Tag Archive for 'Retail'

Christmas in July?

Published on July 22, 2010 in Leslie Nogue. 0 Comments Tags: , , , .

Leslie Nogue, Pitney Bowes Business Insight

This week, Janet Cho of The Cleveland Plain Dealer, published an article titled “Retailers offer Christmas in July specials to woo reluctant shoppers”.  In the article, Janet identifies an emerging trend from retailers, such as Toys R Us, Sears, Kmart, Target and Things Remembered, who are all promoting Christmas this week in an effort to clear out inventory, boost sales, and invigorate reluctant shoppers.  Along with Santas on store signs decked out in a swimsuit, flip-flips and shades, these retailers are offering massive Christmas themed discounts, and even 24-hour Black Friday sales.

But will this work?  Deb Purcell, Director of Client Services at Pitney Bowes Business Insight talked to Janet about this trend.  Deb argues that most families are concentrated on back-to-school items and wardrobes.  Asking consumers to plan for a holiday six months in advance may be a stretch on the family budget.  The full story…

The Cleveland Plain Dealer is one of Ohio’s largest newspaper websites, Cleveland.com.   The site receives 1,645,430 unique monthly visitors.

Predictive Analytics to the Rescue

Published on May 20, 2010 in Brian Hill. 0 Comments Tags: , , , , , , .

Brian Hill, Pitney Bowes Business Insight

I recently read an International Franchise Association article that outlined what franchisors should be doing to help their franchisees obtain funding for new capital projects in today’s risk adverse environment.

The suggestions were good and spoke to the fact that educating lenders about the brand and providing lenders with supporting documentation beyond the FDD is required today to help push things through a system that is still dealing with lots of uncertainty.

Another sound recommendation hinted at, but not expanded on, would be for the franchisor to provide the lender with some indication of the new store’s likelihood for success. An earning’s claim? No, we know these words are heresy, but predictive analytics can go a long way towards this objective without having to provide an actual projected revenue or earnings .

What are the dynamics of the trade area – are they favorable? How many of this brand’s best customers reside proximate to the new location. Where are the competitors and how do they help or hurt this location? What are the unique site characteristics of the physical store itself as well as the retail environment that will help this unit perform well? How does this unit compare to other units in the chain in similar markets sizes and conditions?

A well-thought out predictive analytics plan can help a franchisor more than just evaluating real estate for their own corporate stores, that very knowledge may be the difference between helping a franchisee get funding or not.  Lenders have also gotten wise to this and are now starting to do their own advance real estate research too. It’s a wonder this isn’t a lending industry standard already!

Spring Ahead: The Grass is Getting Greener on the Retail Side

Published on April 28, 2010 in Deb Purcell. 0 Comments Tags: , , , , .

Deb Purcell, Pitney Bowes Business Insight

Ah..spring! A time for renewal and growth. Green shoots are emerging from the thawing ground and buds are blossoming, spreading cheer and optimism of even better days to come. The parallels between the current phase of nature’s cyclical routine and recent retail trends are striking. After hunkering down for a long, seemingly endless, frozen, and lifeless period, consumers are awakening to discover and cultivate new growth. Last week, the Commerce Department reported widespread sales gains in March. A recent Wall Street Journal article on the subject noted that this month’s gain was the fifth in six months, and that “consumer spending is on track to grow at an annualized rate of 3% to 3.5% in the first quarter, which would be the best showing in three years.”

You have to start somewhere.

New growth is branching out from necessity purchases to include postponed repairs and maintenance, even spruced up wardrobes. As consumers regain confidence, they begin to make smart purchases on safe, classic styles, much like the first shoots off dormant plants are those that become strong limbs that support eventual foliage. USA Today reports that the consumer behavior is beginning the shift toward discretionary purchases.  Pent-up demand from consumers who were living off their stores during the “long winter” is driving shoppers out to replenish their own depleted personal inventories. Small indulgences begin to enter the purchasing mix, such as eating out at fast-casual dining. Eventually, those who have weathered the storm decide to celebrate, and their mood will be reflected in their purchases. This change will not happen over night, but the pattern is predictable and undeniably underway.

