Byline: Robin Lewis
The dressing down of America.
Consumers shopping up, down and across.
Discounters trading up and department stores trading down.
The big getting bigger and fewer of them.
Price deflation or real value?
A domestic ‘pie’ that’s not growing, and what do we know about exporting?
These issues did not disappear in 1994: They continue as prominent features dotting our transforming landscape. “Transforming” is the operative word, since dealing with these critical issues as a part of a moving target is much more difficult than in a settled industry.
And it’s not going to settle in 1995.
The transformation is part of our larger economic transition. The evolution began with the ending of the Industrial Revolution. A growing and vital economy that consumed more than it could produce gave power to the manufacturers. As competition increased, markets matured, population growth slowed and the power shifted to the consumer.
Accordingly, the critical issues we face are a result of consumers’ demands shifting the industry from a production to a marketing orientation.
To accentuate this shift, a propellant called the “chip” was introduced, and is presently hurling us into the next century at speeds we cannot keep up with. We’re now in the “Information Age.” And, just as no one had a crystal ball in the middle of the Industrial Revolution, we have no clue about the end result of this new information revolution.
These are the trappings of consumer power, a transforming world and national economy, and a further understanding of how difficult it will be to hit the moving target of industry change.
Welcome to 1995.
What are some of the questions and perspectives regarding these issues? Is there a road map?
The Omnipotent Consumer
If consumers have ultimate power, where are they headed?
Older, educated, “genderly” equal, discerning, value driven, “cocoonists,” ethnically diverse and growing, fragmented, casual and demanding more and better, for less…
…and where they want it, when they want it, how they want it, faster, and more often.
Go figure. But, do not forget that they are running your business.
Welcome to 1995.
What does one create for this consumer? Casual basics are a safe bet. But what about fashion innovation, newness and excitement? What is fashion, anyway?
Is fashion relevant? Or is it merely relevant to be fashionable among peers?
Fashion does have its own definable relevance among the socially elite. But, except at the rarefied top, where designers still reign, most Americans are attempting to define their own individual idea of fashion.
In fact, fashion is as fashion does. No wonder there’s fashion fuzziness.
What a great opportunity for all of us. Just because consumers are enjoying a more casual lifestyle, it doesn’t mean they don’t want newness, excitement and career and social wardrobes that are “fashionable” in their eyes. Just ask any of them. They’re generally bored with what they see.
How do we make the most of this opportunity? By taking direction from the companies that are most successful. In every case, they run their businesses on three principles:
1) They clearly identify and steadfastly maintain a tight focus on a consumer whose fashion psyche they want and are capable of owning.
2) They define their own image and products in terms of specific benefits to the consumer, as they have been identified.
3) They explicitly and continually refuse to extend or expand their scope beyond their image and what they can effectively manage and deliver.
Many apparel companies that began with a clear consumer focus come to mind. However, they fell victim to the apparel industry syndrome. They achieved the status of “hot” very quickly, experienced explosive growth, indiscriminately seized expansion opportunities and grew ever larger, to awaken one morning seeing fuzzy images, finding that the behemoth they created was out of control. They tried to be all things to all people. They blew up like big balloons. Some even went “pop.” And more will.
So, if we are to learn from the winners and losers, the strategy is clear. Focus! Focus! Focus! On your consumer, on your image and on your products. Do only what you do best. If you do not, you most likely will fail.
Welcome to 1995.
Fuzziness in fashion is mirrored in shopping patterns. We find consumers referring to some discount stores as department stores. After all, they do have departments and, these days, “better” and branded merchandise. Conversely, some department stores have squeezed costs and prices to support their own reorientation, which is to be perceived as providing greater value for less.
I submit that, to the consumer, the definition of a store is less important than how that store can fill a particular need at a particular price at a particular time. For satisfaction, today’s consumer will “surf” from one channel to another and within channels. Store loyalty is fast disappearing, and perhaps for good reason.
Who said one store should own anyone’s total closet and drawer space for a lifetime? It’s a ridiculous notion, and what a bore the person would be that would allow such a thing.
Is this upward, downward, and sideways convergence all going to end in the middle, where all retailers will serve vanilla? It might.
This is a problem because cross-shopping is here to stay. But, it is also an opportunity. The same focus, focus, focus strategy that works for manufacturing will work for retailing. Define your consumer. Define your image. And stick with it. Does it work? In the interest of diplomacy, I won’t name names in our industry. But, we can find proof in Home Depot, Staples, Barnes & Noble and CompUSA, to name a few.
Welcome to 1995.
Consolidation: More is Less
Fear played a heavy role in the consolidating of our industry. As the ubiquitous demand for ever-higher bottom lines grew harder to achieve in our mature and oversaturated marketplace, mergers and acquisitions became the option of choice, the expected result of which was greater efficiency, productivity, revenues and profits.
So, regardless of the genesis, the strategy was sound. Just combine complementary operating and marketing systems to create synergies that result in a powerhouse that’s greater than the sum of its separate entities. In fact, further reduce risk and add muscle by inviting the strongest vendors to form strategic alliances (partnerships).
