect of our lives, hopefully in more positive ways than not. However, one thing is certain, and that is our total inability to predict the outcome on any front. And, the world of retailing is also right smack in the middle of that path of change. So, if you don’t want to be on the destruction end of it, by simply reacting as it rolls over you, you need to figure out what’s driving the change and then proactively preempt it through the creation of new, change-responsive ways of pursuing growth, yes, through innovation.

with a better than Apple retail model, that in fact was successfully up and running. Our accompanying Q&A with its “game-changing” architect, award-winning Ed Schlossberg, gives you the back-story and some of the grit around its creation. Plus, you’ll get a firsthand view (mine) of the new store design Ron Johnson is master planning for JC Penney. So, as I’ve said, don’t waste the disruptions, the paradigm shifts and the game-changing headwinds. Embrace the opportunity, proactively create a new vision and change and create new “games” for growing your business.

Also in this issue, we take a look at the less than stellar innovation in the home sector and how new There are four major drivers of tools and innovations are enhancing change: economic slowdown, even in emerging countries; over-capacity, business as usual with a report on the men’s market (Measure One, likewise, soon to be so in the Buy Twice); customer segmentation developing world; the fundamental (Multichannel Breakthrough); disruption across all industries targeting customers better (How brought on by the Internet and its Do You Give Customers What They contiguous technologies; and, all Really Want); and a smart strategy of this adding even more power to the already “all-powerful consumer.” for using data to provide actionable And, by the way, thanks in large part insights for your business (The New to the Internet, this hyper-competitive Age of Discovery). We also look inside of the phenomenon, Lululemon, environment is not just confined as well as three other bellwether store to the United States. We are now experiences to watch (Shopifying: competing on a truly flat, global playing field, which is both positive, When Less is More). And a study on what really propels creativity in providing growth opportunities (Musings on Business (not) as Usual). for domestic retailers, and negative, providing entry to foreign retailers In the spirit of innovation, have into the U.S. which is already a great read! over-stored. So to fight one’s way through these substantial headwinds, to successfully compete and win “game-changing” innovation has got to be the weapon of necessity. And, that’s what this issue is about. In my lead article, I attempt to provide clarity to what real, fundamental, and “gamechanging” innovation is (Starbucks, Amazon, Apple, Zara and others), and how to go about doing it. I also re-visit the fact that Best Buy blew their chance to “out-Apple Apple”

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.

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Innovation Rar a d Ill-Defined, M i n d erstood an su “Innovate or die.” “Ideation

is the new thing.” “It’s a gamechanger.” New this, new that, and blah, blah, blah. On and on we hear about the necessity for breakthrough creativity, to find the next best new thing, service or experience; the next Apple, Starbucks or Amazon. If we are not creating new today, we will be gone tomorrow. How can we not all agree? Of course we do. But how many entrepreneurs, companies or their leaders really understand or agree on what gamechanging innovation really is? And, more importantly, how many really understand how it is actually accomplished? And, further yet, how do we do it? The answer to the last three questions is: very few. Otherwise there would be more Apples, Starbucks, and Amazons: fundamental “breakthrough” concepts.

What is it, Really?

First of all, innovation is in the eye of the beholder. And the beholder “be” the consumer. And when the beholder is confronted with something new, or an experience, they’ve never seen or possessed before, and when it is so compelling to them that they change their behavior, it is only then that you know an innovation has been made, along with the creation of new consumer value. But, there are two types of innovation: one changes the “game;” and the second creates a new “game.” And there are elements of both in truly powerful innovations. For example, Starbucks changed coffee-drinking

Issue Seven November 2012

behavior, but more importantly, created a new “game,” that of an experience called the “third place” outside work and home, where people could hang out, network, read, use the Internet, etc. Apple gave consumers a new perception of computers through design and integrated technologies, “changing the game,” so to speak. But the new game they created was an experience called the “genius bar” as a part of their breakthrough, holistic “must-go-to place” where Apple simplifies what is complex for consumers, where customers are educated, and have an incredibly fun experience, all at the same time. Amazon changed the rules of the game of retailing and consumers’ shopping behavior; but more phenomenally, created an entirely new game, which no one will soon replicate. Amazon is an awesome, digital marketplace, that they own independently, and where they can sell

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integration of all of the back-end supply chain functions. And, this raises another very important point about innovation. If whatever you create new today can be “knockedoff” tomorrow, then you haven’t either changed or created a new game. The Starbucks, Apple, Amazon and Zara innovations cannot be copied overnight. JC Penney’s planned innovation, in my opinion, if successfully implemented, will provide consumers a new and compelling shopping “place” and thus, will change the game of how merchandise is selected, presented and priced in stores. More importantly, they will have created a new “game,” which again is a fun, “third place” type experience where consumers will want to hang out. And there are those who already say that if Ron Johnson begins to realize success with his newly created “game,” his competitors will immediately copy what’s working. Ron addressed this in a discussion I had with him, and I’m paraphrasing,“…even if they wanted to, based on the time and capital required for what we’re doing, I don’t

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anything in the world to everybody in the world, better and faster than anybody else, 24/7, period. Zara changed consumer behavior through changing the fashion “game:” speed; delivering new styles twice a week. But, the new game they created was the fast-fashion process, which is the time compression and unique

believe this is something they are going to want to pursue.”

How Do You Innovate?

Innovation emanates from the outside, in. It cannot emanate from the inside, out. The first speaks of tapping into a large strategic vision spun out of the emergence of an often unstated understanding what the world doesn’t yet know it wants, or needs.

Innovation The second scenario of innovating from the inside out, from the confines of one’s own mind, from a group of “brainstormers,” or from the genius of creatives inside of any company, is often a tactical “crap shoot.” All too often, innovation is constrained by quantitative extractions from research or limited by individual imagination, all in the hope that something new will “stick” with consumers. If you research consumers with an open-ended question, “How would you describe a perfect shopping experience or describe what new product you would want?” They will respond with what they know, what they’ve already experienced, or what they’ve heard from their friends. If you connect the dots, you may identify some tactical innovations they would like: better service; better sight lines and lighting; more convenient shopping and quicker check-out, and, so forth. Or, for products, you might hear a lot about improvements they might desire, for instance a Tide detergent to be used in cold water (there are now 39 improved brands of Tide today). However, you’re not going to hear, for example, “we want to have branded drinking water that we will pay a lot of money for.” A new outside-in model of innovation is emerging, emblematic of the digital age: gameification — crowd-sourced, open-sourced, collaborative product innovation. A news-making example of this is the FoldIt project from the University of Washington, where 280,000 online game participants collaboratively helped to decipher a crystal structure critical in an AIDScausing monkey virus. The players produced an accurate 3D model of the enzyme in just 10 days. The problem of how to configure the structure of the enzyme had stumped post-doc scientists for 15 years. The application of this sort of open-source collaboration is truly a game changer, and a new game (literally). Great individual innovators who change games and create new ones may use all traditional, non-traditional and sophisticated new technologies and research 4

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to understand consumers, their wants, desires, what changes their behavior, and hundreds of other characteristics down to a “gnat’s eyelash.” Such disciplines might suggest innovations that will change the game. But, as mentioned, they alone will merely yield a tactical “crap shoot.”

Howard Schultz, looked outside of the coffee-drinking paradigm. He observed in Italy the coffee-drinking social experience and compelling ambiance, on almost every street corner. Research and/or brainstorming did not tell him this concept would be overwhelmingly desired worldwide. The same was true of Steve Jobs and Jeff Bezos. And, while the jury is still out, Ron Johnson knows his vision will change and create a new game, so much so that he is not testing it first. Proctor & Gamble, the giant and revered consumer package goods company, arguably has the largest and most sophisticated consumer research process, with 26 “innovation facilities” around the world, with 1000 Ph.D.’s among the 8000 total employees in those facilities. P&G has historially created both new products (gamechangers), and new product categories (new games). As reported in a recent Businessweek article, they spent $2.03 billion during fiscal 2012 on R&D. New games created over the years: Ivory Soap; Crisco all-vegetable shortening; Dreft, the first synthetic detergent; Pampers, first disposable diaper; and others. Game changers would be all the new and improved brands and sub-brands such as Tide, Pringles, Crest and others. Issue Seven November 2012

ence continue d...