The thaw.

As consumers come out of hiding, another key enabler of recovery-credit-is also emerging from the deep freeze. As home prices stabilize and volatility in financial markets runs its course, investors are also increasingly willing to leave their safe havens and entertain new ventures in an effort to reap higher returns. Healthy operators will be the first to leverage the opportunity and take over the most fertile ground, markets that offer the greatest consumer demand, healthy job prospects and stable or rising home prices. According to Kiplinger retailers and restaurants face a tougher lending environment than other small business types, but as consumer demand reappears, credit to support new growth will become increasingly available during 2010. Think of it as fertilizer.

There are naysayers who believe that new growth may be stunted by continued high unemployment or that a double-dip recession is possible, but for today I choose to inhale the sweetness of the positive news, allow the possibility of better times ahead to affect my outlook, relax just a bit…and maybe even go shopping.

Zombie Retail

Published on April 23, 2010 in Eric Steckling. 0 Comments Tags: , , , , , .

Eric Steckling, Pitney Bowes Business Insight

As Americans and consumers, we have all witnessed the decline of countless national retailers in the past decade only to see them rise from the dead and live again. When a failed company is dismembered by bankruptcy court or investors, one intangible asset is generating interest; the company name. One question persists, if a brand failed to be successful in the retail arena, why would anyone want to invest in and perpetrate a brand that consumers have largely abandoned?

Each zombie puppeteer has different strategic reasons for acquiring the rights to failed corporate identities but one underlying theme prevails; brand equity. As a brand matures, customers become familiar with the company’s offerings, product assortment, pricing, ect. This “familiarity” coupled with millions of dollars spent annually on advertising can turn into loyalty and goodwill. This customer recognition is extremely expensive to create from scratch, which is why it is often appealing to resurrect a brand.

Once a $2 billion a year company, CompUSA succumbed to increased competition and torpid sales. Even though CompUSA closed most of its stores in 2007, consumers are largely still aware of the corporate name, identity and offerings. Acquired by Systemax in early 2008, arguably the most valuable piece of the company was the website and logo which is still used to sell merchandise online. The company is now reinvesting in their store network (see Retail 2.0: Brick vs. Click). After 60 years in business, Circuit City fell victim to the same perils as CompUSA. The $14 million Systemax paid for the company’s identity will probably top the price fetched by the company’s former 288,560 square foot headquarters recently returned to its lender. The building recently appraised for $46.2 million is listed for sale for $11 million.

When a retailer comes back to life with an internet only business model, name and reputation are by far the biggest assets they have to drive traffic and sales. With mitigated real estate, inventory and labor costs, online only retailers have much fewer expenses than their brick & mortar counterparts, allowing them to profit on much lower sales volumes. The next question is who is the next national retailer to close shop and serve your town from the sidelines of the internet? My guess: Blockbuster Video.

From Deserts to Desserts

Published on April 14, 2010 in Shawn MacDonald. 0 Comments Tags: , , , , , , .

Shawn MacDonald, Pitney Bowes Business Insight

Lately it has been fashionable for national media outlets to spotlight the failures that have been plaguing Detroit for the past several decades and administrations. In June of last year, The Wall Street Journal Online edition published an article highlighting the mass exodus by national retailers (Retailers Head for Exits in Detroit – WSJ.com). Then, Time Magazine established Assignment: Detroit, a year-long endeavor where several journalists (including Detroit native Daniel Okrent) live in an east side home and write about everyday life in the beleaguered city (The Detroit Blog – One year. One city. Endless opportunities. – TIME.com). More recently, Time’s sister online publication Life.com chronicled Detroit’s demise through a series of photographs (Ragged Glory) that depicts the extent of the city’s urban decay (Detroit: Still Life – Photo Gallery – LIFE).

