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R3: REQUIRED RETAIL READING

December 6,2010

RESEARCH ANECDOTES

  • What a difference a year makes.  This year’s Super Bowl is shaping up to be a virtual car lot, with a whopping eight automakers scheduled to advertise during the most televised event in the world.  Interestingly, this compares to just six auto advertisements last year and five the year before.  Not only are automakers snatching up the $3 million per 30 second slots but they are also planning 2-3 ads each.
  • E-commerce appears to have significant legs, at least if you consider the following facts from a recent Ad Age/Ispos Observer survey.  While 70% of consumers are now comfortable making purchases online, only 50% are doing so.  Furthermore, of those actually shopping online, only 25% of their spend makes its way to the internet.  Clearly much more growth to come from the world of online shopping.
  • According to a Harris Interactive poll, supermarkets and hospitals rank as the most trusted industries to consumers out of 17 industry groups.  Interestingly, while still holding the top spot, supermarkets are highly trusted by 29% of consumers, down substantially from 40% in 2003.  The decline is second only to banks, which lost 15% of trusted consumers over the same time frame.

OUR TAKE ON OVERNIGHT NEWS

Cool Temperatures Boost Outerwear Sales - November’s big chill heated up sales for outerwear manufacturers and retailers, and they’re looking for more of the same from Mother Nature. After a warmer than usual start to fall in much of the country — an average October temperature of 56.9 degrees — the weather turned more wintry. Although there were a few days of springlike readings this week, weather forecasting firm Planalytics said that last month was the coldest in the U.S. since 2002 and Black Friday weekend was the coldest in three years. The combination generated an estimated 11 percent spike in outerwear sales compared w ith a year ago. Forecasters predict colder temperatures starting today. Planalytics reported that outerwear sales climbed in several cities, including Los Angeles, where temperatures were in the 40s and volume was up 90 percent over last year; the Seattle region saw a 43 percent increase, Cleveland, 39 percent and Boston, 21 percent. “It’s completely weather-dependent,” said Ken Giddon, president of Rothmans in New York. “When it’s cold, people buy outerwear. And men shop when they’re moved to shop.” Giddon said the outerwear business hasn’t been “truly exciting yet,” but in the past few weeks, he has experienced “nice action” with Spiewak’s $175 retro-inspired wool peacoat and jackets from Cole Haan. Dress overcoats in shorter, tighter models from Hugo Boss, which retail for $645, are also standouts. Stuart Segel, president of Mr. Sid in Newton Center, Mass., has seen an uptick in outerwear sales since the colder temperatures arrived. “The little leather we had we sold quite well,” he said. Coats in technical fabrics or waxed cotton finishes also connected with customers. <WWD>

Hedgeye Retail’s Take: Good timing for the weather to kick in after extremely tough compares with last year’s “perfect storm” of frigid temps that created the appearance of a slowdown.  This year is actually shaping up to be more traditional in terms of timing of outerwear purchases.  It was last year that was an anomaly.

FTC Supports 'Do Not Track' Guidelines -The Federal Trade Commission endorsed the idea of a “do not track” mechanism that would allow consumers to opt out of certain varieties of targeted online marketing that have gained popularity among retailers. The endorsement was one piece of a larger preliminary staff report on consumer privacy in which the commission proposed a framework it says would simplify and streamline online privacy protections for consumers. Among the issues addressed in the report is how consumer activity online can be tracked, stored and used by third parties to target ads to consumers. The commission said first-party marketing, where a company communicates directly with a user based on their purchases on its site, is not at issue. What could be affected by the FTC proposals are practices like retargeting, where consumer activity online is tracked and used to serve ads up to potential customers after they’ve left a site. Most retailers have started using retargeting in the last year because it boosts conversion by several points. So, for example, if a Web surfer were to visit The New York Times after browsing at Saks, she might see a display ad for Saks on the Times’ Web site. <WWD>

Hedgeye Retail’s Take:   Interesting twist for online marketers which stand to take a major hit if they’re no longer allowed to use “cookies” for retargeting.  Seems like this would be hard to enforce but nonetheless it may save consumers from seeing repeated ads from sites they recently browsed.  Ever wonder why you see repeated Under Armour ads after only visiting the UA homepage just once?  Now you know why.