But, think about this. If one were to identify within P&G, the individuals who connected the final dots and changed or created new games over

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The great innovators possess something else. They are able to “leap” outside of the data, research, qualitative and quantitative stuff to intuitively and almost instinctively know what the consumer has never seen, felt or experienced. They know how to change or create a new game.

the decades of time, with billions of dollars and human capital spent on innovation, they would be the great innovators. Those are the people who had that “something else:” that intuitive and instinctive gene; the person who was able to actually get out in front of the consumer’s mind and emotions and create something the consumer had never seen, but would love when they saw it. In short, great innovators are not driven, guided, or told by consumers what they want or desire. Great innovators lead consumers and cultures and are worth their weight in gold. And, of course people like Steve Jobs, Howard Schultz and Jeff Bezos are worth more than their weight in gold. Hmmmmm….wonder about those few and far between within P&G’s $2 billion-a-year innovation process who ultimately innovated the big “aha?” Were they compensated their “weight in gold?”

What Happens When the “Game-Changer” Doesn’t Know it You Got It!

You might want to go back and read my article titled: “How Best Buy Blew the Chance to Out-Apple Apple.” The irony of Best Buy out-Appling Apple and then discontinuing it would be laughable if it were not so tragic. And, what happened is an example of a company’s leader who was changing and creating a new game, but didn’t realize it. How bad is that? World-class and award-winning

designer of “collaborative public experiences,” ESI Design’s Edwin Schlossberg, innovated a concept called a “digital playground,” and sought to perfect its commercial application. Realizing it required the buy-in of an electronics retailer, he found a fellow visionary in Brad Johnson, then CEO of Best Buy in 1998, and together they created a better than the current Apple model. Two small store concepts were designed, one named Studio D for 20-something soccer moms and other more tech-challenged consumers; and Escape for younger tech-savvy consumers. The strategy was to customize these stores for specific niche demographics and lifestyles. And had they continued, they would likely have expanded across a multitude of niches. Each was designed and imaged differently, with customized merchandising and service strategies, and all were highly educational and experiential. As I said, they almost certainly closed the initiative down because, though the stores were making money, they weren’t making enough money to justify the investment and the more complex operations (given the educational, experiential, and customized merchandise in these stores). Why spend time and investment on a side show when the main attraction in the big box was on fire at the time, with soaring double-digit growth? Finally, had they continued, not only might they not be in the “pickle” they’re in, being bled to death by Amazon on one side and Walmart on the other; they would have preempted Apple. Can you imagine? Apparently they couldn’t. All of this is tragic, but true. For more, read the accompanying Q&A with Ed Schlossberg, and check out the blog and video of these stores by accessing: http://vimeo.com/32811220; http://therobinreport.com/how-best-buyblew-the-chance-to-out-apple-apple/

with Ed Schlossberg, Founder & Principal of ESI Design Robin Lewis: What in the world was Best Buy thinking when they discontinued their Studio D and Escape small store concepts several years ago? You designed these neighborhood boutiques to customize these stores for specific niche demographics and lifestyles. What’s the backstory on this?

Ed Schlossberg: I had this idea in 1998 to do something called a Digital Playground. I thought if these technology companies were going to be successful, they needed to let people play using digital stuff so that they could see what would work. So I made a presentation to Brad Anderson who was CEO of Best Buy, and he said, ‘This is fantastic, we would love to do this.’ He hired us to design the first Digital Playground. It took some time to get it going. When Brad hired James Damien as their visual merchant, he was really excited about it, and we kind of became his team.

RL: What was the design strategy?

ES: Each store was designed and imagined differently, with customized merchandising and service strategies, and all were highly educational. Our design strategy was to work from the customer’s perspective into the design and not from the product or store out to the customer. It was to create a model based on the needs and interests of the customer and then create a way to meet those needs in the store using physical design, staff, virtual tools and an online component. For Studio D, our customer was a 20-something married woman who had little access to software or hardware, but sought solutions to her digital needs –- composing, creating, managing, etc. We decided to create relationships with both virtual and physical community organizations. We actually gave those groups a percentage of the profit of the sales of their members to connect Studio D in a meaningful way with the community. Our offering of classes was especially popular and proved that people would pay to learn about how to use new software and hardware. For Escape, our customers were 18- to 30-year-old men and women who loved the newest and greatest hardware and software. We created a relationship with a company that modified cool Japanese tech that was unavailable anywhere else, so we could exclusively offer really hip stuff. We created spaces where new video games and other software could be tried out, and we created a membership program where members could reserve spaces for friends and get email blasts about new gear. We also did an outreach programs to the colleges in the vicinity.

RL: Why was this so radical at the time?

ES: For Studio D, we introduced a sense of community centricity focused on local ethnic groups and women. The challenge with a traditional single centricity strategy is that you as a customer don’t know that you’re in a store that’s marketing to you. It’s not personalized to your wants and needs. It helped the merchants buy merchandise better, but it didn’t help in the retail experience that much. We were problem solvers and developed community centricity to merchandise to a particular customer by knowing where she was in her shopping cycle and a variety of other behaviors. For Escape, with that age group, the membership program was as radical as the ‘try before you buy’ program. The early-adopter product strategy was radical for customers, and the 6,0000 square foot store model was new for Best Buy. RL: What were the revenue implications of changing the design?

ES: At the time, the stores typically cost about $2.5 million, and they would produce about $21 million in revenue the first year. So, not a bad deal. But the new design prototype store that we did for the West Hollywood store produced $35 million because the products were given more room; the vistas were clear because of lower fixtures. New comprehensive signage and wayfinding made the experience more inviting. And not using permanent walls for ‘area creation’ made changing and refreshing the interior environment much easier.

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RL: Did you use a matrix to measure the customer experience?

ES: They used sales per square foot. Period. That’s not a bad thing to measure with, but that shouldn’t be the only thing you measure with. We made alternative measurements a really active idea because there were a number of new tools we could use. There were heat maps of stores, so you could actually measure ‘does this end capture attract anyone?’ What are the sales per square foot depending on where you place things? How could you experiment with that? So we wanted to build, which I never got to do, but we wanted to build a store in which we could evaluate and measure every single piece of furniture and fixture based on a test store. It could help define and perfect what made a difference. RL: What role does physical design and experiential design play in retail profitability?

ES: Design has to be based on customer needs, and then you need to work with these needs into designing the experience. Separating out physical, visual, or experiential design elements is meaningless. The customer has only one experience and that is the whole experience of the store. Profitability is a measure of that total design experience integration.

RL: What lessons can we learn from the Best Buy experience?

ES: Integrated design works. Working from the customer in, rather than from the product out, works. Innovation requires an organization that takes risks. RL: Didn’t they just reintroduce something though? The ‘Connected Store?’ They’re coming back with this now, right?

ES: Best Buy is coming back with the connected store design concept but it seems to be physical solution, not supported by all the other elements that makes for a successful store experience. As you say, a solution in retail is a solution that involves how the physical store works and how the staff works, the digital solution and the level of interactivity and the training programs, and the advertising programs. You can’t solve it isolated with any one of those. Ever. RL: How do you see the future of innovation in store design today?

ES: Stores need to be intersections in the complex communication and experience world that we are now living in. That means that stores and experiences need to be designed online as well as in-store. And they need to serve a vital social link in their communities.

RL: What is your impression of what JC Penney is trying to do?

ES: I think that Ron Johnson’s approach is really interesting. And I’ve been sort of rooting for what he’s been doing. I think it may take too long, because he’s asking the audience to behave differently, and that’s not easy. My point about saying this is that I don’t know if his customers can evolve to his vision in a short enough time to produce results. I mean, you love people who have an idea, and a rudder, and know what they’re doing. It’s satisfying. RL: Finally, do you have a guiding philosophy about designing the customer experience?