Now, I am not saying that Detroit’s struggles should not be the focus of national media scrutiny. In addition to the decline of the American automobile industry, much of the city’s plight can be linked to past administrations hard-line stances that they can go it alone. That is, without the help of the suburban civic leaders who have been more than willing to come to the Detroit’s aid over the years. Furthermore, an archaic tax code has made it increasingly difficult for businesses to prosper, all to the detriment of the city’s residents.

When Hudson’s flagship store on Woodward Avenue closed its doors in the 1980’s, Detroit became the only major city in the United States without a department store within its city limits. Now, the city owns another distinction – the only major city without a national or regional supermarket chain. In 2006, Farmer Jack was sold piecemeal to several buyers, ending the chain’s long reign within southeast Michigan. In addition to Farmer Jack, the city was once home to many banners such as Kroger, A&P, Wrigley, Great Scott!, Packer, and Chatham. Today, only Kroger remains, although none of it supermarkets are within the city.

However, Detroit is not alone in its struggles to offer residents quality supermarket options. Of the 15 poorest cities (based on the percentage of residents living in poverty), nine are under-served (less than 2.5 square feet of space per resident) by supermarket chains with at least 25 stores, as the following graph depicts:

 

Conversely, among the Top 25 largest US cities, ten are rife with supermarket chains having more than 3 square feet of chain supermarket space per resident. Of those ten cities, the following six have more than have more than 4 square feet per resident and may be considered “over-served”: Phoenix, AZ; Columbus, OH; Fort Worth, TX; Indianapolis, IN; Austin, TX; and Jacksonville, FL.

 

True, poverty levels in these six cities are significantly lower which may account for a more inflated ratio. However, it is not as though the poorer cities have significantly less demand for grocery-related items. In fact, on average, demand for grocery-related items in the “Under-served Nine” is 90% of the “Over-served Six” level despite having 86% less chain supermarket space. Can you say “untapped potential”?

 

So, how does the playing field become leveled?

Well, to the rescue here comes… drum roll please…The United States Government!! Now hold on, this is a good thing. As part of her initiative to combat childhood obesity, First Lady Michele Obama is spearheading a campaign called Healthy Food Financing Initiative, a $400 million effort to end “food deserts” in some of the nation’s largest and poorest cities. The program will be modeled after a Pennsylvania initiative that has produced more than 80 supermarkets in the past five years, where nearly 400,000 people now have access to better food choices while supplying about 5,000 jobs.

To underscore the administration’s commitment to this cause, Jeff Brown, owner of the 10-store Brown’s Super Stores (a ShopRite affiliate), was not only recognized in the President Obama’s State of the Union address, he was also a guest of Mrs. Obama. A fourth-generation grocer, Mr. Brown has been very active in Pennyslyvania’s Fresh Food Initiative. Please reference this link for more information: Success in Pennsylvania Stirs Hope for Food Deserts

The idea is catching on! New York, Louisiana, Illinois, Colorado, and New Jersey have all launched similar programs. So far, independent supermarkets have embraced these programs while reaction among chains has been lukewarm. Given the tremendous untapped potential combined with government incentives, this soon may change.

Despite all of the rancor and partisanship in Washington these days, this initiative seems to have bipartisan support. And, as long as there are no strings attached (like the auto and banking bailouts), Democrats and Republicans should be eager to “bring home the bacon” to food deserts within their districts.  The jobs these supermarkets provide will be the “icing on the cake”, which would be a tasty dessert!!

Retail 2.0: Brick vs. Click

Published on April 1, 2010 in Eric Steckling. 0 Comments Tags: , , , , , , , , , .

Eric Steckling, Pitney Bowes Business Insight

CompUSA is attempting to neutralize the Internet’s one big advantage: Information. In an effort to improve the retail shopping experience, CompUSA has upgraded 23 of its 32 stores to the “Retail 2.0” version. Chief executive of parent Systemax Technology Products Group Gilbert Fiorentino has designed new product displays that include touch screen computers which provide specifications, pictures, customer reviews, competitor’s prices and other information about the products on display. The idea was to change the passive approach to retail and engage the customer. CompUSA has found that information empowers the customer and allows them to make more informed decisions, which Fiorentio says is translating to loyalty and increased traffic.

