Byline: David Moin

NEW YORK — Retailers are in a deep hole, with business turning from bad to worse after Sept. 11. Yet business could pick up next year, and there’s hope for the long term, even at the much-maligned department store sector.
The keys to a better future: innovate, stay focused, maintain a grip on brands that resonate with consumers, improve service and develop multiple channels of distribution.
Those were some themes emanating from a lively Fashion Group International panel discussion last Wednesday titled “The Real Revolution: Now Everybody’s a Retailer.” “The way to get out of a no-growth situation is through innovation,” advised Arthur Martinez, chairman emeritus, Sears, Roebuck & Co. “Innovation, broadly explored through new-store configurations and products, is the way to arrest the slide,” Martinez said. “You can’t cost-reduce or price yourself to success.”
Martinez cited the Great Indoors division of Sears, which he said he “godfathered,” while still running Sears. The new concept features products and materials for every room of the home, like home textiles, bedding, appliances, flooring and entertainment electronics in a big-box format. Martinez, adding that the most successful retailers are those “very focused on the specific needs of specific customers,” credited Wal-Mart with an “ever-widening circle of product classifications for their target customer.” Elaborating on the innovation theme, he cited Kmart’s Joe Boxer distribution deal and Target’s exclusive on Massimo fashion. “These are great examples of innovation,” he said.
Still, Martinez, noted: “At the moment, I am pessimistic about industry conditions,” due to the country’s rising unemployment and personal bankruptcies, consumer debt not being paid down rapidly, and 401Ks getting “decimated.”
The other panelists were Carl Steidtmann, director of consumer business research, Deloitte Research; Dawn Robertson, president and chief merchandising officer, Federated Direct; Pauline Brown, vice president strategic planning and new business development, The Estee Lauder Cos., and Robin Lewis, vice president of Fairchild Publications. Omar Wasow, executive director of and Internet analyst at NBC, moderated the session.
Surprisingly, Steidtmann, among the industry’s more cynical seers, cited tax reductions, government spending increases and oil price decreases as reasons to expect improved consumer spending next year.
And Federated’s Robertson advised retailers to sit tight and not impose knee-jerk responses to Sept. 11. “It’s too soon for any retailer to develop techniques to get the consumer back to the stores.” She advised “staying focused on the mission and executing superbly.”
Taking the big-picture viewpoint, Lewis outlined the department stores ongoing market share decline, but what’s even worse for them, he said, is that six to eight major brands are “de-linking from department stores and doing it very aggressively.”
For example, more than 50 percent of Ralph Lauren’s revenues are through Lauren’s own retail channels, compared with five years ago, when the figure stood at 35 percent, Lewis said.
“No one is just a retailer, but every one today has to be more than just a manufacturer,” Brown suggested.
Lauder, however, has not gone into retailing to the extent that Lauren has, she noted. When Lauder opens one of its own stores, such as an Origins unit, after the first few months of operation, both the Origins store and the Origins business in a nearby department store benefit.
But it’s not only department stores that are taking hits. As Steidtmann pointed out, it’s the luxury sector feeling as much pain as any, if not more. “It’s much more cyclical,” he said. “It attracts the well-to-do and a wannabe well-to-do customer in goods times. But in bad times, they lose that wannabes, and that’s where they would get their growth.”
However, Brown said Lauder hasn’t experienced a downturn and characterized the Lauder offering as an “affordable luxury.”
In the aftermath of the Sept. 11 catastrophes, should retailers switch to more made-in-America products, to help them lift out of the malaise? Probably not, according to Steidtmann. “There is very little correlation between country of origin and the desire of the consumer to buy that product. Any change might be short-lived.”
Asked if retailers could improve service, Martinez replied: “We won’t solve the problem until our education system gets back to teaching fundamental skills.” Retailers, he said, find themselves as “educators of last resort,” teaching basic mathematics and English as a second language. “One of the great crises of retailing is the absence of reasonably qualified entry-level labor,” he said.