ES: There’s a section in the Timaeus, Plato describes the process of culture. He says that what we do in culture is we take parts of our body out of ourselves, and make it big, and then learn how it works, and then we make it small and we swallow it again. And he says the best thing is, you see it poking its head out and smiling. It’s such an unbelievably brilliant insight into the role of culture in life. Which is what we do all of the time, that’s how we learn and create culture.

Issue Seven November 2012

Innovation I t Ain’ t Jus t Fitted Shee t s Drum Roll Please, Ladies and Gentlemen. Announcing the three greatest moments of innovation in the history of home furnishings products: 3. F urniture manufacturers, trying to reduce their cost of upholstering with expensive craftsmen and detailed stitching and sewing techniques, invent the staple gun as a way to attach fabric to frame. 2. S mall appliance makers, seeking to differentiate their blenders and give them the perception of more power, employ a Spinal Tap-esque technique and increase the markings on the speed indicator of their machines from “10” to “11.” 1. Producers of bed sheets, responding to a customer base that wants to cut corners on making hospital corners, run elastic around the edge of their product and create the fitted sheet. OK, so innovation has not been the strong suit of the home furnishings industry. Outside of the consumer electronics segment of the home business—and let’s face it, the CE

in Home Products: By Warren Shoulberg

guys don’t consider themselves on the same planet, much less the same industry as companies that make furniture and housewares and home textiles—the industry’s track record when it comes to creating innovative products is pretty dismal. Some of that is to be expected. Like the apparel business, much of home is driven by fashion more than technology. The industry counts on new styles, rather than new bells and whistles, to drive its sales. So, you wouldn’t look for the home guys to lead the way on product innovation. And up to fairly recently, that has been the case. But more recently, we are starting to see producers of home products if not out-and-out embrace technology and innovation at least learn to work with it. Of course, the recent surge is not without some precedent. In the late 1940s, engineers at a company called Raytheon were working on some new technology for radar devices when they accidently noticed that the rays from their machine were heating up some nearby food. A bunch of weird science later, the microwave oven was invented. That product has gone on to be a staple of every American kitchen and 7-Eleven in the world and today, most people would tell you that the microwave is the most innovative home product they own. But that was a long time ago and there really haven’t been a lot of repeats of the microwave’s impact on American living. The closest more-recent example has to be the Dyson vacuum cleaner. Into a market dominated by some of the longest, most established brand names in consumer products—Hoover, Eureka and Bissell to name the biggest—came James Dyson with what he said was a better mouse trap…or at least a better machine to clean up mouse droppings anyway. The basic technology behind the Dyson—a bag-less, cyclone-like chamber that sucked up dirt more efficiently—had existed before Dyson invented his machine, but he perfected the process. Only 18 months after entering the American market, Dyson became the number-one selling machine in the marketplace in dollars.

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Within three years, it was the number one seller in units. This was insane: In a segment where the best-selling machines retailed for about a hundred bucks, Dyson's sold for four times that amount, starting at around $400. And still consumers bought them in record numbers. Hoover and the others were left flatfooted and still haven’t truly caught up. And retailers like Walmart and Target carried Dyson at the same price as the fancy specialty stores did. Clearly the marketing and ad push behind Dyson made a difference, but if the machine wasn’t better than the competition in the first place, it would never have achieved the success it has. Even in the land of 11-speed blenders, technological innovation had triumphed. An even more unlikely story is unfolding in the bedding business. If there was ever the ultimate blind item, it has to be the mattress. This is an industry, after all, where the softest product it sells is labeled extra firm and smoke-and-mirror-terms, such as coils and ticking, are hoisted upon an unsuspecting consumer who last shopped for this product a generation ago. For all those generations, the innerspring mattress was the defacto standard product. Yes, there were oddball products like waterbeds and futons, but the innerspring was the choice for most Americans. But then in the late 1990s, a company called Tempur-Pedic started to market a new kind of mattress made of some alien material called viscoelastic. In fact, it was from out of this world, but it got here courtesy of NASA, which had developed the material as a cushioning for its astronauts. Like a whole host of other things from GPS systems to Tang, the product was adapted to the consumer market and it gradually caught on. Today Tempur-Pedic has joined the traditional Big Three of the mattress business—Serta, Sealy and Simmons— as one of the powerhouses of the industry. And, in fact all three of those bedding giants (not to mention just about everybody else in the business) has its own products featuring viscoelastic, which is more commonly called memory foam by most. Following on the heels of the mattress business, memory foam started turning up in pillows, mattress pads and even bath rugs. They have all been successful. It’s another example of a new technology reinventing product classifications and changing the order of the marketplace. There are no reliable numbers on what

Issue Seven November 2012

kind of market share these types of mattresses have garnered but the fact that everybody has jumped into the field—causing Tempur-Pedic by the way to take a real hit in its stock price the past year —would seem to indicate that memory foam mattresses are now a big part of the business. Dyson and Tempur-Pedic are the poster boys for innovation in the home industry, but sadly there aren’t too many other contenders. Sheet and towel producers have experimented for more than a decade with the so-called performance fibers and fabrics that have had such an impact on the apparel business. These technologies manage moisture, offer heating and cooling properties and can even provide improved wear and care attributes. Some of them have been mildly successful, such as towels that hold their colors better after repeated washings. But others, such as ones that employ precious metal-thread to provide temperature control (yeah, I don’t understand how it works either and I’ve had people spend hours trying to explain it) haven’t really caught on. Fitted sheets are still on the top of the textiles technology food chain it seems. So, what’s the difference here? Clearly, the technology has to be measurable improvement over what else exists. A food-cooking device that heats up your meal in a third the time of a conventional oven is a yes. A sheet that warms you up two degrees, not so much. But perhaps the biggest factor in the marketplace embracing product innovation in the home space is the same thing it is in virtually every consumer product: You’ve got to tell the consumer about it, loudly, clearly and often. You’ve got to market the hell out of the sucker. That’s what Dyson did—has done. It’s not what the Silver Thread Whatever Sheeting Co. has done. Innovation in the home business isn’t easy. Successful innovation is even tougher. But at least it’s easier to make your bed now. That’s something…I guess. Warren Shoulberg is editorial director of several Sandow Media home furnishings business publications and is still trying to finish his next book, Stupid Business.

How Do You Give People What They Want? By Emily Thompson

Consumer Facts from Cotton Incorporated Lifestyle Monitortm willing to wait until the school year had begun in order to snag the best deals. “Our research indicates that year over year, consumers are willing to wait for end-of-season sales to make purchases, rather than paying full price at the beginning of a season,” says Kim Kitchings, Vice President, Corporate Strategy and Program Metrics, Cotton Incorporated. “That behavior held true for back-to-school shopping this year, and was likely influenced as much by habit as by tighter consumer budgets and recordsetting warm weather.”

The Global Recession has left retailers with overstuffed inventories and rapidly declining margins, as cash-strapped consumers pulled back on all but the most necessary of purchases. In response, some retailers have revamped the consumer experience with a variety of strategies, from flashy celebrity endorsements and hefty back-to-school discounts, to new pricing strategies and a more holistic approach to in-store versus online. But are any of these giving consumers what they really want? Leveraging the power of celebrity appeal is a popular tactic that shows no signs of slowing. Ann Taylor recently announced that Kate Hudson will continue to be their spokesperson for the third year running, while H&M recently revealed its continuing partnership with David Beckham.

