PANELIST PAINTS GLOOMY SCENE FOR 2000 RETAIL
Byline: David Moin
NEW YORK — Though consumer spending is holding firm, the year ahead looks rough for retailers and filled with paradox: watch for more consolidations amid accelerated overstoring, inventory reductions as B-to-B Internet links grow, and declining credit ratings.
That bleak outlook came from Margaret Cannella, senior retail analyst and managing director, Chase Manhattan Bank, during the 11th annual Herbert Blueweiss Key Issues Seminar on Thursday at the Fashion Institute of Technology.
“Overstoring hasn’t gone away at all,” she said. “Retailers are starting to build a lot of new stores in a very different way.” This year will mark a “relatively dramatic upturn” in openings, with Home Depot, Lowe’s, Wal-Mart and Target accounting for 50 percent of the expansion, she said.
Ironically, the retail surge strikes amid “dismal productivity” overall. The industry suffers from “chronic overcapacity — and it’s probably going to get worse in this Internet age.” Cannella put a somber spin on a provocative forum for industry leaders. It focused on change, the Internet, brand-building and retailing’s future and featured Daymond John, ceo of FuBu; Cecil Kearse, Kmart’s senior vice president and general merchandise manager, home; Bill Bass, senior vice president, e-commerce and international, Lands’ End; Nicholas Graham, Joe Boxer ceo, and Jim Tenny, partner in Della Femina. Bloomingdale’s chairman and ceo Michael Gould moderated the panel discussion, and consultant Emanuel Weintraub was seminar chairman.
According to Cannella, Alan Greenspan, chairman of the Federal Reserve, “is not going to bring good news to the retail industry.” She predicted one or two more interest rate hikes by the third quarter, but none in the second half since the Fed historically leaves rates alone during an election year. “He is trying to drive down equity prices over the course of the year.”
Forecasting a new wave of consolidations in the next year or two, she said, “May or Federated could be quite interested in picking up a number of other players,” though there is a limited field to choose from. “Consolidations are a very risky business. There are as many failures as successes.”
The message from Daymond John of FuBu, a $350 million wholesaler founded in 1992, was that achieving brand recognition does not require huge marketing expenditures. He said that when his company was new and not making money, he designed T-shirts and tie-top hats in his apartment and put them on rap artists, but took back the clothes.
Kearse talked up Kmart Corp., saying the chain has moved from a turnaround to a growth mode, has 1 million subscribers on its Bluelight.com Web site, expects three million after Bluelight’s first anniversary in July, and in its exclusive Martha Stewart Everyday home collection will surpass $1 billion in sales this year.
Lands’ End Bass said his company posted $138 million in Internet sales last year, compared with $61 million in 1998, and noted the Internet business has been profitable since at least 1998. “This past year, it was more profitable than our catalog,” he said. The average Internet order is $95 to $100, while the average catalog order is $100 to $105, he said. That’s because with the Internet, “there are lots of first-time shoppers. Typically, they test us.”
Bass gave advice for creating e-commerce sites: make them fast, with ordering ability within three clicks, and limit the personal information requested. “Computers are scary things to people,” he said. “At Lands’ End, we have made a concerted effort to preserve everyone’s privacy.” While the Internet is perceived as a “great treasure trove” of information, don’t get overzealous in soliciting information for marketing purposes. “Marketing people — you have to stop them.”
He described the Internet as an efficient selling channel, with e-mail a powerful tool. However, the Internet is not a great medium for browsing, he said, noting that portals are unimportant. “They’re just a small part of our marketing strategy. Don’t get a lot of angst if you are not on AOL. It doesn’t really matter.” He also downplayed advertising on the Internet.
“How many people remember any banner ad on the Internet?” he asked rhetorically. “Keep your money in your pocket.”