So who won and who lost?
No, it isn’t the New Year’s bowl games. Instead, the key question after holiday 2010 is which retailers gained in the bruising battle for market share and which ones lagged. And the fight is only going to get more intense in 2011.
“The pie is not growing. It shrank, and now it’s just regaining its original shape, recovering to 2007 levels,” said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates. “Luxury is leading the way, department stores are stabilizing and improving, the specialty area is where you see some trade-offs and discounting as a whole is seeing some improvement. It’s still a zero-sum game, and any increase is going to be a hard-fought battle. The winners in 2011 will be those that are multichannel, aggressive globally and focus on merchandise innovation.”
They also are likely to be the stores that scored big this holiday. December sales numbers, to be reported by many major retailers on Thursday, should bear this out, though last week’s blizzard severely impacted business for two days.
“If you are a retailer and haven’t made money this season, you are in the wrong industry,” said Craig R. Johnson, president of Customer Growth Partners. “This will turn out to be the best Christmas since 2005 at least, if not 1999.”
“Positive results in midtier and higher-end department stores continued into December. The number-one factor is private brands,” giving consumers something unique and a reason to shop, observed David L. Bassuk, managing director and head of global retail practice at AlixPartners LLP. He believes private brands such as Simply Vera Vera Wang at Kohl’s and Macy’s INC, Material Girl and Sean John labels were factors. For designer stores and higher-end chains such as Neiman Marcus, Saks Fifth Avenue and Nordstrom, “it couldn’t have been a better time for the stock market to be doing so well,” Bassuk added. “Traffic has been very strong up and down Madison Avenue and Fifth Avenue.”
Weeden & Co. analyst Amy Noblin said, “We are in the midst of a recovery, albeit at a slower pace than what we are accustomed to in a cycle. I don’t think we’re just seeing a holiday splurge. There were good trends in Q1, back-to-school and now holiday,” despite high unemployment. Before the first quarter, “a far greater number of people were spending as if they were unemployed. It was not in vogue to shop. But people got confident, more secure in their jobs or income level, and loosened up their purse strings. It became a little more OK to shop. We have seen a more pronounced pickup on the aspirational and luxury ends, while overall the lower end has continued to struggle. People are cautious in how they spend. It’s definitely not back to prerecession levels.”
December could have been a great month or just OK, hampered by the blizzard, according to Marshal Cohen, chief industry analyst for NPD Group. “Consumers stepped up to buy what I call ‘necessary luxuries,’ things like upgrading to a newer cell phone to get faster service, adding surround sound to your flat screen TV, or buying small handbags to complement the collection of big bags bought prior to the recession,” he said.
Early projections on the holiday season overall indicate Apple Retail taking the gold. Apple has been fueled by the iPad, which, next to gift cards and the Xbox Kinect, may have been the single hottest holiday item. Strong service, steady store openings, fast checkouts with associates utilizing hand-held devices so customers need not wait on lines, iTunes and Beatles downloads, and Apple’s hip brand image all contributed.
“Apple and Steve Jobs have become huge style leaders,” Johnson said. “If you realize that fashion is not about fabric but about newness, then you’ll understand why Apple — more so than the Ralph Laurens or Donna Karans — is America’s leading style icon for the 21st century.”
Others that led the pack during holiday 2010 include:
Forever 21: The store scored big, particularly in Times Square and at other recently opened flagships, which have far greater space than older units and are filled with improved product and visual displays. Even as it rapidly expands, Forever 21 has maintained its appeal for trendy fast fashion, low prices and color, and its sharp read on what teens want and the price they’ll pay for it.
Target: After some down trends, the nation’s “chic discounter” has come back this season as more price competitive, taking share from Wal-Mart and resonating with shoppers with a deal giving an automatic 5 percent discount on anything purchased with the Target credit card.
Amazon: The company is excelling in the fastest-growing shopping channel, experiencing outsize growth and seemingly stealing share from bookstores and electronics chains as more consumers gravitate online to buy electronics.
Zumiez: The chain is reporting sky-high comparable store gains and has been putting out strong products, including cool sweatshirts and excellent fleece, though it’s a relatively small specialty business.
Coach: The aspirational customer came back to shop, and Coach capitalized with fresh styles. It’s been riding the accessories wave, along with Gucci and Louis Vuitton. “Coach had difficulty in their regular price stores, but this season, all cylinders have been firing. There has been growth at outlets and in international. China has been a home run, with the growing middle class.”
