The glass is definitely half full.
That was the sentiment at least during last week’s Global Retailing Conference in Tucson, Ariz., put on annually by the University of Arizona’s Terry J. Lundgren Center for Retailing. The theme, amid all the flashy talk of virtual reality and what to do about Millennials and Generation Z, is that retail reinvention isn’t about trends as much as it is knowing and understanding the customer. It was apt considering this year’s conference theme of “Retail is In.”
“Consumers are just more informed when they’re shopping because they start their research on their phone and then they decide where they’re going to shop,” said Macy’s Inc. chief executive officer and chairman Terry J. Lundgren in an interview with WWD. “In the old days they used to go to the mall and look around and go to eight stores. Now they go to the mall informed with where they want to shop and what they want to buy and who they want to buy it from….There will be less brick-and-mortar stores [in the future] but the majority of the business will still be done in brick-and-mortar stores.”
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It remains to be seen whether, if real estate portfolio’s shrink across the broader industry, the future lies in hyperlocal or regional chains as opposed to national or international behemoths.
“I don’t know,” Lundgren said on the subject. “It’s hard to say. Off-price still are opening a lot of stores. They believe that brick-and-mortar is the answer for them and they’re opening hundreds of stores. So it just depends on the type of retailer before you can answer that question.”
As some in the industry ponder real estate, many more are focused on the digital conversation.
“There’s such a focus on technology and there hasn’t been a step back,” said Piers Fawkes, founder and president of research firm PSFK.
Walgreen’s underwent a major initiative going back to the basics of customer service, taking a hard look at how it was treating its customers.
“Customers are changing and they’re wanting more faster,” said Richard M. Ashworth, president of pharmacy and retail operations for Walgreen Co.
That required changes in processes. “We were not consistent in the way we asked employees to engage customers,” Ashworth said.
For designers, addressing the on-demand expectation has been around the buy-now-wear-now mantra. “Runway shows and presentations have been so hugely about buzz and it doesn’t work that way now,” said Alice + Olivia’s Stacey Bendet, who presented her spring collection at a fashion show in Los Angeles just days before speaking at the conference. “I think our industry in general has been really behind and slow to embrace what we can do with technology.”
From the runway to retail aisles, it’s about looking at the shopper experience and the different paths to purchase from the lens of shoppers, PSFK’s Fawkes went on to say, to try and figure out “how do we dance with them along the way?”
Fawkes’ talk during the conference focused on case studies ranging from a Southeast Asian beauty brand called Laneige that lets consumers experiment with what different cosmetics would look like on themselves before actually committing to buying or True Religion’s Beverly Center store that’s trialing how much more effective sales associates wearing Apple watches can be for customers. Virtual reality, which Ikea is experimenting with, is another option Fawkes pointed out, although caution should be applied.
“It’s such an early market. Hardware is still developing. Platforms are still developing. Use cases are still developing,” said serial entrepreneur and Marxent cofounder and ceo Beck Besecker.
Marxent, which makes virtual reality apps, partnered with Lowe’s on its Holoroom virtual reality experience, with Besecker giving a talk primarily focused on future-proofing technology in light of the rapid rate of change and evolution taking place within tech. “Over the last five years, we’ve made a lot of mistakes,” Besecker said of his company’s own journey navigating changes in technology.
“While digital is a tremendous growth driver of our business…we’re also always going to focus on what makes the biggest difference for our consumers and that’s our front-line athletes and our team members in stores,” said Christiana Shi, president of direct-to-consumer for Nike Inc.
Nike’s approach is about marrying tech, or its online business, with the stores, in which the company sees its site as a point of connection with customers and Nike stores as a “way to catalyze the market,” Shi said.
The Beaverton, Ore.-based firm last year said it’s targeting $50 billion in revenue by the end of its fiscal year 2020, ending in May, which involves site performance improvements and broadening assortments on the direct-to-consumer side, while also aggressively expanding its e-commerce business. Nike launched its site in Mexico, Chile, Saudi Arabia, Israel and other markets in the past three months.
Women’s only stores, in places such as Newport Beach, Calif., are helping grow that portion of the business with more personalized services such as bra fittings and tailoring. Nike Community Stores, the first in California having opened in East Los Angeles last year, is another way the company’s solidifying its brand at a hyperlocal level.
“We’re confident about hitting our growth targets,” Shi said.
Carlos Alberini, chairman and ceo of Lucky Brand, is also confident of the potential in his company’s opportunity for growth amid plans to build the brand into a premium lifestyle company beyond simply denim in the eyes of consumers.
The company’s rolled out a number of new of initiatives since its 2014, $225 million acquisition by Los Angeles private equity firm Leonard Green & Partners following several years languishing and falling a bit out of favor among consumers. Improvements have been seen via expansion into new categories such as outerwear and a new concept store design that weaves in technology and the full breadth of merchandise as it aims for $1 billion in annual sales in five years.
“We started with the customer,” Alberini said. “With those findings, we went to the product and evolved it.”
For off-price retailer Tuesday Morning, which also recently embarked on a turnaround, fixing the business meant getting back to its original customer following a rough set of years between 2008 and 2013 when the company underwent “massive, massive change in the business and not for the better,” said president and chief operating officer Melissa Phillips. Former management, during those years went forward with an aggressive expansion plan, inking short-term lease deals — in many cases month-to-month — while adding apparel, shoes and intimates. The company, during that five-year period ballooned by 100 stores, yet dropped $100 million in revenue.
In 2014, an activist investor ushered in a new board and new management, including turnaround specialist Phillips.
“In a turnaround everything is low-hanging fruit and in a turnaround everything’s just on the ground,” Phillips said. “Retail’s not brain surgery. We did not go to school to be brain surgeons. Do not overthink it. The fundamental principles of what makes a retailer successful hasn’t changed.”
Tuesday Morning cleaned up its stores and got to better know its loyal customers, the ones that stuck with it even during its darker days. Buyers changed their strategy from very narrow and deep to broad and shallow. There are now visual merchandising standards and the company’s taking action on 60 to 80 stores annually in the form of relocations, expansions, new stores and closures. It’s also focusing on the 40- to 50-year-old demographic rather than running for Millennials, like much of the industry.
As the broader retail industry ponders its future, a key question — particularly for department stores that carry the panacea in product offerings — is whether tactics that aim to be everything to everyone as it relates to merchandising, makes sense with individuality prevailing so heavily among younger shoppers. Lundgren argues offering choice is the right route — at least for Macy’s.
“It’s different because, in our case, I think we have to have more choices for consumers so we actually have to bring in more categories than we’ve had in the past,” Lundgren said.
He pointed to Macy’s bringing into stores its off-price concept Backstage, Bluemercury, Etsy and Best Buy.
As for whether more concepts will be trialed in stores, the answer’s yes, Lundgren said. “We’re going to continue trying these different ideas to create more interest for customers to find different things inside of Macy’s.”