 

UK Bans Reebok Easytone Curve Ads - The United Kingdom has banned print and TV advertisements for Reebok Eastytone Curve shoes, saying research the manufacturer submitted was either too limited or failed to substantiate its claims that the shoes improves muscle tone. The magazine ad featured headline text that stated "Reetone [sic] with every step. Get up to 28% more of a workout for your bum. And up to 11% more for your hamstrings and calves". Underneath was an outline of a woman with the text "28% gluteus maximus", "11% hamstrings" and "11% calves" written next to the corresponding parts of her body. The TV ad featured women walking, dancing, jumping, spinning around and standing, with the camera fixed on their bottoms and legs; all were wearing trainers. The voice-over stated "Reebok EasyTone. Helps tone legs and bum more than regular trainers. Reebok EasyTone with balanced ball inspired technology. Better legs and better bum with every step".   The U.K's Advertising Standards Authority received two complaints challenging the efficacy claims for the product and alleging they were misleading and could not be substantiated.  <Sports One>

Hedgeye Retail’s Take:  Score one for UK consumer protection.  Unfortunately in the U.S, advertising claims are harder to enforce. Ever wonder how “As Seen on TV” turned into a multi-million dollar business?  The ShamWow doesn’t exactly work as advertised.

John Lobb Debuts New Campaign, Styles John Lobb has plenty to celebrate — from a new campaign to a range of limited-edition styles. The Paris-based men’s footwear brand recently unveiled its spring ’11 marketing campaign, which highlights the 190 steps it takes to make one pair of shoes. JohnLobb.com/190-Steps shows the craftsmanship that goes into each shoe. From No. 2 (preparation) to No. 182 (hand glazing), the 190 steps illustrate John Lobb’s balance between traditional and modern shoemaking, said Renaud Paul-Dauphin, CEO and general director of the brand. “I like the contrast of modernity and the very iconic way of doing Goodyear-welted shoes,” he said. “It’s about a complex process that takes time — time to make it and be sure you can wear it for a lifetime. Our mission is to keep those [steps] alive.” <WWD>

Hedgeye Retail’s Take:   This campaign is truly worth checking out if you have any interest in learning about the lost art of making something by hand.  Now if only we had a similar site to chronicle the production of a $13 pair of shoes from Payless. 

Google punishes rogue e-retailers -Google announced this week that it had changed the way it ranks retail sites to ensure that abusive retailers don’t move up in natural search rankings as a result of consumer complaints posted on online forums. The search engine acted quickly following Sunday’s publication by the New York Times of a major article suggesting that an online retailer of designer eyewear, DecorMyEyes.com, was benefiting from the many complaints consumers were posting about the retailer’s poor service, profane language and threatening behavior. “Being bad to customers is bad for business on Google,” Amit Singhal, a Google fellow, wrote in a post to the Google blog yesterday. Singhal said Google had identified hundreds of merchants, including the one mentioned in the New York Times article, “that, in our opinion, provide an extremely poor user experience.” He did not specify how Google would treat those merchants or how it identifies bad retailers. But he said Google had already implemented a change to the way it ranks these retailers “and Google users are now getting a better experience as a result.” The newspaper article suggested that DecorMyEyes.com benefited from the many negative comments about it on consumer review sites—RipOffReport.com says there are more than 100 complaints about the e-retailer on its site—because those postings contained links from authoritative sites to DecorMyEyes.com, and that search engines like Google give credit for any link to a web site, regardless of whether the comment is positive or negative. <Internet Retailer>

Hedgeye Retail’s Take:  Surprised it took this long for Google to realize that “bad” shouldn’t be turned into something good.  Clearly the retailers were benefitting from “any publicity is good publicity”.  Good news for consumers getting sucked into deals that look too good to be true.