HH Gregg: The emerging hard goods chains is taking share from the much bigger Best Buy, and rapidly adding locations by taking over former Circuit City and Linens ‘n’ Things sites. Appliance offerings give Gregg a big edge, with the home improvement market turning around. Consumers continue to restrain from major kitchen renovations but are back buying refrigerators and stoves.
Macy’s and Nordstrom: Though the two chains compete head-to-head in many locations, department stores in general have staged a comeback in recent years. At Macy’s, exclusive brands and a steady program of marketing and promotions to push the value component has created buzz around the business. At Nordstrom, it’s all about execution. The Seattle-based chain knows how to buy and sell merchandise, keep inventories lean and keep newness flowing in. Its reputation in shoes, among the top categories of the year industrywide, and a pricing structure that spans Macy’s to Neiman’s, are also major success factors.
Anthropologie: Exciting and seamless store and online experiences and eclectic, fun merchandising have established this brand as a destination point for its core customers.
Lululemon: The Vancouver, Canada-based chain continues to generate great active-oriented product, sell full price, and appeal to aspirational customers. Stores connect with community-based programs.
During the holiday season, a number of retailers showed they were squarely on a recovery course, including:
Abercrombie & Fitch: The brand is coming back, reconnecting with customers in terms of products, promotions, social networking and e-commerce, after struggling for a long time with declining comparable store sales, stale product and pricing that wasn’t competitive. It’s now priced more appropriately with targeted promotions, there’s a wider range of fashion and the company is projecting a proactive, competitive image. The store has been marking down wear-now items, which wasn’t done in the past, but raising some questions on fourth-quarter margins. In addition, the international expansion is working, particularly with big-city flagships where more goods are sold at full price.
Aéropostale: The youth chain had been struggling to keep up its comps after being on fire for so long and to maintain a grip on the fickle junior market. Some see the product as over logo-ed, but a lot is cute and dirt cheap and sufficient to draw large crowds in the 14-to-17-year-old range. The chain appears to have passed the speed bump it hit earlier last year. Typically, the teen sector is the first in and first out of a recession.
Chico’s: The Baby Boomer chain is rebounding. New leadership is reworking the fashion and fit, boosting Internet operations and chucking a lot of the glitz.
Williams-Sonoma, Pottery Barn and Bed Bath & Beyond: All were said to have chalked up good seasons, benefitting from consumers spending again on tabletop and furniture.
Among those retailers for whom the holiday glitter seemed lacking this season were:
Wal-Mart: The gorilla lost ground this year to Target, department and dollar stores, and fell short on the merchandising. Apparel continues to be a problem, and some stock-outs on toys were noticed.
Best Buy: Bitten by Apple and the Internet, Best Buy has seen some slowing of sales and price deflation on flat-screen televisions eating into margins. In addition, 3-D television has yet to take off. Best Buy’s Geek Squad remains a competitive advantage, though while the service is great, the store aura lacks a contemporary appeal à la Apple.
Hot Topic: Too much inventory.
Gap Inc.: The chain has been starting to see some increased traffic, and it surprised the competition with a buy-one, get-one-at-60-percent-off promotion while other specialty chains rolled out “bogos” at 50 percent off. The Gap North America division had a more interesting presentation than last year’s at holiday time, though it’s still weighted to denim and black pants and doesn’t generate enough interest in tops yet, but the team is working on the shortfall.
J. Crew: After riding high for several seasons, some fashion misses and a stepped-up promotional stance eroded some of the chain’s luster. However, the company remains fundamentally sound, with potential for global growth and expansion of newer concepts such as Madewell, Crewcuts and J. Crew bridal. It’s going private, via a $3 billion deal with Texas Pacific Group and Leonard Green.
Talbots: The business missed its numbers last quarter and could be losing share in the misses sector, which generally is considered crowded and intensely competitive, even as it represents the biggest piece of the women’s apparel pie. Talbots and other misses chains have elevated their fashion over the past two years, though there’s been much me-too-ing. Some fallout seems inevitable.
Sears: The lumbering chain continues to lose market share and struggle to overcome the imbalance between hard goods and the weaker softer side of the business. Not enough capital has been injected into store renovations, though Sears has stepped up efforts to attract exclusive fashion lines.
Pacific Sunwear: New leadership needs more time to impact the business and reposition it.