Christmas Eve Holiday Shoppers


It’s a new year and fashion retailers are in deep analysis.

After getting pounded by warm weather, stock market gyrations, diminishing tourism, consumer lethargy and furiously discounting to clear excess inventories, they’re fretting over the impact on fourth-quarter margins. Sales numbers may tally up at expected modest levels or under in some cases, but profits could be a sadder story that comes to light when quarterly results are reported next month.

It’s unanimous that holiday 2015 was tough and served as a wake-up call for how to approach the future and how to compel fickle consumers to buy apparel again. There’s no question that after a difficult year, retailers will make serious adjustments that include the re-examination store fleets, technology initiatives, real estate holdings, product offerings, inventory levels and head-counts.

Here, in broad strokes, key industry figures give recommendations on how to think about the future, cope with the accelerating pace of change, and reshape the business model for better results.

Terry Lundgren, chairman and chief executive officer, Macy’s Inc.: “Department stores must be a place for customers to come and get away from the everyday challenges of their lives, and to be entertained when they shop.”

Stephen M. Ross, chairman and majority owner, The Related Companies: “All retail has hit a wall. Retail is probably the greatest form of entertainment. It has to be a place where people feel they are being entertained. So much buying is done online today, so you go [brick-and-mortar] shopping as a form of entertainment. If you can’t do that well, you are not going to succeed. We are going to have a lot fewer malls. ‘B’ and ‘C’ malls have got to be wondering what’s the alternative use. At places like Hudson Yards or Time Warner Center [both Related developments] we do very well and compete very well with online.”

David Jaffe, ceo, Ascena Retail Group: “For retail, agility is an increasingly important competency. Agility enables a company to create the right product, the optimal inventory levels, and create a customer journey that leverages the convergence between all channels.”

Jerry Storch, ceo of Hudson’s Bay Co.: “It’s important not to confuse transient factors with ongoing long-term trends. The weather, tourism, the strength of the dollar, the weakness in the oil sector — those will all change. Many are confusing those short-term factors with long-term sea changes like the ascendance of the Internet, which is the most important change. That is why we have embraced the Internet and have made the Gilt Groupe acquisition. It reinforces our all-channel presence.”

Britt Beemer, chairman and ceo, America’s Research Group: “The biggest lesson that jumped out to me is something consumers have been saying for the last 10 years, that there is nothing really new to shop for. ‘Nothing new’ has clearly affected retailers. Staff reductions are biting these mall retailers in the butt. Consumers can’t find anyone to ring up their purchases. Nobody realizes how time-short Americans are. Women are complaining that the stores don’t make the effort to put things back in the right order, in the right sizes. That’s career women saying that. Their time is precious.”

Steven B. Tanger, president and ceo, Tanger Factory Outlet Centers Inc.: “The fact remains that consumers still have the weight of the economy on their minds, evidenced by the complex retail spending environment we saw over the holiday season and expect to see in 2016. Looking forward, we will continue to remain focused on delivering a best-in-class collection of brands and designers in friendly and innovative shopping center environments that make shopping for deals enjoyable for our customers. Traffic was strong throughout 2015 at our centers nationwide.”

Walter Loeb, retail analyst: “The 2015 holiday season made the major shifts in consumer buying patterns very clear. Consumers don’t want to own as much. The rise of Internet shopping and growth of off-price retailing are megatrends. Retailers who want to survive will have to respond by restructuring. Retailers have to close stores and reduce the number of senior executives that run organizations. It’s time to cut back. It’s a question of creating a more efficient operation like TJX Cos. has. Near-term sales weakness in apparel and general merchandise is adding to the pressure. Young customers are prioritizing the purchase of new technology over other goods, and the unseasonably warm weather has left many winter coats, boots and sweaters on retailers’ shelves awaiting even deeper markdowns. I believe that many retailers did not anticipate the change in buying patterns and the negative momentum it would bring to their stores. They did not see the rapid shift to online shopping, which often occurs in the middle of the night when customers have ample leisure time. Nor did they see how the demand for new technology would cause a shift away from ready-to-wear apparel. I am worried about the future profitability of many leading retailers. They are now on the defensive against the leading Internet and off-price retailers such as Amazon and TJX.”

Karen Murray, president of VF Sportswear Coalition: “It’s become more than just about running a business or being creative. It used to be easy. You would put products in a store and sell them. Now it’s about innovation, strategy, business development, and really understanding where your business is and where it is going. You have to deal with so much more — the in-store [display], online, fast fashion, technology, all of these things.”