Lord & Taylor Confirms Yonkers Unit -  Lord & Taylor says Yonkers, N.Y., could just be the first stop on a new expansion trail. “Business has been very strong. We are looking to open new stores to expand our concept,” Richard Baker, chairman of Lord & Taylor’s parent company, the Hudson’s Bay Trading Co., told WWD. “We are working on a number of additional full-line stores, in addition to outlets, in existing markets and perhaps new markets.” He didn’t specify any potential sites. Baker, and Forest City Enterprises Inc., developer of the Ridge Hill mixed-use center in Yonkers, confirmed Friday that Lord & Taylor will open an 80,000-square-foot, two-level unit on the site in spring 2012. Yonkers marks Lord & Taylor’s first regular-price store opening in 10 years. Lord & Taylor now operates 46 units concentrated in the Northeast. There are also stores in Washington, Chicago and Detroit. Lord & Taylor opened its first two outlets this year. “Ridge Hill is located in a portion of Westchester with great demographics. We think it is very underserved,” Baker said. <WWD>

Hedgeye Retail’s Take:   Growth=IPO (eventually).

What's Next for Mindy Meads? - Mindy Meads, Aeropostale Inc.’s co-chief executive officer, herself chose to leave the company, market sources said. The disclosure Wednesday that Meads’ last day at the retailer is Dec. 15 surprised the investment community. Meads could not be reached for comment about the reasons for her departure. An Aéropostale spokesman said Meads will “pursue other interests,” and that she’s leaving the company with a “solid infrastructure” of merchants. Some sources said she didn’t always see eye to eye with former ceo Julian Geiger, who resigned earlier this year. Geiger, who remains as chairman, named Meads and then-chief operating officer and executive vice president Thomas Johnson co-ceos in February. The shared position is atypical, and sources said that Meads became less directly involved with merchandising, a role at which she excelled. Before Meads joined Aéropostale three years ago, boxy sweatshirts and traditional cotton T-shirts lined the store’s shelves. Meads infused the brand with a trendy sensibility while keeping prices low. <WWD>

Hedgeye Retail’s Take:   Not surprisingly co-CEO’s didn’t work out.  This was one of our top risks as it pertained to ARO beginning the day the succession plan was originally announced.

Jimmy Choo to Relaunch Men's Footwear - Jimmy Choo is re-entering the men’s footwear arena. Though the London-based luxury brand had previously offered men’s shoes (the line was discontinued in 2002), its multi-gender collaboration last year with H&M prompted it to embark on a new collection, set for fall ’11. “The H&M collaboration showed us that our brand is bigger than our business today and that there is a demand for the Jimmy Choo aesthetic in the men’s categories,” said CEO Joshua Schulman. “Creating a focused Jimmy Choo men’s shoe collection at the luxury level is consistent with our goal of evolving into a significant dual gender lifestyle brand across categories, channels and geographies.” The Italian-made assortment of about 12 styles will include dress shoes, moccasins, biker boots, sneakers and evening slippers in a variety of colors and materials. <WWD>

Hedgeye Retail’s Take:   Is there really demand for men’s Jimmy Choo’s or just the co-branded, cheaper collabs with H&M?  Sounds like yet another attempt to diversify ahead of another impending IPO.

Amazon invests $175 million in Groupon rival LivingSocial - While analysts await confirmation of rumors that Google Inc. will acquire Groupon, the  daily deal site’s principal rival LivingSocial announced yesterday that it secured a $175 million investment from Amazon.com Inc. LivingSocial also announced it raised $8 million from venture capital firm Lightspeed Venture Partners.  LivingSocial says it generates revenue of more than $1 million a day on average. It says it expects its 2011 revenue will surpass $500 million .Amazon.com, No. 1 in the Internet Retailer Top 500 Guide, investing in LivingSocial is a clear sign the world’s largest online retailer intends to become a bigger player in both online daily deals as well as in local commerce, says Colin Sebastian, an analyst for Lazard Capital Markets who covers e-commerce stocks.  <Internet Retailer>

Hedgeye Retail’s Take:  Clearly a cheaper way to play the “Groupon” euphoria in an industry that has yet to consolidate and shake out all the fringe players.  Interestingly, this puts Amazon slightly closer to the physical world of retailing with the coupon site generally focused on local, real-world discounts.