So what’s next for “Retail 2.0”? Amazon.com often gets me to buy items by simply suggesting them to me based on items I have in the cart, have already bought or even looked at. These (usually on target) suggestions are generated from a vast database of the browsing and purchasing records of myself and the other 76 million unique visitors last month.   The difference is data. Online retailers have an easier time collecting and storing customer data. Most brick and mortar retailers have been slow to collect or utilize transactional data, which is instrumental in improving stores’ customer experience.

It is evident that technology will play a key roll in helping retailers “engage” their customers. RFID controlled inventory and smart shopping carts could perform the same suggestive functions by identifying items in your cart and making suggestions based on prior customers’ cartloads. To fully leverage transactional information retailers must also know who you are, another task Internet retailers have no trouble with. Once the customer is identified, Retail 2.0 should include social media interaction as well as purchase driven targeted emails. Only time will tell what other innovations brick and mortar retailers will create to slow the market share loss to online vendors.

Real Estate Spotlight on Manhattan: Taking Advantage in a Down Economy

Published on March 18, 2010 in Kyle Bingham. 0 Comments Tags: , , , , , , , , .

Kyle Bingham, Pitney Bowes Business Insight

When describing New York, Frank Sinatra famously said, “If I can make it there, I can make it anywhere.” Simply called “The City” by locals, Manhattan has always been a place that’s been tough to break into for many national retailers, but as rents continue to drop and independent retailers abandon their unprofitable storefronts, now is the time for these national retailers to seize an opportunity. According to various reports, Manhattan’s commercial-lease rates are expected to bottom out in the early part of this year; they are expected to begin rising by late summer.

New Yorkers have unique shopping habits and transportation methods, so a national retailer’s traditional formats may not always work in Manhattan. Success stories are a result of concept flexibility. The drugstore chain Duane Reade famously conquered the landscape with creative store configurations and by giving New Yorkers the products they need, convenient locations, and fast service. Walgreens was so enamored by Duane Reade and their presence in Manhattan that they agreed to buy the chain last month for $1.1 billion. Restaurant chains like Chipotle (19 Manhattan units) have also made a push into Manhattan, with some success. Other major national brands, like The Home Depot and, more recently, Costco, have opened locations in Manhattan to more modest success. Both companies had to drastically change their concept to fit the typical New Yorker: families in SUVs weren’t going to be dropping by to buy a new lawn mower or to fill up their minivans with seven cases of peanut butter; entire departments had to be revamped to add more items that could be carried onto the subway or down the block. Those retailers with smaller footprints, like Starbucks, can be more nimble in the city, filling the spaces that others cannot. Starbucks now has more than 170 units in Manhattan, some famously across the street or around the corner from… another Starbucks. Whether for a public-relations play or for a full-blown strategy, one must enter Manhattan armed with research.

In Manhattan, location is truly king, but simply being in Times Square does not guarantee success. Other factors come into play – factors like street-front access, proximity to a subway access point (stairwell), and corner (as opposed to midblock) location. Even being on an avenue instead of a street can have a huge impact on potential revenues. Daytime population also plays a huge role in a site’s potential; in fact, the highest density of daytime employees in the United States is proximate to the 42nd Street/Madison Avenue intersection, near Grand Central Station. Using our extensive database of employee and daytime population in Manhattan and augmenting it with field research, Pitney Bowes Business Insight is able to effectively serve our New York-bound clients. Techniques used to forecast sales for suburban locations don’t necessarily work in Manhattan: drive-time analysis, for example, gets thrown out the window. When analyzing Manhattan, pedestrian counts and proximity to daytime population become paramount. Operations of the business also can also play more of a role in Manhattan than in other, less dense areas. Specifically, adjusting staffing levels to the time of day and the district is important; after all, the staff necessary for a store in the Financial District may be drastically different from one in the Upper West side.