Despite the prevalence of starpowered promotion, 3% of consumers cite celebrities as being most likely to influence them to purchase new apparel, though 22% say clothing worn by celebrities is still influential in their own clothing choices, according to the Cotton Incorporated Lifestyle Monitor™ Survey. Most say (53%) friends are the most influential source in their purchasing decisions. This year’s back-to-school retail push is another such example of an industry-driven event that did not quite match consumers’ shopping habits. Teen Vogue’s Back to School Saturday on August 11 was designed to bring retailers together in a coordinated effort across the country, with live performances, fashion shows, and special discounts and giveaways, to encourage consumers to get out early and save. Concerned with high prices, though, consumers instead seemed

One retailer’s recent attempt to simplify the bargain hunt was met with confusion and skepticism. JC Penney came under fire earlier this year for its revised promotional pricing structure that offered a threetiered approach of “Daily Deals,” “Month Long Value,” and “Best Price;” as opposed to a series of incremental reductions to artificially inflated prices. Consumers failed to embrace the notion of a “square deal,” which ran counter to the more familiar circle of sales, and the retailer abandoned the strategy six months after it began. “It is no surprise that consumers are above all concerned about price,” says Kitchings. “The challenge to retailers is not just to communicate product value relative to the price tag, but to enhance the overall retail experience as an added value.” JC Penney has since announced it will continue offering free haircuts for children, hoping this added value

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will woo consumers back in store. Meanwhile, Walmart has seized on layaway as a means to ease the pressure its shoppers may be feeling as the holiday season nears. This year, the retailer has brought back layaway ahead of the holiday season, and simplified fees associated with the service. Other chains that have historically offered layaway, including Sears, Kmart, and Toys-R-Us, have rolled it out again as well. That should resonate well with consumers, most of whom are not feeling optimistic about their personal financial situations and are concerned about their future income. Currently, just 37% of U.S. consumers are very or somewhat optimistic about the U.S. economy, up significantly from last year (34%), but still well below pre-recession levels and levels seen in 2007 (45%) and 2006 (47%), according to Monitor data. And only 48% of consumers are very or somewhat optimistic about their own personal financial situation. Meanwhile, nearly eight out of 10 consumers (78%) are very or somewhat concerned about a reduction in their household income. Ultimately, it may be a more holistic approach to retail that works for consumers, merging shopping channels and making it simpler for consumers to save time and money. Some retailers report bringing the

online experience in-store for both efficiency and experiential reasons, according to a recent report in Stylus: “Digital and retail consultants such as Kokley and Lilitab are integrating screens into retail space to further inform customers about products and promotions, and save them time at check out.” This seems to dovetail with consumers’ shopping habits, as now a whopping 48% of consumers say they browse the Internet for clothing on their smartphones, and that percentage jumps to 55% among consumers making $75,000 or more per year. “Smart phones are still primarily being used for informational purposes, to price check, for example,” Kitchings says. “But as the technology gets faster and more efficient, we expect to see the number of consumers actually purchasing items on their smart phone to increase.” It also may enable retailers to tailor the consumer experience without alien-

Issue Seven November 2012

ating online or in-store. Bringing iPads in-store is one mechanism; enabling consumers to shop online but pick up in store, for example, is another. Nordstrom and Sears both offer this option, and other retailers are catching on. “The retail industry is changing,” Kitchings says. “In-store is moving online, and online is moving in-store. Consumers are more informed and more specific in their purchasing needs than they ever have been, but the technology is rapidly advancing to meet those needs. If retailers can provide unique, personalized experiences for their consumers, that may be what moves the needle for them.” 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. The data found in this article, as well as additional relevant information, can be found at CottonLifestyle Monitor.com.

Musings on Business (not) as Usual Boredom Recommended as the Recipe for Creativity Remember being bored as a kid? We were pushed outdoors and told to “go play.” And then what happened? Out of boredom came unspeakable adventures and untold risk. Play took over and cool stuff got created. With our release into nature and our blissful freedom, magic occurred. We built dams, climbed trees, created caves in the woods, and built lemonade stands in the front yard.

Feedback is critical to creatives; none of us lives in a vacuum. At the right time, a trusted listener may be welcome…not as a problem solver (we’re not there yet), but rather, as someone who is invited into our process to listen, see, and ask probing questions. Most likely, this confidante will ultimately be able to see and share the picture, the vision, the new product, or service that once dwelt only in our imagination. He, or she, becomes a safe haven to test ideas and openly discuss the challenges at hand—often while taking long walks.

In this space of “no agenda” lives a highly underrated commodity…our creativity and genius for invention and innovation. When given unstructured space, our playful curiosity begins to experiment, which leads to creative adventures as varied as nature itself.

What really is creativity? Robert Fritz, author of The Path of Least Resistance, defines very clearly the difference between problem solving and creating. Fritz states, “Problem solving is taking action to have something go away. Whereas creating is taking action to have something come into being— the creation. Getting rid of what you don’t want is different from creating what you do want.”

When is the last time you played with an idea, notion, an inkling—without trying to make it into something concrete right then and there? Or looking into the void, where possibility lives; playing simply for the fun of playing; taking a shower just because you feel like it; running for the joy of it, unencumbered; walking in the woods; or driving untethered to our electronic devices. All these experiences open a space for unexpected observations and intuitive insights that show up in our newly quieted minds.

It is the creator who must first birth the child before exposing it to the larger “family.” The job of the successful manager for creatives is to back off and let the process naturally unfold and breathe. This does not mean insensitivity to deadlines. The rules of project management are a given, and creatives are typically self-disciplined, responsible and accountable. The challenge for As creatives, our best work is often structured management is to allow done when we are in our preferred natural creatives to look and act differently state of being left alone. Interrupted with at the process of creating and finding endless questions; people poking into solutions. Our goal-oriented society our projects; or being forced to attend has little experience or tolerance with endless meetings, is not supportive to the creative process. Our cultural sense the creative process. We all know the of urgency, impatience, metrics, and answer to the question, what’s a camel? linear thinking explains why results A horse designed by committee. typically trump the process. Too often, we bypass the creative process Focused and intentional work is possible altogether, and end up with pedestrian when we are left alone. Google was and unimaginative solutions. a pioneer with an in-house incubator program encouraging innovation and A word about brainstorming: some entrepreneurship by giving engineers believe the more creative ideas, the 20% of their time to work independently better. In reality, brainstorming and on their passions. Why don’t more creativity are like oil and water— companies adopt this policy to nurture a toxic cocktail. The creative process their creative talent, enhancing the is NOT brainstorming! Brainstorming intellectual capital of their organizations? is, in fact, far from a supportive strategy for creativity, invention, imagination 12

By Jill Butler

and innovation. Brainstorming generally delivers the lowest common denominator by consensus; the willfulness of the loudest voice in the room; or the alpha power position that the group is afraid to differ with. Brainstorming can be useful in the marketing and sales process, but it must be carefully facilitated in order for all ideas and voices to be heard without interruption or judgment. In lieu of brainstorming, I recommend mind-mapping as the tool for gathering all of the possible ideas. With this tool, there’s a placeholder created to track all of the ideas as they spill and tumble from the group. With mind-mapping, the silly or “stupid” idea often creates the crucial stepping-stone to the ultimate solution. Without the “stupid” idea, the process might have been truncated, thus causing a less innovative result. Recognition of the positive role of creative imagination is slowly coming to be more widely respected. As a result, we are at a crossroads in business with a danger that traditional management does still not fully understand, or have the patience to nurture and allow the creative process to occur. Time for “failure” and learning from failed attempts needs to be built into the timeline and funding of all creative projects. So now, get off your devices, and take a hike! New research studies report that time spent in nature increases performance of creativity by 50% in all age groups. Value yourself and your employees with outdoors play-time. Counterintuitive? You bet! But unstructured play is the incubation lab for breakthrough thinking and innovative solutions. Jill Butler is an author/illustrator, designer, as well as a creativity coach and visionary keynoter. Her most recent creative collaboration was with Human Resources at GE in visually transforming their content for their training manual and support materials for GE Women’s Leadership Practices, a worldwide program. With a database of over 10,000 images created by Butler, and a unique ability both as a designer and facilitator, Based in Chester, Connecticut, Jill Butler… art&design, offers a unique services for creating art and messaging for off-site meetings, conferences and trainings. For more information: www.jillbutler.com, 860.525.5155.

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JC PENNEY: Department Specialty Store? Mall Within a Mall?...Whatever! By Robin Lewis

You say tomato, I say tomahto. And, “…frankly my dear, I don’t give a damn!” You can call Ron Johnson’s visionary reinvention model currently under “construction,” at least the physical store component, whatever you want. He varies the definition himself, attempting to provide a clear snapshot of what defies a clear snapshot. You have to see it, feel it, and be wrapped in the energy of it, which I was fortunate enough to experience recently. Ron Johnson walked me through a “mock-up” of what their stores are going to look like once the reinvention is complete, which at their current rate of progress, he believes,can beat his stated deadline of 2015.

