Karin and Stephen Sadove

NEW YORK — Retailing isn’t dead. It’s healthy and retailers are changing, but not fast enough to keep up with consumers.

In a nutshell, that was the assessment from Stephen Sadove, principal of Stephen Sadove & Associates, founding partner of JW Levin Management Partners and retired chairman and chief executive officer of Saks Inc.

On Tuesday, he also donned the hat of industry pundit, commenting on everything from the state of retailing to listing those retailers he believes are changing for the better, to what consumers want, at a meeting of the Retail Marketing Society at the Fashion Institute of Technology here.

“Retailers think they are changing fast, yet not anywhere nearly as quickly as the consumer,” Sadove said. “There are some companies changing really quickly. Most think they are, but they are not. It’s not easy. Try to change very quickly and then you pull a Ron Johnson and you push J.C. Penney off a cliff.”

Sadove’s commentary on retailing was prompted by Robin Lewis, ceo of the The Robin Report who moderated the discussion, and opened up the conversation by giving a dire assessment of retail. “The entire big box and department store sector has been in a steady revenue decline for the past 10 years, from about $2.5 trillion in revenues in 2006 to down to $1.5 trillion today and it is projected at $1.2 trillion by 2020,” said Lewis. “We are entering our third year of consecutive month-over-month traffic declines. Department store apparel sales have declined by 7 percent over the last ten years, while online sales of apparel have increased 15 percent.”

Lewis also said Amazon’s U.S. share of apparel is projected to increase from 11 percent to 19 percent in 2020, eclipsing Macy’s as the nation’s largest apparel retailer, and hitting $52 billion in apparel sales by then.

“Not a pretty picture would be an understatement,” Lewis said, noting “massive store closings and an expected deluge of bankruptcies.”

Robin Lewis and Stephen Sadove at the Retail Marketing Society. 

“If you listen to Robin’s perspective, you say, ‘Oh my gosh, retail is dead.’ That no one is shopping. The reality is retailing is very healthy,” Sadove countered. “Retailing in the first five months of this year is up 4 to 5 percent; retail was up last year around 4 percent. It’s not that the consumer isn’t shopping. It’s that they are shopping differently. Our definition of retail isn’t necessarily where the consumer is thinking. If you look at travel, airlines, hotels, restaurants, home improvement, they are all growing and doing very nicely. Even apparel is flattish. It’s not growing as quickly as it had been.

“Everything is changing so quickly, the Millennial customer is different than others. Everyone wants experiences, the Millennial customer is more into sharing — the rise of Rent the Runways, the Airbnbs, the Ubers of the world. The traditional retailer has to change.”

He said the biggest issue confronting retailers is the proposed border tax — “a trillion-dollar tax on imported goods, existential in terms of a threat. There is going to be a lot of debate…A lot of attention needs to be placed on this one.”

Shifting to consumers, Sadove said they think about three things. “They want value. They want convenience. They want trust.”

If you asked consumers which retailers deliver on all that, they would likely list Amazon, Costco, T.J. Maxx, Ross Stores and Burlington Stores, Sadove said.

He said he wasn’t certain you’d get the same response on department stores. “I am not going to name any.”

He also gave Wal-Mart a good review, stating, “Wal-Mart is a company that is changing. I sat in a Wal-Mart presentation three years ago and I was yawning.” But two weeks ago, he witnessed a chief merchandising officer presentation. “I said, ‘wow.’ That is a company that is changing the way the world is evolving. The Jet.com acquisition had nothing to do with financials. It had to do with helping culture change…I think Wal-Mart is moving at a pace that is so much faster than they were before. They are making people stand up and notice and I think the consumer is starting to see it.”

He characterized Wal-Mart’s buy-online-pick-up-in-stores program as “a real way to start to deal with last mile delivery, the economics. With an Internet business largely based on low-priced units, shipping costs are a major issue. It’s hard to make the economics work. Give [shoppers] a 5 percent savings with pick up in store, that’s a way to make it work.” And they could also possibly buy more while at the store.

Experience, he said, means different things to different retailers. As far as he’s concerned, “I love it when you go to a mall and there’s a ski slope, an aquarium, and you bring excitement. Food is still an excitement.” At Brookfield Place in lower Manhattan, the food experience is “fantastic.” Sadove also cited the wellness pop-up shop just opened on the second floor of the Saks Fifth Avenue flagship in Manhattan. “They have a whole floor of wellness, a gym, massage therapy.”

Among other retailers and brands getting high marks from Sadove were:

  • Story, the store in Manhattan that constantly changes the categories of merchandise it sells. “It’s one little store that’s an experience.”
  • Best Buy for reinventing with boutique concession shops.
  • Sephora and Ulta have done “fantastically well.”
  • Nordstrom for being “a great, forward-thinking retailer” making good investments in technology, though having a tough time, as are many other retailers.
  • Home Depot for doing a great job of integrating services with the products it sells.
  • Coach for “a great job of trying to reinvent itself.”

Sadove also cited Louis Vuitton and Gucci as “hot” among younger customers, even Millennials, and said retailers and brands should be aware that young people “want to affiliate with sustainability, social responsibility, something that is a do good kind of thing.”

“There is a normal life cycle on brands,” Sadove said. “They have to continue to reinvent. It’s hard…Fundamentally you’ve got to really have product people want and then you got to have the environment that they want it in. In the end, it’s differentiated product.”

More From WWD:

Oscar de la Renta Takes Its Fall Collection to Cipriani

Barack Obama Discusses Climate Change and Future Plans in Milan

John Legend, Valerie Jarrett Talk Criminal Justice Reform

load comments
blog comments powered by Disqus