R3: Grounded Consumerism

R3: REQUIRED RETAIL READING

December 22, 2009

 

 

TODAY’S CALL OUT

 

Based on a recent survey, a surprising number of Americans indicate that the recession has actually had a positive impact on their lives.  In the wake of such an eye opening response, there is likely a longer term impact on how retailers and their customers think about the new reality of “grounded consumerism”.

 

 

We don’t often read too much into consumer surveys, however a recent study caught my eye.  The Context-Based Research Group recently released its findings from a 1,000 person survey (arguably a small sample) aimed at examining the changing attitudes and behavior of American consumers in the wake of the recession.  Sounds like a bunch of touchy-feely stuff, but I have to admit the results are very interesting and worth thinking about as we contemplate an eventual economic recovery.

 

The study, which is a follow-up to a similar one conducted one year prior, discovered that the recession has actually had a positive impact on people’s lives.  Amidst all the job loss, housing turmoil, and heightened stress, 43% of respondents indicated that the recession has actually been a positive. Huh?  Even more interesting is that those who have been most impacted by the recession feel the same way as those that have been least impacted.  Score one for what Context-Based Research calls “grounded consumerism”.

 

The simple fact is that consumer shopping habits and  social habits have shifted over the past year.  The obvious changes come in the form of fewer trips to the mall, buying private label, and cutting back on luxury purchases.  However, the less obvious consumer changes are coming in the form of more altruistic acts, be it spending more time with family and friends or actually engaging in volunteerism.  I’m not writing this as a call to arms for everyone to quit their day jobs and head to a soup kitchen, but rather to suggest the floodgates of retail and consumerism may not re-open as fast as we might think to the extent that this survey is representative of the US Consumer at large. 

 

Job creation will most certainly go a long way and there is no doubt more cash in consumers’ wallets will help to rebalance the playing field between value, moderate, and luxury retailers.  Mall traffic will pick up and discretionary products will sell once again.  However, the winners in the future may no longer be as obvious.  Retailers will have to be more strategic and less “in your face” in an effort to reduce their “transactional” images and to enhance their positive social messages. Price may not ultimately be the key driver of demand.  At the end of the day a retailer is always going to be focused on the next sale, but a little understanding that the consumer of tomorrow may no longer be all about consumption, consumption, consumption may ultimately be the best strategy. 

 

Eric Levine

Director

 

 

LEVINE’S LOW DOWN 

  • Walgreen’s management believes that consumers are waiting longer than ever to make holiday/seasonal purchases. As a result, the focus on the this week is more important than ever, with the bulk of sales still to come. Walgreen is one of the few retailers open for business on Christmas Day.
  • In an effort to reinforce the retailer/customer relationship, JCrew has once again sent its best customers a personal gift. In the past, the company has been known send a small item in appreciation for their business. This year’s gift is a day planner, which was sent out last week. While most retailers are looking to cut costs, this certainly stands out as an example of one retailer that is investing the future. The ability for JCrew to create one on one relationships with its core consumer is in fact eye opening in today’s world of retailing.

 

MORNING NEWS 

 

Uniqlo Ramps Up Growth in Europe - In central Paris, where Uniqlo opened a 23,000-square-foot flagship on Oct. 1, which that month rang up the most sales of any of its doors worldwide, the brand plans as many as six other locations. Taking into account the city’s outlying neighborhoods, some 10 doors in all are expected, each measuring at least 22,220 square feet, said Charlotte Bouvier, marketing director of Uniqlo France. Uniqlo also has its sights set on other major European cities, such as Madrid, Barcelona, Milan and a city in Germany. It’s possible the retailer will expand in London, where it has 14 boutiques, Bouvier said. Such moves are part of Uniqlo’s goal of being a global force. It intends to open 100 to 200 stores a year outside Japan, as part of a plan of its parent company, Fast Retailing Co. Ltd., to grow sales from 685.04 billion yen, or $7.12 billion at average exchange, for the year ended Aug. 31, to 5 trillion yen, or about $54.85 billion at current exchange, by 2020.  <wwd.com>