Over the years, I have learned that successfully analyzing Manhattan requires quality data sources for daytime and employee population, a good understanding of pedestrian patterns, and strong fieldwork – not to mention a little bit of intuition. A good pair of walking shoes helps, too.

Keeping Predictive Models Current: Dealing with Continuous Change…Continuously

Published on March 4, 2010 in Nat Evans. 0 Comments Tags: , , , , , , , .

by Nat Evans, Pitney Bowes Business Insight

Most contemporary predictive models, which forecast performance such as sales, customer visits, membership levels, etc., are based on historical data that create “snapshots in time,” using whatever relevant sources were current at the time of analysis. Examples include POS distributions, store and competitive locations, store sales performance and demographic data. But we know operations and the environment changes as soon as a model is completed and put into use. As a result, model accuracy erodes with each passing day as the data inputs into the model or the benchmarks upon which expected performance are based become stale. To be sure, most site selection professionals and researchers attempt to make sure models are as fresh as possible, updating these data elements on a regular and recurring basis. During recent engagements with several long time clients, we have been asked if there was a way to take into consideration dynamic time series data elements to help with forecasting and minimizing risks.

What do we mean by dynamic data?

Many factors may play pivotal roles in retail forecasting and market prioritization. Depending on the level of aggregation, the obvious thought is that a researcher may be able to affect a change in market conditions or individual sales estimates, depending on the application. Indeed, they can significantly sway analyses enough to change even the simplest of decisions, either minimizing risks (if used appropriately) or increasing a company’s vulnerabilities, especially given the current macro-economic climate.
A couple of sources of dynamic data within the context of a static model may include:

• Macro-economic data such as housing starts, CPI (consumer price indices), funds rates, and unemployment percentages either nationally or at varying levels of macro geography – state, county, or CBSA. Such measures provide a look into the health of consumers’ collective behavior, and depending on how the analysis is structured, whether these factors will be leading or lagging indicators of retail growth and consumer spending (PBBI has created an approach-MarketPulse-that incorporates these factors into predictive models).

• Gas prices. Gas price fluctuations on a regional or even local level can create a similar effect that macro-economic variables may produce in models. Obviously, the higher gas prices rise, the less disposable income consumers will have to purchase goods and services, potentially depressing actual local store performance. Distance may become a stronger deterrent to patronage as a result.

If a retailer’s or restaurant’s sales forecast model was created in better times, it may produce a “false positive,” inappropriately triggering a go/no-go decision and costing company valuable resources and capital from other locations that may be more profitable. Just as importantly, if a company is judging a general or district manager on existing location(s) sales performance based on a projection created earlier in the fiscal year, the company may be unduly influencing that leader’s performance rating on factors outside of his or her control.

How can we create more flexible models using dynamic data?

There exists a myriad of ways we can leverage dynamic data through any forecasting or analytical process, more generally. The important point with any data source is to leverage any and all relationships that may prove fruitful through the forecasting process. But, it must be relevant to your research design, have purpose, and be significant enough to warrant using in modeling and analytical review.

In the future, the ability to collect and cleanse data continuously not only from existing, well-documented sources, but also new sources, such as e-commerce and online social/behavioral data, will become more available and increasingly important across any organization. Additionally, whether on-premise or in the “Cloud”, the technology that facilitates a seamless data flow into predictive applications should enable decision-making with the most up-to-date analysis possible.

Spotlight on New Orleans: The Crescent City, Five Years Later

Published on February 16, 2010 in Kyle Bingham. 6 Comments Tags: , , , , , , , .

Kyle Bingham, Pitney Bowes Business Insight

This month, I was in New Orleans, analyzing several sites for a large retail client. The last time I was in the Crescent City was five years ago – just a mere four months after Hurricane Katrina hit. I was both excited and anxious to see how the city had changed. I had many questions on my mind as I left Louis Armstrong International Airport in my rental car: at what level were the most impacted neighborhoods coming back? What shape was the infrastructure in? What retail was operating in these areas?