...you can call it whatever you want, because there’s nothing to compare it to. It is a game-Changer. First of all, there is nothing similar in retailing today. It will end up being like an enclosed mini-mall, with 100 to 120 branded specialty shops that they will curate from the roughly 400 they presently have (including private and exclusives), and also new brands they are receptive to, or seeking, from around the world, such as Joe Fresh from Canada. And speaking of fresh, the whole experience is like a breath of fresh air. These branded boutiques, like Giggles, Levi’s, Martha Stewart, Izod, Arizona, the new and exciting JCP brand, Sephora and many others, still under wraps, are designed and merchandised by the brands themselves, so the look, ambiance, aura and the whole DNA of the brand is presented and connects with customers as the brand intends it to. Only the associates will be JC Penney employees. And now hear this. The whole process of selecting associates will be just as is done today by most of the specialty branded retailers. Chico’s,

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A&F and others hire from their loyal customer base. Why? Because those customers love the brand, which reduces the training curve and also enhances their ability to share their “love” with the customers (read: incredible customer relationship building). So, the brands will direct JC Penney as to the types of associates that fit their brand’s DNA. JCP will then hire and train these brand “ambassadors” who will then emotionally connect with the customers. These shops line the 14-foot-wide “streets” of this “mall” called JC Penney. Streets that will have activities going on, tables with iPads to play with over a coffee and pastry from Martha Stewart’s kitchen, and more, all turning the JCP mall into a more exciting place to hang out than the bigger mall they now anchor. And, guess what? When you get people “hanging out,” they not only start telling their friends, “…I’ll meet you ‘on the street,’” then all of them start spending more time shopping the shops, which means they will end up spending more, and they will come back more often. Guys, this is called ramping up on productivity big time. This is why the pricing strategy will ultimately work. And, this is why the financial guys, including William Ackman, can see sugar plums dancing in their heads, projecting $350 a square foot in revenues vs. the current, roughly $135. Is this rocket science? I don’t think so. I may call it visionary, but even Ron Johnson says, “Hey… this is pretty simple.” I say simple in concept, but awesome in execution, which indeed, is Ron Johnson’s uber-challenge. It is beyond a tall order. It’s truly paradigm-changing tough. And “it is a marathon, not a sprint,” as Johnson has said. When you are physically in the middle of one of the streets, facing these branded boutiques; when you see it, feel it, and are wrapped in the huge, crisp, clear and powerful energy of it, you will believe this vision of Ron Johnson’s is coming true. And, you can call it whatever you want, because there’s nothing to compare it to. It is a game-changer.

Shopifying: When Less is More By Grace Ehlers

massively anticipated GQ for Gap Best New Menswear Designers in America Collection, launched in September), is Saturdays Surf NYC. Tucked away in Soho, you might miss their storefront —if not for the immaculately-dressed surf crowd, taking cigarette breaks in front of the sliver of a store (or in the spacious backyard living room deck in the summer). Saturdays gained crucial, initial respect from the NYC surf community for fostering surf culture This new movement also addresses the in New York through their shop that kept emerging customer backlash of having authentic surfing essentials on hand (sex to deal with too much stuff and too many wax, rash guards, used boards), a limited stores that is not only fatiguing, but also line of menswear, and consistently in some cases, devalues choice. From updating their websites daily with surfing the “Shops at Target,” to the shopping conditions for Rockaway, Lincoln, and village model that JC Penney’s Ron Montauk—and Tokyo—beaches. Because Johnson has begun to implement as the of this, surfers gave partial credit to the store’s headline-making new direction, brand for reviving surfing culture in New big brands are starting to think small, York by providing a physical hub in their specialty, and curated. Crosby Street brick-and-mortar store. Owners Josh Rosen, Morgan Collett Here’s a brief review of three independent and Colin Tunstall opened Saturdays New York shops that are catalysts in three years ago based on their experience the shift towards intentional limitation. in wholesale fashion and their passion Each is an epicenter, creating an emotional for surfing. Josh, a former professional connection with customers, often extending snowboarder, says that Saturdays was out of the shop to the beach, the general created for men like them; stylish boardstore, the boudoir and of course, online. ers (skate, snow, surf) who appreciate Customers are loyal, built on the trust the lifestyle and the look. The owners of a shared worldview that each shop were inspired to open Saturdays by offers and to the narrative; the storyline editing what they most loved in their to the shop. Each store is worth looking closets to stock their shops, recreating at as a bellwether of a new emerging retail a 50s and 60s surf aesthetic. According theme of small being big, less leading to Josh, Americans typically define value more, and experience trumping all. by price and accessibility. The Saturdays philosophy is to curate a menswear Possibly the most formidable of the three collection that values passion, authenticity (having just been tapped by Gap for the and craftsmanship. Their philosophy is It may be counterintuitive and even surprising when retailers decide to skew small, but in an era of unlimited accessibility, many big-box brands are looking towards the archetypical “shop” for the next directional shift of retail. In other words, favoring a curated, specialty shop experience as an alternative to the over abundance of choice and lack of personal community a typical retail store offers today.

to focus on what is artisan high quality and honest, both in merchandise and customer service—with no hype. Their original designs are in 120 doors (including Barney’s, Bloomingdale’s and Fred Segal) in major international cities, and according to Josh, “business has been insane.” The combination of the real, online, and boarder-based emotional connections pays off. Online moments capturing the personal thoughts and experiences of high cool-factor icons reinforce the Saturdays surf attitude and worldview. They have launched a magazine, they sell books, and their blog is filled with imagery that reinforces the lifestyle, the passion and the fashion. Revenues have increased substantially over the last two years, especially since word broke of the collaboration with Gap. According to Saturdays PR Director, Sarvie Nasseri," Due to our collaboration with Gap, recent store openings in New York's West Village and two stores in Tokyo, and the re-launch of our e-commerce site, we foresee further growth for the coming year." Saturdays is filled with customers that seek out this hybrid of classic American active wear and Soho style as the brand that the three owners have developed, carefully integrating all platforms (online, in-store and events) that reinforce their personal sense and sensibility. A 10-minute subway ride from Saturdays over the Williamsburg Bridge will bring you to Brook Farm General Store. This shop keeps true to its name, as at first glance it appears to be a traditional general store, but only sells the very best

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of the owner couple’s personal tastes in a carefully selected group of 20 to 30 merchandise categories. This highlycurated collection, housed in a small, pristine space, includes an eclectic mix ranging from stainless steel straws, retro brass bicycle bells, Canadian woolen blankets, artisanal soap, beautifully designed and highly-functional utensils, et al. The shop is a beacon of turnof-the-century Brooklyn domesticity. Owners Christopher and Philippa Winterbourne started Brook Farm four years ago because they lived in the neighborhood and found a real gap in available goods that they had any interest in buying. As a result, they opened a shop filled with a highlypersonal collection, buying only what they loved. They also started their own line, Tourne, including woolen blankets, dishware, and handmade soaps, which is currently their principle focus. Philippa explains “We both have done everything together. Our philosophy is based on integrity, our own personal integrity as well as that of the items we sell. It’s also about the integrity of where it is made, who makes it, who buys it, and how it’s displayed. There is no target customer, homewares are appealing to people of all ages and backgrounds; what they share is our aesthetic.” She adds, “There is a real directional movement today for people wanting to be surrounded by things that are authentic, honest and pure. It’s cyclical, and no doubt gold-plated straws will come back, but we love what’s real.” Everything at Brook Farm is calculated to be intriguing and spare in design, and their blog reflects their personal aesthetic with another highly-curated photo portfolio (shot by Chris) of beautifully designed objects, spaces and places

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from around the world to inspire customers. By taking an age-old tradition of the general store, and filling it with hand-picked, well-designed wares for modern day Brooklynites, Brook Farm attracts customers that depend on it as a roadmap of what constitutes day-to-day essentials and necessary indulgences. Emerging as a contender to Victoria’s Secret, Claire Chambers, founder and CEO of Journelle offers an intimate experience for customers in a lingerie shop that is about beautifully made innerwear. From the French “journellement” which means daily, Journelle reclaims the buying experience of lingerie for women, bringing the focus away from what could be considered occasion-centric product design towards everyday luxury found in everything from a silk romper to a smartly nuanced nightgown. Journelle offers a personal, intimate and edited selection of lingerie that women typically choose for themselves, going so far as to give mainstream exposure to boutique brands such as The Lake & Stars (who later collaborated with Urban Outfitters for a intimates collection), Araks, and the first collection of Ari Dein.

