In recession, major international chains shift strategy
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One of the biggest changes is greater personalisation and regionalisation of merchandise
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— PHOTO: AFP
SEIZING THE MOMENT: A Home Depot store in Brooklyn borough, New York City.
Shopping as we know it is on the brink of major change.
Hammered by the recession, some of the nation’s biggest retailers are seizing the moment to reinvent their business strategies. And the impact will mean changes in the merchandise on their shelves as well as subtler alterations, like how many pa
ntyhose to keep in stock.
High-end stores
High-end stores like Neiman Marcus, Saks and Coach will offer more mid-priced merchandise. Many chains, including Wal-Mart, will carry less inventory and fewer brands.
The likes of Sears and J.C. Penney will put self-service computers in stores so customers can browse collections or buy out-of-stock items. And retailers of all stripes will offer more exclusive merchandise and more attentive customer service.
One of the biggest changes consumers are likely to see is greater personalisation and regionalisation of merchandise.
An initiative known as “My Macy’s” requires the retailer’s merchandisers and other planners to go into stores each week to learn from the sales staff, who keep logs at the cash registers, what shoppers are requesting, snapping up or griping about.
For instance, when strapless and bare-shouldered dresses were selling well everywhere except in Salt Lake City and Pittsburgh, Macy’s employees in those stores knew the problem was that their customers wanted more modest dresses. So they passed that information on to the merchandisers. Out went the strapless dresses; in came dresses with cap sleeves. And sales went from lacklustre to robust. “I think what Macy’s is embarking on is perhaps the largest transformation in our company in a couple of decades,” said Terry J. Lundgren, President and Chief Executive.
The Macy’s change is just one example of a wide variety of initiatives retailers are pursuing as they struggle to cope with an economy where sales are lower than they were just a few years ago.
At high-end stores, the era of ever-escalating prices on luxury goods appears to be over. In the future, consumers will still be able to buy chic brand names, but at a wider range of prices.
“Our customer loves our brands,” said Stephen I. Sadove, Chairman and Chief Executive of Saks. “They don’t want to trade down to lower brands. But they want more of a range in price within the brands that they love”.
And that is what retailers intend to give them. Burton M. Tansky, President and Chief Executive of Neiman Marcus Group, told investors on a conference call last week that “we’re working with the designers to try and ease a portion of their collections into a new price range”.
Prices will also be lower at some “affordable luxury” chains, like Coach, which is increasing the proportion of handbags it sells for less than $300. About 50 per cent of the company’s handbags will cost $200-300, in contrast to about 30 per cent of handbags last year.
Another change is that consumers will have fewer brands from which to choose. Wal-Mart, Target, Home Depot, and PetSmart are just a few of the chains winnowing their brands. As Home Depot’s Executive Vice-President for merchandising, Craig Menear, put it: consumers are “time-starved” and “looking for simplification in the entire shopping experience”.
That may delight minimalists, because it will be easier to find items on the shelves. But it also limits choice.
Potential drawback
Another potential drawback for consumers is that stores may run out of stock more quickly than in the past because, as Lundgren of Macy’s explained, “retailers learned that you can’t get out of the merchandise that you ordered months before”.
“Instead,” he said, “you’re more likely to see retailers ordering fewer of each individual size and taking that risk that they’ll sell out and not capture every sale, rather than the risk of having too much inventory left over to mark down”.
Another trend is on the horizon: seasonal transitions for apparel will probably have shorter lead times. With strapped consumers buying only what they need when they need it, it has occurred to retailers that selling swimsuits to New Yorkers in early March is not necessarily a winning strategy.
And so chains are beginning to work with suppliers to shorten the time between ordering and delivering merchandise.
Consumers will also see even more of the exclusive collaborations between retailers and prominent designers that are so prevalent today. That will help distinguish stores as well as avoid price wars because the same items will not be sold at multiple chains.
Yet another change will be the obliteration of any remaining divide between online and in-store shopping.
In Sears stores, “appliance research centres” with computers are enabling customers to compare local competitors’ prices. (If Sears does not offer the best price, it will match the lowest offer and 10 per cent of the difference.)
Four J.C. Penney stores in Dallas are testing “FindMore” machines the size of arcade games, letting customers see every item J.C. Penney sells and find out if the item they want is in the store or online.
Shopping by cell phone will also become widespread.
“Everything we are developing is with a mind-set that it’s going to be running on a handset,” said J.C. Penney’s chief information officer, Thomas M. Nealon. Despite all the new technology, consumers will be getting more attention from sales staff.
Middle-market chains
More middle-market chains are striving for Nordstrom-quality service to win customers. Even Home Depot has adopted its “most extensive customer service training ever,” its Chairman and Chief Executive, Frank Blake, told investors and retailing analysts last week.
Of course, luxury chains have always featured a high level of attentiveness. But the chains say that in this economy, customers have heightened expectations.
Saks, for one, has invested tens of millions of dollars in the last year on software that provides its sales staff easy access to information about client purchases and preferences, so that a returning customer might be greeted by a sales representative who recalls the shopper’s suit size and penchant for Christian Louboutin heels.
Economists and analysts forecast that it will take up to 10 years to return to 2007 levels of consumer spending, which makes now a good time for retailers to re-imagine the future. — © 2009 The New York Times News Service
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