 

Zungui Haixi Completes Initial Public Offering - Zungui Haixi Corporation (TSX VENTURE:ZUN), a China-based manufacturer of sportswear and casual footwear, is pleased to announce the successful closing today of its initial public offering. 11,500,000 common shares were sold for gross proceeds of $37,375,000 by a syndicate of underwriters led by CIBC World Markets Inc. and including Canaccord Financial Ltd., GMP Securities L.P. and Research Capital Corporation. The underwriters have an over-allotment option exercisable for a period of 30 days from closing to purchase up to an additional 1,725,000 common shares at the offering price of $3.25 per share. Zungui Haixi intends to use the net proceeds of the offering to expand its retail and distribution network in China, increase production capacity, invest in marketing and promotional activities and for working capital and general corporate purposes. <benzinga.com>

 

S&P Upgrades Burlington Coat's Debt - Burlington Coat Factory Warehouse Corp. won a ratings upgrade from Standard & Poor’s based on its plan to reconfigure its $800 million asset-based credit facility. S&P raised its rating on BCF’s secured debt to “B-minus” from “CCC-plus” while maintaining the Burlington, N.J.-based off-price retailer’s stable outlook and overall “B-minus” corporate credit rating. BCF intends to extend the maturity date of $600 million of its revolving credit facility to January 2014 and pay off $200 million upon its May 2011 expiration. In addition, it is seeking to extend the maturity of $550 million of its $865 million term loan, due in May 2013, for two years. The upgrade moves BCF’s rating up one notch and, while still in speculative territory, implies the issuer “has the capacity to meet its financial commitment.”  <wwd.com>

 

Bluefly Gets $15M Boost - Bluefly said Monday it will receive $15 million from Rho Ventures, giving the troubled company more working capital with which to buy inventory and acquire customers. The 10-year-old online purveyor of off-price goods has never turned a profit. In its most recent statement, filed in November for the quarter ended Sept. 30, the company had an accumulated deficit of $147 million and said it was working under a “streamlined” business plan intended to help Bluefly meet its expenses. The plan called for reductions in marketing, hiring and buying new inventory. The company said in the filing it believed it had enough cash and credit to continue operating for at least 12 months. However, the filing was not audited. Net sales decreased by 14 percent to $17.1 million for the three months ended Sept. 30 compared with the same period in 2008, the filing said.  <wwd.com>

 

Judge Halts Macy's-Calvin Klein Chocolate Giveaway - A federal judge halted a Macy’s-Calvin Klein chocolate giveaway on Monday, granting an Oregon sweet shop’s request for a restraining order. In a lawsuit filed Friday, Eugene, Ore.-based Euphoria Chocolate Co. alleged that a promotional box of chocolates that Macy’s has given to customers who buy the Calvin Klein fragrance Euphoria infringes on its own trademark rights. According to Macy’s Web site, the candy is a gift to shoppers who spend $65 or more on the scent. Along with the complaint, filed in U.S. District Court in the confectioner’s hometown, Euphoria Chocolate also filed a motion for a temporary restraining order and preliminary injunction. Judge Ann Aiken signed the order Monday.  <wwd.com>

 

Private equity bidders offer £800m for Pets at Home - Four private equity firms have each submitted offers of more than £800m for specialist retailer Pets at Home. The business is being prepared for a sale or float in the new year by owner Bridgepoint. Apax, Bain, KKR and TPG are all interested in acquiring Pets at Home, the Daily Telegraph reported. The retailer appointed JP Morgan Cazenove to advise on options in October, and a ‘dual-track’ process – which could result either in an IPO or sale – is under way. The store group has been one of the retail winners during the recession as shoppers proved reluctant to rein in spending on their pets. Last year Pets at Home’s profits rose by 29%. Bridgepoint bought Pets at Home for £230m in 2004. The business has since been refinanced four times, generating more than £120m for investors. <retail-week.com>