Then, why do I say “more is less”?
I say this because there is an inherent trap in the strategy of consolidation. Simply, the larger a business becomes, the more difficult it is to focus on its consumer and brand image while maintaining growth and the ability to innovate.
This is also the irony of the consolidation strategy that reduces risk in an industry whose lifeblood thrives on the risk of innovation.
So, I believe more will be less. Bigger and fewer players will result in less innovation, newness and excitement.
It’s already happening. Most shoppers are acutely aware of a sameness in apparel offerings and homogenization of store surroundings.
Will there be an opposite reaction to consolidation?
Will the small, creative apparel entrepreneur or designer, who finds it impossible to break through the matrix screen, meet up with the fashion-hungry consumer in a small, exciting retail store?
I believe so.
I can envision a retail environment with goliaths at one extreme, delivering superior value in basic apparel, and with a reemergence and proliferation of innovators, fragmented and dispersed throughout the country, selling newness and fashion excitement on a more personal, service-oriented basis. This too is happening now. Specialty stores that have identified their niche are thriving.
Consumers do want more for less. But they also demand excitement and innovation.
They want it all.
Welcome to 1995.
Price Deflation or Real Value?
A major deflation in prices has been occurring for the past six months, and it seems to be a trend. Again, the condition is being driven by the consumer in an oversaturated market.
A consumer who understands real value.
A consumer dressing down and expecting to pay lower prices for casual apparel.
A lack of product differentiation and fashion excitement, which places emphasis on price promoting, further accentuated by the buildup in the market of far too much merchandise relative to demand.
It’s a deleterious cycle for an industry that needs margin for innovation and risk taking. But, we cannot turn the clock back. The classic markups of the good old days from fiber to textile to apparel maker to retailer to consumer are gone forever.
However, reasonable pricing and profit margins will emerge at some point, following a purging of goods from the overstuffed market, combined with the new and more productive systems and technologies being adopted by the more enlightened retailers and manufacturers.
Of course, the one big imponderable remains: Can these leading industry companies satisfy real consumer desires for fashionability, newness, quality and style, within these new and efficient systems, or will they offer only the most predictable of basic merchandise? And if so, who provides the innovation the consumer will continue to demand?
Again, I vote for the proliferation of the small, innovative fashion entrepreneurs selling to their small retail counterparts.
Welcome to 1995.
Go West, Young Man — And East and North and South
In the U.S., the consumer is the happy recipient of the overabundance of choice, while the producers and marketers doggedly compete to steal a piece of the pie from each other. And it’s a pie that’s not growing.
Economic maturity and consumer power are driving confusion, cross-shopping, price deflation and consumer consolidation. They have also spawned new home shopping formats, providing more choice to the consumer, but more bloat to the industry.
The obvious alternative to this cutthroat madness is to grow beyond our borders. The new trade agreements are eliminating many of the barriers.
Unfortunately, since we have enjoyed a long period of domestic growth, we have not needed export markets and, therefore, have limited knowledge of the problems, opportunities or strategies required. However, I have no doubt that our product development and marketing expertise are up to the task of abbreviating the learning curve.
Globalization could very well be the leading industry issue during 1995.
Welcome to 1995.
A Road Map
For 1995, we are faced with a host of critical issues, all linked by the interaction between consumer and supplier in an oversaturated, no-growth environment.
To address them, think of this article as a road map. But with “superhighways” only. Each of these issues will be treated in detail throughout the year in a new WWD critical issues series (see related story).
There are, however, four strategies we can reference now because they have direct application to all of the critical issues.
Harvard professor Mary Beth Kantor identified them as imperative to survive and gain competitive advantage in the next century. She calls them the “4-Fs.”
Focus, Fast, Flexible, Friendly.
Focus on what you do best, and eliminate everything else. In this oversupplied world, a “me too” position cannot survive.
“Speed” to market, just-in-time, QR, lead time and cycle time reductions are all buzzwords that signify the importance of Kantor’s “Fast” strategy. Another Harvard guru, Professor Michael Porter, says speed has become crucial to getting ahead internationally.
Flexibility is linked to speed. It drives innovation and makes change possible. The winners have achieved flexibility by adopting the new technologies, such as modular manufacturing, seamless product development and distribution, flattened organizational structures and employee empowerment. The list goes on.
The “Friendly” strategy equates with forming alliances or partnerships that break down the traditional and adversarial buy/sell relationships. After all, they are both after the same consumer. The fundamental agreement in these alliances requires a sharing of risk and information, involving every activity in the supply chain, from product development to marketing, distribution and managing the flow of goods into the store.
Obviously, these four strategies are interdependent. They are also synergistic and can provide superior and sustainable competitive advantage.
In 1995 and beyond, WWD will spend more time examining and applying these strategies.
For now, I will sign off by using the “Friendly” strategy to invite you into a strategic alliance with us. WWD will provide an interconnecting communications link between all segments of our industry that you can use both to hear from and be heard. And, from this most unique position as a communications clearinghouse, we will be able to provide you with all of the news and actionable information you need to help you compete and win.
We look forward to serving you.
Welcome to 1995.