Even the in-store experience gets a makeover with dressing rooms like mini-spa spaces with fluffy terry robes to make it easy to try on lingerie. Complimentary designer chocolates and water are small indulgences that make Journelle light years away from the impersonal, cookiecutter customer experience of any VS. To that extent, personal profiles of the sales staff connect online customers with Journelle in-house role models. Journelle also offers a men’s guide, customer rewards program, events and programs, romantic videos, fashion inspirations, and Q and A’s with designers—everything in their aspirational arsenal to connect emotionally with women. Not only is Journelle reclaiming women’s lingerie buying experience for women, but they are beginning to bridge the gap between low and high lingerie markets, offering a more personalized alternative to the VS store environment and typically bleak lingerie departments in large department stores. Grace Ehlers is a trend forecaster, Gen Y consumer expert and freelance consultant in digital media strategy. She lives in Williamsburg, Brooklyn where she often finds that everyone in the grocery store is under 30.

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Measure Once, Buy Twice Solving the Elusive Male Market By Judith Richardson While it’s no secret that when it comes to the brick-andmortar world of retail apparel, the old rule of “men buy, women shop” is as true today as it has been from the beginning of the retail experience itself. Researchers at Wharton and Toronto’s Verde Group observe that women see in-store shopping as a social opportunity and spend vast amounts of time interacting with sales associates and browsing, while men see it as a tactical chore and are in and out of the store ASAP, and see it as a kind of slow torture. Despite every kind of marketing approach to change the purchasing habits of men and increase the time spent in-store, demographics for the male shopper have seen very little change and remain a point of frustration among retailers. Enter “intelligent shopping”—one company’s solution to the mysterious male shopper and returning some parity back into the sales-to-the-sexes imbalance. Me-Ality by Unique Solutions has quietly and quickly moved digital size matching stations into a growing number of malls across the US and created an impressive array of nearly 100 apparel retailer partnerships. Although the brand retail partners all share a common affiliation with the company, each retailer is aggressively competing for purchase space where men have taken a surprising leadership position: online. Many studies are now available that measure this new shopping behavior. One study conducted by ROI Research Group found that men are more likely to research online sites before making a purchase. Male shoppers will frequently compare products, read reviews, research availability and get store information on social networks to create the confidence needed to create a buy response. Another study provided by ComScore concluded that 70% of men research and buy online as opposed to only 14% buying in-store after researching online.

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Me-Ality

Market Insights from Unique Solutions

With these facts in mind—Me-Ality’s innovation in connecting with the male apparel buyer market is clear. The company’s sizing matching concept provides the missing link for buyers and retailers alike. For men, the free service offers the most critical piece of research possible—finding their specific size for each retailer and a “no-return-necessary” measurement. Equally crucial, the service provides retailers with a direct connection to the male buyer and their online selection of garments. With these new male purchasing insights, as well as a robust array of partnerships, Me-Ality is emerging as a tactical and proven solution for retailers seeking to grow its share of the elusive male market. Introducing a bold new way of creating an almost assured buyersatisfaction experience with custom tailor-like sizing. Me-Ality’s innovative service helps to build new purchasing possibilities for both men and retailers. Delivering a targeted solution to an unmet need is what defines creativity in the m Male shoppers

Male shoppers will frequently compare products, read reviews, research availability and get store imformation on social networks to create the confidence needed to create a buy response.

will frequently compare products, read reviews, research availability and get store information on social networks to create the confidence needed to create a buy response. Marketplace. The sales potential is clear: “measure once, buy twice”. Judith Richardson, as Executive Vice President of Me-Ality by Unique Solutions, brings global strategist experience in creating the corporate culture to make the impossible, possible! Working to ignite vision, performance and aligned action in internal teams, with customers and external teams, she is a strong advocate of living the Me-Ality brand inside and out, as well as a master strategist of performance and quality assurance. Me-Ality’s innovative body scanning technology matchesconsumers to brands, styles and sizes thatfit them best based on their exact body measurements.

The New Age of Discovery The most insightful industry leaders aren’t jumping at every new technology and trend that promises gold.

N E

W S

One commodity retailers never seem to run out of is problems. We’ve seen no shortage of business challenges in recent years, as brickand-mortar retailers have wrestled with overcapacity, flat same-store sales, Internet incursions, and a tepid economic recovery. But amidst all the hand-wringing over the future of retail, it’s instructive to look at (and learn from) those who are managing to thrive: truly forward-looking explorers who are, in many ways, migrating from an old world to a new one, and finding better “trade routes” in retail markets that have become increasingly crowded and hypercompetitive. These merchants are leading the way in what I’ve begun to think of as a new “age of discovery” in retail. Like the explorers of old, today’s smartest retailers aren’t expecting to simply stumble upon better routes to that new world. They are exploiting new and better tools, and new and better ways of navigating. That’s only part of

the story. The most insightful industry leaders aren’t jumping at every new technology and trend that promises gold. Being more strategic, they recognize that discovering new opportunities usually requires being able to see their worlds anew, from a fresh perspective. And to do that, these top managers often need to first change the lenses they use to view their businesses. They pay attention to new and different kinds of data, and use the insights that result from this to make better decisions at every level of their organizations, from the CEO to the part-time associate. No longer focusing obsessively (and exclusively) on product or price, for instance, the savviest among them have begun to look deeply at what I call Customer Engagement—how buyers interact with their brands in their stores. They’re examining metrics such as store visits and drilling down on measures of staff productivity to better engage their customers and improve their customers’ experiences. The results? Better decisions. More transactions. Larger transactions. Profits. Take the Casual Male Retail Group, a $400 million men’s clothing retailer with over 400 stores nationwide. During the recession, like most retailers, CMRG saw a drop in store traffic. In the first half of 2009, in fact, overall foot traffic fell by double digits. Comp sales stayed nearly flat, however. “With fewer buyers coming through the door, we doubled down on improving sales productivity and raising our sales conversion rates,”

said COO Dennis Hernreich. “But it’s not like we put one or two fixes in place and that improved store performance across the board. We committed to a process that transformed behavior and outcomes, first in one or two areas, but eventually that process had broad impact and changed how we do business. “It was really about simplifying at first. Retail operations are often extremely complex. There are just so many details and so many small decisions to get right. You can get lost in it all. In our case, we decided to begin by improving a single key metric—return-on customer visits—and it turned out that improvements in that arena alone had powerful and far-reaching effects on same-store sales.” Moreover, instead of looking at store performance in a monolithic way, CMRG also began analyzing where and how each associate contributed to each store’s sales. “This changed not only how we hire and train, but how we schedule and reward our employees,” says Hernreich. CMRG now sets individualized sales goals for each associate, and empowered store teams have taken greater responsibility for individual store sales. Three years after they began prioritizing return-on-visits and incentivizing staff for greater productivity, CMRG is growing again. The company plans to open more than 200 new stores by 2015.

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By Toni Yacobian

Casual Male isn’t alone in seeing a pay-off by looking at their world—and their data—differently. Advanced Auto Parts, a national chain with $6 billion in revenue, is taking its own approach to improving store performance, after examining certain key performance indicators in a new way. Staples, Inc. has embarked on a similar journey. I’ll be sharing insights and highlights from the odysseys of these two industry leaders in future editions of the Robin Report. But for now, here are some key questions to think about in your own organization:

in that journey toward higher store performance and profitability. In our data-drowned industry, it’s worth noting that the real challenge resides not so much in capturing information. There are plenty of tools for that. And, as we know, good data doesn’t necessarily yield good decisions. The task is really a matter of selecting the right data, interpreting it correctly and then knowing what to do with it to optimize performance at every level in the organization. “We saw our stores in a completely new light,” noted Hernreich. “But we wondered if, in the individual stores, our staff

• What kind of customer experience does my brand promise? Deliver? • Are high-sales stores always and necessarily my best-performing stores? • Which stores are making the most of each customer visit? • Am I positioned for success in each store each day?