 

Potential buyers circle U.K. Department Store Liberty - Big names are running the slide rule over department store Liberty, but a “serious offer” remains to be tabled. Robert Bensoussan’s Sirius Equity, which backs LK Bennett, and distribution and retail giant Li & Fung are said to be among potential bidders. However, a source familiar with the situation said that interest received so far did not yet amount to “serious offers” and did not know whether the process would lead to the tabling of fleshed out proposals. Liberty, which is backed by property firm MWB which last week unveiled a £25m share placing to avoid breaching banking covenants, appointed advisors Cavendish Corporate Finance and Global Leisure Partners in July to advise on finding new investors or partners as it seeks to expand internationally. However, the fundraising also attracted interest from parties interested in buying the whole of Liberty. <drapersonline.com>

 

Gabriella Forte to quit D&G - Gabriella Forte, who joined Dolce & Gabbana USA in 2002 as president and licensing director is to leave the Milanese fashion label. During her time at D&G, Forte has served in a number of high-profile roles and was most recently executive adviser to the the board and to the founders, Domenico Dolce and Stefano Gabbana. Forte was responsible for the expansion of the brand in the US during the three years she held the post of president. Forte leaves D&G on January 1 and a successor has not been appointed. <drapersonline.com>

 

Outsourcing on Rise as Stores Cut Costs - Outsourcing doesn’t only take place in India — it’s also happening at the local mall. Apparel companies are increasingly looking to third parties to help stock, merchandise and sell goods on the department store floor as they seek new and cost-effective ways to entice shoppers. Merchandising responsibilities in the past fell to the retailer. More recently, brands themselves shared some of the burden, assembling in-house merchandising teams that fanned out across the country, descending on department stores where they ensured sizes were stocked, presentations were neat and signage was up to standards. But in lean times, in which retailers have reduced sales staff and vendors are closely scrutinizing operational costs, outsourcing some or all merchandising jobs to retail service companies has come into vogue. <wwd.com>

 

Online retail sales set a single-day record by topping $900 million - Last Tuesday was the biggest sales day in the history of online retailing, says web measurement firm comScore Inc. E-retail sales totaled $913 million on Dec. 15, making it the first day ever to top the $900 million mark, comScore says. It followed a disappointing Monday, when sales were 1% below last year. But Tuesday through Thursday were all strong online sales days, comScore says. “In fact, each day through Thursday December 17—the last day that many online retailers would guarantee free shipping in time for Christmas—saw at least $800 million in spending, which suggests that savvy consumers may have been waiting for those last-minute deals,” says comScore chairman Gian Fulgoni. For the holiday season, online retail sales are up 3.7% to $24.757 billion from $23.873 billion last year, comScore says. That covers the period from Nov. 1 to Dec. 18. MasterCard Worldwide reported today even stronger online growth, estimating e-commerce <internetretailer.com>

 

Stores Push to Recoup Lost Sales - Retailers have no illusions about miracles in the final stretch of a mostly muted holiday season. Markdowns likely will accelerate, more ads will be placed, but generally strategies are set, and there’s little to do to make up for the estimated $2 billion in losses from the weekend snowstorm that blanketed the Northeast and Mid-Atlantic states. Despite the pressures, retailers don’t seem to be panicking, citing greatly reduced inventories, rising online sales and an extra day of shopping compared with last year’s disastrous season. Projections are holding steady for flat to slightly positive or negative comparable-store sales for holiday. A clearer read will emerge Jan. 7, when December comps are reported. “Most of the sectors are showing improvements in their growth rates since Black Friday,” said Michael McNamara, vice president of research and analysis at SpendingPulse, an information service of MasterCard Advisors. “In terms of the latest performance figures, the electronics, men’s apparel, footwear and furniture and furnishings sectors are all showing positive or flat year-over-year growth rates since the Black Friday weekend. E-commerce continues to be one of the stars of the season with a season-to-date growth rate of 13 percent. <wwd.com>