My fieldwork took me to many of the neighborhoods that, five years ago, were completely under water. West of City Park, neighborhoods like Lakeview and Lakeshore showed positive signs of recovery; however, the rebuilding efforts were sporadic and entire blocks remained unoccupied. It was strange to see homes with fresh paint and new roofs next to boarded up homes that still bore the spray-paint markings of post-Katrina rescue teams. The current state of the roads in these neighborhoods was also unexpected. The hurricane and subsequent years of neglect had taken their toll. I was constantly on the lookout for potholes and saw large depressions in the road that were the size of Volkswagen Beetles. While it was clear that, with the help of U.S. federal stimulus dollars, a concerted effort was being made to improve the major thoroughfares, both my rental car and I agree there is still a lot of road work that needs to be done.

The retail landscape was also a mix of redevelopment and vacancy. The retail sector in which I saw the most redevelopment was pharmacies/convenience stores. Walgreens dominated the landscape, with newer/redeveloped units in Lakeview, Mid-City, and Gentilly Terrace. Though not a new development, local and quick-service restaurants also seemed to be making a comeback. Clearly, the winners in the post-Katrina rebuilding efforts are the home-improvement centers. The Home Depot, for example, still operates two smaller, non-prototype units that were opened as a result of the hurricane. In both Chalmette and East New Orleans, Lowe’s and The Home Depot have units within a half mile of one another – in Chalmette, they even have adjacent parking lots. It was in Chalmette – in St. Bernard Parish, that the recovery has been the slowest, evident from the empty parking lots and the lack of other national chains. The return of retail to these areas has been clearly affected by the economy and by the uncertainty of the population return. The latest estimates show that the return of residents is slowing down, with population levels still below pre-Katrina numbers in many neighborhoods.

As I drove through the Lower 9th Ward, I noticed a sign installed by the city that stated the recovery efforts were underway in that area; underneath, in spray paint, someone had scrawled “Five years later!” Its clear things aren’t happening as fast as many had hoped they would, but as those who have visited know, the city’s residents are very proud of their culture, extremely resilient, and determined to rebuild. My trip was right before the Super Bowl, a mayoral race, and Mardi Gras, all three of which dominated the conversations I heard from the French Market to the Garden District. Now that the Saints have won and Fat Tuesday is upon us, there is a lot to celebrate, but a lot of work to still be done.

Positive Retail Comp Sales – A Good Sign? It is All Relative

Published on February 12, 2010 in Ed Borden. 1 Comment Tags: , , , , , , , , , .

Ed Borden, Pitney Bowes Business Insight

The monthly reports of retail year-over-year comp (comparable sales) is often viewed a strong sign of the health of retailers; however, the recent positive gains are being plotted against the sales performance of 2009 — not a banner year for retail sales. While the January-over-January gain of 4.7% is an encouraging sign that the industry is recovering, the sales remain significantly lower than the volumes of even two years. As quoted from blog article Retail Sales Advance the “Year-over-year numbers, though, often tell you as much about conditions a year ago as they say about current conditions.”

Like the Retail Sales Advance article discusses, PBBI has also directly witnessed through our retail and restaurant client relationships that change sales comp numbers without historic context can be misleading. Moreover, the shape and size of this retail recovery is not being share equally among all retailers or even amongst all retailers in the same retail specialties (e.g., home improvement, electronics, and apparel).

The graphs below depict the national historic trends in total retail sales, and consumer confidence and sentiment. Naturally there is a link between the consumers’ spending and the consumers’ feelings towards spending — the peaks and valleys generally follow the same trend. Even though none of the information provided in the charts is all that new, the graphical representation of this information clearly shows just how hard this recession has affected retailers. So when you hear great news about the retail sales recovery, just know it is all relative.

US Retail Sales

US Retail Sales

Consumer Confidence and Sentiment

Consumer Confidence and Sentiment

Year-Over-Year Change in Retail Sales

Year-Over-Year Change in Retail Sales