Jack Kleinhenz, chief economist, National Retail Federation: “Last year was puzzling. We won’t be able to write the story until we really see how the dust settles. Consumers are in a good position financially but they are conservative. The Great Recession has impacted people. There’s been a spending shift to services over and above goods. Retailers are going to have look very closely at inventory expectations going forward, how far in advance they need to get inventory and shortening the supply chain in some cases. But that is going to cost something. In some ways, retailers will have to integrate services in their stores, make it a place to shop for a shirt but also where you can get a haircut. They are in an unenviable area, on the front line of the economy.

Lou Amendola, chief merchandising officer, Brooks Brothers: “I don’t think brick-and-mortar will go away, but we’ll have to re-engineer the model. That may be scary for some, but every few years the industry has to change. There’s a new reality among consumers. They only buy when they need something. If they don’t need something, they wait. The new year will bring an adjustment to how we react to this changing environment.”

Kevin McLaughlin, cofounder and creative director, J. McLaughlin: “People are looking for experiences, rather than just a product. People want to learn how to kayak or travel. Those things are competing for the retail dollar.”

Tom Schoenwaelder, chief commercial officer at Doblin, the innovation and design arm of Deloitte LLP: “The retail industry has a propensity to jump on bugaboo bandwagons or issues, like building innovation labs, and lose sight of the bigger picture — improving their core operations and figuring out what they actually are and plan to be for the customers and how to build really unique experience for their customers. They should learn how to integrate and innovate in a multifaceted way. When we studied innovation patterns, we have found companies and industries that focus on unilateral innovation — a single product or channel — end up innovating in ways much easier for competitors to replicate. If you innovate on a broader basis, in a multi-faceted way, you create systems that are much harder to emulate by competitors. Ikea set up a really innovative system 75 years ago — flat-packing the furniture, home assembly, to bring costs [and prices] down. There is actually a good level of quality in their price points. They become anchors in locations not [initially] popular among retailers and ultimately they bring other retailers to the area. They do put the customer through some hardship, forcing you to snake through the showrooms before picking up the purchases and then you’ve got to assemble the stuff at home. But Ikea basically offers things that the customer really wants, and is savvy enough to say we don’t have to be everything to everyone.”

Lynne Coté, ceo of Cabi: “Retailers can sell tons of skirts and sweaters, but if they are not incorporating a relationship and service-based experience that makes their customers’ lives better, then they are just selling ‘stuff,’ and anyone can sell ‘stuff.’ People long for human connection in every area of their lives. Why would retail be any different?”

Thomas McGee, president and ceo, International Council of Shopping Centers: “The big piece of advice I give is, listen to the consumer. What’s really becoming increasingly important to the consumer is experience. They want more experiential offerings. You see the growth of restaurants, entertainment and services. I also say embrace and understand technology, make sure to integrate technology in the shopping experience. I actually think it was a strong shopping season. All of the information from our member surveys indicate a strong holiday. Certainly, there has been a lot of press around the growth of online. It’s a little bit overblown. The reality is as a percentage of total retail sales, it’s not a huge part. It’s has been generally flat at 6 to 8 percent of total retail. It’s not a story of bricks versus clicks. The more interesting is bricks and clicks.”

Rick J. Caruso, founder and ceo, Caruso Affiliated: “The year 2016 will be marked by opening first-to-market retail stores, flagship tenants and launching exclusive pop-up shops across our retail portfolio including The Grove and The Americana at Brand. In addition, we will continue to work alongside our retailers to surpass consumer expectations by adding and enhancing amenities and services such as delivery, in-store pickup, social media interaction and customer service. The ability to create more time for our guests through this service offering will only increase our value.”

Faith Hope Consolo, chairman of The Retail Group of Douglas Elliman Real Estate: “It’s all about instant gratification. It’s about having it now. Same-day deliveries. With online competing with brick-and-mortar, consumers want it to be in their hands before they even finish the order. Same-day delivery is the big push. So are givebacks. Money cards. It’s not just points anymore. Or friends and family. Retailers are giving cash certificates and immediate discounts when you check out. It’s all about the here and now. We are in this ‘need it now’ lifestyle. Everybody is in a big rush. It’s not about personalization. It’s about gratification.”

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