The answers are not always obvious, and the corollary questions that follow vary from retailer to retailer. But asking the right questions and knowing what to do with the answers represent the first steps

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would actually be able to use those insights to take specific actions. Would they be able to implement changes and then see measurable results?”

“Not only could they do it, they welcomed it,” says Hernreich. “Now we can’t imagine running our business any other way.” I’ll be taking a closer look, in a series of articles, at how other savvy retailers, like Casual Male, are growing in this flat, hot, and crowded world. Though their business challenges vary, and there’s no one-size-fits-all solution, you’ll discover that these industry survivors and thrivers do hold certain traits in common: a willingness to look at their businesses—their products, customers and employees—from a fresh vantage point, and a willingness to chart a new course, that can be pursued consistently, in each store, each day. Toni Yacobian has spent the last 25 years re-defining the intersection of customers, staff, and products to inspire associates, better serve customers, and systematically grow sales. Using her deep foundational knowledge of customer buying triggers, combined with her understanding of business processes and organizational design, Toni created a patented software-based platform. With it, every level from CEO to part-time associate can make better decisions to positively impact customers. Toni is the CEO and Founder of The Yacobian Group, a transformative resource to drive value and profit among leading retailers. She can be reached at tyacobian @yacobian.com

Lululemon: A Cult, a Phenomenon or Just a Great Brand A few years ago, I noticed a woman in Central Park with what I thought was a tag or store sticker on the outside of her pants. “You still have the tag on your pants,” I told her as I passed her on the track. “That is the label, it belongs there!” she explained. This was the first time I noticed the Lululemon brand icon. The logo is featured on pant legs in a way that looks like it was stuck there. An rounded A shape that appears like an upside down U, it is inconspicuous, but, for those in the know, it is the sign of membership in what is one of today’s most powerful brands.

Lululemon is one of the fastest growing companies in the retail and apparel space and is outperforming the industry on almost every level.

Lululemon was founded in 1998 in Vancouver, British Columbia by Chip Wilson, a 20-year veteran of the surf, skate and snowboard business, who noted a need for a more technical and performance-based product after he took, and loved, his first yoga class. Wilson, now a Forbes ranked ‘Yoga Billionaire,’ stepped down from his role as CEO and passed the reins to Christine Day, a former Starbucks executive. Wilson remains Chairman. Together Wilson and Day hold approximately 32% of the company’s outstanding shares. “We like that management has skin in the game,” a Morningstar report noted recently. Lululemon opened its first store in 2000. The company now has 147 stores in North America. Lululemon 20

is one of the fastest growing companies in the retail and apparel space and is outperforming the industry on almost every level. Lululemon management is projecting FY 2012 growth of 25% with same store sales growth at 25% and direct to consumer growth, which accounts for 14% of sales of 179%. Last year the company reached a billion dollars in sales; this year the company is projecting revenue in the range of $1.3 billion. And it holds no debt. Lululemon scores higher than 87% of all companies for which an S&P Report is available. With sales of $1731 per square foot, Lululemon is the fourth highest among retailers, according to RetailSails, behind Apple, $5626; Tiffany, $2974; and Coach, $1820. The company announced second quarter earnings were up 56.6% year over year driven by 25% comp store increases and 30 new store openings. Lululemon pays its employees at near the top of its retail peers and competitors. At $12 per hour, Lululemon’s army of well outfitted, athletically proud, smiling, energetic and friendly associates earn more than the Apple geniuses who make just $11.91 per hour. So, what is the secret sauce? The recipe is simple: a strong brand premise and articulation; somewhat unique product; sharp consumer knowledge and focus; committed, invested management who are supporting a corporate culture with shared values; and, superior execution on all fronts. Easier said than done and Lululemon seems to be doing it. The brand is designed and positioned for the new age. Lululemon understands that today, their core customer—upscale, urban and suburban 30-something women—walk around in exercise clothes much of the day and still want to look

By Jane Singer

good and feel good in what they are wearing, whether they are exercising, practicing yoga, or not. More and more women don’t draw a line between active wear and work wear. And, even if they wear a suit or dress by day, and exercise wear on weekends and after work, they want to look good, feel good and strut their stuff. Lululemon helps them achieve this. First, the clothes fit well and are figure flattering. Next they wear well. They are expensive and have the status appeal of an aspirational brand. The brand is an idea, and a community and lots of women, and men, want in. The brand is built on high-quality, relatively highly-styled and highperformance merchandise suitable for most active sports. Lululemon is the Patagonia of the new century. The brand has a creed, its Manifesto, written by its founder, and evokes, at least in his view, some of the qualities and complexities of a life well lived. “Lululemon Athletica creates components for people to live longer, healthier, and more fun lives. If we can produce products to keep people active and stress-free, we believe the world will become a much better place.” Lululemon positions itself as a community. Nearly all Lululemon stores offer free yoga classes once a week, usually at 10:00 on Sunday morning. Lululemon has ‘ambassadors’—local athletes, instructors, and role models in Lululemon store communities who embody the Lululemon lifestyle. Ambassadors meet regularly with managers to provide feedback on product in exchange for free clothing. Ambassadors also appear as models on the Lululemon website, on posters in their local stores, and volunteer to teach in-store classes. www.TheRobinReport.com

Lululemon promotes its brand, its community and its culture with local events, some quite large in scale. In New York this September, an event entitled, “The Gospel of Sweat” was staged at Riverside Church inviting people to “Come together to build community, engage spirituality, and celebrate fitness!” Lululemon’s corporate vision and culture, along with its supporting, multifacted and largely grass-roots promotional strategy combine to create and nourish a unique and well-defined brand personality. CEO, Christine Day recently said, “While others may try to mimic parts of our business, it is impossible to copy a personality.” The power of the Lululemon, and what has gone into building it from the ground up, can not be underestimated. Surely Lululemon has attracted its share of competitors. Most importantly, Gap’s Athleta, in my opinion, an also-ran, but with the retail and financial clout of Gap behind it. Athleta has done its best to emulate Lululemon in brand positioning, product line and some promotional activity. Athleta product is less expensive than Lululemon, though still pricey: pants at Athleta range from $69 to $98, Lululemon’s are mostly $98, with some biking styles as high as $128. But, Lululemon’s assortment is rational and focused, well presented in store, in packaging and on-line. Lululemon’s “Astro Pant,” a $98 style with a unique banded waist, designed to minimize “muffin top,” has been copied by Calvin Klein. Lululemon is suing for infringing on its design patent. Athleta, very simply, is all over the lot. So, are customers buying a personality or are they buying expensive, somewhat performance related athletic products? The answer to both is yes. Yoga pants, like much of the merchandise that is in the market place today, is distinguished by its brand and what that says about the customer. Note that while Lululemon insists its products are technical, and goes a long way to explain in merchandise tagging and by in store educators the performance criteria of the fiber, none of the fabric is patented. But what does

Issue Seven November 2012

exist is a powerful affiliation between the brand and the customer. The clothes perform. Generally the fit is flattering and comfortable. The shopping experience, both in-store and online, reinforce the value proposition. In store associates are knowledgeable, friendly and helpful. Basics are usually in stock, but fashion items are sold through and not replenished. Credit Suisse’s August equity research report stated, “Demand still running ahead of supply as Lululemon can’t keep product in stock and discounting remains modest.” Credit Suisse tracked the availability of product in store and on line and reported that “only 67% of Lululemon’s product is available online at any given time, 33% sell out rates are high relative to peers… discounting remains modest…significantly below other specialty retailers.” Analysts estimate that Lululemon can reach 300 stores in North America comfortably and maintain their position over the next decade. International expansion is in the works with showrooms in Hong Kong and London. The product line, still focused on active wear including yoga, running, biking and dance, seems to be experimenting with fashion in color and product detail, but, remains intent on its niche: “I want to be really clear,” the CEO recently

stated: “We aren’t shifting the brand to fashion. What we do better than anyone in the world is create such a beautiful athletic product that it can be used for multipurpose.” Of course there are always naysayers and critics. Myself, occasionally, one. I don’t love their tops and cannot really justify the price points. Other consumers I interviewed agreed. One California mom/attorney thought it was too pricey and too trendy: “People say it’s the uniform of the moms at our school (though only among certain people), and not worth the price for workout clothes!” In the end, Lululemon is a collection of pants, tops, jackets, underwear, socks and accessories. And a compelling brand that appeals to a group of customers willing to pay more for a product they can buy somewhere else, but, happily, buy at Lululemon. So far, they are doing all of it well. Stay tuned to see how it continues. Jane Singer is a consumer product marketing consultant specializing in branding and marketing strategy. She began her career at Grey Advertising, has held senior executive positions at BBDO, Bozell Worldwide, and Marc USA, and has worked with clients including Kmart, Neiman-Marcus, Rite Aid Drug Stores, Office Depot, The Sports Authority, Visa, Liz Claiborne, VF Corporation, Gold Toe, and others.

Multichannel Breakthrough: Segmentation Powers Insights into the Empowered Shopper Merchants have long understood that their customers have different shopping and spending patterns— what they buy, how much they spend, what triggers prompt purchases, etc. In order to plan effectively, retailers think in terms of segments of their customer base. The most forwardlooking, seemingly clairvoyant retailers have used intensive segmentation strategies based on comprehensive data and rigorous analysis.

As with all new approaches, the best innovations in the digital marketplace occur not as a result of reinventing the wheel, but by integrating and retooling existing assets. Things become truly exciting for the merchant in the combination of insights derived from spending behavior with insights derived from transaction analysis—in time as well as virtual space. By including the insights from real-time transaction data, behavioral models of different segments of e-shoppers can help to extrapolate that a device that has clicked on these specific links is likely to make purchases in certain market sectors within a specified period of time. At MasterCard, we are creating a breakthrough for merchants in segmentation by bringing our own enormous anonymized data set to bear on the task of identifying shopper segment behaviors. By applying insights on spending behavior to our partners’ online populations using common geo-demographics, our

partners are able to identify online shoppers with a high propensity to spend in a given industry in the next 30 days. It is becoming increasingly clear amid the rapid growth of ecommerce that merchants need to excel at their online strategy, and soon, if they are going to survive (let alone thrive) in a multichannel environment. Most merchants understand that there is not a single best approach to multichannel operations, and that a store’s online presence must be tailored to its overall brand strategy and business model. What is often missed in the rush to market, though, is that just as no two retailers are exactly the same, so are no two shoppers. And in these times of movement toward multichannel ubiquity, the adage “The Customer is King” doesn’t begin to describe the power and control that shoppers have taken of their shopping experience.

What these segmentation schemes have not taken into account, however, is a different metric: customers not only have different purchasing behaviors, they now have different ways of going digital, as well. It’s a timing issue, in part. Some shoppers are still just getting comfortable with ecommerce; some use ecommerce almost exclusively; and there are many shades of grey in between. In economic terms, though, what we have found is that a multi-channel buyer at a specific merchant spends 300% more than an exclusive channel buyer with the merchant. In order to capitalize on that increase, an effective multichannel strategy will need to make space for these different kinds of in-store and online behaviors if it is to have any real impact on sales. That strategy could become more powerful when it’s possible to identify transactions taking place on mobile devices. In addition to multichannel musthaves like foolproof, secure and efficient payment systems and nearinstantaneous shipping and home delivery, successful multichannel merchants will need to rethink and supplement their segmentation www.TheRobinReport.com

Con s Insi umer ght s fr Mas om ter Advi Card sors

strategies by adding a new dimension to existing information. There will be, for example, aspirational shoppers who would not dream of buying something without having a chance to see it up close and personal; there will be others who may only rarely set foot in a store; and some who will try things out first and then wait for an online deal before making a purchase.

to track the sites that the computer subsequently visits. While any site can do an IP address look-up to determine the likely geography, unless you’re Google or a very savvy shopping site neither the cookie nor the website knows very much about the person on the computer—only that this computer looked at a luxury leather goods site.

In the new environment of constant and instantaneous connection, customers expect to be able to shop exactly when and how they want. Savvy marketers can design offers that will appeal to each different behavior, whether it is an emailed invitation to a private in-store trunk sale, an online-only special, or even an app that will allow customers to get targeted promotions when their mobile device signals that they’re near a store. But if those offers are to result in sales, they have to reach the right shoppers—and only the right shoppers, to avoid the very real danger of deal fatigue. How can all these different segments be reached? If you spend any time online, you’ve already seen some version of this: the ads that appear on your screen seem surprisingly in tune (or oddly just off key) with searches you may have recently made or sites you visited. One way this happens is through the use of “cookies.” A cookie is a small packet of data that is placed by a website on a computer, and can be used Issue Seven November 2012

The cookie, though, will be the reason you may be getting ads for handbags while you read the news online. This example is obviously oversimplified. There’s actually a hierarchy of cookies that makes for a more complex picture. The 1st party cookie is the cookie “dropped” by cookies.com on its own users. 3rd party cookies are cookies dropped on cookies.com by data companies that have agreements to tag cookies.com users. 1st party cookies are generated from the website itself, and 3rd party cookies originate on a web site other than the one you’re currently looking at. Using cookies, web sites can track if you’ve put something in a shopping cart, if you’ve abandoned the cart or made the sale, and other browsing behavior data. In addition, companies associate attributes like age, ZIP Code and income to specific cookies over time,

such as behavior and registration data as those metrics become available. Given the trend toward smaller and more defined physical store locations and capacity in the face of wildfire ecommerce growth, merchants absolutely need to understand their customers’ online behavior more accurately than ever before. MasterCard works with partners that maintain large third party online populations, to which MasterCard appends insights regarding spending behaviors, in order to glean an understanding of online behavior. In the new environment of constant and instantaneous connection, customers expect to be able to shop exactly when and how they want. MasterCard’s innovative approach to segmentation and data analysis, coupled with what our partners are doing in the area of e-shoppers, enable the development of powerful multichannel strategies and incisively targeted marketing, so as to identify shopper segments, not individuals, likely to make purchases in a specific category over a specified period of time. Armed with the new generation of browsing and transaction analysis, merchants will be able to provide these shopper segments with the full multichannel shopping experience. Andrew Mantis leads the MasterCard Advisors Information SolutionsMerchant practice. He can be reached at Andrew_Mantis @mastercard.com

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Quotes to Remember

HOW POETIC – TELL IT TO A TYPE “A” PERSON

“ Spend the afternoon. You can't take it with you." Annie Dillard, American author THERE’S A BIG ASSUMPTION IN THIS STATEMENT

“ The fastest way to succeed is to double your failure rate." Thomas J. Watson, American businessman THAT THE ODDS WILL INCREASE IN FAVOR OF YOUR EVENTUALLY HITTING ON A SUCCESS – I’D LIKE TO KNOW HOW MANY FAILURES ONE MUST GO THROUGH OK – THOMAS, NOW I GET IT —WORKS THE SAME WAY WITH MARRIAGES—AND HERE’S MORE ON WEDLOCK

“ By all means, marry. If you get a good wife, you'll become happy; if you get a bad one, you'll become a philosopher.” Socrates

HOW CAN I QUOTE ZSA ZSA GABOR AND GROUCHO MARX ON THE HEELS OF SOCRATES?

“ I have never hated a man enough to give his diamonds back.” Zsa Zsa Gabor “ I was married by a judge. I should have asked for a jury.” Groucho Marx AND THANKS GEORGE — IT’S WHAT PEOPLE SAY ABOUT MY SPEECHES

“ The secret of a good sermon is to have a good beginning and a good ending; and to have the two as close together as possible” George Burns

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